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NorthStar Realty Finance To Acquire Griffin-American Healthcare REIT II In $4 Billion Transaction

Stocks in this article: NRF NSAM

NEW YORK, Aug. 5, 2014 /PR Newswire/ -- NorthStar Realty Finance Corp. (NYSE: NRF) ("NorthStar Realty") and Griffin-American Healthcare REIT II, Inc.  ("Griffin-American") today announced that the Boards of Directors of both companies have unanimously approved a definitive merger agreement under which NorthStar Realty will acquire all of the outstanding shares of Griffin-American in a stock and cash transaction valued at $4 billion, including approximately $600 million of debt, establishing NorthStar Realty as a leading investor in the healthcare real estate sector.

NorthStar Realty is acquiring the portfolio, which is comprised of predominantly 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 and the transaction is expected to be neutral to NorthStar Realty's cash available for distribution. The acquisition increases the scale and diversification of NorthStar Realty's assets and increases owned real estate to approximately 75% of the pro forma company. The transaction creates a best in class healthcare portfolio diversified by geography, asset class, tenant/operator and operating model, with a weighted average lease term of 9.1 years. 

Subject to the terms and conditions of the merger agreement, Griffin-American stockholders will receive $11.50 per Griffin-American share comprising: (i) $7.75 per share in cash; and (ii) $3.75 per share in NorthStar Realty common stock. The stock portion will be subject to a collar such that Griffin-American shareholders will receive 0.1859 NorthStar Realty shares if NorthStar Realty's stock price is above $20.17 per share at closing and 0.2344 NorthStar Realty shares if NorthStar Realty's stock price is below $16.00 at closing. If NorthStar Realty's stock price at closing is between $16.00 and $20.17 per share, Griffin-American shareholders will receive a number of NorthStar Realty shares between 0.1859 and 0.2344, equal to $3.75 in value.  

NorthStar Realty's Chairman and CEO, David Hamamoto, commented, "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."

Jay Flaherty, who oversees NorthStar Realty's healthcare real estate business, said "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."

Key Strategic Benefits:

  • Highly desirable healthcare portfolio with stable, long-term, contractual cash flows
  • Accelerating NorthStar Realty portfolio transformation with 75% of pro forma assets in owned real estate 
  • Expanded ability to unlock asset and platform value through strategic transactions
  • Expanded tenant relationships resulting in future acquisition and development opportunities
  • Enhanced dividend safety and growth potential
  • Potential to realize multiple expansion given premium valuations afforded to diversified healthcare REITs 

Approvals and Timing

Completion of the Griffin-American transaction is subject to the approval of NorthStar Realty and Griffin-American shareholders and satisfaction of customary closing conditions. The transaction is expected to close in the fourth quarter of 2014.

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