Newcastle Investment Corp. (NYSE:NCT) announced Monday an agreement to acquire a 52-property portfolio of senior housing properties from affiliates of Holiday Retirement for approximately $1.01 billion.
Newcastle is a real estate investment trust primarily focused on senior housing along with other types of real estate and debt and is externally managed and advised by an affiliate of Fortress Investment Group.
Fortress Investment Group owns Holiday Retirement, the largest independent living provider in the nation. During its third quarter earnings call, Chicago-based Ventas (NYSE:VTR) announced the acquisition of a 26-property portfolio from Holiday for nearly $800 million and told analysts of the potential to buy more properties down the road.
Holiday operates 333 independent living properties around the country and will continue to manage the communities being purchased by Newcastle, which have been split into two identical triple net master leases. The portfolio was 91% occupied on average as of the end of the third quarter.
The 52-property portfolio includes communities located across 24 states with a “complementary footprint” to the REIT’s existing portfolio. Each master lease includes 26 properties, has a 17-year term and first-year rent equal to 6.5% of the purchase price with annual increases during the following three years of 4.5% and then up to 3.75%.
Also on Monday, Newcastle announced plans to make a public offering of 50 million shares of its common stock, with net proceeds intended to go toward funding the portfolio acquisition. Newcastle also intends to grant underwriters a 30-day option to purchase up to an additional 7.5 million shares of common stock. Priced at $5.25 per share, gross proceeds of the offering could reach up to $303.8 million if the underwriters exercise that option.
Newcastle expects to fund approximately 70% of the $1.01 billion purchase price with non-recourse debt financing, which is currently being negotiated, and the remainder with equity, including the net proceeds from the public offering.
Newcastle notes it may also use the net proceeds from this offering for general corporate purposes, which could include acquisitions of other senior housing properties, CDO debt, other real estate securities and loans, operating businesses, or other assets. Credit Suisse Securities LLC and UBS Securities LLC are the joint book-running managers for the offering.
The REIT also noted an “attractive pipeline” for investments in senior housing assets in its prospectus filing.
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“In addition to the Holiday Portfolio, we have also signed either a purchase and sale agreement or a letter of intent (granting us exclusive rights to negotiate a purchase and sale agreement) with respect to 15 properties with an aggregate estimated purchase price of $274 million (including assumed debt and other transaction costs),” Newcastle said in the filing. “The equity investment for these properties (net of financing) is expected to be approximately $89 million.”
As of press time, Newcastle had not responded to SHN’s request for comment while Holiday declined to provide any additional information. The acquisition is expected to close in December.
Written by Alyssa Gerace