NEW YORK CITY—New Senior Investment Group Inc., the standalone REIT spun off from Newcastle Investment Corp., said Monday it had closed on its first portfolio acquisition, originally announced this past December. SNR has paid $435 million to acquire 17 private pay, independent living seniors housing properties from affiliates of Hawthorn Retirement Group.
The portfolio is 100% private pay, thereby increasing SNR’s share of NOI from private-pay/independent living to 93%. It contains 2,082 units located across 10 states: three properties apiece in Florida, North Carolina and California; two in Washington State; and one each in Massachusetts, New Hampshire, Ohio, Nebraska, Texas and Utah.
With an average age of seven years, the properties in the Hawthorn portfolio had an average occupancy rate of 92.6% as of February. The portfolio will be operated by Holiday Retirement, and SNR expects it to generate an NOI yield of approximately 6.3%.
The REIT financed the acquisition partly with cash on hand and partly with proceeds from a $670-million first mortgage loan with Freddie Mac through Walker & Dunlop. The loan, which was secured by 52 seniors properties and which SNR CEO Susan Givens says was “executed at a very attractive rate,” bears interest at Libor + 234 basis points and matures in seven years. Loan proceeds were used to refinance existing floating rate debt and to fund other acquisitions as well as the Hawthorn portfolio.
In a report on the seniors housing market earlier this month, Marcus & Millichap rated the independent living segment’s prospects highly. MMI predicting that new construction will add 2.4% to the existing stock of independent living facilities in 2015, a development pipeline that under other circumstances might lead to concerns about rent growth, However, MMI said that thanks to an improving residential market that’s enabling seniors to unlock equity in their homes, occupancy in this segment is expected to rise 50 bps to 92.3% by year’s end, while average rents advance 3.1% to $2,923 per month.