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8-K - AMERICAN REALTY CAPITAL HEALTHCARE TRUST INC | v242486_8-k.htm |
EX-99.2 - AMERICAN REALTY CAPITAL HEALTHCARE TRUST INC | v242486_ex99-2.htm |
December 1, 2011
The Board of Directors of
Grubb & Ellis Healthcare REIT II, Inc.
1551 N. Tustin Avenue, Suite 300
Santa Ana, CA 92705
Gentlemen,
We hereby express formally the interest of American Realty Capital Healthcare Trust, Inc. (“ARCHT”) in acquiring Grubb & Ellis Healthcare REIT II, Inc. (“GEHRII”). Under the proposed transaction, ARCHT would acquire all the outstanding shares of common stock of GEHRII for $9.01 per share consisting of (i) $6.00 per share payable as cash to GEHRII shareholders and (ii) $3.01 per share as stock in ARCHT (issued at $10 per share). GEHRII shareholders may also be given the option to elect to receive either 100% ARCHT stock or 100% cash with a cumulative cap on cash consideration equivalent to $6.00 per share. We are confident we can consummate a transaction quickly and on the terms proposed.
Based on GEHRII’s publicly available information, we believe this offer price reflects a premium to the net asset value of the GEHRII properties, providing immediate value to GEHRII security holders. The proposed transaction also will create significant value for GEHRII and ARCHT security holders by creating a combined company with a high quality portfolio, increased critical mass and operating synergies, and a highly qualified team of health care investment and operating professionals. The purchase price provides certainty of value to GEHRII’s security holders in today’s uncertain economic environment.
Our board has already considered and approved the proposed transaction. We also have completed a thorough review of GEHRII’s publicly available information and are prepared to move forward immediately to consummate a transaction with minimum disruption to GEHRII1. We believe that with adequate access to the necessary information we can complete all required due diligence in approximately six weeks. We believe that our due diligence review would require limited access to a small number of senior executives of GEHRII and its legal, accounting and financial advisors. Importantly, no interaction with any of the tenants of GEHRII will be required until all other due diligence is completed and the material terms of a transaction are agreed to.
1The offer is based on the portfolio and capitalization data shown in Appendix A as available in GEHRII’s public filings.
Considerable time and resources have been expended in developing this offer. While our offer is conditioned on a financing requirement, based on our careful analysis, we are confident that we will be able to obtain the needed funding, as we already secured good faith commitments of approximately $209 million of financing from multiple lenders and plan to fund the balance of the cash portion of our offer with approximately $46 million cash on hand. However, our offer is subject to the satisfactory completion of our due diligence review of GEHRII, the negotiation and execution of mutually acceptable definitive transaction agreements, and the satisfaction of customary conditions to be set forth in such agreements. As incentive to successfully conclude this transaction, our offer would be subject to a customary lockup period, and we would be agreeable to a “go-shop” provision with appropriate mutual protections.
We believe that moving quickly to negotiate and conclude our proposed merger is in the best interests of GEHRII and ARCHT. Waiting for a later date leaves open significant uncertainty regarding the timing, the probability and the value of a potential transaction, and is not in the best interests of either GEHRII or GEHRII’s security holders.
We have the highest regard for GEHRII, its management and its employees, and we would therefore expect GEHRII’s management to continue with GEHRII as part of the transition and thereafter.
As a way of background, ARCHT is a non-traded public REIT with a diversified portfolio of income producing real estate properties, focusing primarily on medical office buildings and healthcare-related facilities. As of the end of November 2011, we had received aggregate gross proceeds in excess of $50 million from the sale of approximately 5.0 million shares of common stock in our public offering. Since the commencement of our operations in June 2011 and through the end of November 2011, we purchased nine properties with an aggregate purchase price of approximately $129.2 million, comprising approximately 399,000 square feet which were 95.4% occupied on a weighted average basis.
In addition, our affiliated managing broker dealer, Realty Capital Securities, LLC, has more than 100 licensed professionals across its sales, operations and compliance divisions and is well-versed in representing healthcare offerings, having raised over $1.1 billion for healthcare offerings specifically. In just over three and one-half years, Realty Capital Securities has raised in excess of $3.4 billion for ten public and seven private real estate investment trust and business development company offerings.
We look forward to hearing back from you by 3:00 p.m. Eastern Standard Time on December 5 with a response to our proposal.
We are available to meet and discuss all aspects of this proposal with you and your Board. If you have any questions, please do not hesitate to call us at (212) 415-6500. We very much look forward to hearing from you and working with you and the GEHRII team to consummate a successful transaction.
