NorthStar Realty to Acquire Griffin-American Health Care REIT II in $4 Billion Deal

After being long-rumored to have been eyeing the acquisition of Griffin-American Health Care REIT II, NorthStar Realty Finance Corp. (NYSE: NRF) said today it will acquire the REIT in a transaction valued at $4 billion. 

The boards of both companies have agreed to a merger agreement under which NorthStar Realty will acquire all of the outstanding shares of Griffin-American at $11.50 per share.

The stock and cash deal specifies Griffin-American shareholders will receive $7.75 in per share in cash and $3.75 per share in NorthStar Realty stock, under certain terms and conditions. 

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Through the transaction, NorthStar Realty is acquiring Griffin-American’s portfolio, 30% of which comprises seniors housing investments in the U.S. and U.K. An additional 43% of its portfolio comprises medical office buildings, with the entire portfolio having an approximate 6.4% cap rate, according to NorthStar. 

“This acquisition represents a highly desirable portfolio of healthcare real estate assets, which creates the framework for substantial multiple expansion and provides NorthStar Realty an exciting opportunity to un-lock asset and platform value through future transactions,” said NorthStar Realty’s Chairman and CEO, David Hamamoto. 

Griffin is a major non-traded REIT investor in senior housing, skilled nursing and medical office buildings among its healthcare investments. In recent months, the company has completed several large-scale senior housing deals, including the acquisition of four continuing care retirement communities for $300 million in January.

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In September, Griffin-American acquired a large portfolio of 44 senior housing properties in the United Kingdom for $472 million. It also completed $541 million in acquisitions in December, bringing its 2013 investment activity to a total of $1.5 billion. 

The $4 billion price tag agreed to by NorthStar Realty is higher than most recently reported by the Wall Street Journal; a transaction previously estimated to be valued around $3.7 billion during the course of a bidding war for the REIT. 

Previously, American Realty Capital (ARC), had been rumored as the front-running bidder for Griffin-American, prior to ARC’s June acquisition by Ventas for approximately $2.6 billion in stock and cash.  

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“When we launched Griffin-American Healthcare REIT II nearly five years ago, we set out to build a premium portfolio of diversified healthcare real estate in order to provide investors with an opportunity to realize a compelling return on their investment,” said Jeff Hanson, chairman and CEO of Griffin-American. “With this transaction, we have executed on our strategy, validating our investment thesis and delivering a strong result for stockholders.”

The deal is expected to close in the fourth quarter of 2014, pending closing conditions.

Written by Elizabeth Ecker