NorthStar to Acquire $640 Million CCRC Portfolio

NorthStar Healthcare Income Inc., a public, non-traded real estate investment trust, has agreed to purchase 15 continuing care retirement communities (CCRCs) from subsidiaries of Fountains Senior Living Holdings, LLC, in a deal totaling approximately $640 million.

National senior living operator Watermark Retirement Communities Inc. will continue as the day-to-day operator of the CCRCs after the sale. With more than 35 communities in 20 states, Watermark is the operating partner of Tucson, Ariz.-based acquisition, finance, design and development firm The Freshwater Group.

The portfolio consists of six entrance-fee CCRCs and nine rental CCRCs, totaling 3,637 units, according to a Form 8-K recently filed with the Securities and Exchange Commission. Of the total units, about 65% are rental properties and 35% are entrance fee properties, with 23 being contracted life estate units. The CCRCs are located in 11 states.

The deal is expected to close around June 1, at which time NorthStar will lease the entrance fee properties to affiliates of The Freshwater Group Inc., pursuant to a master net lease. The rental properties will be held under a RIDEA structure, with NorthStar owning 97% and Freshwater owning 3% of the joint venture. Under the joint venture agreement, NorthStar will manage and control the joint venture’s business and affairs, with Freshwater’s consent on certain major decisions.

NorthStar expects to finance the deal with seven-year debt at a fixed interest rate of 3.92%, which is equal to approximately 64% of the portfolio’s purchase price. On April 10, NorthStar delivered a rate-lock deposit to the lender of approximately $8 million.

The parties entered into the purchase agreement in late February, and NorthStar’s $20 million deposit toward the purchase become non-refundable as of April 9, according to the Form 8-K.

NorthStar Healthcare Income Inc. owned a portfolio of 20 investments, including 16 equity investments with a total cost of $942.7 million and four debt investments with a principal amount of $145.9 million, as of Feb. 6, 2015. On that date, NorthStar issued a prospectus and announced an offering of up to $500 million in shares of common stock to the public at $10.20 per share in a primary offering. An additional $200 million in shares were offered at $9.69 per share.

With a focus on originating, acquiring and managing the assets of equity and debt investments in health care real estate, NorthStar Healthcare Income is a wholly-owned broker-dealer subsidiary of NorthStar Asset Management Group Inc. (NYSE: NSAM).

Another arm of NSAM, NorthStar Realty Finance Corp. (NYSE: NRF), recently acquired an $875 million portfolio of 32 independent living communities from an affiliate of Holiday Retirement.

And in one of the biggest seniors housing deals of 2014, NorthStar Realty Finance Corp. announced a $1.05 billion acquisition involving more than 8,500 beds in 43 mostly private-pay senior housing communities and 37 skilled nursing facilities.

That deal was a joint venture with private investment firm Formation Capital LLC and global investment house Safanad.

Written by Tim Mullaney