Goldman Sachs Initiates Coverage On Colony Financial

Goldman Sachs believes Colony Financial's

CRE portfolio should provide an attractive yield in an uncertain environment. Despite upside to book value, Goldman initiates coverage of this mortgage REIT with a Neutral rating, given a more challenging prospective investment setting. CLNY raised $290 million in a 2009 IPO and is now 93% invested across 19 positions, targeted to earn 15-20% unleveraged IRRs. Goldman expects CLNY to raise additional capital for new investment in 4Q10. It also sees a multi-hundred-billion dollar opportunity set for CRE investment in the current environment, where firms with expertise like CLNY's should be disproportionate winners as in past cycles. Risks to achieving the target price include a double dip recession; wider credit spreads for CRE lending, and weaker capital markets or competition could limit fundraising capacity. CLNY is trading 1% lower at $18.45