New Senior Investment Group (NYSE: SNR) announced Wednesday it received $53 million as part of a lawsuit settlement. The New York City-based real estate investment trust (REIT) received the settlement from its largest investor, private equity firm Fortress Investment Group (NYSE: FIG), its primary operator, Holiday Acquisition Holdings, and members its board of directors.
The settlement also calls for changes to New Senior’s corporate bylaws and certificate of incorporation to eliminate the company’s classified board over a period of three years and an amendment to the bylaws providing for the election of directors by a majority of the votes cast in uncontested elections.
The deal is subject to approval from the Delaware Court of Chancery, and $14.5 million from the total settlement will cover attorney fees and other expenses.
The lawsuit, brought about by New Senior shareholder John Cumming in December 2016 and amended six months later, centered on New Senior’s 2015 acquisition of 28 senior living properties from Holiday Retirement dubbed the “Holiday Portfolio,” which is majority owned by one of Fortress’ private equity funds.
Cumming alleged the $640 million deal was approved to line the pockets of Fortress executives at the expense of New Senior shareholders. He further alleged the deal caused New Senior stock prices to plummet, costing shareholders over $100 million.
“Fortress and [Fortress co-founder Wes] Edens controlled New Senior’s management and the process for the Holiday acquisition, stood on both sides of the Holiday acquisition … and were admittedly ‘materially interested’ in, and uniquely benefitted from, the Holiday acquisition,” the suit states.
The changes to New Seniors bylaws must be approved by company stockholders at its 2019 annual meeting.
New Senior has been busy working to separate itself from Fortress, as part of a larger restructuring effort. The REIT issued 400,000 shares of Series A Preferred Stock to another Fortress affiliate last January, with a preferred liquidation price of $40 million.
New Senior also recently transitioned 51 Holiday properties from leases to a management structure and is moving to diversify its portfolio, which consists of 133 senior housing communities across 37 states.
New Senior and Holiday had not replied to requests for comment from Senior Housing News as of press time. Fortress declined to comment for this article.
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Source: Senior Housing News