Griffin-American Healthcare REIT III Inc. and Griffin-American Healthcare REIT IV Inc., two healthcare-focused non-traded real estate investment trusts, have agreed to merge in a tax-free, stock-for-stock transaction to create a combined company with approximately $4.2 billion in healthcare real estate assets.
The combined company will be renamed American Healthcare REIT Inc. and will be the 11th largest healthcare-focused REIT globally with an approximately 19 million-square-foot international portfolio of healthcare real estate comprised of 314 medical office buildings, senior housing communities, skilled nursing facilities and other real estate-related investments.
Immediately prior to the REIT merger, GAHR III has agreed to purchase the business and operations of American Healthcare Investors LLC, the co-sponsor of both REITs, and the REITs’ external advisors.
All of the consideration paid for the AHI acquisition will be in the form of operating partnership units of GAHR III’s operating partnership, which may be converted into American Healthcare REIT stock.
Following both transactions, American Healthcare REIT will have an integrated management platform with capabilities in acquisitions, asset management, finance, accounting and tax, that are expected to result in operational cost savings of approximately $21 million annually, the companies said in a statement. The post-merger distribution rate is expected to be $0.40 per share annually.
More than 100 employees of AHI, including its three founders, will become employees of the newly combined company. Jeff Hanson will be named executive chairman of American Healthcare REIT, Danny Prosky will be named president and chief executive officer, and Mathieu Streiff will be named chief operating officer. All other AHI executives and employees will retain similar roles and titles.
“We are excited about the opportunities this transformative tri-party transaction creates for both GAHR III and GAHR IV, their stockholders and American Healthcare REIT’s goal for a planned future listing on a national stock exchange,” said Jeff Hanson, chairman and chief executive officer of both REITs. “We believe that merging these complementary portfolios together, along with the sponsor company, will create a portfolio with meaningful scale and diversification, as well as drive significant operating efficiencies and earnings accretion for stockholders, well-positioning the company for future growth that should be rewarded in the public markets.”
As of September 30, 2020, Griffin-American Healthcare REIT III shares were valued at $8.55 each, and Griffin-American Healthcare REIT IV shares were valued at $9.22.
In exchange for each share of GAHR III common stock, GAHR III stockholders will receive 0.9266 of a share of GAHR IV Class I common stock. Following the close of both transactions, current GAHR III stockholders will own approximately 65.2 percent of American Healthcare REIT, GAHR IV stockholders will own approximately 29.7 percent, the management team will own approximately 2.3 percent, and other sellers in the AHI acquisition will own approximately 2.8 percent.
The proposed transactions are expected to close in the fourth quarter of 2021, with a listing planned by the end of 2022.
Griffin-American Healthcare REIT III launched its initial public offering in February 2014 and closed in March 2015 after raising more than $1.9 billion. As of March 31, 2021, the REIT owned 100 buildings and 120 integrated senior health campuses purchased for roughly $3.17 billion.
Griffin-American Healthcare REIT IV commenced its initial public offering in February 2016 and raised $754.1 million in investor equity prior to closing in February 2019. As of March 31, 2021, the portfolio was comprised of 94 healthcare buildings purchased for nearly $1.1 billion.