NorthStar Realty Finance Corp. in Talks to Buy Griffin-American Healthcare REIT II, Sources Say

By Robbie Whelan 

NorthStar Realty Finance Corp. is in exclusive talks to purchase Griffin-American Healthcare REIT II, a large owner of senior housing, skilled nursing facilities, hospitals and other properties, according to two people familiar with the negotiations.

The cash-and-stock deal, which would value the real-estate investment trust at $3.5 billion to $3.7 billion, isn't final and could still fall apart. The exclusivity period ends this weekend and, if a deal isn't cut by then, Griffin can start talking to other bidders, these people said.

Griffin is being represented by Bank of America Merrill Lynch's health-care banking group, these people said. News of the talks was reported earlier Tuesday by the Financial Times.

Griffin-American is a nontraded REIT, meaning that it is publicly-owned, but its shares are sold by individual broker-dealers and not traded on any public stock exchange. Nontraded REITs are more difficult to value than traded REITs because of their lack of liquidity. Griffin-American's shares, which began selling at $10 a share in 2009, were last revalued at $10.22 a share in 2012.

In May, Griffin-American's independent board of directors entered into exclusive negotiations to sell the company to American Realty Capital Healthcare Trust Inc., a company controlled by investor Nicholas Schorsch, for about $12.50 a share, which would value Griffin-American at around $3.7 billion. Those talks fell apart in early June, when ARC Healthcare was sold for $2.6 billion in cash and stock to health-care REIT Ventas Inc.

NorthStar's offer for Griffin-American isn't as high as ARC Healthcare's earlier offer, according to one person familiar with the deal process.

Griffin-American Healthcare was originally named Grubb & Ellis Healthcare REIT II Inc. and was sponsored by the commercial real-estate-services firm of the same name.

But, in early 2012, with Grubb & Ellis Co. about to file for bankruptcy protection, the firm transferred its nontraded REIT advisory and dealership business to a team led by American Healthcare Investors and Griffin Capital Corp., changing the fund's name in the process. The company has raised $2.84 billion from investors.

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