Walker & Dunlop’s Whopper of a Deal

The real estate lender expanded its senior housing lending and its relationship with one of the sector’s largest owners with this $465 million deal.
Willy Walker, Walker & Dunlop
Willy Walker, Walker & Dunlop

By Gail Kalinoski, Contributing Editor

Walker & Dunlop Inc. expanded its senior housing lending and its relationship with one of the sector’s largest owners with its latest deal: the origination of 28 loans totaling $465 million, secured by independent living properties New Senior Investment Group Inc. purchased from affiliates of Holiday Retirement.

The loans were structured as 10-year fixed-rate CME loans with five years interest only, followed by a 30-year amortization schedule, using the Freddie Mac Seller/Servicer program, according to information supplied by Bethesda-based Walker & Dunlop. Vice presidents Russell Day and Laura Beaton led the Walker & Dunlop team that closed on the portfolio.

New Senior Investment Group paid $640 million for the portfolio, which has 3,298 units in 28 assets in 21 states. Holiday Retirement will continue to manage the private-pay properties, most of which are in California, Florida, North Carolina and Oregon. The portfolio had an average occupancy rate of 89.8 percent as of July.

The New York-based senior housing REIT said in a prepared statement that it paid for the portfolio with cash on hand and the loan, which bears a fixed interest rate of 4.25 percent. The company noted that the proceeds of the loan were approximately $15 million more than originally expected, so it plans to pay down $15 million of existing floating-rate debt on Sept. 1.

“Walker & Dunlop established a strategy to grow our senior housing lending business dramatically in 2015, and with this financing, we have done over $1.2 billion of seniors financing this year,” chairman & CEO Willy Walker said in a prepared statement. “This is the second major financing we have done for New Senior this year, reflective of the great partnership we have created with one of the fastest-growing senior housing owners in the industry.”

With the latest acquisition, New Senior now owns 152 properties in 32 states, including independent living and assisted living/memory care facilities. The REIT focuses on two major segments: managed properties and triple-net-leased properties.

“This acquisition further increases our industry-leading private-pay senior housing exposure to 92 percent of our NOI,” New Senior CEO Susan Givens said in a prepared statement about the Holiday Retirement portfolio. “As the largest operator of independent living properties in the United States, Holiday has a strong track record of outstanding performance for our existing portfolio, and we are excited to grow our relationship with them.”

New Senior and Walker & Dunlop worked together in March to finance the acquisition of 17 private-pay independent living senior housing properties with 2,082 units in 10 states from affiliates of Hawthorn Retirement Group for approximately $435 million. Walker & Dunlop originated a $670 million first mortgage loan with Freddie Mac secured by 52 senior housing assets. Proceeds from that loan were used to refinance existing floating-rate debt and fund acquisitions, including the Hawthorn Retirement portfolio, according to information provided by New Senior. Holiday Retirement is also operating that portfolio for New Senior.

Managed by an affiliate of Fortress Investment Group L.L.C., New Senior has been on a buying spree this year, announcing or completing at least $1.2 billion worth of acquisitions as of early August, according to the company’s second-quarter earnings report, released Aug. 6. During the second quarter, the firm closed $98 million in acquisitions.

“With 92 percent of our portfolio NOI from private-pay assisted living and independent properties that have delivered superior growth relative to the industry, we remain excited about our prospects for 2015 and beyond,” Givens said in a prepared statement within the second-quarter results.