Griffin-American Healthcare REIT III, Inc. (GAHR III) and Griffin-American Healthcare REIT IV, Inc. (GAHR IV) have entered into a definitive merger agreement so that GAHR IV will acquire GAHR III in a tax-free, stock-for-stock transaction. The newly merged company will be renamed American Healthcare REIT, with approximately $4.2 billion in combined healthcare real estate assets.
Immediately prior to the acquisition, GAHR III will also acquire the business and operations of American Healthcare Investors, LLC (“AHI”), the co-sponsor of both REITs, and the external advisors of GAHR III and GAHR IV. Combining these entities and the capabilities in acquisitions, asset management, finance, accounting and tax are expected to result in operational cost savings of approximately $21 million annually.
In exchange for each share of GAHR III common stock, GAHR III stockholders will receive 0.9266 of a share of GAHR IV Class I common stock. On a pro forma fully diluted basis, upon the closing of the merger and AHI acquisition, current GAHR III stockholders will own approximately 65.2 percent of American Healthcare REIT, GAHR IV stockholders will own approximately 29.7 percent, the management team will own approximately 2.3 percent and other sellers in the AHI acquisition will own approximately 2.8 percent. The three founding principals of AHI are currently among the single largest individual investors in both REITs. In addition, the post-merger distribution rate is expected to be $0.40 per share annually, subject to approval by the board of directors of the combined company.
Jeff Hanson will be named executive chairman of American Healthcare REIT, Danny Prosky will be named president and chief executive officer, and Mathieu Streiff will be named chief operating officer. They will oversee an approximately 19 million-square-foot international portfolio of healthcare real estate comprised of 314 medical office buildings, senior housing communities, skilled nursing facilities and other real estate-related investments.
In addition, the announcement made clear management’s intention to list the REIT on a national stock exchange by the end of 2022, subject to the closing of the proposed transactions and market conditions. They believe a fully integrated, self-managed REIT should support much stronger earnings multiples/valuations in a public listing compared to externally managed REITs.
Robert A. Stanger & Co., Inc., Truist Securities and KeyBanc Capital Markets are acting as financial advisors to the special committee of the board of directors of GAHR III, the special committee of the board of directors of GAHR IV and AHI, respectively. DLA Piper LLP (US) and Sullivan & Cromwell LLP are acting as legal counsel to the special committees of the board of directors of GAHR III and GAHR IV, respectively. Morrison & Foerster LLP is acting as legal counsel to AHI. Morris, Manning & Martin, LLP is acting as legal counsel to GAHR IV.
The IPO and SPAC boom has yet to make its way to the seniors housing and care market, so this announcement stands out. We’ll also be happy to see another major institutional buyer make some moves in the M&A market, either paring its portfolio or seeking even more scale.
