New Senior Announces Definitive Documentation for Internalization
November 20 2018 - 6:33AM
Business Wire
Company’s Management Function Will Be
Internalized as of January 1, 2019
New Senior Investment Group Inc. (“New Senior” or the “Company”)
(NYSE: SNR) announced today it has entered into a definitive
agreement to internalize the Company’s management function,
effective as of January 1, 2019.
Strategic Review
As previously announced on February 23, 2018, the Company’s
Board of Directors (the “Board”), together with the Company’s
management team and legal and financial advisors, have been
exploring a full range of strategic alternatives to maximize
shareholder value. The Board formed a special committee (the
“Special Committee”), composed entirely of independent and
disinterested directors, to address certain aspects of the
strategic review. In connection with the strategic review, the
Company retained J.P. Morgan Securities LLC as its financial
advisor and Skadden, Arps, Slate, Meagher & Flom LLP as its
legal advisor. In addition, the Special Committee retained Morgan
Stanley & Co. LLC as its independent financial advisor and
Wachtell, Lipton, Rosen & Katz as its independent legal
advisor.
The strategic review has been a multi-step process, resulting in
the following previously announced initiatives: (1) the termination
of triple net leases and entry into new management agreements for
51 IL Assets in May 2018, (2) a re-set of the Company’s dividend in
August 2018, (3) the $720 million refinancing completed on October
10, 2018 and (4) an agreement in principle reached in August 2018
to internalize the Company’s management function, subject to the
completion of definitive documentation.
On November 19, 2018, the Company and the Manager formalized the
agreement in principle to internalize the Company’s management
function with the entry into a Termination and Cooperation
Agreement (the “Termination and Cooperation Agreement”).
Termination and Cooperation Agreement
Currently, the Company is externally managed by FIG LLC (the
“Manager”), an affiliate of Fortress Investment Group LLC, subject
to oversight by the Board, pursuant to a Management and Advisory
Agreement, dated November 6, 2014 (the “Management Agreement”). In
accordance with the Management Agreement, the Manager provides the
Company with a management team, other personnel and corporate
infrastructure. Accordingly, all of the individuals who provide
services to the Company are currently employees of the Manager. In
exchange for the Manager’s services, the Company pays the Manager
certain fees, including a management fee and, subject to
performance, an incentive fee. The Company also reimburses the
Manager for certain costs.
Under the Termination and Cooperation Agreement, the parties
have agreed to terminate the Management Agreement effective as of
January 1, 2019. In consideration for the termination of the
Management Agreement prior to the end of its term, the Company will
(i) make a one-time cash payment of $10 million to the Manager and
(ii) issue to the Manager 400,000 shares of the Company’s newly
created Series A Cumulative Perpetual Preferred Stock, which will
have a liquidation preference amount of $100 per share and pay a
cumulative quarterly cash dividend at a rate of 6.0% per year (the
“Preferred Stock”). The Preferred Stock will be redeemable by the
Company at any time. In addition, the Manager will have the right
to require the Company to redeem 50% of the Preferred Stock
beginning at the end of 2020, and the other 50% beginning at the
end of 2021.
As a result of the termination of the Management Agreement, the
Company will cease to be externally managed, and the Company will
become the employer of its officers and employees. Susan Givens has
accepted an offer of employment to remain as the Company’s Chief
Executive Officer, and the post-internalization management team is
expected to include several individuals who currently are employees
of the Manager and serve in key roles at the Company. In addition,
the Manager is expected to continue to provide certain services (at
cost) for a transition period, pursuant to a transition services
agreement.
Expected Benefits of the Internalization
The internalization is expected to have the following key
benefits:
- Cost-Savings. The Company
estimates that the internalization will result in a reduction in
general and administrative expenses of approximately $10 million
per year.
- Simplicity and Transparency. The
internalization is expected to simplify the Company’s
organizational structure and increase the transparency of its
financial results.
- Expanded Institutional
Ownership. New Senior’s institutional ownership base could
expand as a result of increased comparability with its peers in the
healthcare REIT sector.
The internalization is one of several types of transactions that
were given thorough consideration by the Board and the Special
Committee during the course of the strategic review. Having
considered a range of alternatives, the Board and the Special
Committee believe that internalizing the Company’s management
function will provide the greatest opportunity to maximize value
for shareholders.
ABOUT NEW SENIOR
New Senior Investment Group Inc. (NYSE: SNR) is a
publicly-traded real estate investment trust with a diversified
portfolio of senior housing properties located across the United
States. As of September 30, 2018, New Senior is one of the largest
owners of senior housing properties, with 133 properties across 37
states. New Senior is managed by an affiliate of Fortress
Investment Group LLC, a global investment management firm. More
information about New Senior can be found at
www.newseniorinv.com.
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Certain information in this press release may constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, including without
limitation statements regarding the expected internalization of the
Company’s management, including with respect to the potential costs
and benefits, and the expected completion, thereof. These
statements are not historical facts. They represent current
expectations regarding future events and are subject to a number of
risks and uncertainties, many of which are beyond our control, that
could cause actual results to differ materially from those
described in the forward-looking statements. These risks and
uncertainties include, but are not limited to, risks and
uncertainties relating to the Company’s ability to successfully
manage the transition to self-management. Accordingly, you should
not place undue reliance on any forward-looking statements
contained herein. For a discussion of these and other risks and
important factors that could affect such forward-looking
statements, see the sections entitled “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in the Company’s most recent annual and
quarterly reports filed with the Securities and Exchange
Commission, which are available on the Company’s website
(www.newseniorinv.com). New risks and uncertainties emerge from
time to time, and it is not possible for New Senior to predict or
assess the impact of every factor that may cause its actual results
to differ materially from those contained in any forward-looking
statements. Forward-looking statements contained herein speak only
as of the date of this press release, and New Senior expressly
disclaims any obligation to release publicly any updates or
revisions to any forward-looking statements contained herein to
reflect any change in New Senior's expectations with regard thereto
or change in events, conditions or circumstances on which any
statement is based.
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for New Senior Investment Group Inc.David Smith, (212)
515-7783
New Senior Investment (NYSE:SNR)
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