Colony Credit Real Estate Signs Agreement to Internalize Management
Structure Enhances Alignment of Management with Shareholders
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
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
$14to 16 million per year or approximately $0.10to 0.12 per share of common stock.
Management Continuity and Team Expertise. The Company will continue to be led by
Mr. Mazzeialong with Chief Operating Officer Andrew Wittand 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
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
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
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
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.
Addo Investor Relations