Seeking Alpha

Newcastle presentation on Senior Investment spinoff

  • The spinoff of New Senior Investment Group (SNR) will leave Newcastle Investment (NCT) with its real estate debt and golf course businesses, says the company in a presentation.
  • Presentation slides
  • By separating the senior housing operation, Newcastle management hopes SNR will attain a valuation closer to that of its peers (something it hoped the New Residential spin would do last year). Between properties already owned and those under contract, the senior housing portfolio is 99 properties and 12.4K beds, with 95% private-pay independent and assisted-living properties.
  • Post-spin, Newcastle will focus on managing its existing CDO, restructuring core golf operations, and maybe investing in distressed golf assets. The company will also eye other potential investments, with a primary focus on commercial real estate.
  • Previously: Newcastle to spin off Senior Housing business
Comments (13)
  • Michael Bryant
    , contributor
    Comments (5350) | Send Message
     
    "Newcastle management hopes SNR will attain a valuation closer to that of its peers (something it hoped the New Residential spin would do last year)."
    So SNR will have a 12% dividend like (NRZ)?

     

    What is the spin off size? 1 SNR for 1 (NCT)?
    16 Jun, 05:02 PM Reply Like
  • taxman100
    , contributor
    Comments (244) | Send Message
     
    If they are valued like other senior housing, figure the dividend around 7%. If you assume 50% of the current dividend is related to senior housing, that puts the stock price around $2.85 post split, and CDO's and golf courses of $2.40 or so as their yield needs to be higher vs. the current combined of 8%.

     

    Senior housing around $500 million of assets, CDO's around $408 million, and golf courses around $79 million. This is per the presentation slides.
    16 Jun, 05:19 PM Reply Like
  • crl1603
    , contributor
    Comments (143) | Send Message
     
    any thoughts as to whether nct or the combined assets of nct are unervalued and if so what is a reasonable price target?
    16 Jun, 05:27 PM Reply Like
  • Michael Bryant
    , contributor
    Comments (5350) | Send Message
     
    In my article http://seekingalpha.co... , I noted "Fellow contributor Alpha Hungry has written an excellent article on why he thinks NCT is undervalued and could be about $11 by the end of the year, a nearly 100% gain from current levels."
    16 Jun, 08:49 PM Reply Like
  • t515cc
    , contributor
    Comments (28) | Send Message
     
    How about a reverse split of 3 or 4 to 1 after the spinoff to get the share price above $5 for both companies. Lots of funds and investors can't/won't buy a stock with a price below $5.
    16 Jun, 07:56 PM Reply Like
  • Exquisite Decay
    , contributor
    Comments (152) | Send Message
     
    Reverse split confirmed. According to Exhibit 99.1: Each Newcastle stockholder will be entitled to receive share(s) of New Senior Investment Group common stock for each share of Newcastle common stock held by such stockholder at the close of business on , 2014, the record date of the distribution, prior to giving effect to a one-for- reverse stock split that Newcastle intends to implement immediately prior to the distribution. The New Senior Investment Group common stock will be issued in book-entry form only, which means that no physical stock certificates will be issued.
    16 Jun, 10:21 PM Reply Like
  • t515cc
    , contributor
    Comments (28) | Send Message
     
    Aha! Thanks Ex. So lets say SNR shares are issued on, say, a 1 to 4 ratio. SNR would then open at around 10 or 11. If NCT then reverse splits by the same ratio its price would also be in the vicinity of 10. I'm for that.
    17 Jun, 10:19 AM Reply Like
  • Len Friedman
    , contributor
    Comments (48) | Send Message
     
    Why do I get the feeling that I'm the king and I've just been invited to the Emperor's party only to find I'm the bird of prey about to be divided and subdivided--all for the sake of appearances? Sure, it'd be nice to see units of SNR trading above $10 but they are still around half of today's $5 NCT units with different clothing. And a reverse is merely mathematical game-play, either way you look at it. Nobody is getting anything for nothing.

