NEW YORK CITY and LOS ANGELES—Shares of Colony NorthStar Credit Real Estate Inc., the publicly traded finance REIT created from the merger of two non-traded entities, began trading Thursday on the New York Stock Exchange under the CLNC ticker. The merger of NorthStar Real Estate Income Trust Inc. (NorthStar I) and NorthStar Real Estate Income II Inc. (NorthStar II), which also entailed the contribution of $1.6 billion of assets and liabilities from Colony Northstar Inc. (CLNS), was first announced this past August.
The all-stock merger has resulted in a commercial real estate credit REIT with approximately $5.1 billion in assets under management and $3.3 billion, or approximately $25 per share, of book value. It's now the second largest publicly listed commercial mortgage REIT after Starwood Property Trust.
With an equity stake of approximately 37%, CLNS is the new entity's largest investor. A CLNS subsidiary manages CLNC, whose strategy is to originate senior mortgages, mezzanine loans and preferred equity interests, while selectively acquiring other CRE debt and credit assets and net leased real estate.
“We expect to derive significant benefits through our affiliation with Colony NorthStar, which brings extensive transaction and asset management experience across numerous commercial real estate asset classes and through multiple cycles,” says Kevin Traenkle, CEO and president of CLNC. “As the external manager and largest shareholder in the company, Colony NorthStar's interests are aligned with those of Colony NorthStar Credit's stockholders.”
Richard B. Saltzman, CLNC's chairman and CLNS's president and CEO, says the merger represents “a winning proposition for all stockholders. Credit investing across the capital stack is a core competency of Colony NorthStar and the creation of Colony NorthStar Credit permits us to pursue this great market opportunity in scale. At the same time, it also helps to continue simplifying the Colony NorthStar story as these investments used to be made either directly by Colony NorthStar or through its sponsored non-traded real estate investment trusts.”
In an SEC filing last month, CLNC said senior mortgage loans comprised the largest chunk of its initial portfolio at 35%. Owned real estate, divided between net lease and “other” property types, accounts for another 32%, with mezzanine loans comprising 12% of the portfolio, private equity interests another 8% and CMBS and preferred equity each representing 6%. By property type, office represents the largest segment with 24% of the portfolio, followed by hospitality (18%), industrial (14%), retail (13%), multifamily (12%) and diversified (19%).
On the merger, J.P. Morgan and Barclays acted as CLNS's financial advisors and Hogan Lovells US LLP acted as legal counsel. Credit Suisse Securities (USA) LLC acted as financial advisor and Alston & Bird LLP acted as legal counsel to the NorthStar I special committee. Moelis & Company LLC acted as financial advisor and Venable LLP acted as legal counsel to the NorthStar II special committee and Greenberg Traurig LLP acted as legal counsel to NorthStar II.
For the NYSE listing, J.P. Morgan and Barclays acted as CLNC's advisors. Hogan Lovells US LLP acted as the company's counsel and Clifford Chance US LLP acted as the listing advisors' counsel.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
