NEW YORK CITY—NorthStar Realty Finance Corp. is stepping up its game in the healthcare real estate arena by acquiring Griffin-American Healthcare REIT II. The two companies announced Tuesday morning that their boards had approved the $4-bilion stock-and-cash acquisition, which includes the assumption of $600 million in debt.
Griffin-American II’s healthcare portfolio is comprised mainly of medical office properties and senior housing in the US and UK. NorthStar is acquiring it at a 6.4% cap rate; the portfolio increases owned real estate to about 75% of the pro forma company.
“With the addition of the high-quality Griffin-American assets, NorthStar Realty’s healthcare real estate portfolio is positioned to be a leading healthcare real estate platform with a strong mix of diversified assets, attractive contractual lease bumps and formidable EBITDAR coverage,” says James Flaherty, CEO of NorthStar Healthcare. Flaherty was chairman and CEO of HCP before joining NorthStar this past January.
“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,” says 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.”
Under terms of the merger, Griffin-American II shareholders will receive $11.50 per share comprising $7.75 and $3.75 in NorthStar common stock. The deal is expected to close in the fourth quarter.
UBS Investment Bank and CS Capital Advisors are acting as financial advisors to NorthStar, and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as its legal counsel. On the Grffin-American side, BofA Merrill Lynch, Robert A. Stanger & Co. Inc. and KeyBanc Capital Markets Inc. acted as financial advisors, while Latham & Watkins LLP, McGuireWoods LLP and Morris, Manning & Martin LLP acted as legal advisors.
Separately, Griffin Capital Essential Asset REIT II Inc. said Tuesday that the SEC had declared effective its registration statement for an initial public offering. It plans to offer up to $2 billion in common stock.