     

    Meanwhile, I'm as pleased as could be, now that the spin is actually in play. I'm just not especially impressed when I see people playing numbers games in justification of anything when it comes to fictionalizing my cash.
    17 Jun, 03:30 PM Reply Like
  • Exquisite Decay
    , contributor
    Comments (152) | Send Message
     
    Len,
    The NYSE will initiate delisting a stock if it trades below $1 for 30 consecutive trading days. The reverse split is more to ensure that does not happen. I don't think NCT is trying to have shareholders feel they are getting something for nothing.
    17 Jun, 06:58 PM Reply Like
  • Len Friedman
    , contributor
    Comments (48) | Send Message
     
    It's been suggested that SNR will command something close to$2.78 or so of the current $5, representing all assets combined. And it is the senior assets that bear the brunt of earnings responsibility, with ease, I might add.

     

    Speaking in generalities only, we're talking about slicing NCT of today into two pieces, somewhat unequally shaped. Each piece is virtually assured of exceeding exchange requirements and thus there is no exposure to the possibility of delisting. And like you, I'm not at all suspicious of NCT, I'm certain the company is doing what it can for the sake of unit holders' enrichment. What I'm not yet connecting is the need to do a reverse---unless the remaining assets are thought to be at risk as a stand-alone entity. Were that the case, why not do a partial reverse? Or effect the reverse following the divorce?

     

    Again, I'm not thinking along conspiracy lines as my nearly 16,000 units should make it clear I'm a very happy camper. But I would like to understand more.

     

    Thanks to anyone daring to unfog my brain. I hope you won't become similarly Infected. lol
    18 Jun, 07:42 AM Reply Like
  • Michael Bryant
    , contributor
    Comments (5350) | Send Message
     
    16,000 units is impressive. I have a long way to go. Those 16,000 units of (NCT) give you about $6,400 in dividend income per year. That is enough for a cruise a year.

     

    The way I see it, the reverse split is believed to draw institutional investors, because many institutions don't buy shares under $10, sometimes because of criteria reasons listed in the fund's constitution.
    18 Jun, 09:43 AM Reply Like
  • Flave
    , contributor
    Comments (20) | Send Message
     
    A reverse split should enhance NCT/SNR value long term.
    18 Jun, 08:10 AM Reply Like
  • Len Friedman
    , contributor
    Comments (48) | Send Message
     
    Michael Bryant, I'm enjoying your remarks in particular; Exquisite Decay also. However, I'm a bit surprised that nobody is bringing up a reason for NCT going through with this latest spin in the first place! I'm thinking it's to unlock value from within, value that might otherwise remain under the radar without adequately rewarding unit holders. One thing for certain is that the Company wouldn't go forward with this plan unless there were profit potentials at hand. That said, I think it would be naïve to assume the same old 40 cents per unit distribution will remain in place. The Company's guidance projects 30% ROI which suggests to me that the payouts will escalate before unit pricing moves higher in response. The increasing distribution will spark investor appetite, pushing units higher and more in line with other high profile REITS.

     

    The reverse must be implemented to remove needless risk from the divided components. After a few quarters, I'd expect that time plus smart management will have convinced investors that SNR is, indeed, a worthy investment vehicle. It will take time to demonstrate distribution stability and I think several quarters should do it.

     

    I've been adding units, $4.71 is a fine price. Tomorrow (Monday) I'll be continuing the hunt, especially if units drop back towards the $4.50 range and slightly below. This is where I was adding before the recent run-up by REITs in general. Units closed at $4.42 on May 6th. What with just having gone ex on Friday, we've got 90 days to wallow in nobody's land, effectively dead money. My hunch is that units will drop to something between $4.30 and $4.45. The 40 cents currently paid out might be justified by today's mixed assets but will not make any sense when only the senior housing portfolio is in the spotlight. If NCT's projection is close, then we add 30% to the 40 cents being paid and we come up with an annual distribution rate of just over 13%. I can believe it.

     

    I hope I'm not the only one jumping in bed with this one!
    22 Jun, 09:55 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|