LOS ANGELES–(BUSINESS WIRE) – Colony Credit Real Estate, Inc. (NYSE: CLNC) (the “Company”) today announced that the Company and its external manager, CLNC Manager, LLC, a subsidiary of Colony Capital, Inc. (the “Manager”) Or “Colony Capital”), have signed definitive agreements to terminate the management contract by consensus and internalize the management and operating functions of the Company. This internalization transaction is the result of the previously announced strategic alternative review process to maximize shareholder value that was undertaken by the special committee of the company, composed exclusively of independent and disinterested directors of the company (the ” special committee ”).
As part of this internalization, Colony Capital will cease to have affiliated directors on the board of directors of the company when their terms expire at the next annual meeting of shareholders of the company in May 2021. Accordingly, the board of The company’s administration is expected to consist of four current independent directors, plus Michael J. Mazzei, chief executive officer and president of the company, and will be led by Catherine D. Rice as independent president.
The Company has also agreed with Colony Capital to enter into a new shareholders’ agreement, which will come into force upon the closing of the internalisation transaction. In accordance with the shareholders’ agreement, Colony Capital will vote in the election of directors as recommended by the board of directors of the company, as long as Colony Capital owns 10% or more of the outstanding common shares of the company, until the 2022 annual meeting. Colony Capital has also agreed to some customary standstill restrictions until the start of the notice window in the company’s articles for the 2023 annual meeting, thereby limiting Colony Capital’s ability to seek to control or influence society. Colony Capital has also agreed not to acquire additional shares of the Company.
The Special Committee and the management team of the company are convinced that this internalization operation will improve the positioning of the company and produce significant benefits for all shareholders:
- Substantial cost savings expected from reduced operating expensesThe transition to a self-managed structure is expected to significantly increase profits and reduce the general and administrative costs of the company. Excluding the one-time termination fee payable to the Manager on the Closing Date, the Company currently expects to generate operating cost savings of approximately $ 14 to $ 16 million per year or approximately 0.10 to 0. , $ 12 per common share.
- Management continuity and team expertise. The company will continue to be led by Mr. Mazzei with Chief Operating Officer Andrew Witt and his seasoned management team. Approximately 45 employees who have made substantial contributions to investments, underwriting, portfolio and asset management, loan servicing, financial reporting, treasury, The company’s legal, tax, credit, risk and compliance responsibilities become employees of the company.
- Better align management with society and shareholders. The internalized structure will result in a more transparent organizational model and a dedicated employee base, who will focus exclusively on the business. The new structure will align the interests of the management team more directly with those of the Company and all of its shareholders.
- Rebranding to reflect the evolution of the company. Shortly after the in-house transaction closes, the company plans to start operating under a new name. This rebranding strategy marks an important step for the company by becoming self-managed for the first time since its inception, with independence from Colony Capital.
Upon completion of the transaction, the company anticipates an orderly and timely transition of all required operating functions and will enter into a short-term transition services agreement with Colony Capital to facilitate continued operations.
At Closing, in accordance with the terms of the Termination Agreement, the Company will make a one-time cash payment of $ 102.3 million to the Manager to terminate the Management Agreement. In addition, the Company will pay unpaid management fees and reimbursable expenses accrued in accordance with the management agreement up to the closing date.
The internalisation transaction, which is subject to certain customary closing conditions, is expected to close in the second quarter of 2021. At that time, the management contract between the Company and the Manager will be terminated and the Company will no longer pay. no management or incentive fees to the Manager for any future period.
The internalisation transaction was negotiated and unanimously approved by the special committee, without the participation of directors affiliated with Colony Capital. Lazard was the independent financial advisor to the special committee and Wachtell, Lipton, Rosen & Katz, its independent legal advisor.
Ms. Rice said, “The internalization of our leadership team is the culmination of a thorough strategic review. The Special Committee is unanimous in its belief that the transaction will benefit our shareholders and allow Mike and the management team to continue to reposition and profitably grow our asset base.
Mr. Mazzei said, “This internalization concludes a year of achievement by the CLNC team in stabilizing and improving the business over the long term. We believe that the economics of this transaction, along with the certainty and focus it creates for our newly dedicated management team, will lead to greater shareholder value.
Additional details regarding the internalization and related matters will be contained in a current report on Form 8-K that will be filed by the company with the United States Securities and Exchange Commission.
About Colony Credit Real Estate, Inc.
Colony Credit Real Estate (NYSE: CLNC) is one of the largest publicly traded Commercial Real Estate Credit (CRE) REITs focused on building, acquiring, funding and managing a diversified portfolio comprised primarily of states United. The investments in CRE debt mainly consist of first mortgage loans, which should be the main investment strategy. Colony Credit Real Estate is managed externally by an affiliate of the world’s leading digital real estate and investment management company, Colony Capital, Inc. Colony Credit Real Estate is organized as a Maryland corporation and taxed as a REIT for the purposes of of US federal income tax. For more information on the Company, its management and its activities, please consult www.clncredit.com.
Caution Regarding Forward-Looking Statements.
This press release may contain forward-looking statements within the meaning of federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions regarding matters that are not historical facts. In some cases, you can identify forward-looking statements by using forward-looking terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “Believes”, “estimates”, “predicts”, or “potential” or the negative of those words and expressions or similar words or expressions which are predictions or indicate future events or trends and which do not relate solely to historical questions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond our control, and may cause actual results to differ materially from those expressed in any forward-looking statement. Among other things, the following uncertainties and other factors could cause actual results to differ from those stated in forward-looking statements: the possibility that the conditions of closing of the internalisation transaction will not be satisfied in a timely manner or not at all ; the operating costs and business disruption associated with the internalisation transaction may be greater than expected, which could reduce the potential cost savings anticipated in the internalisation transaction; uncertainties regarding the continued impact of the novel coronavirus (COVID-19); the ability to realize efficiencies as well as the expected strategic and financial benefits of internalization; whether the Company will achieve its expected distributable earnings per share for 2021 (adjusted), or maintain or produce higher distributable earnings per share (after adjustment) in the short term or never; the possibility that the company may not be able to retain key employees; and the company’s ability to maintain or increase the dividend in the future. The above list of factors is not exhaustive. Additional information on these and other factors can be found in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as well as in other documents filed by Colony Credit Real Estate with US Securities. and Exchange Commission. In addition, each of the factors mentioned above is likely to be also directly or indirectly impacted by the continued impact of COVID-19 and investors are urged to interpret almost all of these statements and risks as being heightened in due to the continued impact of COVID-19. COVID-19[FEMALE.
We caution investors not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of this press release. Colony Credit Real Estate has no obligation to update any of these forward-looking statements after the date of this press release, nor to comply with any statements made prior to actual results or revised expectations, and Colony Credit Real Estate no do not intend to do so.