[Update] Northstar Realty to Sell Position in $900 Million Senior Housing Portfolio

Amid stock market turmoil, one senior housing real estate investment trust (REIT) is about to shake things up with a buyback plan.

NorthStar Realty Finance (NYSE: NRF) has announced its plans to sell its interests in a senior housing portfolio for a gross price of approximately $900 million, with $648 million of mortgage financing in place being assumed as part of the transaction. NorthStar anticipates it will receive approximately $150 million in net proceeds from the sale. The company expects the transaction to generate an internal revenue rate (IRR) of approximately 13.6% on its invested equity.

The transaction is part of the REIT’s newly-announced efforts to recapture shareholder value over the long term. The REIT plans to continue its $500 million stock repurchase authorization and has repurchased approximately $180 million of common stock to date.

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“The substantial amount of monetization we’ve achieved in such a short amount of time, in addition to the number of initiatives that are in process, is hopefully going to provide us an opportunity to really make a dent in both, in terms of aggressively buying back our stock and taking the risk out of our business, which certainly in this environment should be highly valued by the market,” a company representative said during a conference call with analysts Friday morning.

NorthStar Realty also noted in the filing it would consider sales of other assets, sale and/or accelerated repayments of its loans, debt investments and real estate securities, and a sale of all or a portion of its real estate private equity fund.

“This capital, together with cash generated through our asset monetization efforts, will be redeployed towards actively repurchasing our common stock and eliminating our recourse corporate borrowings, thus simultaneously creating immense value through share buybacks and reducing risk in our business,” Jonathan Langer, chief executive officer, said in a separate statement.  “While our near term focus is centered on creating liquidity to repurchase our stock and reduce leverage, we continue to maintain a best in class investment platform and remain poised to continue to grow, as and when market conditions allow, as a diversified equity REIT.”

Under this monetization plan, NorthStar Realty has received or expects to receive approximately $930 million of cash proceeds.

The REIT also responded to a shareholder of NorthStar Asset Management (NYSE: NSAM), an asset management company that was spun off in 2014. In January, a NSAM shareholder urged the company to recombine with NorthStar Realty Finance, as the company was undervalued and saw its stock prices decline more than 50% from their highs.

In a public filing listed on Thursday, NorthStar Realty Finance noted they are exploring that possibility and have hired an investment bank as an advisor.

“NorthStar Realty also announced its board of directors has formed a special committee and the special committee has retained UBS Investment Bank as its financial advisor to explore a potential recombination transaction with NorthStar Asset Management Group Inc. (NSAM),” the filing reads.

Executives did not specify a clear strategy on the potential recombination with NSAM or a timeline for its buyback plan during a conference call with analysts Friday morning. The management did state that the company would explore strategies with UBS as an advisor to recapture value for NorthStar Realty shareholders only, noting that the strategy may diverge from NSAM’s.

The REIT’s stock was trading up in response to the company’s stock buyback plan and earnings report.

NorthStar Realty did not returned SHN’s request for comment as of press time.

Written by Amy Baxter

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