NorthStar Realty Finance Corp.’s $4bn acquisition of all outstanding shares of Griffin-American Healthcare REIT II will include a reported $3bn of CMBS backing.
Citigroup Global Markets, Barclays Bank, JPMorgan Chase Bank and Column Financial (the real estate financing arm of Credit Suisse AG) will provide the CMBS financing.
NorthStar announced that it would acquire the Griffin-American portfolio in a stock and cash transaction valued at $4bn, including $600m of assumed debt, in order to expand further into the healthcare real estate market.
The portfolio is comprised predominantly of medical office buildings (43%) and senior housing facilities (30%) in 30 US states and the UK – at an approximate 6.4% cap rate, Northstar said, based on estimates for its 2015 NOI.
Jay Flaherty, head of NorthStar’s healthcare real estate business, wrote in a statement that the acquisition will establish a “leading healthcare real estate platform with a strong mix of diversified assets, attractive contractual lease bumps and formidable [Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or rent] coverage.”
The acquisition of the non-traded REIT marks Northstar’s second major healthcare purchase this year, having paid Formation Capital and Safanad Limited a reported $1.1bn for 43 senior housing and 37 skilled nursing facilities.
Traditional real estate companies have been drawn to healthcare in recent years after the sector fared comparatively well during the recession. Senior housing growth in particular has boomed, with dollar volume of M&A transactions during the first six months of this year reaching circa $9bn in the US by some estimates – more than double the number from the first half of 2013.
Boards of directors from both companies unanimously approved the acquisition, but completion of the transaction is subject to the approval of NorthStar Realty and Griffin-American shareholders. Griffin-American stockholders will receive $11.50 per Griffin-American share, comprising $7.75 in cash and $3.75 per share in NorthStar Realty common stock.
The transaction is expected to close in the fourth quarter. Commercial Real Estate Direct first reported on the CMBS financing.