Mainstreet Development Group Has Stake in New Senior Housing & Care REIT

There’s a new healthcare real estate investment trust in town, and this one’s been formed with a focus on not just acquiring and owning senior housing and care properties, but also developing them. HealthLease Properties Real Estate Investment Trust announced today it had completed its initial public offering of 11 million trust units, raising gross proceeds of $110 million.

The trust units were priced at $10.00. The REIT has also granted the offering’s underwriters an option to purchase up to an additional 1.1 million trust units at the same prices for a 30-day period after the offering closes; if exercised in full, this would increase the offering’s gross proceeds to $121 million.

The offering is being underwritten by a syndicate of underwriters co-led by Canaccord Genuity Corp. and National Bank Financial Inc., along with BMO Nesbitt Burn Inc., CIBC World Markets Inc., Dundee Securities Ltd., GMP Securities L.P., and Raymond James Ltd.

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The REIT will be listed by the Toronto Stock exchange under the symbol “HLP.UN”. Cicero, Ind.-based Mainstreet Property Group, LLC indirectly holds a 17.9% interest in the REIT on a fully exchanged basis through ownership of Class B limited partnership units of a subsidiary of the REIT (which are economically equivalent to and exchangeable for trust units of the REIT).

Zeke Turner, the founder, chairman, and CEO of Mainstreet, said there were several reasons for choosing to be listed on the TSX, including a more streamlined regulatory environment for small- to mid-sized companies compared to the U.S.

Other reasons include a real estate market in Canada that’s still growing and is attractive to investors, and that Canadian investors have a “healthy appetite” for yield.

“Since we are a yield-generating business, the alignment made sense for us and the deal was obviously well-received in the market,” Turner told SHN. “Ultimately, we have a great growth opportunity in front of us, but to capitalize on our growth, we needed access to capital. We now have that. The rest comes down to our operator partnerships and execution on our business strategy.”

He said they may look to the U.S. markets at some point down the road, perhaps by a dual-listing on a U.S. exchange, but that remains to be seen.

In the meantime, net proceeds from the offering will be used to directly and indirectly acquire a portfolio of nine senior housing and care properties owned by a wholly-owned affiliate of Mainstreet. The portfolio will include three pre-leased development properties, which are currently under development with completions expected within 12 months of the close of the offering, along with six properties owned by a subsidiary of Northern Property Real Estate Investment Trust. The net proceeds will also be used to repay debt in respect of certain of the acquired properties, and for working capital purposes.

HealthLease Properties plans to make monthly cash distributions of $0.07083 per trust unit to trust unit holders. The first REIT distribution will be for the period between the close of the offering, to July 31, 2012, and will be paid on or about August 15, 2012 in the amount of $0.0978 per trust unit, assuming closing occurs on June 20, 2012.

The securities have not been and won’t be registered under the U.S. Securities Act of 1933 and can’t be offered or sold in the U.S. without registration of an applicable exemption from the registration requirements of that Act.

The properties to be purchased by HealthLease Properties:

(Currently owned by Mainstreet Property Group and being transferred to the REIT):

  • Alexandria Care Center, Alexandria, Indiana
  • Avalon Springs Health Campus, Valparaiso, Indiana
  • Brookville Healthcare Center, Brookville, Indiana
  • Highland Manor Health and Living, Indianapolis, Indiana
  • Marion Rehab & Assisted Living, Marion, Indiana
  • Miller’s Merry Manor of Marion, Marion, Indiana
  • The Bridge Care Suites, Springfield, Illinois
  • Mishawaka, Indiana facility (under construction)
  • Wabash, Indiana facility (under construction)

(Additional properties being purchased by the REIT):

  • Beverly Centre-Glenmore, Calgary, Alberta
  • Beverly Centre-Lake, Calgary, Alberta
  • Columbia Assisted Living, Lethbridge, Alberta
  • Harmony Court Care Centre, Burnaby, British Columbia
  • Orchard Manor, Brooks, Alberta
  • Valleyview Care Centre, Medicine Hat, Alberta

Written by Alyssa Gerace

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