Diversified commercial real estate investment company NorthStar Realty Finance Corp. (NYSE: NRF) said Aug. 5 that it plans to acquire Griffin-American Healthcare REIT II, Inc., a public non-listed REIT (PNLR), in a stock and cash transaction totaling $4 billion.
The transaction is expected to close in the fourth quarter. Under the terms of the deal, Griffin-American stockholders will receive $7.75 per share in cash and $3.75 per share in NorthStar Realty common stock. As part of the deal, NorthStar would assume $600 million in debt from Griffin-American.
Griffin owns a diversified portfolio of 295 health care-related real estate properties. They consist of medical office buildings, senior housing and other health care-related facilities located across 31 states and the United Kingdom.
NorthStar said the transaction will increase the value of its owned real estate to more than $10 billion, which is equivalent to approximately 75 percent of the merged company’s pro forma assets.
Jay Flaherty, who oversees NorthStar Realty’s health care real estate business, said the addition of the Griffin-American assets means NorthStar Realty’s health care 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 (earnings before interest, taxes, depreciation, amortization and rent/restructuring cost) coverage.”
NorthStar said the acquisition will produce expanded tenant relationships, resulting in future acquisition and development opportunities. Other potential benefits, according to NorthStar, include enhanced dividend performance and the potential to realize expansion, given the premium valuations afforded to diversified health care REITs.
Deutsche Bank analyst Stephen Laws said the transaction will significantly increase NorthStar’s healthcare portfolio, making it a viable stand-alone company. A spin-off of the portfolio could occur in the first half of 2015, he added.