Tom Barrack’s Colony Capital explores sale of warehouse business

Tom Barrack’s Colony Capital Inc. is exploring the sale of Colony Industrial, its unit that owns warehouses, according to people with knowledge of the matter.

Real estate investor Colony Capital, which in February said it would conduct a strategic review as it attempts to salvage its sinking market value, is working with Eastdil Secured and Morgan Stanley to solicit interest from potential buyers for the unit, which may fetch more than $5 billion, said the people, who asked not to be identified because the talks are private. Suitors for the unit include Brookfield Asset Management Inc. Representatives for Brookfield and Los Angeles-based Colony Capital declined to comment.

Colony Industrial, based in Dallas and led by Lew Friedland, has been growing. In March, it bought a portfolio of 54 buildings spanning 11.9 million square feet in states including California, Washington and Oregon for almost $1.2 billion.

The unit’s holdings are mostly light industrial properties, which serve as the last mile of the logistics chain and are crucial for companies seeking to make speedy deliveries to consumers. Its assets were worth about $4.3 billion as of March 31, according to filings. Including interests held off-balance sheet, this number exceeds $5 billion, according to one of the people.

The warehouse business was one of a few that was discussed when Colony Capital held preliminary talks with Oaktree Capital Group late last year, Bloomberg has reported. Because of relatively strong growth and low vacancies, warehouses have remained in favor with real estate investment trusts such as Prologis Inc. and private equity firms including Blackstone Group Inc. Both companies struck large industrial deals in recent months.

Colony Capital, which manages $43 billion, has been struggling to bounce back from a calamitous January 2017 merger with two NorthStar companies. Since the deal’s completion, its stock had fallen about 65% through Tuesday. The shares, which were trading as low as $4.99 earlier Wednesday, jumped to as high as $5.15 after Bloomberg reported the company was exploring a sale of the industrial unit. They traded at $5.12 at 4:02 p.m. in New York.

Barrack, who was chairman of President Trump’s inauguration committee, returned to the chief executive role at Colony in November.

One of Colony’s affiliates, NorthStar Realty Europe Corp., agreed this month to be acquired by Axa Investment Managers.

Bloomberg writers Scott Deveau and Lily Katz contributed to this report.