NYSE-listed REIT NorthStar Realty Europe announced on Friday that its stockholders have approved the proposed merger with and into a core fund managed by AXA Investment Managers – Real Assets (AXA IMRA).
NRE stockholder approval was a condition to the closing of the transactions which was first announced in July. Under the deal, AXA IMRA is paying $16.95 per share to take control of NorthStar Realty Europe's €1.1 bn office-led property portfolio in Europe on behalf of a client.
Closing of the merger is expected to take place by the end of September.
NRE's portfolio comprises 12 office properties and two hotel assets covering 122,000 m2 with a combined value of €1.1 bn, located in key cities across Germany, the UK and France. The office portfolio is 96% let, with an average lease expiry of 5.9 years. AXA said it offered potential for both asset management and further income generation.
The transaction follows an announcement by NRE in November 2018 that its board of directors was undertaking a strategic review of the business, including a possible sale of the company.
Colony received $64.6 mln in a lump sum incentive and termination fee payment and $96 mln for its 11% ownership representing a premium of approximately $22 mln or 30% above Colony’s cost basis, said Colony.
'The Colony team led by Mahbod Nia has done a tremendous job in stewarding NRE's high-quality European assets and managing a very challenging process which has concluded with a win for all parties,' said Thomas Barrack, chairman and CEO of Colony.
'The closing of this transaction represents another great milestone of accomplishment for our strategy to arbitrage public and private markets, and simplify our story and balance sheet, and we plan on using the proceeds from this transaction to continue to right-size our capital structure and invest in digital growth businesses as we transform into the leading operator, investment manager, and capital provider in the digital infrastructure industry.'
However, those comments appear to gloss over the mistake of Colony Capital merging NorthStar Asset Management Group with NorthStar Realty Finance Corp in 2016 to create a larger group that incorporated NRE.
The Wall Street Journal reported on September 17 that Barrack told investors the preceding week that the move was a mistake. 'We mispriced it,' he reportedly said. 'It’s on me. It’s my responsibility, and it shouldn’t have happened.'
As part of its new tilt towards becoming a digital firm, Colony Capital acquired Digital Bridge Holdings earlier this year for $325 mln (€291 mln) in the form of cash plus shares in Colony.
'As our experiential world gives way to a new future – a data-driven world – real estate in its current format with long-dated contractual revenue streams from traditional tenants will have to change and adapt or face substantial obsolescence,' said Barrack.