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New Senior Announces Second Quarter 2018 Results

August 9, 2018

NEW YORK--(BUSINESS WIRE)--Aug 9, 2018--New Senior Investment Group Inc. (“New Senior” or the “Company”) (NYSE:SNR) announced today its results for the quarter ended June 30, 2018. In addition, the Company announced three strategic initiatives: (i) a plan to internalize management, (ii) the expected refinancing of a $720 million loan, and (iii) a change to the Company’s dividend policy.

SECOND QUARTER 2018 FINANCIAL HIGHLIGHTS

Net loss of $39.1 million, or $(0.48) per basic and diluted share Total net operating income (“NOI”) of $45.3 million Total same store cash NOI decreased 3.0% versus the second quarter of 2017 Normalized Funds from Operations (“Normalized FFO”) of $12.6 million, or $0.15 per basic and diluted share AFFO of $15.0 million, or $0.18 per basic and diluted share Normalized Funds Available for Distribution (“Normalized FAD”) of $13.8 million, or $0.17 per basic and diluted share

STRATEGIC REVIEW UPDATE

On August 7, reached an agreement in principle with its external manager to internalize the Company’s management Expect to refinance a $720 million loan maturing in May 2019 with long-term flexible secured debt Dividend re-set to $0.13 per common share for the quarter ended June 30, 2018

SECOND QUARTER 2018 RESULTS

SECOND QUARTER 2018 GAAP RESULTS

New Senior recorded GAAP net loss of $39.1 million, or $(0.48) per basic and diluted share, for the second quarter of 2018, compared to GAAP net income of $3.1 million, or $0.04 per basic and diluted share, for the second quarter of 2017. The year over year decrease was primarily driven by a $59 million loss on extinguishment of debt in the second quarter of 2018 partially offset by a $40 million gain on lease termination in the second quarter.

SECOND QUARTER 2018 PORTFOLIO PERFORMANCE

Total NOI decreased 18.5% to $45.3 million compared to $55.6 million for 2Q 2017, primarily driven by approximately $325 million in asset sales. Total same store cash NOI decreased 3.0% vs. 2Q 2017.

For the managed portfolio, same store average occupancy decreased 140 basis points to 85.4% compared to 86.8% for 2Q 2017, and same store RevPOR increased 1.4% to $3,128 compared to $3,085 for 2Q 2017. Year-over-year, same store cash NOI decreased 3.3% to $24.1 million compared to $24.9 million for 2Q 2017.

For the triple net portfolio, same store cash NOI increased 3.0% to $1.4 million compared to 2Q 2017. Same store triple net average occupancy was 89.3% and same store EBITDARM coverage was 1.37x as of June 30, 2018 . Triple net average occupancy and EBITDARM coverage are presented one quarter in arrears on a trailing twelve month basis.

STRATEGIC REVIEW UPDATE

As previously announced on February 23, 2018, the Board, together with the Company’s management team and legal and financial advisors, has been exploring a full range of strategic alternatives to maximize shareholder value. The Board formed a special committee (the “Special Committee”), composed entirely of independent and disinterested directors, to address certain aspects of the strategic review.

In connection with the strategic review, the Company retained J.P. Morgan Securities LLC as its financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP as its legal advisor. In addition, the Special Committee retained Morgan Stanley & Co. LLC as its independent financial advisor and Wachtell, Lipton, Rosen & Katz as its independent legal advisor.

The strategic review has been a multi-step process. As part of the strategic review, in May 2018, the Company terminated its triple net leases with affiliates of Holiday Retirement, which reduced credit risk and increased the transparency of the Company’s operating results. Today, the Company is announcing three additional strategic initiatives, as described in more detail below. The Board believes that these initiatives, together with the prior lease termination, will position the Company for growth and facilitate additional efforts to maximize shareholder value.

1. Plan to Internalize Management

On August 7, the Special Committee reached an agreement in principle with New Senior’s external manager, FIG LLC (the “Manager”) to internalize the Company’s management function. The agreement in principle was negotiated and unanimously approved by the Special Committee. Subject to the completion of definitive documentation, the internalization is expected to be effective by January 1, 2019. The agreement is non-binding, and there can be no assurance that the internalization will occur as expected or at all, or that the final terms of the internalization will be as described below. The Manager is an affiliate of Fortress Investment Group LLC.

Currently, New Senior is externally managed and advised by the Manager, subject to oversight by the Board of Directors. Pursuant to a management agreement (the “Management Agreement”), the Manager provides the Company with a management team, other personnel and corporate infrastructure. Accordingly, all of the individuals who provide services to the Company are currently employees of the Manager. In exchange for the Manager’s services, the Company pays the Manager certain fees, including a management fee and, subject to performance, an incentive fee. The Company also reimburses the Manager for certain costs.

