SANTA ANA, CA-Grubb & Ellis Healthcare REIT II politely but firmly rebuffed an unsolicited offer by a rival public company to take control of the Orange County-based REIT.

New York City-based American Realty Capital II said it had sent a formal offer in November to the board of directors of Grubb & Ellis Healthcare REIT II Inc. In essence, American Realty proposed  to take over the role of REIT sponsor, to replace outgoing Grubb & Ellis. The locally-based brokerage announced in October that it would take the unusual move of “transitioning” the REIT sponsorship away from Grubb & Ellis to a new “co-sponsorship” of  American Healthcare Investors, LLC and Griffin Capital Corp. The company will be renamed Griffin-American Healthcare REIT II Inc., but will retain current management, including president Dan Prosky and chief executive Jeff Hanson.  

“Given our experience, track record and highly competitive pricing, we believe that our proposal was in the best interests of (the Grubb & Ellis REIT) 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, chief executive of American Realty, says in a statement.

Under the proposed arrangement, Realty Capital Securities would act as managing broker dealer. American Realty, in a statement, said it did not contemplte making any significant changes to the current investment strategy of the Grubb & Ellis REIT.

In its proposal, ARC explained that it had the “highest regard” for both the REIT and its management, and “would therefore expect Messrs. Prosky and Hanson to continue with (the REIT) s part of the transition and thereafter.”

ARC’s proposal emphasized that RCS is the only managing broker dealer to transition and close a non-traded REIT offering successfully. During its tenure as dealer-manager for Healthcare Trust of America, Inc., RCS raised more than $1 billion in its IPO and several subsequent offerings. G&E’s Jeff Hanson, who is also the chairman of the REIT board and one of its major shareholders, tells GlobeSt.com that: “We are flattered that one of our competitors thinks so highly of our management team and the real estate portfolio we built,” he says.

Beyond that, however, ”the actions by (American Realty) are puzzling for everyone involved on many levels,” he adds. “We remain focused on building and managing one of the best performing non-traded REITs in the industry.”

An industry source, who asked not to be named, says that the offer was “baffling,” in part because of the potential conflict of interest that American Realty would face by operating two non-traded healthcare REITs.