NorthStar Realty Finance Corp to buy Griffin-American Health Care

NorthStar Realty Finance Corp said it would buy Griffin-American Healthcare REIT II Inc for $3.35 billion as it sought to take advantage of increased demand for senior care facilities in a healthcare real estate sector that has seen cosolidation, Reuters reported.

The real estate finance company's shares were up as much as 8 per cent in afternoon trading.

The healthcare real estate sector had seen a number of deals this year as companies in the sector looked take up favourable positions in the senior care market.

Ventas Inc, one of the largest US healthcare real estate investment trusts (REITs), said in June, that it would buy American Realty Capital Healthcare Trust Inc for about $2.6 billion.

The company also bought 29 independent senior housing communities in Canada from Holiday Retirement Corp for $900 million.

In February Brookdale Senior Living Inc had revealed plans to acquire Emeritus Corp for about $1.4 billion, creating the largest owner-operator of senior housing in the US.

The Griffin-American acquisition is NorthStar's second deal in the sector in 2014.

The company acquired 43 private-pay senior housing facilities and 37 skilled nursing facilities in March for about $1.1 billion from Formation Capital and Safanad Limited.

In a press release NorthStar Realty Finance Corp announced, the Boards of Directors of both companies had 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 per cent) and senior housing facilities (30 per cent) in the US and the UK, at an approximate 6.4 per cent 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 per cent 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.