Griffin-American REITs to Merge, Largest Healthcare IPO Ever May Follow


If all goes according to plan, the largest ever public offering for a healthcare real estate investment trust (REIT) could take place next year – involving a company that has more than 11,500 beds in residence for the elderly.

Two non-traded REITs – Griffin-American Health Care REIT III (GAHR III) and Griffin-American Health Care REIT IV (GAHR IV) – intend to merge in a stock transaction, the companies. The REIT’s co-sponsor, American Healthcare Investors, would also be integrated into the combined company through a separate transaction with GAHR III.

The combination represents a total gross investment value of $ 4.2 billion, as well as the assumption of $ 1.8 billion of GAHR III debt.

These transactions set up the new REIT – which will be called American Healthcare REIT – for an initial public offering scheduled by the end of 2022, according to a presentation to investors.

The American Healthcare REIT portfolio would consist of 314 buildings and campuses, of which 35.1% is senior housing, 26.5% skilled nursing and the remainder is medical office and hospital buildings. The portfolio would also include a small amount of debt investments.

In a $ 1.125 billion joint venture investment that closed in 2015, GAHR III acquired a controlling interest in Louisville-based Trilogy Health Services. In 2020, Trilogy was the 12th largest provider of senior housing in the United States, according to the Argentum ranking.

Trilogy operates more than 100 locations in Kentucky, Indiana, Ohio, and Michigan, providing independent living, assisted living, memory care, and skilled nursing services, among others.

“GAHR III’s largest investment, Trilogy Health Services, offers a powerful investment opportunity in the best-in-class operator with a captive development platform that is well positioned to take advantage of the impending wave of increased demand for senior housing and skilled nursing facilities, ”the investor states presentation.

A new public REIT

Griffin-American REITs have signaled their intention to take new directions.

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In October 2020, GAHR IV’s board of directors created a special committee to explore strategic alternatives, including listing the company’s shares on a national stock exchange.

If the initial public offering goes through, it would be the largest ever for a healthcare REIT, based on KeyBanc Capital Markets figures cited in the investor presentation.

In terms of total assets, American Healthcare REIT would be the 11th largest listed healthcare REIT and the 8th largest owner of senior housing among public REITs.

The Griffin-American REIT combination creates a company with properties in 36 US states, as well as the UK and Isle of Man.

The acquisition of American Healthcare Investors is also intended to set up an IPO, as this move will result in cost savings and internally managed REITs tend to trade higher than externally managed REITs. .

“American Healthcare REIT will have a fully integrated management platform with capabilities for acquisitions, asset management, finance, accounting and tax, which are expected to result in operating cost savings of approximately $ 21 million per year, “read Thursday’s press release.

Jeff Hanson will be Executive Chairman of American Healthcare REIT, Danny Prosky will be President and CEO and Mathieu Streiff will be COO.

In a March 2021 letter to investors in GAHR IV, Hanson and Prosky said the board of directors estimated the net asset value per share of its Class T and Class I common shares at $ 9.22. This is a decrease from a previous estimate of $ 9.54, taking into account the effects of Covid-19.

A relatively low impact from Covid-19 should be seen as a “sign of strength,” Hanson and Prosky wrote.

By combining Griffin-American REITs, there is an opportunity to unlock a NAV bounty by going public, thanks to the size and scale of the entity, says the presentation to investors.

“Listed healthcare REITs have consistently traded at significantly higher premiums to net asset value (an average premium of 20.4% over the past 14 years versus an average of just 0.06% for the ‘all REITs over the same period),’ the presentation said, citing Green Street Statistics.

Bullish on the trilogy

Trilogy will play an important role in the future success of American Healthcare REIT. As stated in the investor presentation:

“Trilogy Investors, owned by both GAHR III (~ 68%) and GAHR IV (~ 6%) was one of our best performing assets before the Covid-19 pandemic and we expect it to works well as long as the effects of the pandemic continue. to calm down.”

Trilogy has increased its beds by 29.4% since 2015, with particularly strong growth in assisted living in 2017.

Additionally, Trilogy has a “refined development prototype and rental strategy,” the presentation reads. Since 2014, only one new campus has failed to stabilize its occupancy rate in three years.

Trilogy is aiming for a 90% occupancy recovery by the end of 2021, CEO Leigh Ann Barney recently told SHN’s sister site, News from qualified nurses. The company’s occupancy rate is up 900 basis points since January 2021, the presentation to investors said.

Like other operators of retirement homes and qualified nurses, Trilogy faces workforce challenges. The company’s revenue has gone from the low 40% range to the high 40% range, but some other vendors have seen their revenue increase by more than 100%, Barney said.

Even before Covid-19, Trilogy invested heavily in workforce efforts, with particular emphasis on professional development and training opportunities.

For example, Trilogy has partnered with Purdue University Global to fully fund the online college for employees. A temporary hiatus on new registrations was implemented last year, but Barney expected registrations to resume in 2021, she told SHN in August 2020.

Earlier this year, Barney was optimistic vaccines would usher in a pandemic rebound, and she was focused on building market and workforce confidence.

“My main priorities: to continue to improve the basic and minimum salary scales for recruiting and retaining staff,” she told SHN. “We made significant salary investments last October for our certified caregivers, but we understand that we will need to continue investing in salaries in order to stabilize our workforce.”


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