Griffin-American Doubles in Size

Griffin-American Healthcare REIT III and NorthStar are teaming up for a Trilogy.

Griffin-American Healthcare REIT III, Inc., will nearly double its holdings when it completes an agreement with joint venture partner NorthStar Healthcare Income, Inc., to acquire Trilogy Investors, L.L.C., for $1.13 billion.

Jeff Hanson

Jeff Hanson, Griffin-American

Trilogy Investors is the parent company of Trilogy Health Services, L.L.C., a Louisville, Ky.-based provider of senior healthcare and hospitality services. The definitive agreement calls for Irvine, Calif.-based Griffin-American to own 70 percent of the joint venture and act as its manager. NorthStar Health, a New York City-based REIT, will own 30 percent. Randy Bufford, Trilogy’s founder & CEO, along with other members of Trilogy management, will maintain an investment of about $24 million in Trilogy.

“This is a transformational event for Griffin-American Healthcare REIT III, which will nearly double in size upon completion of the Trilogy acquisition to approximately $2 billion in real estate and real estate-related investments,” Jeff Hanson, chairman, CEO and one of the largest stockholders in Griffin-American Healthcare REIT III, said in a prepared statement. “Randy Bufford and his executive team, which will continue to manage the Trilogy assets on behalf of the joint venture, have established themselves as one of the premier providers of long-term senior care in the country.”

Founded in 1997, Trilogy now operates 96 properties comprised of more than 10,000 beds, most of which were built or substantially renovated within the last 10 years. The properties, which offer assisted living, memory care, independent living and skilled nursing services, are located in Indiana, Ohio, Michigan and Kentucky.

“Trilogy has been strategically built over the course of nearly two decades in select markets that have experienced growing demand for long-term care services and in which Trilogy has established an industry leading presence,” Griffin-American president & COO Danny Prosky said in a prepared statement. “Trilogy’s annual growth rate and profitability has been remarkably consistent over the past two decades, regardless of market cycle.”

Ron Jeanneault, CEO & president of NorthStar Healthcare, also noted in a prepared statement that the Trilogy leadership has “a strong track record of delivering results.”

He said the transaction would “be another positive step in rounding out the NorthStar Healthcare portfolio with high-quality senior housing investments.”

Trilogy has been active in recent months, adding at least two new facilities earlier this summer. On June 1, Trilogy acquired Waterford Crossing Senior Living Village in Goshen, Ind. The location, which was renamed The Residence at Waterford Crossing, provides assisted living and memory care apartments. Later that month, it opened The Willows at Howell¸ a health campus in Howell, Mich., that offers assisted living, short-term rehabilitation, long-term care, adult day/night care and respite care for seniors.

“We are excited for this new chapter in our company’s history,” Bufford said in a prepared statement. “We have known the principals at Griffin-American and NHI for quite some time and have a great deal of respect for their vision and business acumen. We look forward to the financial and strategic support this new relationship will bring to our company as we continue our journey towards our goal of being the ‘Best Healthcare Company in Michigan.’ ’’

A closing date for the Trilogy transaction was not available but the companies said the deal was being structured as a RIDEA (REIT Investment Diversification and Empowerment Act of 2007) investment.

CS Capital Advisors L.L.C. acted as financial advisor to Griffin-American and NorthStar Health. Paul, Weiss, Rifkind, Wharton & Garrison, L.L.P., served as lead legal advisors to the joint venture. Morris, Manning & Martin L.L.P. acted as legal advisors to Griffin-American.

“This Trilogy investment is a continued reflection of our sponsor’s ability to source unique institutional opportunities for our company and partnering with Griffin-American and its sponsor American Healthcare Investors demonstrates our powerful combined presence in the healthcare market,” Jeanneault of NorthStar Health said in a prepared statement.

NorthStar and Griffin-American have a shared history. Last summer, NorthStar Realty Finance Corp. agreed to acquire Griffin-American Healthcare REIT II, Inc., in a $4 billion stock-and-cash transaction. The deal, which gave NorthStar a portfolio with 289 buildings in 32 states and the United Kingdom featuring medical office buildings, seniors housing, skilled nursing facilities and hospitals, closed in December 2014.

Northstar Healthcare’s portfolio, as of Sept. 14 and adjusted for commitments for acquisitions, consists of 39 investments with a total cost of $2.8 billion, including 35 equity investments with an aggregate total cost of $2.6 billion and four debt investments with an aggregate principal amount of $203 million.

As of Aug.14, Griffin-American Healthcare REIT III had acquired a portfolio of 67 buildings and one collateralized debt instrument for about $1.03 billion. The REIT spent $311.3 million in the second quarter on acquisitions, which resulted in portfolio growth of approximately 49.3 percent during the quarter, according to its 2Q earnings report released Aug. 20. Between June 30 and Aug. 13, the REIT acquired five additional medical office buildings in Waterloo, Ill., and Napa, Calif., as well as one seniors housing facility in Mishawka, Ind., for a total of $48 million, according to the earnings report.