Colony Capital, a real estate investment firm founded by Thomas J. Barrack Jr., has agreed to combine with Colony Financial Inc., a real estate investment trust managed by a subsidiary of Barrack’s firm, in a deal valued at $658 million.

The agreement between the Santa Monica companies would shift nearly all of Colony Capital’s real estate and investment management interests, including about $19 billion in assets under management, to the REIT.

In exchange, Colony Financial would give Colony Capital up to $658 million in common stock or operating partnership units. Of that, about $548 million would be paid upfront and roughly $110 million would be subject to multiyear performance targets.

The companies’ announcement cited benefits including reduction of operating expenses and greater simplicity from unifying investment activity.

A representative for both entities wouldn’t comment further on the deal.

Colony Financial, traded on the New York Stock Exchange, has a market cap of $2.7 billion. With more than 460,000 shares, Barrack is its largest individual shareholder. Colony Capital is privately held.

Jason Weaver, a research analyst at Sterne Agee & Leach in Nashville, Tenn., thinks the two companies together could get a much higher valuation than they would as independent businesses. The announcement was made after the markets closed on Nov. 4; Colony Financial shares rose about 9 percent Nov. 5, closing at $24.08.

Weaver said he thought Colony Capital might have seen this as an easier regulatory route to bringing the company public.

“The idea at first is just to get Colony Capital’s asset management business public,” Weaver said.

Barrack will serve as executive chairman of the combined company, which will operate as Colony Capital Inc. Richard B. Saltzman, the Colony Capital firm’s New York-based president, will assume the role of chief executive at the joined entity.

The deal must be approved by Colony Financial stockholders and a committee of its board members. The companies hope to close the deal by the end of the first half of 2015.

Barrack, with an estimated net worth of $1.45 billion, is No. 35 on the Business Journal’s list of Wealthiest Angelenos. He founded Colony Capital in 1991 and has led it through a number of high-profile deals, including debt restructuring for Michael Jackson’s Neverland Ranch and forming a partnership with Annie Leibovitz after settling an outstanding loan for the famous photographer.

Colony Financial was launched in 2009. It acquires, originates and manages a portfolio of real estate-related debt and equity investments.

Excluded from the deal is Colony American Homes, which has become a self-managed REIT.

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