Structure Enhances Alignment of Management with
Shareholders
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
consensually terminate the management agreement and internalize the
Company’s management and operating functions. This internalization
transaction is a result of the previously announced strategic
alternative review process to maximize shareholder value that was
undertaken by the Company’s special committee, consisting
exclusively of independent and disinterested directors of the
Company (the “Special Committee”).
In connection with this internalization, Colony Capital will
cease to have affiliated directors on the Company’s Board of
Directors when their terms expire at the Company’s upcoming annual
shareholders meeting in May 2021. As a result, the Company’s Board
of Directors is expected to consist of the four current independent
directors, plus Michael J. Mazzei, the Company’s Chief Executive
Officer and President, and will be led by Catherine D. Rice as
Independent Chairperson.
The Company has also agreed with Colony Capital to enter into a
new stockholders agreement, which will become effective upon
closing of the internalization transaction. Pursuant to the
stockholders agreement, Colony Capital will vote in director
elections as recommended by the Company’s Board of Directors, so
long as Colony Capital owns 10% or more of the Company’s
outstanding common shares, through the 2022 annual meeting. Colony
Capital has also agreed to certain customary standstill
restrictions until the beginning of the advance notice window in
the Company’s Bylaws for the 2023 annual meeting, thus restricting
Colony Capital’s ability to seek to control or influence the
Company. Colony Capital has also agreed that it will not acquire
any additional shares of the Company.
The Special Committee and the Company’s management team are
confident that this internalization transaction will enhance the
Company’s positioning and produce meaningful benefits for all
stockholders:
- Substantial Anticipated Cost Savings through Reduction in
Operating Expenses.The transition to a self-managed structure
is expected to be significantly accretive to earnings and reduce
the Company’s general and administrative expenses. Excluding
one-time termination charges payable to the Manager on the closing
date, the Company currently anticipates generating operating cost
savings of approximately $14 to 16 million per year or
approximately $0.10 to 0.12 per share of common stock.
- Management Continuity and Team Expertise. The Company
will continue to be led by Mr. Mazzei along with Chief Operating
Officer Andrew Witt and its seasoned senior management team.
Approximately 45 employees that have contributed substantially to
the Company’s investment, underwriting, portfolio and asset
management, loan servicing, financial reporting, treasury, legal,
tax, credit, risk and compliance responsibilities are expected to
become employees of the Company.
- Further Aligns Management with Company and Stockholders.
The internalized structure will result in a more transparent
organizational model and a dedicated employee base, which will
focus exclusively on the Company. The new structure will more
directly align the interests of the management team with those of
the Company and all its stockholders.
- Rebranding to Reflect the Company’s Evolution. Shortly
after the closing of the internalization transaction, the Company
expects to begin operating under a new name. This rebranding
strategy marks an important milestone for the Company in 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 execute a short-term transition services agreement with
Colony Capital to facilitate a seamless continuation of
operations.
At the closing, pursuant to 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 any unpaid management fees and
reimbursable costs accrued in accordance with the management
agreement up to the closing date.
The internalization transaction, which is subject to certain
customary closing conditions, is expected to close in the second
quarter of 2021. At that time, the management agreement between the
Company and the Manager will be terminated and the Company will no
longer pay any management or incentive fees to the Manager for any
future periods.
The internalization transaction was negotiated and unanimously
approved by the Special Committee, without participation of
directors affiliated with Colony Capital. Lazard served as the
Special Committee’s independent financial advisor, and Wachtell,
Lipton, Rosen & Katz, served as its independent legal
counsel.
Ms. Rice said, “The internalization of our management team is
the culmination of an extensive strategic review. The Special
Committee is unanimous in its belief that the transaction will be
beneficial to our shareholders and that it will better enable Mike
and the senior management team to continue to reposition and
profitably grow our asset base.”
Mr. Mazzei said, “This internalization caps off a year of
achievements by the CLNC team in stabilizing and improving the
company for the long haul. 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 to be
filed by the Company with the U.S. 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 (CRE) credit REITs, focused
on originating, acquiring, financing and managing a diversified
portfolio consisting primarily of CRE debt investments and net
leased properties predominantly in the United States. CRE debt
investments primarily consist of first mortgage loans, which we
expect to be the primary investment strategy. Colony Credit Real
Estate is externally managed by a subsidiary of leading global
digital real estate and investment management firm, Colony Capital,
Inc. Colony Credit Real Estate is organized as a Maryland
corporation and taxed as a REIT for U.S. federal income tax
purposes. For additional information regarding the Company and its
management and business, please refer to www.clncredit.com.
Cautionary Statement Regarding Forward-Looking
Statements.
This press release may contain forward-looking statements within
the meaning of the federal securities laws. Forward-looking
statements relate to expectations, beliefs, projections, future
plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. In
some cases, you can identify forward-looking statements by the use
of forward-looking terminology such as “may,” “will,” “should,”
“expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” or “potential” or the negative of these
words and phrases or similar words or phrases which are predictions
of or indicate future events or trends and which do not relate
solely to historical matters. 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 significantly from those expressed in any
forward-looking statement. Among others, the following
uncertainties and other factors could cause actual results to
differ from those set forth in the forward-looking statements: the
possibility that the conditions to closing the internalization
transaction will not be satisfied in a timely manner or at all;
operating costs and business disruption from the internalization
transaction may be greater than expected, which could reduce the
potential cost savings anticipated in the internalization
transaction; uncertainties regarding the ongoing impact of the
novel coronavirus (COVID-19); the ability to realize efficiencies
as well as anticipated strategic and financial benefits of the
internalization; whether the Company will achieve its anticipated
2021 Distributable Earnings per share (as adjusted), or maintain or
produce higher Distributable Earnings per share (as adjusted) in
the near term or ever; the possibility that the Company may not be
able to retain key employees; and the Company’s ability to maintain
or grow the dividend at all in the future. The foregoing list of
factors is not exhaustive. Additional information about these and
other factors can be found in Part I, Item 1A of the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2020, as well as in Colony Credit Real Estate’s other filings with
the U.S. Securities and Exchange Commission. Moreover, each of the
factors referenced above are likely to also be impacted directly or
indirectly by the ongoing impact of COVID-19 and investors are
cautioned to interpret substantially all of such statements and
risks as being heightened as a result of the ongoing impact of the
COVID-19.
We caution investors not to unduly rely on any forward-looking
statements. The forward-looking statements speak only as of the
date of this press release. Colony Credit Real Estate is under no
duty to update any of these forward-looking statements after the
date of this press release, nor to conform prior statements to
actual results or revised expectations, and Colony Credit Real
Estate does not intend to do so.
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Investor Relations
Colony Credit Real Estate, Inc. Addo Investor Relations Lasse
Glassen 310-829-5400
Colony Credit Real Estate (NYSE:CLNC)
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