Griffin-American Healthcare REITs Complete Merger, change name to American Healthcare REIT Inc.
The White Law Group continues to investigate securities lawsuits involving the liability that broker dealers may have for improperly recommending non-traded REITs such as Griffin-American Healthcare REITs to investors.
American Healthcare REIT, Inc. (formerly known as Griffin-American Healthcare REIT IV, Inc.) announced on October 1 that it has completed its merger with Griffin-American Healthcare REIT III, Inc. in a tax-free, stock-for-stock transaction that created a combined company with a gross investment value of approximately $4.2 billion in healthcare real estate assets, according to a press announcement.
How Does a Merger Affect Shareholders?
Companies often merge as part of a strategic effort to boost shareholder value, often by creating new business lines and/or gaining greater market share. However, the economic environment at the time of the merger, size of the companies and management of the merger process all play a part in future returns for shareholders.
Shareholders may experience a significant loss of voting power, and while the spike in trading volume tends to inflate share prices, if economic conditions are not favorable at the time of the merger, shareholders may see significant losses.
In exchange for each share of Griffin REIT III common stock, its stockholders will receive 0.9266 of a share of Griffin American Healthcare REIT IV Class I common stock. Following the close of both transactions, current Griffin REIT III stockholders will own approximately 65.2 percent of American Healthcare REIT, Griffin REIT IV stockholders will own approximately 29.7 percent, the management team will own approximately 2.3 percent, and other sellers in the AHI acquisition will own approximately 2.8 percent.
Griffin REIT III declared a new net asset value of $8.55 each, as of September 30, 2020, a decline of 9 percent compared to the previous valuation of $9.40 per share, as of June 30, 2019, according to filings with the SEC.
As of September 30, 2020, Griffin REIT IV’s Class T and Class I shares were valued at $9.22 each, a decline of 3.4 percent compared to the previous NAV of $9.54, as of December 31, 2019. Shares were originally sold for $10.00 per share.
Tender offer Price Suggests Losses for Investors
In January 2021, we reported that Griffin REIT III’s board urged shareholders to reject a tender offer by Comrit Investments 1, Limited Partnership, to purchase up to 554,529 shares of the REIT’s common stock for $5.41 each.
As we previously reported, the Griffin REIT III suspended monthly distributions to shareholders on June 1, 2020 and suspended its distribution reinvestment plan and share repurchase plan, citing the effects of the COVID-19 pandemic on the healthcare sector and its portfolio. In addition, the REIT’s advisor deferred half the asset management fee for six months beginning in June 2020.
Investigating Potential Securities Fraud Claims
The White Law Group is investigating potential securities fraud claims involving broker-dealers’ improper recommendation that investors purchase high-risk non-traded REIT investments. Many investors are not fully aware of the problems and risks associated with these investments before purchasing them.
Real estate investment trusts (REITs) are complex and inherently risky products. Compared to traditional investments, such as stocks, bonds and mutual funds, REITs are significantly more complex and often better suited for sophisticated and institutional investors.
Another problem often associated with REIT recommendations is the high sales commissions brokers typically earn for selling REITs – as high as 15%. Brokers have an obligation to make investment recommendations that are consistent with their clients risk tolerance, net worth, investment objectives and experience in the market.
Unfortunately, in many cases, the high sales commission may provide some brokers with enough incentive to make unsuitable investment recommendations.
Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Firms that fail to do so, may be held responsible for any losses in a FINRA arbitration claim.
If you are concerned about investment losses in Griffin-American Healthcare REITs and would like a free consultation with a securities attorney, please call The White Law Group at 888-647-5510.
The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois.
For more information on The White Law Group, visit www.whitesecuritieslaw.com.