Yours sincerely, | |
/s/ Nicholas S. Schorsch | /s/ Brian Jones |
Nicholas S. Schorsch | Brian Jones |
Chief Executive Officer and | Senior Vice President and Managing |
Chairman of the Board | Director - Head of Investment Banking |
American Realty Capital |
APPENDIX
A
GEHRII PORTFOLIO AND CAPITALIZATION DATA USED
Capitalization: 42,803,820 shares of common stock outstanding as of October 31, 2011. Portfolio:
Property Portfolio as of October 3, 2011 | Property Type | Location | State | GLA | Occcup. | Pur. Date | Price |
Lacombe Medical Office Building |
Medical Office Building |
Lacombe | LA | 34,000 | 100% | 3/5/2010 | $6,970,000 |
Center for Neurosurgery and Spine |
Medical Office Building |
Sartell | MN | 37,000 | 100% | 3/31/2010 | 6,500,000 |
Parkway Medical Center |
Medical Office Building |
Beachwood | OH | 88,000 | 84% | 4/12/2010 | 10,900,000 |
Highlands Ranch Medical Pavilion |
Medical Office Building |
Highlands Ranch |
CO | 37,000 | 100% | 4/30/2010 | 8,400,000 |
Muskogee Long-Term Acute Care Hospital | LTAC Hospital | Muskogee | OK | 37,000 | 100% | 5/27/2010 | 11,000,000 |
St. Vincent Medical Office Building |
Medical Office Building |
Cleveland | OH | 51,000 | 94% | 6/25/2010 | 10,100,000 |
Livingston Medical Arts Pavilion |
Medical Office Building |
Livingston | TX | 29,000 | 100% | 6/28/2010 | 6,350,000 |
Pocatello East Medical Office Building |
Medical Office Building |
Pocatello | ID | 76,000 | 100% | 7/27/2010 | 15,800,000 |
Virginia Skilled Nursing Facility Portfolio | Skilled Nursing | Multiple | VA | 232,000 | 100% | 9/16/2010 | 45,000,000 |
Sylva Medical Office Building |
Medical Office Building |
Sylva | NC | 45,000 | 100% | 11/15/2010 | 11,400,000 |
Surgical Hospital of Humble | Specialty Hospital | Humble | TX | 30,000 | 100% | 12/10/2010 | 13,100,000 |
Lawton Medical Office Building Portfolio |
Medical Office Building |
Lawton | OK | 62,000 | 100% | 12/22/2010 | 11,550,000 |
Ennis Medical Office Building |
Medical Office Building |
Ennis | TX | 30,000 | 95% | 12/22/2010 | 7,100,000 |
Monument Long-Term Acute Care Hospital Portfolio |
LTAC Hospital | Multiple | Multi | 115,000 | 100% | 1/1/2011 | 41,695,000 |
Columbian Long Term Acute Care Hospital | LTAC Hospital | Columbia | MO | 30,873 | 100% | 1/31/2011 | 12,423,000 |
St. Anthony North Medical Office Building |
Medical Office Building |
Westminster | CO | 60,372 | 89% | 3/29/2011 | 11,950,000 |
Loma Linda Pediatric Specialty Hospital | Specialty Hospital | Loma Linda | CA | 34,268 | 100% | 3/31/2011 | 13,000,000 |
Yuma Skilled Nursing | Skilled Nursing | Yuma | AZ | 40,000 | 100% | 4/13/2011 | 11,000,000 |
Hardy Oak Medical Office Building |
Medical Office Building |
San Antonio | TX | 42,000 | 100% | 4/14/2011 | 8,070,000 |
Lakewood Ranch Medical Office Building |
Medical Office Building |
Bradenton | FL | 58,000 | 94% | 4/15/2011 | 12,500,000 |
Jersey City Medical Office Building |
Medical Office Building |
Jersey City | NJ | 68,000 | 93% | 5/10/2011 | 28,680,000 |
Central Arkansas MOB Portfolio |
Medical Office Building |
Benton & Bryant |
AR | 111,000 | 72% | 5/10/2011 | 15,370,000 |
Dixie-Lobo Medical Office Building Portfolio |
Medical Office Building |
Multiple | Multi | 156,000 | 100% | 5/12/2011 | 30,050,000 |
Care Pavillion SNF | Skilled Nursing | Philadelphia | PA | 139,000 | 100% | 7/7/2011 | 29,000,000 |
Cheltenham York SNF | Skilled Nursing | Philadelphia | PA | 60,000 | 100% | 7/7/2011 | 14,000,000 |
Maplewood Manor SNF | Skilled Nursing | Philadelphia | PA | 59,000 | 100% | 7/7/2011 | 12,000,000 |
Cliveden SNF | Skilled Nursing | Philadelphia | PA | 59,000 | 100% | 7/7/2011 | 10,000,000 |
Tucker House SNF | Skilled Nursing | Philadelphia | PA | 65,000 | 100% | 7/7/2011 | 10,000,000 |
Maxfield Medical Office Building |
Medical Office Building |
Sarasota | FL | 41,000 | 91% | 7/19/2011 | 7,200,000 |
Lafayette Physical Rehabilitation Hospital |
Rehabilitation Hospital |
Lafayette | LA | 26,000 | 100% | 10/3/2011 | 12,000,000 |
Total Portfolio | 1,952,513 | 96.5% | $443,108,000 |
Portfolio Leverage:
Property Leverage as of October 3, 2011 | Property Type | Sr. Debt | Maturity | Rate | |
Center for Neurosurgery and Spine | Medical Office Building | $ | 3,130,000 | 08/15/21 | 6.00% |
Highlands Ranch Medical Pavilion | Medical Office Building | 4,360,000 | 11/11/12 | 5.88% | |
Muskogee Long-Term Acute Care Hospital | LTAC Hospital | 7,200,000 | 04/08/18 | 4.28% | |
Pocatello East Medical Office Building | Medical Office Building | 7,926,000 | 10/01/20 | 6.00% | |
Virginia Skilled Nursing Facility Portfolio | Skilled Nursing | 26,810,000 | 03/14/12 | 5.50% | |
Lawton Medical Office Building Portfolio | Medical Office Building | 7,257,000 | 01/01/16 | 4.41% | |
Monument Long-Term Acute Care Hospital Portfolio | LTAC Hospital | 15,500,000 | 06/19/18 | 5.53% | |
Hardy Oak Medical Office Building | Medical Office Building | 5,206,000 | 10/10/16 | 6.60% | |
Dixie-Lobo Medical Office Building Portfolio | Medical Office Building | 23,239,000 | 12/28/11 | 6.34% | |
Maxfield Medical Office Building | Medical Office Building | 5,120,000 | 02/28/15 | 5.17% | |
Total leverage | $ | 105,748,000 |