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Deals & Dealmakers

NorthStar/Colony shareholders approve largest real estate merger of the year

The shareholders of NorthStar Asset Management Group, NorthStar Realty Finance Corporation and Colony Capital have jointly approved a $58 billion merger that stands as the largest real estate deal of the year.

The approval creates Colony Northstar. Inc., a NYSE-listed real estate investment trust with $58 billion of assets under management. The new entity will have shares in New York City properties through RXR Realty, which owns Manhattan office towers such as 1330 Avenue of the Americas and 530 Fifth Avenue. NorthStar Realty Finance bought a 30 percent ownership interest in RXR in 2013. Earlier this year, NorthStar/RXR made its initial investment by acquiring a minority stake in 1285 Avenue of the Americas.

The deal, which was first announced in June, will lead to a leadership reshuffle. Thomas Barrack, the founder of Colony Capital who was recently named as the chairman of President Donald Trump’s Inauguration Committee, will become Colony Northstar’s executive chairman. David Hamamoto, the executive chairman of NSAM and Chairman of NRF, will become the executive vice chairman. Richard Saltzman, the president and CEO of Colony Capital, was named CEO of Colony NorthStar.

“The overwhelmingly favorable shareholder vote provides support to our view that combining these three complementary companies will result in what we believe is the best outcome for all stakeholders. We are very excited with creating such a strong partnership of already established companies and our future prospects,” said David T. Hamamoto, the executive chairman of NSAM and Chairman of NRF.

“Our focus now turns to the successful integration of the businesses, realizing the anticipated synergies of the merger, and executing on our go-forward strategic plan by taking advantage of the unique scaled platform resulting from the merger,” added Richard B. Saltzman, the CEO of Colony.

The merger pushed through in spite of opposition from some investors. Last September, Land and Buildings investment manager Jonathan Litt urged fellow Northstar Asset Management shareholders to vote against the merger. “We continue to believe that there are superior alternatives for NSAM shareholders and the tri-party merger as currently structured does not present the most compelling opportunity,” Litt wrote in a letter addressed to NorthStar stockholders.

His comments were echoed by billionaire Michael Dell. Dell heads MSD Capital, one of the biggest shareholders in NSAM.

“We agree that the proposed combination has the potential to create significant value though scale, cost synergies, strategic focus and enhanced valuation. The combination could be a positive transformational transaction for all three companies,” MSD Capital said in a letter. “However, we also believe that, as currently structured, the proposed combination does not provide sufficient value to NSAM’s stockholders. In addition, the currently proposed governance structure for the combined company falls short of good governance norms in many key respects,” the fund said.

The REIT, which will trade in the NYSE under the ticker symbol “CLNS,” will have a market capitalization of $8 billion. The merger is expected to close in 2017.

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