Griffin American Healthcare REIT III, Inc. will acquire Louisville-based Trilogy Health Services LLC in a $1.125 billion RIDEA joint venture with NorthStar Healthcare Income, Inc., the companies announced Tuesday.
Griffin American will own 70% of the joint venture and act as its manager, while NorthStar Healthcare—a public, non-traded REIT— will own 30%. Trilogy founder and CEO Randy Bufford, along with other members of the management team, will maintain an investment in the company of approximately $24 million.
“Everything about the way we do business will be exactly the same,” Leslie Knox, vice president of communications for Trilogy, tells SHN. “[Griffin American and NorthStar Healthcare] won’t be involved in the management or oversight of our operations.”
The transaction nearly doubles the size of Griffin American, bringing its total portfolio of real estate and real estate-related investments to approximately $2 billion. The deal adds Trilogy senior living communities to the REIT’s existing portfolio of health care assets totaling 67 buildings and one collateralized debt instrument.
“This is a transformational event for Griffin-American Healthcare REIT III,” said Jeff Hanson, chairman, CEO and one of the largest stockholders of the REIT, in a prepared statement. “Randy Bufford and his executive team, which will continue to manage the Trilogy assets on behalf of the joint venture, have established themselves as one of the premier providers of long-term senior care in the country.”
Of Trilogy’s 96 operated senior living communities, 53 are owned, 16 are leased with purchase options, six are leased and expected to be purchased over time, 14 are leased pursuant to joint ventures including one with a purchase option, and the remaining seven are leased, according to a filing with the SEC. Trilogy will be divided into a PropCo, OpCo and eligible independent contractor (EIK) pursuant to a RIDEA transaction. The PropCo will initially own 53 properties, and the OpCo will operate all 96 properties, according to the filing.
The deal has been in the works for some time, Knox says, as private investors overseas who had been involved in the company since 2008 were looking to get a return on their investment in Trilogy. As such, Trilogy began looking at domestic opportunities, and the joint venture with NorthStar and Griffin American proved to be a “good match for everybody across the board as we continue to expand and grow,” Knox says.
In addition to its senior living communities across Kentucky, Indiana, Ohio and Michigan, Trilogy operations include rehabilitative services company Paragon Rehabilitation and PCA Pharmacy, an institutional pharmacy.
Trilogy’s senior living services encompass more than 10,000 beds, and include independent living, assisted living, skilled nursing and rehab. The majority of Trilogy facilities have been built or renovated in the past decade, the company stated in announcing the deal. The company was founded in 1997.
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“Trilogy has been strategically built over the course of nearly two decades in select markets that have experienced growing demand for long-term care services and in which Trilogy has established an industry-leading presence,” stated the company’s President and COO Danny Prosky, in a prepared statement. “Further, Trilogy’s annual growth rate and profitability has been remarkably consistent over the past two decades, regardless of market cycle.”
The transaction is expected to close by the end of the year, Knox says, and is subject to customary closing conditions and third-party approvals.
Written by Tim Mullaney