NorthStar Healthcare REIT Terminates Advisor and Internalizes Management
NorthStar Healthcare Income Inc., a non-traded real estate investment trust, completed the internalization of the company’s management function.
NorthStar Healthcare Income Inc., a non-traded real estate investment trust, announced that the company and its external advisor, CNI NSHC Advisors, LLC, entered into a definitive agreement to terminate the advisory agreement between the company and the advisor. As a result, the company has internalized its management and operating functions.
The company has also executed a short-term transition services agreement with its former external advisor to facilitate an orderly transition and seamless continuation of the company’s operations.
The company says the internalization transaction is the result of a strategic review process undertaken by a special committee of the board of directors, consisting exclusively of independent and disinterested directors of the company, to review the company’s alternatives in hopes to strengthen its capital position and to place the company in a position to maximize stockholder value.
According to Northstar, the transition to a self-managed structure is expected to be accretive to earnings by reducing the company’s general and administrative expenses by approximately $7 million in 2023.
Kendall Young, a healthcare real estate investment trust executive with nearly 40 years of experience in real estate, including the past 12 years in senior housing, will lead the company as its new chief executive officer and president. Additionally, a group of former employees of the advisor that have contributed to the company’s investment and portfolio management and operations are now employees of the internalized company, including Nicholas Balzo who has been appointed as the chief financial officer of the company.
The company says the internalized management team will be wholly focused on managing the company’s investments and furthering the company’s strategic objectives.
The company says the internalized structure will result in a more transparent and simplified organizational model, including a more efficient implementation of the company’s strategy. The new structure will also more directly align the interests of the management team with those of the company and all of its stockholders.
“After thoroughly and extensively evaluating various alternatives, the ‘special committee’ believes that transforming NorthStar Healthcare to an internally managed structure best positions the company to execute its strategy and to maximize value for its stockholders,” said Andy Smith, chairman of the Northstar’s board of directors. “I am also very pleased that Kendall has agreed to join NorthStar Healthcare as its chief executive officer, president and a member of the board of directors. I have had many opportunities to work closely with Kendall and I am confident that he brings strong leadership skills, deep industry knowledge and experience, and relationships that will serve NorthStar Healthcare well in the future. We are also fortunate to have Nicholas Balzo step into the chief financial officer role, which will provide continuity for the company at a senior level.”
“I am very pleased to have the opportunity to lead NorthStar Healthcare and am excited about joining the company,” said Young. “I have had the benefit of working closely with both the internalized team and the ‘special committee’ over the past few months and am confident we are well-positioned to execute NorthStar Healthcare’s strategy and create stockholder value.”
Pursuant to the terms of the termination agreement, the company will pay any unpaid management fees and reimbursable costs accrued in accordance with the advisory agreement to date, but will no longer pay any management fees to the advisor for any future periods. The company is not paying the advisor a separate termination fee.
The internalization transaction was negotiated and unanimously approved by the “special committee.” CS Capital Advisors, LLC served as the financial advisor to the committee, and Willkie Farr & Gallagher LLP and Alston & Bird served as its legal counsel. The committee also engaged consulting firm B. Riley to assist in its evaluation of, and preparation for, the internalization of management.
In August 2022, Ronald Jeanneault resiged as chief executive officer, president, and vice chairman and member of the board, as reported by The DI Wire.
NorthStar Healthcare Income was formed to acquire, originate and asset manage a portfolio of equity, debt and securities investments in healthcare real estate. From inception in February 2013 through June 30, 2022, and raised $2 billion, including $232.6 million through its distribution reinvestment plan.
