Health Care REIT CEO: Not Interested in Overpaying for Mediocre Assets

Multi-billion deals this week amid rumors of a recent bidding war between several active health care real estate investment trusts (REITs) in the senior living space has set the stage for various speculation as to who will emerge the top owner in the industry, but one chief executive is clearing the air of his company’s intentions.

At the heart of the rumor mill is Griffin-American Healthcare REIT II, which triggered a bidding war among its potential buyers, many of which analysts speculate to be major senior housing investors, including Health Care REIT, Inc. (NYSE:HCN).

The Toledo, Ohio-based Health Care REIT, which manages an asset portfolio that includes operator relationships with national brands like Brookdale Senior Living (NYSE:BKD) and Sunrise Senior Living (NYSE:SRZ), says people shouldn’t believe everything they read when it comes to their interest in Griffin-American, according to comments made by CEO Tom DeRosa this week to SNL Blogs.

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“One of the fun things we get to do in our jobs is, we maybe hang around the hoop, and if we can drive the price up of Griffin-American by acting like we’re interested, and have somebody pay a high price for a bunch of mediocre to poor assets, so be it,” DeRosa reportedly said during NAREIT week. “We’re competitive, right?”

The company’s biggest competitor, Chicago-based Ventas, Inc. (NYSE:VTR) made headlines this week with its $2.6 billion agreement to purchase American Realty Capital Healthcare REIT, a company which Reuters last month had named as the frontrunner to purchase Griffin-American.

On the same day, Ventas also announced it will acquire Holiday Retirement’s 29-property Canadian portfolio for $900 million in cash.

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The acquisition of ARC Healthcare adds a total of 143 properties, 29 of which are senior housing operating communities, to what will be a $33 billion enterprise value for Ventas.

Even though the company acquired the front-running bidder for Griffin-American, future REIT-to-REIT transactions aren’t out of the question for Ventas, according to comments Chief Investment Officer John Cobb made to SHN this week. The company, however, did not explicitly state intentions to acquire Griffin-American.

As for Health Care REIT, purchasing Griffin-American just doesn’t make much sense when taking into consideration past transactions between the two companies, according to DeRosa.

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“A lot of assets we sold were to Griffin-American,” DeRosa said to SNL. “So why would we buy those assets back at a premium?”

Health Care REIT did, however, complete a $1 billion common stock offering overnight this week, which would be used to repay advances under its primary unsecured credit facility and for “general corporate purposes, including investing in health care and seniors housing properties,” the company stated in a release.

The public offering of 16,100,000 shares, at a price of $62.35 per share, was the largest overnight marketed stock offering completed by any company registered with the U.S. Securities and Exchange Commission thus far in 2014 based on total gross proceeds.

A buyer has yet to be named for Griffin-American Healthcare REIT II, which owns several portfolios of assisted living communities, CCRCs and skilled nursing facilities among its asset holdings. Apart from Health Care REIT and Ventas, those reportedly interested also included NorthStar Realty Finance Corp.

Written by Jason Oliva

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