New York City

NEW YORK CITY—NorthStar Realty Finance Corp. is looking to spin off Wakefield Capital LLC, which began as a net-leased seniors housing and healthcare-related property investment joint venture several years ago, into a separate publicly traded company of its own.

Earlier this week New York City-based NorthStar filed a registration statement for a proposed IPO of the new entity, NorthStar Healthcare Investors Inc., which expects to qualify as a REIT. NorthStar Healthcare expects to continue and expand Wakefield’s business, with a focus on acquiring and owning senior housing facilities, primarily private pay assisted living facilities, and other healthcare properties, according to the filing with the Securities and Exchange Commission. The proposed maximum offering price is $200 million, but the filing does not specify the per-share price. It expects the new entity’s stock to be listed on the New York Stock Exchange.

When the stock offering and related formation transactions are completed, according to the SEC filing, NorthStar Healthcare will own a portfolio of 66 senior housing facilities (encompassing 3,878 units/beds in 14 states) and one life sciences campus. When the transactions are complete, 32 of the senior housing facilities will be triple-net leased to third-party operators; the other 34 will be leased to its taxable REIT subsidiary and operated by third-party operators on behalf of the TRS lessee under management agreements. “By leasing certain senior housing facilities to our TRS lessee, we are able to benefit from the growth in facility-specific cash flows generated by the operator engaged by our TRS lessee and we have more control over this operator’s performance,” the filing states.

The three-building, 286,700-square-foot life sciences campus, located in Hillsboro, OR, is fully leased to Oregon Health Sciences University, a BBB-rated tenant.

“Through the network of relationships established by our senior management team, we have an active pipeline of acquisition opportunities in various stages of due diligence and we expect this pipeline to continue in the future,” the filing states. “We are currently evaluating approximately $200 million of acquisition opportunities, the majority of which are private pay ALFs. We have not reached a binding agreement or understanding with the current owners of any of the senior housing facilities in our pipeline and we cannot provide any assurance that we will pursue or continue to pursue any of these acquisition opportunities or complete any of these acquisitions.”

Wakefield was established as a joint venture between NorthStar Realty Finance and Chevy Chase, MD-based Chain Bridge Capital LLC in 2006 and began with a $64-million acquisition of 13 net-leased assets, primarily assisted living facilities, from Chain Bridge.

Net leased to a single tenant or otherwise, healthcare properties would seem to be one of the preferred asset types for what transaction activity is taking place in the current depressed market, whether they are sold between third parties or are the subject of sale-leasebacks.

Recent deals include two that were announced in mid-November, both by public REITs. In one, Omega Healthcare Investors Inc. of Hunt Valley, MD, announced it reached an agreement with CapitalSource Inc. to buy the entities owning 80 triple-net leased long-term care facilities for $565 million, as well as an option to purchase another 63 facilities.

According to an announcement from Chevy Chase, MD-based commercial lender CapitalSource, the agreement encompasses “substantially all of its healthcare net lease portfolio.”

And in another, National Health Investors Inc. of Murfreesboro, TN closed a $28.25-million purchase and leaseback of five assisted living facilities with Olathe, KS-based Bickford Senior Living and affiliates. The properties, four in Michigan and one in Illinois and totaling 216 units, were leased back to Bickford for 15 years at an initial lease rate of 9.5% plus fixed annual increases.

“It’s not for everyone, but senior housing/healthcare owner/operators who are not committed to owing the real estate that houses their business are finding sale-leaseback arrangements can be an attractive alternative in today’s cash-strapped economy,” according to a recent announcement from Chicago-based Cambridge Realty Capital Cos., which specializes in senior housing and healthcare lending. “By signing a long-term escalating lease with a third party investor, owner/operators often are able to generate close to 100% of their capital needs.”