NorthStar Realty Finance Corp (NorthStar Realty) and Griffin-American Healthcare REIT II (Griffin-American) announced today that their Boards of Directors have approved a merger between the two companies. Under the agreement, NorthStar Realty will acquire Griffin-American’s outstanding shares in a stock and cash transaction, which is valued at $4 billion and includes $600 million of debt.
The two companies were rumored to be in talks early in July but the whispers remained unconfirmed until now.
Since NorthStar Realty already sponsors a formidable healthcare REIT, the transaction will make NorthStar a leading investor in the healthcare real estate sector once it is completed, which is expected to be in the fourth quarter of 2014.
Jay Flaherty, overseer of NorthStar Realty’s healthcare real estate business, stated, “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.”
Griffin-American’s portfolio is primarily composed of medical office buildings (43%) and senior housing facilities (30%) in the United States and the United Kingdom, at an approximate 6.4% cap rate based on our estimate of 2015 NOI.
In regards to NorthStar Realty’s cash available for distribution, the transaction is expected to have a neutral impact.
“This acquisition represents a highly desirable portfolio of healthcare real estate assets, which creates the framework for substantial multiple expansion and provides NorthStar Realty an exciting opportunity to un-lock asset and platform value through future transactions,” commented NorthStar Realty’s Chairman and CEO, David Hamamoto.
UBS Investment Bank and CS Capital Advisors are acting as financial advisors to NorthStar Realty, while BofA Merrill Lynch, Robert A. Stanger & Co., Inc., and KeyBanc Capital Markets Inc. acted as financial advisors to Griffin-American.
Completion of the transaction depends on approval by both Griffin-American and NorthStar Realty shareholders as well as satisfaction of customary closing conditions.
NorthStar held a conference call this morning at 11:00 a.m. Eastern time to discuss the proposed transaction.