NorthStar REIT and NorthStar REIT II Shareholders to Vote on Merger
December 6, 2017 | James Sprow | Blue Vault
Shareholders of NorthStar Real Estate Income Trust Inc. and NorthStar Real Estate Income II will vote at special meetings on January 18, 2018 on the merger agreement to combine the two REITs in an all-stock transaction that was announced in August. The combined company, if the merger is approved, will be named Colony NorthStar Credit Real Estate Inc., a CRE credit REIT with approximately $5.1 billion in assets and $3.4 billion in equity value. The merger and creation of the combined company will also include a select portfolio of Colony NorthStar assets and liabilities.
Colony NorthStar resulted from the January 2017 merger between Colony Capital Inc., NorthStar Asset Management Group Inc. and NorthStar Realty Finance Corp. Colony NorthStar has $57 billion in assets under management and manages capital on behalf of its stockholders, as well as institutional and retail investors in private funds, non-traded and traded real estate investment trusts and registered investment companies. Two other nontraded REITs are currently sponsored by Colony NorthStar: NorthStar Healthcare Income, Inc. and NorthStar/RXR New York Metro Real Estate, Inc.
Under the terms of the merger, Colony NorthStar and its affiliates will receive approximately 37 percent, NorthStar I stockholders will receive approximately 32 percent and NorthStar II stockholders will receive approximately 31 percent of the total consideration issued in the merger, on a fully diluted basis.
In the event of a listing of Colony NorthStar Credit Real Estate Class A common stock on a national exchange without an initial public offering, NorthStar I stockholders will receive 0.3532 shares for each NorthStar I share they own. NorthStar II stockholders (both Class A and Class T) will receive 0.3511 shares of Colony NorthStar Credit Real Estate class A common stock for each share of NorthStar II common stock they own.
In the event of an initial public offering of the Company, NorthStar I stockholders will receive 0.0530 shares of Colony NorthStar Credit Real Estate Class B-1 common stock and 0.3002 shares of Class B-2 common stock for each NorthStar I share they own. Each Class B-1 share will convert into one Class A share common stock 30 days after the IPO closes. NorthStar II stockholders (both class A and class T) will receive 0.0527 shares of class B-1 common stock and 0.2984 shares of class B-2 common stock for each share of NorthStar II. Stockholders will receive cash in lieu of fractional shares. Class B-2 shares will convert to Class A shares 180 days after the IPO closes. Colony NorthStar Credit Real Estate intends to apply to list under the trading symbol “CLNC.” This method of creating “tranches” of common stock that cannot be traded immediately is often used by nontraded REITs that list on an exchange to reduce the downward pressure on stock price that can result from nontraded REIT shareholders seeking immediate liquidity.
The boards of both REITs recommend shareholders vote for the merger.
NorthStar Real Estate Income invests in real estate debt, select equity and securities investments predominantly in the United States. The offering was declared effective by the SEC in July 2010 and closed in July 2013 after raising $1.097 billion. As of the third quarter 2017, the company’s portfolio was comprised of 15 loans, 24 CMBS, 42 properties and 4 private equity investments, totaling approximately $2.032 billion in book value, according to Blue Vault’s Q3 2017 report.
NorthStar Real Estate Income II raised $1.139 billion in investor equity before closing the offering in November 2016 and oversees a $1.6 billion portfolio of 26 CRE loans, 3 private equity investments, 22 industrial properties, two office properties and 14 CMBS, according Blue Vault’s Q3 2017 report.
Learn more about Colony NorthStar, Inc. on the Blue Vault Sponsor Focus page.