Colony Credit Real Estate, Inc. Class Action Lawsuit
- Company Name
- Colony Credit Real Estate, Inc.
- Stock Symbol
- Class Period
- Pursuant and/or traceable to Colony Credit’s Registration Statement and Prospectus issued in connection with the combination of Colony NorthStar, Inc., NorthStar Real Estate Income Trust, Inc., and NorthStar Real Estate Income II, Inc. on or about February 1, 2018
- Central District of California
The Colony Credit Real Estate, Inc. class action lawsuit charges Colony Credit and certain of Colony Credit’s officers and directors with violations of the Securities Act of 1933. The Colony Credit class action lawsuit was filed in the Central District of California and seeks to represent purchasers or acquirers of Colony Credit common stock pursuant and/or traceable to Colony Credit’s Registration Statement and Prospectus (collectively, the “Registration Statement”) issued in connection with the combination of Colony NorthStar, Inc. (“Colony NorthStar”), NorthStar Real Estate Income Trust, Inc. (“NorthStar I”), and NorthStar Real Estate Income II, Inc. (“NorthStar II”) on or about February 1, 2018 (the “Merger”). The Colony Credit class action lawsuit is captioned Peters v. Colony Credit Real Estate, Inc., No. 20-cv-08305, and was commenced on September 10, 2020.
Colony Credit is a commercial real estate (“CRE”) real estate investment trust that purports to manage a diversified portfolio of CRE senior mortgage loans, mezzanine loans, preferred equity, debt securities, and net leased properties predominantly in the United States. Following the Merger, Colony Credit common stock was listed on the New York Stock Exchange without an initial public offering: stockholders of NorthStar I received 0.3532 shares of Colony Credit Class A common stock for each share of NorthStar I common stock they owned; and stockholders of NorthStar II received 0.3511 shares of Colony Credit Class A common stock for each share of NorthStar II common stock they owned.
The Colony Credit class action lawsuit alleges that the Registration Statement was materially false and misleading and omitted to state: (i) that the credit quality of certain of Colony Credit’s assets had deteriorated prior to the Merger and was continuing to deteriorate at the time of the Merger; (ii) that certain of Colony Credit’s loans, including four loans for approximately $261 million related to a New York hotel, were substantially impaired, there was insufficient collateral to secure the loans, and it was unlikely that the loans would be repaid; (iii) that, as a result, the valuation attributed to certain of Colony Credit’s assets was overstated; (iv) that certain of the assets contributed as part of the Merger were of substantially lower value than reflected in Colony Credit’s financial statements and the Registration Statement; (v) that, as a result, Colony Credit’s financial condition, including its book value, was materially overstated; and (vi) that, as a result of the foregoing, the positive statements in the Registration Statement about Colony Credit’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
On November 6, 2018, Colony Credit reported a $35 million provision for loan losses for four loans secured by a New York hotel. On this news, Colony Credit’s share price fell more than 5%.
Then, on February 28, 2019, Colony Credit disclosed a $77 million provision for loan losses “related to four separate borrowers as a result of updates to the timing and likely range of outcomes achievable in connection with the asset foreclosures and dispositions.” On this news, Colony Credit’s share price fell more than 5%.
Thereafter, on August 8, 2019, Colony Credit reported a $119 million provision for loan losses “related to four separate borrowers.” On this news, Colony Credit’s share price fell more than 12% over two consecutive trading sessions.
Finally, on November 8, 2019, Colony Credit announced a portfolio bifurcation of certain assets and disclosed a $127 million provision for loan losses. On this news, Colony Credit’s share price fell nearly 18%, further damaging investors.
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