Colony NorthStar is planning to roll up its balance sheet credit investments into a “third-party capital entity,” chief executive Richard Saltzman said on the firm’s second-quarter earnings call Wednesday.
The Los Angeles-based real estate investment trust managed $6.3 billion of “other equity and debt,” separate from its investments in healthcare, industrial and hospitality real estate, on its balance sheet as of June 30, according to its second-quarter earnings. In the next two quarters, the firm plans to create a permanent capital vehicle to manage its balance-sheet debt investments, though it has not yet decided if the platform will be public or private. “We’ve made significant progress toward creating a third-party capital entity,” Saltzman said on Wednesday’s call.
The recapitalization of the firm’s conventional US debt book and related investments is “our number one top priority” over the coming year, he added. “This is a legacy core competency of both Colony and NorthStar… we don’t want to do it in such a balance-sheet-heavy way as it’s currently configured today.”
The real estate and investment manager was listed on the New York Stock Exchange as a REIT in January after the three-way merger of Colony Capital, NorthStar Asset Management and NorthStar Realty Finance was complete.
Colony NorthStar has a series of debt vehicles, the most recent of which, Colony Distressed Credit & Special Situations Fund IV, closed on $1.3 billion in March, PERE previously reported.
With its forthcoming permanent capital vehicle, Colony NorthStar could join asset managers that have spun out debt platforms into REITs. Most recently, TPG took TPG Real Estate Finance Trust public last month, raising $220 million in its IPO.
Colony NorthStar is continuing to raise third-party capital for other strategies, including its open-ended core industrial fund. In the second quarter, the investment manager corralled $285 million of capital from institutional and retail investors, bringing total capital raised in the first half of the year to $1.4 billion. The firm is targeting $2 billion in fundraising for 2017, Saltzman said on its first-quarter earnings call.
Colony NorthStar managed $56 billion of assets as of June 30.