Commercial real estate company NorthStar Realty Finance Corp. will merge with its current external manager, NorthStar Asset Management Group, and private equity firm Colony Capital to become Colony NorthStar, a real estate investment trust with $58 billion in assets, the companies announced Friday. The transaction is expected to be finalized in the first quarter of 2017.
“This strategic combination is the next logical step for NSAM and NRF, creating substantial value for shareholders and transforming the companies into a world-class, internally managed equity REIT that includes a sizable, established institutional and retail asset management platform,” said David Hamamoto, current executive chairman of NSAM and chairman of NRF, which has a solid presence in seniors housing. Hamamoto will be executive vice chairman of the combined entity.
Thomas J. Barrack Jr., current executive chairman of Colony, said the companies will “realize substantial efficiencies and synergies by bringing our organizations together.” After the deal closes, the combined entity should see about $115 million in total annual cost synergies, including about $80 million in cash savings and $35 million of stock-based compensation savings, the organizations said.
Barrack will be executive chairman of the new board of directors, which will have 13 directors. Six will be nominated by NSAM and NRF, six will be nominated by Colony and one additional board member will be mutually agreed on by the existing NSAM, Colony and NRF directors. The majority of the board will be comprised of independent directors, according to the organizations.
Richard B. Saltzman, current CEO and president of Colony, also will be CEO of the combined entity. Colony’s current chief financial officer and chief operating officer, Darren Tangen and Mark Hedstrom, respectively, will have those roles in the combined company, too.
Al Tylis, NSAM’s CEO and a member of the NSAM and NRF boards, will assist in the transition after the merger. Dan Gilbert, NSAM and NRF’s chief investment and operating officer will, among other responsibilities, oversee Colony NorthStar’s retail platform.