NEW YORK CITY — New Senior Investment Group Inc. (NYSE: SNR), a New York-based seniors housing REIT, has agreed to sell its entire assisted living and memory care portfolio for $385 million. The portfolio comprises 28 properties across 14 states totaling 2,840 units. The deal will leave the company with 102 independent living properties and one continuing care retirement community.
Although the buyer was not initially disclosed, it was described as “a very sophisticated institutional buyer with a long track record in seniors housing,” by Susan Givens, CEO of New Senior, on a conference call this morning. “We have a lot of respect for the buyer. We want to see these assets succeed. We have strong relationships with the operating partners, and we want the best for the assets.”
An SEC filing from New Senior this week revealed that the buyer is ReNew REIT, a privately held company that invests in independent living, assisted living and memory care communities. The Toledo-based firm was founded in 2018 by former Welltower CEO George Chapman.
The sold portfolio is spread across six different operators and had an average occupancy rate of 78 percent, well below the national average of 85.4 percent for assisted living, based on third-quarter data from the National Investment Center for Seniors Housing & Care (NIC). By comparison, the average occupancy rate for independent living is considerably higher at 90.2 percent.
“We’ve always liked the assisted living sector, even while facing some challenges,” said Givens. “We looked at a full range of alternatives and a full exit at this time made the most sense for us. There are some challenged assets that require some capital expenditures to be invested. Other groups with time and capital are better suited to own them at this time.”
The price represents a capitalization rate of 5.9 percent.
Reducing debt was a large part of the reasoning for the deal. SNR has approximately $650 million in debt maturing in 2022. The sale will pay down $350 million of that debt, while refinancing the rest at a lower interest rate and pushing the nearest maturity date back to 2025, said Givens.
Drew Babin, a senior analyst with Milwaukee-based broker and investment bank Robert W. Baird, believes SNR is making the right call.
“The transaction eliminates a lot of uncertainty and focuses on the bright spot of New Senior’s business — Independent living,” says Babin. “It’s a good move. It doesn’t solve all their problems, but the operations of the assisted living and memory care portfolio have been holding back their business. It’s addition by subtraction.”
Daniel Bernstein, senior REIT analyst with Capital One Securities, saw the transaction as necessary for New Senior’s future.
“They needed a transaction to get out of a box. This transaction does that,” says Bernstein. “This gives New Senior some financial flexibility to buy some better quality assets and start some external growth, which they haven’t done much of. It simplifies the value of the company.”
SNR’s stock price closed at $7.04 per share on Thursday, Oct. 31, up from $5.33 one year ago. Stockholders appeared to react positively to the news, raising the price to $7.39 in early-morning trading following the conference call.
— Jeff Shaw