Real estate investment and finance company Colony Financial Inc. (CLNY) said Wednesday it would acquire Cobalt Capital Partners in a $1.6 billion deal that would expand the buyer's industrial property portfolio.
Irving, Texas-based Cobalt has a portfolio of 256 light industrial assets housing more than 30 million square feet across 16 major markets. The space, which is focused in Atlanta, Dallas and Chicago, is leased to more than 600 tenants.
Cobalt is currently owned by management and the real estate affiliate of insurance giant United Services Automobile Association (USAA), which, according to reports, put the firm on the block this summer hoping to take advantage of a strong market for commercial real estate assets.
Post-deal, Cobalt will continue to be run by the current management team led by founder Lewis D. Friedland.
Colony, of Los Angeles, is a REIT focused on a range of different properties. The company was founded by investor Thomas Barrack Jr., who in a statement said that the deal is "an important step for us" as Colony attempts to diversify its holdings.
"We have consistently signaled that Colony Financial can achieve additional growth and diversification by launching focused platforms that will grow foundational returns and pursue expansion through bolt-on acquisitions," Barrack said. "A market-leading presence in the light industrial space is one important manifestation of this strategy."
Colony said it has arranged financing from GE Capital Real Estate equal to about 70% of the purchase price, with the balance of the deal to be funded through equity. The portfolio to be acquired is expected to achieve an unlevered net operating income yield of about 7% and an annualized return-on-equity of about 10%.
A Willkie Farr & Gallagher LLP team including Adam Turteltaub, Thomas Mark and Daniel Backer provided Colony with legal counsel.