September 9, 2021, Ben Swett, The SeniorCare Investor - The seniors housing and care M&A market was hit with another major deal announcement a couple of days ago when DigitalBridge Group, formerly known as Colony Capital, disclosed that it was selling its healthcare real estate assets for approximately $3.21 billion. The decision is part of DigitalBridge’s strategy to focus solely on “digital infrastructure,” a strategy that has so far yielded a number of dispositions of “non-core assets” in the last two years and concludes with this deal.
The healthcare assets include MOBs, senior care facilities and hospitals. There are 106 managed MOBs with 3.8 million square feet that were 82.6% occupied as of the end of March 2021. The senior care assets are split between 53 SHOP communities with 4,756 units that were 69.4% occupied in the first quarter of 2021, on average, 65 triple-net leased seniors housing communities with 3,534 units and 70.8% occupancy in Q4:20, on average, and 83 triple-net leased skilled nursing facilities with 9,723 beds and 62.8% occupancy in the fourth quarter. There were nine triple-net leased hospitals with 456 total beds included in the deal as well. Operating partners include Senior Lifestyle Corp., Frontier Management, Miller’s Health Systems, Wellington Healthcare, Citadel Care Centers and Consulate Health Care.
DigitalBridge also sold its equity interest in and management of its sponsored non-traded REIT, NorthStar Healthcare Income, Inc., which Colony Capital acquired (through a merger) in 2016. Former CEO Thomas Barrack Jr. had previously called the merger a mistake, acknowledging that the NorthStar assets were overpriced and came with too much debt. Not to mention, the assets did not perform to expectations even before the pandemic and no longer fit with the company’s vision within the digital infrastructure space, which includes towers, data centers, fiber, and small cells.
Now, they are getting out and fulfilling that wish, at an approximate price of $3.21 billion. Excluding the MOB square footage, that results in a per-unit price of nearly $175,000 per unit, which does not seem too high considering there are seniors housing and hospital assets included in the deal. Making up the purchase price will be $226 million of cash, a $90 million five-year seller note and the assumption of both $2.6 billion in consolidated investment-level debt and $294 million of subsidiary-level debt.
An investment group including two real estate investment firms emerged as the buyer. Highgate Capital Investments, which is a hospitality-focused firm with over $15 billion in assets under management, and Aurora Health Network, which was co-founded by Joel Landau (fonder of The Allure Group) and Leo Friedman (CEO of Citadel Care Centers).
The deal is expected to close in early 2022. Barclays served as financial advisor to DigitalBridge in connection with the transaction and Willkie Farr & Gallagher LLP served as legal counsel. Deutsche Bank Securities Inc. served as financial advisor to Highgate and Aurora and Latham & Watkins LLP served as legal counsel.