The internalization is expected to result in the following changes:

Management Agreement. The Management Agreement is expected to be terminated, and the Company is expected to pay total consideration to the Manager of $50 million consisting of $10 million in cash and $40 million in preferred stock with an expected rate of 6% per annum. The preferred stock is expected to be redeemable by the Company at any time; in addition, the Manager is expected to be able to cause the Company to redeem 50% of the preferred stock beginning at the end of 2020, and the other 50% beginning at the end of 2021. For a transition period following the internalization, the Manager is expected to continue to provide certain services, at cost, pursuant to a transition services agreement. People. The Company expects to become the employer of the individuals who perform services on its behalf. The Special Committee anticipates that the post-internalization management team will include several key employees of the Manager. Personnel decisions are expected to be finalized prior to entering into a definitive agreement with the Manager.

The internalization is expected to have the following key benefits:

Cost-Savings. The Company estimates that the internalization will result in a reduction in general and administrative expenses of approximately $10 million per year. Simplicity and Transparency. The internalization is expected to simplify the Company’s organizational structure and increase the transparency of its financial results. Expanded Institutional Ownership. New Senior’s institutional ownership base could expand as a result of increased comparability with its peers in the healthcare REIT sector. Continued Manager Support. The Company expects to receive support from the Manager for certain functions during a transition period following the internalization.

The internalization is one of several types of transactions that were given thorough consideration by the Board and Special Committee during the course of the strategic review. Having considered a range of alternatives, the Board believes that internalizing the Company’s management function will provide the greatest opportunity to maximize value for shareholders.

2. Refinancing

The Company expects to refinance a $720 million loan maturing in May 2019 with a long-term loan, increasing the weighted average maturity of the Company’s debt from approximately three years to over five years. Both the existing financing and the proposed refinancing are floating-rate secured loans.

The refinancing is expected to generate meaningful interest rate savings of more than $11 million annually. The rate on the existing loan is currently LIBOR plus 400 basis points, or approximately 6.1% based on LIBOR as of August 8, 2018. The rate on the new loan is expected to be LIBOR plus approximately 240 basis points, or 4.5%.

The Company expects to complete the refinancing during the fourth quarter of 2018. The refinancing is subject to market and other conditions, and there can be no assurance that the refinancing will be completed as expected or at all.

3. Dividend

As previously disclosed, the Board has been actively reviewing the Company’s dividend policy. Dividend coverage has been an ongoing focus as the Company’s payout level relative to earnings has steadily increased. After careful consideration of the potential impact of the strategic initiatives announced to date, as well as the Company’s potential for organic growth, investment and other initiatives, the Board has determined to re-set the dividend to more closely align the Company’s payout ratios with its industry peers. Accordingly, the Board declared a cash dividend of $0.13 per common share for the quarter ended June 30, 2018. The dividend is payable on September 21, 2018 to shareholders of record on September 7, 2018.

ADDITIONAL INFORMATION

For additional information that management believes to be useful for investors, please refer to the presentation posted in the Investor Relations section of the Company’s website, www.newseniorinv.com.

EARNINGS CONFERENCE CALL

Management will host a conference call on August 9, 2018 at 9:00 A.M. Eastern Time. The conference call may be accessed by dialing (877) 694-6694 (from within the U.S.) or (970) 315-0985 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “New Senior Second Quarter 2018 Earnings Call.” A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.newseniorinv.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast.

A telephonic replay of the conference call will also be available approximately two hours following the call’s completion through 11:59 P.M. Eastern Time on September 9, 2018 by dialing (855) 859-2056 (from within the U.S.) or (404) 537-3406 (from outside the U.S.); please reference access code “8673946.”

ABOUT NEW SENIOR

New Senior Investment Group Inc. (NYSE: SNR) is a publicly-traded real estate investment trust with a diversified portfolio of senior housing properties located across the United States. As of June 30, 2018, New Senior is one of the largest owners of senior housing properties, with 133 properties across 37 states. New Senior is managed by an affiliate of Fortress Investment Group LLC, a global investment management firm. More information about New Senior can be found at www.newseniorinv.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements regarding the Company’s exploration of strategic alternatives, the plans to internalize the Company’s management and refinance a $720 million loan, including, in each case, with respect to the terms, timing, potential benefits, potential costs and completion thereof, and the declaration or amount of any future dividend. These statements are not historical facts. They represent management’s current expectations regarding future events and are subject to a number of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties relating to the Company’s review of strategic alternatives and announcement thereof and the Company’s ability to successfully manage the transition to self-management. Accordingly, you should not place undue reliance on any forward-looking statements contained herein. For a discussion of these and other risks and important factors that could affect such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s most recent annual and quarterly reports filed with the Securities and Exchange Commission, which are available on the Company’s website ( www.newseniorinv.com ). New risks and uncertainties emerge from time to time, and it is not possible for New Senior to predict or assess the impact of every factor that may cause its actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements contained herein speak only as of the date of this press release, and New Senior expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in New Senior’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

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