AR Global’s Healthcare Trust to Buy Affiliated REIT in $120 Million Deal
Healthcare Trust Inc., a publicly registered non-traded real estate investment trust sponsored by AR Global, has agreed to purchase substantially all of the assets of affiliated non-traded REIT, American Realty Capital Healthcare Trust III, for approximately $120 million.
The special committee of the board of directors unanimously approved the potential acquisition, which is still subject to shareholder approval and is expected to close in the third or fourth quarter of 2017. If approved, the combined portfolio will total $2.47 billion, based on investment cost.
The DI Wire reported in June of last year that ARC Healthcare Trust III was considering a strategic transaction with a then unnamed affiliate, and last month, the company announced that it was temporarily suspending its distribution reinvestment plan following strategic discussions.
“We are excited about HTI’s acquisition of assets from HT III, which represents a positive step in the evolution of our company in line with our plans for the deployment of additional capital,” said Leslie Michelson, non-executive chairman of the board. “This accretive acquisition enhances HTI’s portfolio through increased occupancy, a broadened base of tenants and operators, further geographic diversification, and the addition of more medical office buildings and private pay assets. We believe this transaction will help us create greater shareholder value, improve our leverage profile and increase our distribution coverage.”
Under the terms of the agreement, ARC Healthcare Trust III will sell 19 properties to Healthcare Trust for $120 million, less a $4.9 million balance of an outstanding mortgage loan on one of its properties that will be assumed by Healthcare Trust or repaid by ARC Healthcare Trust III at closing. Healthcare Trust will deposit $6 million into an escrow account at closing that will be released in installments following the closing date.
ARC Healthcare Trust III will pay a $3.6 million termination fee if it enters into another strategic transaction or if its board changes its approval recommendation of the transaction. Healthcare Trust III has also agreed to reimburse Healthcare Trust of up to $850,000 of certain transaction-related expenses if ARC Healthcare Trust III shareholders do not approve the transaction.
“After an extensive, 12-month-plus process, the special committee feels the asset sale to HTI is the best option to maximize shareholder value,” said Sue Perrotty, chair of the board and lead independent director of ARC Healthcare Trust III. “The all-cash transaction provides liquidity to shareholders and the institutional buyer serves to mitigate any execution risk.”
KeyBanc Capital Markets Inc. is serving as exclusive financial advisor to Healthcare Trust’s special committee, while Arnold & Porter Kaye Scholer LLP is serving as legal counsel. SunTrust Robinson Humphrey, Inc. is serving as exclusive financial advisor to ARC Healthcare Trust III’s special committee, and Shapiro Sher Guinot & Sandler is serving as legal counsel. Proskauer Rose LLP is serving as outside legal counsel to both REITs.
