It was only a few short months ago that NorthStar Asset Management Group (NSAM) announced that it was buying a majority stake in Cleveland, Ohio-based real assets advisory firm The Townsend Group. Now NorthStar is in the position of being sold itself.
Like most publicly-traded real estate investment trusts (REITs), the New York-based asset manager has seen its share prices get pummeled in recent months. At press time, NSAM stock was trading at $10.59 a share, toward the bottom of a 52-week range spanning a low of $9.17 and a high of $24.91. This share price devaluation led NorthStar to announce in January that it was considering strategic alternatives for the company, including a potential sale.
Although they are public REITs, NSAM and its affiliate NorthStar Realty Finance (NRF) have emerged over the past few years as formidable investors in private equity real estate. NRF – out of which NSAM spun out in 2014 – bought a minority interest in European real estate fund manager Aerium Group in 2014 and acquired a number of large real estate secondary portfolios, including nearly $1 billion of fund interests from the New Jersey Division of Investment in 2013. Although NRF has not announced that it is examining strategic options, the company also could potentially be sold along with NSAM.
NSAM is not the only REIT with private equity real estate holdings exploring a sale. Last year, Philadelphia-based Resource America made a strategic investment in Chicago-based real estate fund manager Pearlmark Real Estate Partners, through a 50:50 joint venture. In late January, Resource America also announced that it was exploring strategic alternatives.
Both of these companies are seen as prime takeover targets in the private equity real estate industry. In a January report, FBR analysts Daniel Altscher, Cole Allen and Tim Haye, said NSAM could attract a long list of potential buyers, including traditional asset managers, real estate managers, brokerage businesses, sovereign wealth funds, pension funds and insurance companies.
In its report, FBR singled out two private equity firms that could bid on NorthStar. “Blackstone has said to have interest in entering the non-traded REIT business and could see NSAM as their way into an already fully operational platform,” the analysts wrote. Apollo Global Management, which saw a deal to buy a stake in real estate asset manager AR Capital collapse last year, also was named as a possible buyer. If the company is still in the market, it too could be interested in NSAM.
According to one investment banker, Resource America is likely to attract even more interest than NSAM, since the former would be less expensive to buy because of its smaller market capitalization. It also does not have a stake in an advisory firm like Townsend, which some buyers could see as a potential conflict of interest.
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