Colony Financial Announces New Transaction Activity Totaling $38 Million

LOS ANGELES--(BUSINESS WIRE)--Colony Financial, Inc. (the "Company") (NYSE: CLNY) today announced two new transactions totaling $38.1 million of equity participation.

On March 31, 2011, the Company, together with another investment vehicle managed by affiliates of Colony Capital, LLC, acquired, at a discount, an existing $60 million first mortgage loan secured by fee simple condominium interests within two Manhattan landmark buildings serving primarily as special event spaces, but also including office, restaurant and storage uses, that are owned and occupied by a best-in-class operator. Simultaneously upon closing, the loan was restructured to reflect a $39.1 million face amount with a five-year term. The Company’s pro rata share of the restructured loan is approximately $29.1 million for a 74.4% economic interest. Additionally, the borrower will contribute approximately $3 million of new equity. The restructured loan will bear interest at a fixed rate of 11% per annum, of which 2% may be paid-in-kind for the first two years at the borrower’s option. Inclusive of fees, the yield-to-maturity on the loan is projected to be approximately 13%. The restructured loan is expected to have a debt service coverage ratio in excess of 3:1 and a loan-to-value of approximately 65%.

On March 30, 2011, the Company, together with another investment vehicle managed by affiliates of Colony Capital, LLC, committed to originate, subject to the satisfaction or waiver of certain conditions set forth therein, an $18 million senior secured term loan secured by substantially all the assets of Grubb & Ellis Company and its affiliates, a national real estate services firm engaged in brokerage, asset management and investment management. The Company’s pro rata share of the loan is $9 million for a 50% economic interest. The loan will have an eleven-month term, bear interest at an average fixed rate of 11.7% per annum, all of which can be paid-in-kind at the borrower’s option, and include an upfront 1% origination fee and certain prepayment fees. The loan also includes warrants equal to approximately 9.6% of the Grubb & Ellis Company’s common shares outstanding and blocks all distributions to shareholders until certain financial covenants are met.

About Colony Financial, Inc.

Colony Financial, Inc. is a real estate finance and investment company that is focused primarily on acquiring and originating commercial real estate loans and real estate-related debt at attractive risk-adjusted returns. Secondary debt purchases may include performing, sub-performing or non-performing loans (including loan-to-own strategies). Colony Financial has elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes. Colony Financial is a component of the Russell 2000® and the Russell 3000® indices. For more information, visit www.colonyfinancial.com.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company's control, that may cause actual results to differ significantly from those expressed in any forward-looking statement. Statements regarding the following subjects, among others, may be forward-looking: business and investment strategy; investment portfolio; projected operating results; actions and initiatives of the U.S. Government and changes to U.S. Government policies and the execution and impact of these actions, initiatives and policies; ability to obtain financing arrangements; financing and advance rates for the Company's target assets; expected leverage; compliance with obligations under, and restrictions imposed by, the Company's credit facility; general volatility of the markets in which the Company invests; expected investments; expected co-investment allocations and related requirements; interest rate mismatches between the Company's target assets and its borrowings used to fund such investments; changes in interest rates and the market value of the Company's target assets; changes in prepayment rates on the Company's target assets; effects of hedging instruments on the Company's target assets; rates of default or decreased recovery rates on the Company's target assets; the degree to which the Company's hedging strategies may or may not protect the Company from interest and foreign exchange rate volatility; impact of changes in governmental regulations, tax law and rates, and similar matters; the Company's ability to maintain its qualification as a REIT for U.S. federal income tax purposes; the Company's ability to maintain its exemption from registration under the 1940 Act; availability of investment opportunities in mortgage-related and real estate-related investments and other securities; availability of qualified personnel; estimates relating to the Company's ability to make distributions to its stockholders in the future; the Company's understanding of its competition; and market trends in the Company's industry, interest rates, real estate values, the debt securities markets or the general economy.

All forward-looking statements reflect the Company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the Company's future results to differ materially from any forward-looking statements, see the section entitled "Risk Factors" in the registration statement relating to the Company's underwritten public offering filed with the Securities and Exchange Commission on March 21, 2011, as amended, and the Company's Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission on March 7, 2011, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission.