EX-99.1 3 d944613dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined financial information was derived from the application of pro forma adjustments to the consolidated financial statements of New Senior Investment Group Inc. (“New Senior,” “the Company,” “we” or “our”). The unaudited pro forma combined statements of operations for the three months ended March 31, 2015 and the year ended December 31, 2014 give effect to the Pro Forma Transactions (as defined below) as if the Pro Forma Transactions had occurred or had become effective as of January 1, 2014. The unaudited pro forma combined balance sheet as of March 31, 2015 gives effect to the Pro Forma Transactions as if the Pro Forma Transactions had occurred or had become effective as of March 31, 2015. However, to the extent the Pro Forma Transactions were already reflected in the underlying historical data, no pro forma adjustment has been made to the historical financial statements.

The pro forma adjustments are based on available information and certain assumptions that we believe are reasonable in order to reflect, on a pro forma basis, the impact of the transactions listed below on our historical financial information. The unaudited pro forma combined financial information is provided for informational and illustrative purposes only and should be read in conjunction with our unaudited financial statements as of and for the three months ended March 31, 2015 and the notes thereto included in our Quarterly Report on Form 10-Q filed on May 8, 2015 with the Securities and Exchange Commission (“SEC”), our audited financial statements for the year ended December 31, 2014 and the notes thereto included herein, the Combined Statements of Revenues and Certain Operating Expenses of the Timber Portfolio (as described below) for the three months ended March 31, 2015 (Unaudited) and the year ended December 31, 2014 and the notes thereto, included herein, and the Statement of Revenues and Certain Operating Expenses of the Hawthorn Portfolio (as described below) for the year ended December 31, 2014 and the notes thereto, included as Exhibit 99.2 in our Form 8-K filed on May 14, 2015 with the SEC.

The unaudited pro forma combined financial information has been prepared to reflect adjustments to our historical consolidated financial information that are (i) directly attributable to the Pro Forma Transactions, (ii) factually supportable, and (iii) with respect to the unaudited pro forma combined statements of operations, expected to have a continuing impact on our results. However, such adjustments are estimates and may not prove to be accurate. Information regarding these adjustments is subject to risks and uncertainties that could cause actual results to differ materially from our unaudited pro forma combined financial information.

The unaudited pro forma combined information set forth below reflects the historical information of New Senior, as adjusted to give effect to the following transactions (together, the “Pro Forma Transactions”):

 

  •   the acquisition of the Hawthorn Portfolio which comprises 17 private pay, IL-only properties (“Hawthorn Portfolio Acquisition”) and related financing on March 27, 2015;

 

  •   the mortgage financing, which comprises the refinancing of mortgage loans (“Mortgage Loan Refinancing”) and the additional financing secured by existing properties (“Additional Financing”), on March 27, 2015;

 

  •   the anticipated issuance by us of              shares of common stock of the Company (“Common Stock Issuance”), to finance primarily the acquisition of the Timber Portfolio as well as general corporate purposes, and which for purposes of this unaudited pro forma financial information reflects the issuance of 17,500,000 shares at the closing price on June 19, 2015, which was $15.76;

 

  •   the anticipated acquisition of the Timber Portfolio which comprises 28 private pay, IL-only properties (“Timber Portfolio Acquisition”) and related financing; and

 

  •   the continuing effect of the transactions described above on management fees payable to FIG LLC (an affiliate of Fortress Investment Group LLC), the Company’s manager (the “Manager”), pursuant to the management agreement entered into between New Senior and the Manager effective as of the spinoff on November 6, 2014.

The impact of the Hawthorn Portfolio Acquisition and related financing, Mortgage Loan Refinancing and Additional Financing are already reflected in the Company’s historical consolidated balance sheet as of March 31, 2015; accordingly, no pro forma balance sheet adjustments for those transactions are presented herein. In addition, the Company’s historical consolidated statement of operations for the three months ended March 31, 2015 includes the impact of the Hawthorn Portfolio Acquisition and related financing, Mortgage Loan Refinancing, and Additional Financing for the period from March 27, 2015 through March 31, 2015;

 

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accordingly, pro forma adjustments in the unaudited pro forma combined statement of operations for the three months ended March 31, 2015 are only for the period from January 1, 2015 through March 26, 2015.

The attached unaudited pro forma combined financial information is provided for informational purposes only. The unaudited pro forma combined statements of operations do not purport to represent what New Senior’s results of operations would have been had such transactions been consummated on the date indicated, nor do they represent our results of operations for any future date or period.

 

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UNAUDITED PRO FORMA COMBINED BALANCE SHEET

March 31, 2015

(dollars in thousands, except share data)

 

     Historical     Common Stock
Issuance		     Timber Portfolio
Acquisition and
related financing		     Pro Forma  

Assets

         

Real estate investments:

         

Land

    $ 170,690      $ —        $ 40,312 (A)    $ 211,002   

Buildings, improvements and other

      1,907,393        —          531,915 (A)      2,439,308   

Accumulated depreciation

      (70,391 )      —          —          (70,391 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net real estate property

   2,007,692      —        572,227      2,579,919   
  

 

 

    

 

 

    

 

 

    

 

 

  

Acquired lease and other intangible assets

   239,557      —        67,773 (A)    307,330   

Accumulated amortization

   (95,811 )    —        —        (95,811 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net real estate intangibles

   143,746      —        67,773      211,519   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net real estate investments

   2,151,438      —        640,000      2,791,438   

Cash and cash equivalents

   107,090      266,147 (J)    (198,000 )(C)(D)    175,237   

Receivables and other assets, net

   69,208      —        —        69,208   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Assets

 $ 2,327,736    $ 266,147    $ 442,000    $ 3,035,883   
  

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities and Equity

Liabilities

Mortgage notes payable, net

 $ 1,614,759    $ —      $ 445,000 (C)  $ 2,059,759   

Due to affiliates

   9,924      —        —        9,924   

Dividends payable

   —        —        —        —     

Accrued expenses and other liabilities

   75,753      —        —        75,753   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Liabilities

 $ 1,700,436    $ —      $ 445,000    $ 2,145,436   
  

 

 

    

 

 

    

 

 

    

 

 

  

Commitments and contingencies

Equity

Preferred stock $0.01 par value, 100,000,000 shares authorized and none outstanding

 $ —      $ —      $ —      $ —     

Common stock $0.01 par value, 2,000,000,000 shares authorized on a historical and pro forma basis, 66,415,415 shares issued and outstanding on a historical basis, 83,915,415 shares issued and outstanding on a pro forma basis

   664      175 (J)    —        839   

Additional paid-in capital

   672,604      265,972 (J)    —        938,576   

Accumulated deficit

   (45,968 )    —        (3,000 )(D)    (48,968 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Equity

 $ 627,300    $ 266,147    $ (3,000 )  $ 890,447   
  

 

 

    

 

 

    

 

 

    

 

 

  
         
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Liabilities and Equity

 $ 2,327,736    $ 266,147    $ 442,000    $ 3,035,883   
  

 

 

    

 

 

    

 

 

    

 

 

  

See notes to unaudited pro forma combined financial information.

 

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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

Three Months Ended March 31, 2015

(dollars in thousands, except share and per share data)

 

     Historical     Timber Portfolio
Acquisition and
related financing		     Hawthorn Portfolio
Acquisition and
related financing		     Mortgage Loan
Refinancing and
Additional
Financing		     Other pro forma
adjustments		     Pro Forma  

Revenues

             

Resident fees and services

    $ 47,188      $ 21,030 (B)    $ 14,010 (E)    $ —        $ —        $ 82,228   

Rental revenue

      26,672        —          —          —          —          26,672   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

   73,860      21,030      14,010      —        —        108,900   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Expenses

Property operating expense

   34,271      12,514 (B)    7,629 (E)    —        —        54,414   

Depreciation and amortization

   30,157      10,638 (A)    7,898 (F)    —        —        48,693   

Interest expense

   15,312      4,963 (C)    2,040 (G)    (974 )(I)    —        21,341   

Acquisition, transaction and integration expense

   3,918      —        (872 )(H)    —        —        3,046   

Management fee to affiliate

   3,050      —        —        —        1,034 (K)    4,084   

General and administrative expense

   3,409      —        —        —        —        3,409   

Loss on extinguishment of debt

   5,091      —        —        (5,091 )(I)    —        —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total expenses

   95,208      28,115      16,695      (6,065 )    1,034      134,987   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (Loss) Before Income Taxes

   (21,348 )    (7,085 )    (2,685 )    6,065      (1,034 )    (26,087 ) 

Income tax benefit

   (95 )    —   (M)    —   (M)    —   (M)    —   (M)    (95 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net Income (Loss)

 $ (21,253 )  $ (7,085 )  $ (2,685 )  $ 6,065    $ (1,034 )  $ (25,992 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loss Per Share of Common Stock

Basic and diluted

 $ (0.32 )  $ (0.31 )(L) 
  

 

 

            

 

 

  

Weighted Average Number of Shares of Common Stock Outstanding

Basic and diluted

   66,415,415      83,915,415 (L) 
  

 

 

            

 

 

  

See notes to unaudited pro forma combined financial information.

 

4

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

Year Ended December 31, 2014

(dollars in thousands, except share and per share data)

 

     Historical     Timber Portfolio
Acquisition and
related financing		     Hawthorn Portfolio
Acquisition and
related financing		     Mortgage Loan
Refinancing and
Additional
Financing		     Other pro forma
adjustments		     Pro Forma  

Revenues

             

Resident fees and services

    $ 156,993      $ 82,311 (B)    $ 56,600 (E)    $ —        $ —        $ 295,904   

Rental revenue

      97,992        —          —          —          —          97,992   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

   254,985      82,311      56,600      —        —        393,896   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Expenses

Property operating expense

   112,242      49,396 (B)    31,197 (E)    —        —        192,835   

Depreciation and amortization

   103,279      42,552 (A)    33,451 (F)    —        —        179,282   

Interest expense

   57,026      19,850 (C)    8,640 (G)    (2,643 )(I)    —        82,873   

Acquisition, transaction and integration expense

   14,295      —        —        —        —        14,295   

Management fee to affiliate

   8,470      —        —        —        7,859 (K)    16,329   

General and administrative expense

   7,416      —        —        —        —        7,416   

Other (income) expense

   (1,500 )    —        —        —        —        (1,500 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total expenses

   301,228      111,798      73,288      (2,643 )    7,859      491,530   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (Loss) Before Income Taxes

   (46,243 )    (29,487 )    (16,688 )    2,643      (7,859 )    (97,634 ) 

Income tax expense

   160      —   (M)    —   (M)    —   (M)    —   (M)    160   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net Income (Loss)

 $ (46,403 )  $ (29,487 )  $ (16,688 )  $ 2,643    $ (7,859 )  $ (97,794 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loss Per Share of Common Stock

Basic and diluted

 $ (0.70 )  $ (1.17 )(L) 
  

 

 

            

 

 

  

Weighted Average Number of Shares of Common Stock Outstanding

Basic and diluted

   66,400,914      83,900,914 (L) 
  

 

 

            

 

 

  

See notes to unaudited pro forma combined financial information.

 

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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

(dollars in thousands, unless otherwise noted)

Timber Portfolio Acquisition and Related Financing

 

  (A) Reflects preliminary measurement of the fair value of the acquired assets and resulting depreciation and amortization of the buildings, building improvements, furniture, fixtures and equipment and intangible assets. The Company’s acquisition accounting for this transaction is still preliminary, and as a result, the related pro forma calculation for depreciation and amortization expense is preliminary and subject to completion. The acquired finite-lived intangible assets are being amortized over their estimated useful lives using the straight-line method. The following table summarizes the calculation of the pro forma adjustment for depreciation and amortization expense resulting from the Timber Portfolio Acquisition:

 

                 Three months ended
March 31, 2015		      Year ended
December 31, 2014		  

Asset class

    Weighted
average useful
life (years)		    Preliminary
Fair Value		      Recalculated
depreciation and
amortization		      Recalculated
depreciation and
amortization		  

Real estate investments:

            

Land

    Indefinite    $ 40,312       $ —         $ —     

Building

    40      502,687         3,142         12,567   

Building improvements

    10      5,054         126         505   

Furniture, fixtures & equipment

    5      24,174         1,209         4,835   

Amortized intangible assets:

            

In-place leases

    2.75      67,773         6,161         24,645   
     

 

 

        

Total assets acquired

 $ 640,000   
     

 

 

     

 

 

     

 

 

  

Pro forma adjustment

 $ 10,638    $ 42,552   
        

 

 

     

 

 

  

 

  (B) Reflects revenues and certain operating expenses of the Timber Portfolio for the three months ended March 31, 2015 and the year ended December 31, 2014 as adjusted for the items detailed in the footnotes below. The historical amounts were derived from the Combined Statements of Revenues and Certain Operating Expenses of the Timber Portfolio for the three months ended March 31, 2015 and the year ended December 31, 2014 included herein.

 

     Three months ended March 31, 2015      Year ended December 31, 2014  
     Historical      Adjustments     Pro forma
adjustment		      Historical      Adjustments     Pro forma
adjustment		  

Revenue:

                

Rent revenue

    $ 21,030       $ —   (i)    $ 21,030       $ 82,311       $ —   (i)    $ 82,311   
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Certain operating expenses:

Facility operating expenses

 $ 10,581    $ —      $ 10,581    $ 41,821    $ —      $ 41,821   

Property management fee

   736      316 (ii)    1,052      2,881      1,235 (ii)    4,116   

Real estate taxes

   881      —        881      3,459      —        3,459   
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Property operating expenses

 $ 12,198    $ 316    $ 12,514    $ 48,161    $ 1,235    $ 49,396   
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

 

  i. Rent revenue has been classified as “Resident fees and services” to conform to the Company’s presentation.

 

  ii. The Timber Portfolio has historically been charged a property management fee equal to 3.5% of rent revenue. Upon acquisition, the Company will enter into new property management agreements for the Timber Portfolio which provide for a property management fee equal to 5% of effective gross income. The effective gross income represents the rent revenue of the Timber Portfolio, as expected to be defined in the respective property management agreements.

The following table reflects the impact of the property management fee increase to 5% of effective gross income:

 

     Three Months Ended
March 31, 2015		     Year Ended
December 31, 2014		  

Resident fees and services

    $ 21,030      $ 82,311   

Property management fee rate

      5.00 %      5.00 % 
  

 

 

    

 

 

  

Pro forma property management fee

   1,052      4,116   

Less: historical Timber Portfolio property management fee

   (736 )    (2,881 ) 
  

 

 

    

 

 

  

Total adjustment to property management fee

 $ 316    $ 1,235   
  

 

 

    

 

 

  

 

 

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  (C) The Company expects to finance the Timber Portfolio Acquisition with $190.0 million of cash available from both the Common Stock Issuance and cash on hand, and with $450.0 million of mortgage notes. Financing costs of approximately $5.0 million are expected to be incurred with the issuance of the mortgage notes. The financing costs have been capitalized and are presented as a reduction to Mortgage notes payable, net on the unaudited pro forma combined balance sheet as a result of the Company’s adoption of Accounting Standards Update No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. For pro forma purposes, the deferred financing costs have been amortized using the effective interest method over the term of the mortgage notes in the unaudited pro forma combined statement of operations.

For purposes of this unaudited pro forma financial information the mortgage notes reflect the following principal balance and weighted average interest rate:

 

Principal balance   Weighted average
interest rate		   Fixed or
variable		   Maturity
$450,000   4.30%   Fixed   10 years

The following table reflects the pro forma adjustment to interest and amortization of deferred financing costs related to the mortgage notes as follows:

 

     Three months ended      Year ended  
     March 31, 2015      December 31, 2014  

Pro forma interest expense

    $ 4,838       $ 19,350   

Amortization of deferred financing costs

      125         500   
  

 

 

     

 

 

  

Pro forma adjustment to interest expense

 $ 4,963    $ 19,850   
  

 

 

     

 

 

  

 

  (D) Reflects acquisition and transaction related costs of $3.0 million expected to be incurred or incurred subsequent to March 31, 2015 by the Company directly attributable to the Timber Portfolio Acquisition, which primarily consist of legal, consulting and accounting fees. Acquisition and transaction related costs of $3.0 million, financing costs of approximately $5.0 million (see note C) and $190.0 million of cash available from both the Common Stock Issuance and cash on hand (see note C) together amount to the cash and cash equivalents pro forma adjustment of $198.0 million on the unaudited pro forma combined balance sheet.

Hawthorn Portfolio Acquisition and Related Financing

 

  (E) Reflects revenues and certain operating expenses of the Hawthorn Portfolio for the period from January 1, 2015 through March 26, 2015 and the year ended December 31, 2014 as adjusted for the items detailed in the footnotes below. The historical amounts were derived from the unaudited Statement of Revenues and Certain Operating Expenses of the Hawthorn Portfolio for the period from January 1, 2015 through March 26, 2015 (not included herein) and the audited Statement of Revenues and Certain Operating Expenses of the Hawthorn Portfolio for the year ended December 31, 2014 (included as Exhibit 99.2 of our Form 8-K filed on May 14, 2015 pursuant to Rule 3-14 of Regulation S-X), respectively.

 

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     Three months ended March 31, 2015 (1)      Year ended December 31, 2014  
                  Pro forma                   Pro forma  
     Historical      Adjustments     adjustment      Historical      Adjustments     adjustment  

Revenue:

                

Rent revenue

    $ 14,010       $ —   (i)    $ 14,010       $ 56,600       $ —   (i)    $ 56,600   
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Certain operating expenses:

Facility operating expenses

 $ 6,252    $ —      $ 6,252    $ 25,341    $ —      $ 25,341   

Property management fee

   490      211 (ii)    701      1,981      849 (ii)    2,830   

Real estate taxes

   676      —        676      3,026      —        3,026   
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Property operating expenses

 $ 7,418    $ 211    $ 7,629    $ 30,348    $ 849    $ 31,197   
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

 

  (i) Rent revenue has been classified as “Resident fees and services” to conform to the Company’s presentation.

 

  (ii) The Hawthorn Portfolio has historically been charged a property management fee equal to 3.5% of rent revenue. Upon acquisition, the Company entered into new property management agreements for the Hawthorn Portfolio which provide for a property management fee equal to 5% of effective gross income. The effective gross income represents the rent revenue of the Hawthorn Portfolio, as defined in the respective property management agreements.

The following table reflects the impact of the property management fee increase to 5% of effective gross income:

 

     Three months ended
March 31, 2015 (1)		     Year ended
December 31, 2014		  

Resident fees and services

    $ 14,010      $ 56,600   

Property management fee rate

      5.00 %      5.00 % 
  

 

 

    

 

 

  

Pro forma property management fee

   701      2,830   

Less: historical Hawthorn Portfolio property management fee

   (490 )    (1,981 ) 
  

 

 

    

 

 

  

Total adjustment to property management fee

 $ 211    $ 849   
  

 

 

    

 

 

  

 

(1) Represents the pre-acquisition period from January 1, 2015 through March 26, 2015.

 

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  (F) Reflects depreciation and amortization of the buildings, building improvements, furniture, fixtures and equipment and intangible assets based on our preliminary measurement of the fair value of the acquired assets. The Company’s acquisition accounting for this transaction is still preliminary, and as a result, the related pro forma calculation for depreciation and amortization expense is preliminary and subject to completion. The acquired finite-lived intangible assets are being amortized over their estimated useful lives using the straight-line method. The following table summarizes the calculation of the pro forma adjustment for depreciation and amortization expense resulting from the Hawthorn Portfolio Acquisition:

 

                 Three months ended
March 31, 2015		      Year ended
December 31, 2014		  

Asset class

    Weighted
average
useful life
(years)		    Preliminary
Fair Value		      Recalculated
depreciation and
amortization		      Recalculated
depreciation and
amortization		  

Real estate investments:

            

Land

    Indefinite    $ 27,737       $ —         $ —     

Buildings

    40      347,607         2,173         8,690   

Building improvements

    10      14,935         373         1,494   

Furniture, fixtures & equipment

    5      15,952         798         3,190   

Amortized intangible assets:

            

In-place leases

    2.75      55,212         5,019         20,077   
     

 

 

     

 

 

     

 

 

  
$ 461,443      8,363      33,451   
     

 

 

     

 

 

     

 

 

  

Less: historical New Senior depreciation and amortization

   (465 )    —     
        

 

 

     

 

 

  

Pro forma adjustment

 $ 7,898    $ 33,451   
        

 

 

     

 

 

  

 

  (G) The Hawthorn Portfolio Acquisition was financed in part with $326.8 million of additional borrowings (see note I for further information). Financing costs of approximately $2.9 million were attributable to the financing of the Hawthorn Portfolio Acquisition.

The financing consists of the following principal balance and weighted average interest rate:

 

Principal balance   Weighted average
interest rate		   Fixed or
variable		   Maturity
$326,815   2.52%   Variable   7 years

The following adjustment represents the pro forma adjustment to interest and amortization of deferred financing costs related to the borrowing as follows:

 

     Three months ended
March 31, 2015		      Year ended
December 31, 2014		  

Pro forma interest expense

    $ 2,056       $ 8,223   

Amortization of deferred financing costs

      104         417   

Less: historical New Senior interest expense

      (120 )       —     
  

 

 

     

 

 

  

Pro forma adjustment to interest expense

 $ 2,040    $ 8,640   
  

 

 

     

 

 

  

A 0.125% change in the variable interest rate would amount to a change in total annual pro forma interest expense of approximately $0.4 million.

 

  (H) Reflects the elimination of acquisition and transaction related costs of $0.9 million incurred in the three months ended March 31, 2015 by the Company directly attributable to the Hawthorn Portfolio Acquisition, which primarily consist of legal, consulting and accounting fees.

 

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Mortgage Financing

 

  (I) In March 2015, the Company obtained financing of $670.0 million (“Freddie Financing”). The Freddie Financing consists of (i) the Hawthorn Portfolio Acquisition related financing of $326.8 million (see note G); (ii) the Mortgage Loan Refinancing of $297.0 million, which replaced our existing floating and fixed rate mortgage loans; and (iii) Additional Financing of $46.2 million which is secured by our existing properties.

Approximately $8.4 million of deferred financing costs associated with the Freddie Financing were capitalized, of which $2.9 million is attributable to the Hawthorn Portfolio Acquisition and $5.5 million is attributable to the Mortgage Loan Refinancing and Additional Financing. For pro forma purposes, the deferred financing costs have been amortized using the effective interest method over the respective terms of the financing facilities.

The Mortgage Loan Refinancing and Additional Financing, collectively, consist of the following principal balance and weighted average interest rate:

 

Principal balance   Weighted
average
interest rate		   Fixed or
variable		   Maturity
$343,185   2.52%   Variable   7 years

The following table summarizes the adjustments in the unaudited pro forma combined statements of operations to reflect the adjustments to interest expense related to the Mortgage Loan Refinancing and Additional Financing:

 

     Three months ended
March 31, 2015		      Year ended
December 31, 2014		  

Pro forma interest expense

    $ 2,159       $ 8,635   

Amortization of deferred financing costs

      198         791   

Less: historical New Senior interest expense

      (3,331 )       (12,069 ) 
  

 

 

     

 

 

  

Pro forma adjustment to interest expense

 $ (974 )  $ (2,643 ) 
  

 

 

     

 

 

  

A 0.125% change in the variable interest rate would amount to a change in total annual pro forma interest expense of approximately $0.4 million.

The unaudited pro forma combined statement of operations for the three months ended March 31, 2015 also reflects the elimination of the $5.1 million loss on extinguishment of debt recorded in the unaudited historical statement of operations for the three months ended March 31, 2015, which is directly related to the Mortgage Loan Refinancing.

 

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Common Stock Issuance

 

  (J) Reflects the anticipated issuance of              shares of common stock of the Company due to its continuing impact to management fees and incentive compensation (see note K) and which for purposes of this unaudited pro forma financial information reflects the issuance of 17,500,000 shares at the closing price on June 19, 2015, which was $15.76. A significant portion of the proceeds will be used to fund the Timber Portfolio Acquisition as well as general corporate purposes. The Company expects to incur issuance costs of approximately $9.7 million. The following table summarizes the adjustments in the unaudited pro forma combined balance sheet to reflect the adjustments related to the Common Stock Issuance (in thousands, except share and per share data):

 

Capital raise information

Shares issued

   17,500,000   

Offering price per share

 $ 15.76   
  

 

 

  

Gross proceeds

 $ 275,800   

Less: issuance costs

 $ (9,653 ) 
  

 

 

  

Pro forma proceeds from share issuance, net of issuance costs

 $ 266,147   
  

 

 

  

 

     March 31, 2015  

Balance sheet pro forma adjustments

    Common Stock
Issuance		  

Common stock $0.01 par value

      175   

Additional paid-in capital

      265,972   

Other Pro Forma Adjustments

 

  (K) Represents the impact to management fees as a result of the Pro Forma Transactions.

 

     Three months ended
March 31, 2015		      Year ended
December 31, 2014		  

Pro forma base management fee - spin-off adjustment (1)

    $ —         $ 10,332   

Pro forma base management fee - Common Stock Issuance adjustment (2)

      1,034         4,137   

Pro forma incentive compensation (3)

      —           —     

Less: historical New Senior management fee (4)

      —           (6,610 ) 
  

 

 

     

 

 

  

Pro forma adjustment

 $ 1,034    $ 7,859   
  

 

 

     

 

 

  

 

(1) The pro forma base management fees for the three months ended March 31, 2015 and the year ended December 31, 2014 reflect the continuing effect on management fees pursuant to the management agreement entered into between New Senior and the Manager in connection with the spin-off of New Senior from Newcastle on November 6, 2014. The amounts are based on applying the base management fee rate payable by New Senior of 1.5% to the invested capital. This pro forma adjustment reflects the base management fee as though invested capital at the spin-off date was the invested capital as of January 1, 2014.
(2) The pro forma base management fee for the three months ended March 31, 2015 and the year ended December 31, 2014 reflects the continuing effect on management fees pursuant to the management agreement entered into between New Senior and the Manager in connection with the Common Stock Issuance. The pro forma adjustment below reflects the base management fee adjustment for the Common Stock Issuance:

 

     Three months ended
March 31, 2015		      Year ended
December 31, 2014		  

Gross equity increase due to Common Stock Issuance

    $ 275,800       $ 275,800   

Base pro forma management fee of 1.5% of share issuance

      1,034         4,137   
  

 

 

     

 

 

  

Pro forma adjustment

 $ 1,034    $ 4,137   
  

 

 

     

 

 

  

 

(3) Reflects the impact of the Common Stock Issuance, the Timber Portfolio Acquisition and related financing, the Hawthorn Portfolio Acquisition and related financing, the Mortgage Loan Refinancing and Additional Financing on the pro forma incentive compensation calculation.
(4) Represents the allocated portion of management fees paid by Newcastle Investment Corp. for management services provided by the Manager during the period prior to the spin-off, pursuant to Newcastle’s management agreement with the Manager.

 

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  (L) Pro forma basic loss per common share attributable to common stockholders has been calculated based on the number of shares assumed to be outstanding, due to its continuing impact to management fees and incentive compensation. The calculations assume that such shares were outstanding for the full period presented.

The following table presents the computation of unaudited pro forma basic and diluted loss per share attributable to common stockholders (in thousands, except share and per share data):

 

     Three months ended
March 31, 2015		      Year ended
December 31, 2014		  

Net Income (Loss)

    $ (25,992 )     $ (97,794 ) 

Shares

      83,915,415         83,900,914   

Loss per share of common stock, basic and diluted

    $ (0.31 )     $ (1.17 ) 

Shares utilized in the calculation of pro forma basic and diluted loss per share attributable to common stockholders are as follows:

 

     Three months ended
March 31, 2015		      Year ended
December 31, 2014		  

Weighted-average shares outstanding, basic & diluted - historical shares

      66,415,415         66,400,914   

Weighted-average shares outstanding, basic & diluted - additional shares issued (see note J) (1)

      17,500,000         17,500,000   
  

 

 

     

 

 

  

Pro forma weighted-average shares outstanding, basic & diluted

   83,915,415      83,900,914   
  

 

 

     

 

 

  

 

  (1) The Company expects to issue 10% of the number of shares issued in the offering, as options to the Manager pursuant to the management agreement in connection with the Common Stock Issuance. However, this issuance of options does not impact the pro forma diluted loss per share calculations, as their effect would have been anti-dilutive.

 

  (M) New Senior has been operating so as to qualify as a REIT for U.S. federal and state income tax purposes. Therefore, certain activities including the Timber Portfolio Acquisition and related financing, the Hawthorn Portfolio Acquisition and related financing, the Mortgage Loan Refinancing and Additional Financing would not be subject to income tax. Accordingly, no adjustment to pro forma income tax expense has been reflected in the unaudited pro forma combined statements of operations.

 

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