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New Senior terminates Holiday Retirement leases amid strategic review

As part of its review of a range of strategic alternatives to maximize shareholder value, healthcare-focused real estate investment trust New Senior Investment Group agreed to terminate its triple-net leases with affiliates of Holiday Retirement for a total consideration of $116 million.

The consideration includes a $70 million termination payment and $46 million of retained security deposits. The agreement is contingent upon the company completing a refinancing of the existing debt on the portfolio, which had an outstanding face sum of roughly $666 million as of March 31 and a current coupon of 4.15%, on or before May 21.

The company plans to refinance the debt with a one-year $720 million secured loan in May. The loan will bear interest of 4.0% over the London Interbank Offered Rate during the first six months, increasing by 50 basis points after the sixth monthly payment and by another 50 basis points after the ninth monthly payment. New Senior Investment expects to see roughly $65 million of prepayment fees and expenses related to the refinancing.

New Senior Investment also entered into property management agreements with the affiliates of Holiday Retirement, which is majority owned by private equity funds managed by the REIT's manager. Under the deal, the REIT will pay a management fee equal to a monthly base fee of 5% of effective gross income in the first year and 4.5% of effective gross income for the remaining period. New Senior Investment will also pay an annual incentive fee of up to 2% of the portfolio's effective gross income, subject to the achievement of certain performance thresholds.

Both agreements were approved by a special committee of New Senior Investment's board of directors, the REIT said in a release.

Additionally, the board expects to determine the amount of the company's first-quarter dividend by June 1. The payout, which is expected June 22, may be less than dividends paid for previous quarters, the trust said.