Goldman and Landmark buy Colony RE portfolio

Colony Capital is understood to be mulling the sale of its remaining real estate fund interests.

Colony Capital has agreed to sell $200 million worth of real estate fund stakes as it prepares to exit the real estate secondaries business, sister publication PERE has learned.

Goldman Sachs Asset Management and Landmark Partners have agreed to buy the fund interests, with Goldman acquiring at least an 80 percent interest in the portfolio and Landmark purchasing the remainder, according to multiple sources familiar with the matter.

Colony, Goldman and Landmark declined to comment. However, PERE understands the firms signed a sale and purchase agreement in June. The transfers of the fund stakes began in July, with the transfer of each closing upon approval by the underlying fund manager. Approximately half of the fund interest transfers have successfully been completed and the entire transaction is expected to close by 30 September, two sources said.

The portfolio is said to include 30 legacy fund interests that predecessor entities of Colony had acquired through various transactions and had a net asset value of $200 million as of 31 December.

It is unclear which fund stakes are involved in the sale. PERE understands that the portfolio did not include the fund interests from two of the largest secondaries transactions that Colony made through predecessor entities. In 2013, NorthStar Realty Finance and NorthStar Real Estate Income Trust acquired up to $1 billion of real estate fund stakes from the New Jersey Division of Investment. The two NorthStar entities had partnered on the deal with GSAM, which acquired a 15 percent stake in the portfolio at the time.

That same year, NorthStar Realty Finance also bought partial interests in 51 real estate funds from a financial services firm that was said to be TIAA-CREF. Northstar paid approximately $390 million in cash for its partial fund interests, which had a net asset value of approximately $765 million, while TIAA-CREF retained $375 million of capital in the funds.

NorthStar Realty Finance, NorthStar Asset Management and Colony merged into a single real estate investment trust last year.

In its second-quarter earnings results, Colony said: “The company had contracts to sell the majority of its real estate private equity investments and concurrent with the sale the company discontinued recognising income for such investments.” The firm did not disclose the amount of investments to be sold nor who the buyers were.

In an earnings call in March, Colony president and chief executive Richard Saltzman said “our earnings performance has not lived up to expectations,” and attributed the results in part to “lower returns in our residual real estate private equity secondaries and CDO securities portfolios.”

The Los Angeles-based investment firm is understood to be mulling the sale of its remaining real estate fund interests, although it plans to retain fund stakes that are expected to liquidate within the next 12 months.