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Analyst Blog

Real estate investment trust (REIT) - Newcastle Investment Corp. (NCT - Snapshot Report) – disclosed the pricing of common stock to fund a part of its recently announced $1 billion senior housing assets buyout.

In particular, the company priced a public offering of around 50.4 million shares of its common stock for gross proceeds of roughly $264.9 million. Also, the company granted a 30-days option to underwriters for buying additional common shares of up to 7.5 million.

As a matter of fact, on Nov 18, 2013, Newcastle Investment announced the penning of a deal to purchase a 52-property senior housing properties portfolio from certain subsidiaries of Holiday Acquisition Holdings LLC. In particular, the $1.01 billion worth portfolio involves 52 independent living properties (5,885 units) situated across 24 states.

Proceeds generated from the offering may also be used by Newcastle Investment for meeting other corporate purposes, including acquisitions of senior housing assets, collateralized debt obligations, other real estate securities and mortgages, operating businesses or other assets.

We believe that though this public offering will result in share dilution for Newcastle Investment, the financing of the acquisition deal is encouraging.  Also, the purchase of the portfolio, which is 100% private pay and 91% occupied on an average (as of September 30, 2013), boost the company’s senior housing asset base and bodes well for its top line growth.

Notably, Credit Suisse Securities (USA) LLC of Credit Suisse Group AG (CS - Snapshot Report) and UBS Securities LLC of UBS AG (UBS - Analyst Report) assisted Newcastle Investment in the common share offering as the joint book-running managers.

Newcastle Investment focuses on managing real estate related assets and especially invests in senior housing assets, real estate & other debts as well as other opportunistic investments.

Currently, Newcastle Investment carries a Zacks Rank #4 (Sell). However, a mortgage REIT that is performing better is Apollo Commercial Real Estate Finance, Inc. (ARI - Snapshot Report) carrying a Zacks Rank #2 (Buy).