Healthcare REIT Rejects Takeover Bid from American Realty

American Realty Capital II, LLC offered to sponsor Grubb & Ellis Healthcare REIT II (GEHRII) in an unsolicited bid submitted to the REIT’s board of directors on Nov. 10, 2011.

The bid, which the board declined on Nov. 16, also included ARC’s affiliates serving in advisory and dealer-manager roles to the REIT.

“Given our experience, track record and highly competitive pricing, we believe that our proposal was in the best interests of GEHRII and its stockholders, both from a financial and a strategic point of view, and superior to the currently pending transition arrangements,” said Nicholas S. Schorsch, CEO of ARC, in a statement.


The health care REIT has been transitioning sponsorship away from Grubb & Ellis in favor of co-sponsorship by Griffin Capital Corporation and American Healthcare Investors, LLC, which was founded by Jeff Hanson and Danny Prosky. The two serve in upper management roles on the REIT’s independent board, with Hanson as chairman and CEO and Prosky as president, COO, and director.

ARC’s proposal placed its affiliated broker dealer, Realty Capital Securities, LLC, as managing broker deal, with no announced changes to the REIT’s investment strategy, primary investment objectives, targeted assets, leverage policy and selling expenses.

It also stated its “highest regard” for the REIT and its executive management, and said it expected Hanson and Prosky to continue on “as part of the transition and thereafter.”


The two didn’t appreciate what some have called a “hostile” takeover bid, viewing it as an attempt to distract them during their transitional period.

“We’re not for sale,” Hanson is quoted as saying in an Investment News article.

“We’re very flattered, and it’s an acknowledgement that they view Grubb & Ellis Healthcare REIT as one of the best-performing in the market,” said Damon Elder, senior director of communications at Grubb & Ellis Company, adding the REIT’s intention to stay focused.

Because ARC currently sponsors another healthcare REIT with goals similar to GEHRII, the proposed sponsorship would be a conflict of interest, Elder pointed out.

A second proposal to “roll up” GEHRII into ARC’s existing REIT through buying its outstanding stock left some puzzled as the Grubb & Ellis REIT is substantially bigger.

“The roll-up proposal is a head scratcher. We’re both raising equity through similar channels—the same broker-dealers and advisors,” Hanson said in the article.

Both proposals were promptly refused, and GEHRII says it will continue to work through its transitional period. The REIT expects to change its name to “Griffin-American Healthcare Trust, Inc.” by early January 2011.

Go here to view American Realty Capital II’s sponsorship offer.

Written by Alyssa Gerace