Colony Acquires $1.5B Cobalt Capital Portfolio

LOS ANGELES—Colony Financial has completed the $1.6-billion acquisition of Cobalt Capital's 256-property light industrial portfolio, and according to analysts at Sterne Agee, the buy will fair well for the company's 2016 consensus. Colony purchased the portfolio with cash and debt, not new secondary equity as imagined, leading analysts to predict a 10% ROE projection on the new assets that will add $0.25-$0.30 per share to current 2016 consensus.

Colony purchased the portfolio with a $1.09-billion loan from GE Capital with a LIBOR plus 230 basis points, plus $327 million in cash and an additional $206 million from the company's co-investors. The transaction also included the acquisition of a Cobalt Capital operating platform for $20 million, which was funded with $10 million in cash and a three-year note “of the principal will be repaid at one-year intervals in shares or equivalent units of Colony common stock with a reference price of $24.22,” according to Sterne Agee analyst Jason P. Weaver. He adds that this amounts to 40,000 shares, which will have an insignificant impact overall.

The acquisition is predicted to generate an EBITDA growth of 5-6%. Colony's equity portion amounts to 63% add approximately $35 million to 2016 core earnings. That estimate includes a depreciation adjustment of $0.27 per share.

This news comes at the end of quite a busy year for Colony Financial. Earlier this month, Colony Financial and Colony Capital definitively merged together as one in a deal valued at $657.5 million. Representing about $19 billion in assets under management and $13 billion of equity under management, the deal does not include Colony American Homes, the self-managed REIT in the single-family rental sector.