Colony Capital Launches $500M IPO

Colony Capital Founder Thomas BarrackColony Financial Inc., a newly formed subsidiary of Century City, CA-based real estate investment company Colony Capital, LLC, is launching an initial public offering to buy distressed commercial real estate debt and other assets, according to a June 30 regulatory filing with the Securities and Exchange Commission. The new company, structured as a finance real estate investment trust (REIT), intends to request the listing of its common stock on the New York Stock Exchange and will "acquire, originate and manage a diversified portfolio of real estate-related debt instruments," according to the S-11 registration statement for the IPO reviewed by CoStar Group. "We initially intend to focus primarily on acquiring, originating and managing commercial mortgage loans and other commercial real estate-related debt investments. We also may acquire other real estate and real estate-related debt assets," Colony said in its prospectus. Continued pricing volatility suggests that the commercial mortgage-backed securities (CMBS) market will bring attractive invesment opportunities for several years, the company said. Colony Financial will also target mezzanine, bridge, real estate-owned (REO), debtor-in-possession and loan-to-own debt. In addition, Colony believed that the availability of government-backed Term Asset-Backed Securities Loan Facility (TALF) financing presents an attractive opportunity to achieve higher returns on qualifying CMBS investments. Colony Financial will be externally managed and advised by Colony Financial Manager, LLC, a wholly owned subsidiary of Colony Capital, the privately held international real estate investment firm founded in 1991. Colony Financial intends to seek tax status this year as a REIT. The company did not disclose the number of shares it will issue in the IPO or the target price per share in its filing. The company had not made any investments as of the date of the filing. Merrill Lynch is serving as underwriter of the proposed offering. Colony Capital is one of the world’s largest acquirers and financiers of real estate-related assets with 200 employees in 14 offices spanning 10 countries. The company isn’t new to the game of making opportunistic investments in distressed assets. Colony has invested more than $39 billion in over 8,500 assets since 1991 and raised and managed $15.4 billion of equity capital on behalf of more than 200 institutional investors. In the early ‘90s, Colony Capital became one of the first buyers of distressed assets from Resolution Trust Corp. (RTC) and Federal Deposit Insurance Corp. (FDIC) auctions, according to the June 30 prospectus. In the mid and late ‘90s, Colony shifted its focus to Europe and Asia and as the current U.S. downturn began in late 2007 and commercial real estate fundamentals began to deteriorate, Colony established a distressed credit private investment fund which has participated in five recent FDIC auctions and invested about $172 million of capital through the acquisition of four commercial mortgage loan portfolios and other CRE-related debt. Outside the world of real estate investment, however, Colony may be best known for its founder, chairman and CEO, billionaire Thomas J. Barrack, Jr., and its role in the November 2008 purchase of one of the world’s most famous distressed properties, the late pop musician Michael Jackson’s Neverland Ranch in Santa Barbara County, CA. Jackson last year reportedly transferred title of the 2,800-acre property to Sycamore Valley Ranch Co. LLC, a joint venture between the pop singer and a Colony affiliate. Barrack and Colony expressed condolences to the Jackson family and released other statements pertaining to Neverland in recent days. However, Barrack announced on the Colony Capital web site he is suspending public comment on his blog due to the "quiet period" for public comments required by regulators after a company files a registration statement for an IPO "I realize this is a moment when you were probably hoping for loads of communications from me with regard to many of the current events that are transpiring around certain Colony investments," Barrack said in the statement. "We recently filed a registration statement for a public offering on Colony Financial, Inc., and as a result -- I have been bound, gagged, and ordered to not communicate in a public forum during this time."