NEW YORK CITY-NorthStar Realty Finance Corp. said Wednesday afternoon that it it had entered into a long-term partnership with James J. Flaherty III, former CEO of HCP Inc., to build its healthcare real estate business. GlobeSt.com reported this past October that HCP's board terminated Flaherty as president and CEO after a 10-year tenure in those roles, and brought in Lauralee Martin, Americas CEO at Jones Lang LaSalle, to succeed him.
In his partnership with NorthStar, Flaherty will be responsible for growing NorthStar's on-balance sheet healthcare real estate portfolio. He will also focus on raising institutional capital for funds to be managed by NorthStar Asset Management Group Inc. and become CEO of NorthStar's healthcare non-traded REIT, NorthStar Healthcare Income Inc.
“We are very pleased and fortunate to have someone of Jay's caliber join the NorthStar team,” says NorthStar's chairman and CEO, David Hamamoto. He cites Flaherty's “distinguished career, institutional credibility and proven ability to dramatically scale a healthcare real estate business while generating superior returns for shareholders” as “incredibly compelling for NorthStar and NorthStar Asset Management.”
Given Flaherty's track record, Hamamoto says, “I am confident that we can build a best in class healthcare real estate platform that will create the framework for extraordinary growth in NorthStar Asset Management and further diversify NorthStar's asset base with high quality investments.” Flaherty grew HCP's market capitalization tenfold during his time there, from about $2 billion in 2003 to more than $20 billion last year, in the process building it into the third largest REIT in the US.
Under terms of the agreement announced Wednesday, the partnership with Flaherty will be entitled to incentive fees ranging from 20% to 25% above certain hurdles in connection with new and existing healthcare real estate investments on NorthStar's balance sheet and new investments in future healthcare real estate funds raised by the partnership. It will also be entitled to the incentive fees earned by NorthStar from managing NorthStar's healthcare non-traded REIT and any future healthcare non-traded REITs sponsored by NorthStar or NorthStar Asset Management.
For his part, Flaherty will be entitled to one-third of any healthcare balance sheet promotes and healthcare NTR promotes, and one-half of any healthcare fund promotes.
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