American Realty again tries to take control of real estate investment trust

Company's execs seek board seats at the former Grubb & Ellis REIT

Jan 5, 2012 @ 3:04 pm

By Bruce Kelly

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American Realty Capital has fired a second salvo in a hostile takeover bid for Griffin-American Healthcare REIT II Inc., a non-traded real estate investment trust that is in flux.

On Wednesday, Griffin-American Healthcare REIT, which has just changed its name from Grubb & Ellis Healthcare REIT II, said in a filing with the Securities Exchange Commission that executives affiliated with American Realty Capital are looking to muscle their way onto the REIT's board.

“We have received correspondence from a stockholder and another individual notifying us of their intention to nominate an alternative slate of directors for election at the 2012 annual meeting of stockholders,” the company said in the filing.

“The notices, which are substantially the same, name persons associated with one or more entities related to American Realty Capital, one of our competitors, as proposed nominees,” according to the filing. “The notices also identify such entities, and certain individuals associated with such entities, as ‘stockholder associated persons,' which in this case means that such persons are acting in concert with the individuals who submitted the notices.”

This isn't the first time that American Realty Capital, which sponsors several non-traded REITs, has attempted to take control of the Griffin-American Healthcare REIT, which has experienced several changes in the past couple of months.

In November, the REIT severed its relationship with its former sponsor, Grubb & Ellis Co., in favor of two newly formed co-sponsors, American Healthcare Investors LLC and Griffin Capital Corp.

Last month, Griffin-American Healthcare REIT II said that it has rejected an unsolicited, conditional offer from American Realty Capital Healthcare Trust Inc. to buy the REIT's outstanding shares at $9.01 a share. Griffin-American is raising money from investors at $10 a share.

American Realty Capital's unsolicited bid was widely thought to be the first hostile takeover attempt of a non-traded REIT.

In response to a call from InvestmentNews, Jeffrey Hanson, Griffin-American's chairman and chief executive, issued a statement that said American Realty Capital was attempting to “disrupt” the REIT as it goes through its period of transition.

The REIT “is one the best-performing non-traded REITs in the industry, and we certainly appreciate American Realty Capital's high regard for our offering,” the statement said.

“In our view, American Realty Capital's various overtures are an attempt to disrupt a very successful sponsorship transition which will be completed tomorrow. Given the surrounding circumstance, we believe that these overtures place American Realty Capital's interests above those of stockholders,” according to the statement.

Indeed, Griffin-American has made strides in recent days to complete its transition.

On Tuesday, the company said that the Financial Industry Regulatory Authority Inc. had issued a “no objection letter” to Griffin Capital Securities to become the company's new broker-dealer manager. The REIT also officially changed its name, eliminating the reference to Grubb & Ellis.

“We believe very firmly the shareholders have a right to choose,” said Nicholas Schorsch, CEO of American Realty Capital. “This is about replacing the board and, in addition, to making an offer to investors. We want to make sure shareholders have the ability to make the decisions, not Jeff Hanson.”

Those decisions include fees that the REIT pays to its advisers, Mr. Schorsch said.

In unrelated news, Grubb & Ellis said that on Tuesday, the New York Stock Exchange notified the company that it intends to delist the company from the Big Board. The NYSE notified Grubb & Ellis, once a leading brand name in real estate, that it wasn't in compliance with its continued listing standard of a market capitalization of $15 million over a 30-day period.

Grubb & Ellis intends to appeal the NYSE's decision. Tomorrow, the stock will begin trading on the OTCQB — as a pink sheet — under a symbol yet to be determined, according to an SEC filing.

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