It’s been a busy few weeks for Jeff Hanson, chief executive for Santa Ana-based Grubb & Ellis Healthcare REIT II.
The non-traded real estate investment trust—which has raised more than $450 million from investors to buy healthcare-related offices and facilities—last month announced plans to distance itself from Santa Ana-based brokerage Grubb & Ellis Co., its namesake sponsor. The investment trust, which kicked off operations in mid-2009, plans to exit its advisory and dealer-manager arrangements with Grubb by the end of the year.
Hanson had been chief investment officer of Grubb and head of the brokerage’s investment management division. He recently resigned from the company, along with Danny Prosky, now president of the Healthcare REIT.
The two started up a new company, Newport Beach-based American Healthcare Investors LLC, to co-manage the REIT along with Griffin Capital Corp., a Los Angeles-based real estate investment company that has sponsored other non-traded REITs. The company is in the process of changing its name to Griffin-American Healthcare REIT II. It’s expected to remain locally based.
Decision
The decision to split from Grubb, whose stock has been struggling this year amid questions over its long-term ownership and financial strength, was “perhaps the most important event for us this year,” Hanson and Prosky said in a letter to investors last week.
The year’s not over, though.
Last week, a smaller healthcare investor based in New York, American Realty Capital Healthcare Trust Inc., disclosed it had made an unsolicited—and unsuccessful —$405 million bid to buy the Healthcare REIT.
American Realty’s current healthcare portfolio is valued at about $130 million. The company offered to buy the Healthcare REIT’s 45 million or so outstanding shares for $9.01 per share with a combination of cash and stock.
$430.8 Million
Executives of the Healthcare REIT place a higher value on the company’s portfolio, according to filings with the Securities and Exchange Commission. It said the company’s nearly 2 million square feet of healthcare-related properties are currently valued at $430.8 million, based on purchase price.
The Healthcare REIT has been selling stock to investors at $10 a share. It continues to bring in plenty of new investors, with almost $300 million of equity this year.
Still, American Realty said it believed the $9.01 per share offer—a combination of a $6 per-share payment in cash and a $3.01 per- share payment in stock— “reflects a premium to the net asset value” of the healthcare REIT’s 55 properties.
The unsolicited offer “is believed to be the first such hostile-takeover bid in the (non-traded REIT) industry,” noted a report last week from financial adviser trade publication Investment News.
Orange County counts its share of non-traded REITs, including multiple offerings from Newport Beach-based KBS Realty Inc., among others.
The rejection of American Realty’s offer could lead to a higher bid for the Healthcare REIT, market watchers said.
“Shocked”
“We were shocked they said no,” Nicholas Schorsch, American Realty’s chief executive, told Investment News. “We think we can create real value for shareholders.”
American Realty said it had $46 million cash on hand and had lined up $209 million in financing from multiple lenders for the deal.
Properties in the Healthcare REIT portfolio now include medical offices, physical rehabilitation hospitals, acute care hospitals and nursing facilities. The portfolio is about 97% leased. Only one property is located in in California, a pediatric specialty hospital in Loma Linda.
The Healthcare REIT also has another $278 million of property acquisitions under contract, which when closing will bring its portfolio over 70 buildings spread across the country (see Healthcare column, page 32).
“We continue to believe that the long-term interests of our stockholders are best served by maintaining the company’s current direction and strategy,” said the Healthcare REIT’s board in a letter to Amercian Realty rejecting the offer.
