NorthStar Realty Finance Corp. (NYSE:NRF) announced Monday an agreement to acquire a $1.05 billion senior housing and care portfolio from investment partnerships owned and managed by Formation Capital, LLC and Safanad Limited.
The healthcare real estate portfolio consists of more than 8,500 beds in 43 mostly private-pay senior housing communities and 37 skilled nursing facilities.
NorthStar, a commercial real estate investment trust and asset management company, is acquiring the properties in a joint venture with Formation, a private investment firm focused on senior housing and care real estate, from Formation’s investment partner, global investment house Safanad.
NorthStar will contribute approximately 92% of the $430 million of equity to purchase the portfolio. The joint venture will assume in-place financing for the remainder of the purchase price.
“Safanad as the lead investor, together with Formation Capital, have built a substantial senior care real estate platform in the US. While this partial exit realizes our expected return, it is also a validation of our senior care investment strategy,” said Safanad’s CEO, Kamal Bahamdan, in a statement. “Consistent with this strategy, we will continue to actively explore further investment opportunities within this sector, while we maximize the value of the remaining assets.”
The deal marks NorthStar’s first major acquisition since bringing on former HCP CEO Jay Flaherty to oversee and grow the REIT’s on-balance sheet healthcare real estate portfolio.
“We are very pleased to have a diversified, quality portfolio of healthcare properties added to our existing healthcare portfolio that we expect will produce attractive current and overall returns,” said NorthStar’s chairman and CEO, David Hamamoto, in a statement. “Since joining our healthcare real estate team only two months ago, Jay Flaherty has sourced an investment pipeline through his relationships in the industry that is adding significant value to the NorthStar franchise.”
Flaherty implied more deals ahead through the joint venture with Formation.
“This transaction represents an initial step towards our goal of expanding NorthStar’s healthcare portfolio into a preeminent healthcare real estate business,” he said. “We are enthusiastic that this will be the first of many compelling transactions that we can complete with our partners at Formation Capital.”
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The deal has a 9.4% cap rate and 36 of the 43 senior housing communities will be owned through a RIDEA structure. The remaining communities, including the 37 skilled nursing facilities, will be owned under triple-net leases across five master leases.
The names of the operators of the properties were not disclosed but sources have confirmed to SHN that existing partner Senior Lifestyle Corporation currently manages 13 of the senior housing properties with plans to manage seven more. A spokesperson for Prestige Senior Living, another of Formation’s existing operating partners, told SHN the company is not involved in Monday’s acquisition announcement.
NorthStar declined to disclose any further information at this time.
The $1 billion portfolio is located across 14 states with the heaviest concentration in Florida, at 35%.
Written by Alyssa Gerace