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NorthStar Realty Finance Announces Definitive Agreement To Acquire A $1.05 Billion Healthcare Real Estate Portfolio

NEW YORK, March 17, 2014 /PRNewswire/ -- NorthStar Realty Finance Corp. (NYSE: NRF) ("NorthStar") today announced that it has entered into a definitive agreement to acquire a $1.05 billion healthcare real estate portfolio (the "Portfolio") from investment partnerships owned and managed by Formation Capital, LLC or its affiliated entities (collectively "Formation") and Safanad Limited. The Portfolio is comprised of 43 primarily private-pay senior housing facilities and 37 skilled nursing facilities. Inclusive of this portfolio, NorthStar has an approximately $1.6 billion healthcare real estate portfolio consisting of over 160 properties.  

NorthStar is acquiring the Portfolio in a joint venture with Formation (the "Joint Venture"). Formation is a leading private investment firm focused on senior care real estate and services and post-acute healthcare. NorthStar and its affiliates will contribute approximately 92% of the $430 million of equity to purchase the Portfolio and the Joint Venture will assume in-place financing for the remainder of the purchase price.

NorthStar's Chairman and Chief Executive Officer, David Hamamoto, commented, "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. 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, who oversees NorthStar's healthcare real estate platform, added, "This transaction represents an initial step towards our goal of expanding NorthStar's healthcare portfolio into a preeminent healthcare real estate business. We are enthusiastic that this will be the first of many compelling transactions that we can complete with our partners at Formation Capital."

Portfolio Highlights   

  • The purchase price for the Portfolio represents a cap rate of 9.4%, an initial unlevered yield of 7.8% and an initial levered current yield of approximately 12%.  
  • The Portfolio is located across 14 states with the heaviest concentration (35%) in Florida.
  • 36 of the 43 senior housing facilities will be owned through a RIDEA structure and the remaining facilities, including all 37 skilled nursing facilities, will be owned under triple-net leases across five separate master leases.
  • The portion of the Portfolio under triple-net leases is expected to have a year-one aggregate lease coverage ratio of approximately 1.3x and all of the leases have fixed rent escalators between 2-3% annually. 

About NorthStar Realty Finance Corp.

NorthStar Realty Finance Corp. ("NorthStar") is a diversified commercial real estate investment and asset management company that is organized as a REIT. NorthStar recently announced a plan to spin-off its asset management business into a separate public company.  For more information about NorthStar, please visit www.nrfc.com.

About Formation Capital

Formation Capital is a leading private investment management firm focused on senior housing and post-acute healthcare real estate investments.  Since 2002, Formation Capital has invested more than $1.5 billion of equity capital in over 25 investments.  For more information regarding Formation Capital, visit www.formationcapital.com.

About Safanad Limited

Safanad is a global principal investment firm that invests in real estate, private equity and public markets. With offices in New York, Dubai, London and Geneva, the firm seeks to identify attractive investment opportunities primarily within the healthcare, education, financial services and retail sectors. For more information regarding Safanad, please visit www.safanad.com.   

Forward Looking Statements

This press release contains certain "forward‑looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward‑looking statements are generally identifiable by use of forward‑looking terminology such as "will," "expect" or other similar words or expressions. Forward-looking statements are not guarantees of performance and are based on certain assumptions, discuss future expectations, describe plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Such statements include, but are not limited to, the performance of the Portfolio and NorthStar's healthcare real estate portfolio generally, NorthStar's ability to close on the Portfolio, NorthStar's ability to source and complete additional transactions in healthcare real estate through the Joint Venture or other ventures with Formation Capital, the ability to allocate a portion of NorthStar's investment in the Portfolio to an affiliate of NorthStar, including NorthStar's healthcare non-traded REIT, and the amount and timing of such allocation, if any, the ability of the third party property operators to successfully manage the facilities in the Portfolio, NorthStar's ability to achieve strong current and overall returns on its healthcare real estate portfolio, NorthStar's ability to source additional opportunities through its joint venture with Mr. Flaherty, the scalability of NorthStar's healthcare platform, the amount of cash flow generated by the Portfolio, if any, in excess of the lease payments, NorthStar's ability to achieve anticipated levels of year-one coverage, NorthStar's future cash available for distribution and NorthStar's ability to maximize shareholder value. Additional factors that could cause actual results to differ materially from those in the forward-looking statements are specified in NorthStar's Annual Report on Form 10-K for the year ended December 31, 2013 and its other filings with the Securities and Exchange Commission.

Any forward-looking statements contained herein speak only as of the date of this press release. NorthStar expressly disclaims any obligation to publicly release any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

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