After New Media Spinoff, Newcastle REIT Positioned for Senior Housing Growth

Newcastle Investment Corp. (NYSE:NCT), which made waves last year by acquiring 52 Holiday Retirement communities for $1 billion, has officially solidified its focus on senior housing. 

The real estate investment trust last week spun off its media-related investments into New Media Investment Group Inc. (NYSE:NEWM), which began trading on the New York Stock Exchange on February 14. Newcastle is managed by FIG LLC, an affiliate of Fortress Investment Group, LLC (NYSE:FIG), which owns Holiday Retirement.

With the media assets spun into their own entity, Newcastle’s portfolio is now comprised of senior housing properties and CDOs (collateralized debt obligation). 


“The New Media spin should accelerate NCT’s transition to a senior living property owner and result in a re-rating of shares,” said Jason Stewart, CFA, an analyst with Compass Point Research & Trading, LLC who covers Newcastle, in a report. “Post NEWM spin-off, NCT’s equity investment will be split (almost 50/50) between senior housing assets and real estate/other debt.” 

Newcastle has considered collapsing its legacy CDO investments, but this is not likely to occur in 2014, Compass Point says.

“Ultimately, we believe management remains committed to focusing NCT’s balance sheet on senior living assets and if a collapse is unlikely, a separation of the CRE and senior living assets is a possibility,” the report says. “…By [the end of 2014] we believe management will effectuate a collapse of the remaining CDOs or split the CRE and senior living assets into separate entities.” 


Senior housing investments are expected to be a key driver of Newcastle’s earnings growth going forward, with management expecting to invest $89 million of equity into more assets in 2014’s first quarter. 

In November 2013, Newcastle announced plans to acquire 52 Holiday Retirement communities for $1 billion. While Newcastle management has said it will consider further Holiday acquisitions, it intends to focus on smaller acquisitions and off-market deals, according to Stewart. 

Written by Alyssa Gerace

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