“double taxation” treatment i.e., taxation at both the corporate and stockholder levels that generally results from investments in a corporation; and
• pays distributions to investors of at least 90 of its annual ordinary taxable income.
In this prospectus, we refer to an entity that qualifies and elects to be taxed as a REIT for U.S. federal income tax purposes as a REIT. We have elected to qualify as a REIT for U.S. federal income tax purposes commencing with the taxable year
ended December 31, 2013.
Q: What is an “UPREIT”?
A: We own substantially all of our assets and conduct our operations, directly or indirectly, through a limited partnership called NorthStar Healthcare Income Operating Partnership, LP, which we refer to as NorthStar Healthcare Income
Operating Partnership, or our operating partnership. We refer to partnership interests and special partnership interests in our operating partnership, respectively, as common units and special units. We are the sole general partner of our operating
partnership. Because we conduct substantially all of our operations through an operating partnership, we are organized as an umbrella partnership real estate investment trust, or “UPREIT.”
Q: Why should I invest in a portfolio of equity and debt investments?
A: Allocating some portion of your investment portfolio to equity and debt investments in real estate may provide you with portfolio diversification, reduction of overall risk, a hedge against inflation and attractive risk-adjusted returns. For these
reasons, institutional investors like pension funds and endowments have embraced commercial real estate, or CRE, as a significant asset class for purposes of asset allocations within their investment portfolios. According to survey data
published by Preqin in May 2014, private pension plans in the United States had an average target real estate allocation of 10.0, compared with 4.6 in 2012. In addition, 93 of institutional investors surveyed by Preqin in August 2014
planned to maintain or increase their allocation to real estate investments in the future. Individual investors can also benefit by adding a real estate component to their investment portfolios. You and your financial advisor should determine whether
investing in real estate would benefit your investment portfolio.
Q: Why should I invest specifically in a company that is primarily focused on equity and debt investments in healthcare real estate?
A: We believe the current market presents an attractive environment for us to invest in healthcare real estate, with a focus on the mid-acuity senior housing sector. We expect the supply of suitable investment opportunities to grow as: i senior
housing operators seek to monetize real estate assets to fund growth in their core businesses; ii investment managers seek liquidity for investors in limited life funds; and iii senior housing owners, operators and investors face challenges
attracting equity and debt capital to acquire, develop or reposition senior housing facilities given the expertise required to focus on this sector. Moreover, we believe this barrier to entry may result in less competition in the senior housing market
compared to other CRE, sectors since we have observed generalist real estate investors refocus on less operationally intensive assets in the multifamily, industrial, office and retail sectors. In addition, senior housing cash flows should benefit
from favorable supply and demand dynamics. Specifically, we believe that senior housing cash flows will benefit as occupancy levels improve. Although construction levels have recently begun to increase, we believe that favorable
demographic trends and overall limited supply growth will continue to place upward pressure on occupancy and rent levels. In addition, we believe that our growth-oriented capital, together with our management team’s experience and
extensive network of long-standing relationships in the senior housing and CRE finance industries, position us to take advantage of the opportunities described above.
Q: What are the major
risks of investing in us?
A: Our equity investments are subject to the risks typically associated with real estate, including decreases in some or all of our properties’ value over time. Similarly, the collateral securing our debt and securities investments may decrease in value
or lose all value over time, which may lead to a loss of some or all of our principal. Also, we have broad authority to use leverage, and high levels of leverage could hinder our ability to make distributions and decrease the value of your
investment. In addition, our organizational documents permit us to pay distributions to our stockholders from any source, including from borrowings, sale of assets and from offering proceeds or we may make distributions in the form of taxable
stock dividends. We have not established a limit on the amount of proceeds we may use to fund distributions. We have paid, and may continue to pay, distributions from sources other than our cash flow from operations, and consequently, we
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may have less cash available for investments, and your overall return may be reduced. Also, if we fail to qualify as a REIT for federal income tax purposes, we could be subject to federal income tax, which could reduce the cash available for
distributions. You should carefully review the “Risk Factors” section of this prospectus which contains a detailed discussion of the material risks that you should consider before you invest in shares of our common stock.
Q: What is the experience of our sponsor?
A: NorthStar Asset Management Group Inc. NYSE: NSAM, or our sponsor or “NSAM,” is a Delaware corporation that was organized to provide asset management and other services to NorthStar Realty and NSAM’s sponsored public, non-traded
REITs, which we refer to collectively as the Managed Companies, and any other companies NSAM may manage or sponsor in the future, both in the United States and internationally. On June 30, 2014, NorthStar Realty NYSE: NRF, a
publicly traded, diversified commercial real estate company that completed its initial public offering in October 2004, completed the previously announced spin-off of its asset management business into NSAM, and NSAM became a separate
publicly traded company, with its common stock listed on the New York Stock Exchange, or NYSE, under the ticker symbol “NSAM.” As a result of the completion of the spin-off, affiliates of NSAM now manage NorthStar Realty pursuant
to a long-term management contract for an initial term of 20 years, as well as the other Managed Companies, including NorthStar Real Estate Income Trust, Inc. or NorthStar Income, NorthStar Real Estate Income II, Inc., or NorthStar Income
II, and us.
As of September 30, 2014, NSAM has an aggregate of 19.4 billion of assets under management, adjusted for acquisitions and agreements to purchase assets through November 7, 2014,
in a variety of CRE investments, with the majority of the assets owned by NorthStar Realty. NSAM has 187 employees located domestically and internationally with
its principal executive offices located in New York, New York and additional offices in Denver, Colorado, Dallas, Texas, Bethesda, Maryland and Los Angeles, California. In connection with NSAM’s international strategy, NorthStar Realty
entered into a strategic alliance with a European asset manager, has opened offices overseas and maintains investment professionals in those offices. NSAM’s management team averages a combined 20 years of real estate investment and
capital markets expertise and has a demonstrated track record of positive returns to its shareholders for the last decade.
Q: How do we differ from other publicly traded and public, non-traded REITs sponsored or managed by NSAM?
A: NSAM sponsors and manages the Managed Companies, including NorthStar Realty, a publicly traded REIT, us and two other existing public, non-traded REITs: NorthStar Income and NorthStar Income II. In addition, NSAM expects to
sponsor future investment vehicles, including NorthStarRXR New York Metro Income, Inc., or NorthStarRXR, a public, non-traded REIT cosponsored by NSAM and currently in SEC registration. Unlike the investment strategies of NorthStar
Income and NorthStar Income II, which are both focused on various sectors of commercial real estate, our companys investment strategy is focused on investments in the healthcare real estate sector. In addition, in comparison to NorthStar
Income and NorthStar Income II, which have or expect to have, as the case may be, substantially all of their respective investment portfolios comprised of debt investments, we expect that, given the current and changing market opportunity, a
majority of our investment portfolio will be comprised of equity investments, with the balance comprised of debt and securities investments, which may provide investors the ability to realize growth as well as income from an investment in
our shares. In comparison to NorthStarRXR, which is expected to focus on investments located in the New York City metropolitan area, our investments are, and our future investments are expected to be, more diversified geographically.
Finally, while NorthStar Realty, a publicly traded REIT, does invest in the healthcare industry, it also invests in multiple CRE asset classes that it expects will generate attractive risk-adjusted returns and that may take the form of acquiring real
estate, originating or acquiring senior or subordinate loans, as well as pursuing opportunistic CRE investments, both in the United States and internationally.
Q: What is the impact of being an “emerging growth company?”
