Shareholders of NorthStar Real Estate Income Trust Inc. and NorthStar Real Estate Income II, two non-traded real estate investment trusts, will soon vote on the merger agreement that was announced in August.
NorthStar Real Estate Income Trust (NorthStar I) and NorthStar Real Estate Income II (NorthStar II) and a select portfolio of Colony NorthStar assets and liabilities are planning to combine in an all-stock combination transaction to create a combined company named Colony NorthStar Credit Real Estate Inc., a commercial real estate credit REIT with approximately $5.1 billion in assets and $3.4 billion in equity value.
The special meetings will be held on January 18, 2018 at the offices of J.P. Morgan, 270 Park Avenue, 11th Floor, New York, New York 10017. NorthStar I stockholders will vote at 9:00 a.m. (EST), and NorthStar II stockholders will vote at 10:00 a.m. (Eastern Time).
It is currently expected that 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.
If Colony NorthStar Credit Real Estate lists its 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 common stock for each share of NorthStar II common stock they own.
If there is an initial public offering, 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.
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.
In the event of an initial public offering, each Class B-1 share will convert into one Class A share common stock 30 days after the IPO closes. 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.”
If the merger is approved, the Colony NorthStar Credit Real Estate board will consist of seven members, including four independent directors. Kevin Traenkle is expected to be chief executive officer and Sujan Patel is expected to be chief financial officer of the company.
The boards of both REITs recommend shareholders vote for the merger.
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.
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 more than $1.1 billion. As of the third quarter 2017, the company’s portfolio was comprised of 15 investments totaling nearly $2.2 billion.
NorthStar Real Estate Income II raised $1.1 billion in investor equity before closing the offering in November 2016 and oversees a $1.6 billion portfolio of 23 investments, according to Summit Investment Research.