Colony Financial originates $60 million in mezzanine CRE debt

Real estate investment firm Colony Financial expressed growing confidence in the commercial retail space by participating in the origination of $400 million in mezzanine debt to finance part of another firm’s acquisition of retail assets from Centro Properties. Of the $400 million in mezzanine debt, Colony Financial originated $60 million. As of late last week, Centro Properties, an Australia-based shopping center developer and manager, possessed a portfolio of 593 American retail properties. The firm that utilized Colony’s mezzanine debt to finance part of its purchase of Centro properties was not named or revealed. However, Centro said last week it sold its U.S. assets and services business to BRE Retail Holdings Inc., an affiliate of Blackstone Real Estate Partners, for $650 million, retaining ownership in only seven of its U.S. properties. The assets backing Colony’s financing deal for the purchase of the Centro assets includes equity interests in 107 shopping centers in 27 U.S. states. Colony Financial also said it closed five new equity transactions valued at $170 million, with 57% of that activity related to loans the firm acquired and 43% tied to loans it originated. “Our second quarter investment activity puts us on pace to fully deploy our recent equity follow-on proceeds before the end of the third quarter, as suggested during our last earnings call,” said Richard Saltzman, president and CEO of Colony Financial. “From a portfolio perspective, our recent investments thematically resemble both our earlier transactions and the opportunities we are pursuing in our robust deal pipeline, with a balance of loan acquisitions and originations, broad diversity by product type and geography, and a blend of current yield and capital appreciation potential that combine to offer attractive risk-adjusted expected returns.” Colony Financial went on to say the firm has now finalized the purchase of 648 performing and non-performing loans with an unpaid principal balance of $388 million from a U.S. bank. Colony acquired the portfolio for $197 million, which is 51% of the portfolio’s unpaid principal balance. The deal includes a portfolio made up mostly of first mortgage, recourse loans. Write to Kerri Panchuk.