NorthStar Realty in Merger Talks to Create Large-Scale REIT

NorthStar Realty Finance (NYSE: NRF), a significant owner of senior housing properties, could merge with Colony Capital Inc. (NYSE: CLNY) and NorthStar Asset Management Group (NYSE: NSAM) into a single real estate investment trust if talks currently underway result in a deal, the three companies recently confirmed in a joint statement.

The news comes several months after NorthStar Asset Management came under pressure from an activist shareholder, pushing the company to consider recombining with NorthStar Realty Finance. The asset management company, which externally manages NRF, was spun off from the real estate investment trust in 2014. NRF held a health care portfolio approaching $7 billion as of last September, with nearly 45% consisting of assisted or independent living assets.

Following the spin-off, the asset management company and the REIT both saw their share prices decline more than 50% from their highs. 


After receiving a letter from activist Land and Buildings, a New York-based hedge fund, NSAM hired Goldman Sachs to begin evaluating strategies to maximize shareholder value.

The potential “tri-party” transaction involving the NorthStar entities and Colony Capital would consist of an all-stock combination based on historical trading prices, the companies disclosed last Friday.

“The three companies believe that the combination would create a world-class diversified real estate and investment management equity REIT with significant scale, deep management talent, and the opportunity to generate substantial revenue and expense synergies,” the companies’ joint statement read.


However, there is no guarantee the transaction will occur and what the precise terms will be, and the companies said they do not intend to provide interim updates.

Colony Capital is a global real estate investment and management firm headquartered in Los Angeles. Over 25 years, it has sponsored $24 billion of equity across various funds and investment vehicles, and has a portfolio primarily consisting of real estate equity, real estate debt, and investment management of private equity funds and vehicles sponsored by the company. 

Written by Tim Mullaney

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