Just several months following a successful IPO in Canada, Mainstreet Health Investments (TSX: HLP.U) is continuing to execute on its acquisition pipeline by bringing $152 million of new senior housing investments into its portfolio. At the same time, the company announced it is internalizing its management—in other words, bringing the management outside of the private Mainstreet umbrella and entirely under publicly-held Mainstreet Health Investments. It is also terminating its existing asset management agreement.
The company’s IPO on June 2 raised $95 million for the investment company, putting it in a position to ramp up and grow its senior housing presence. The acquisitions announced this week include seven properties spanning 739 beds, as well as several mezzanine loans, broadening Mainstreet’s geographic reach and operator partnerships.
“With the IPO, we said our strategy is to build a diversified portfolio of long-term cash-generating health care real estate,” Mainstreet Investments President Scott White tells SHN. “We are going to work to diversify it. With this portfolio we immediately diversified by country, by operator and by state.”
Previously, the company’s portfolio was focused in Illinois with operating partner Symphony. The current acquisitions include two properties operated by The Ensign Group (Nasdaq: ENSG), located in Forth Worth and Houston, Texas, and in Wichita, Kansas; two properties operated by Autumnwood, located in Sudbury, Ontario and North Bay, Ontario; one Symphony property in Illinois; and four mezzanine investments in development projects, which are currently being constructed by MPG and located in Arizona, Colorado and Nebraska.
Across the acquisition portfolio, Mainstreams expects to derive 95% of revenue from private sources and Medicare. The combined purchase price of the Ensign, Symphony and Autumnwood portfolio represents a weighted average year one cap rate of 7.7%.
The transactions represent the company’s plan to target growth in the U.S. and Canada, White says, under overarching plans to build a sizable health care real estate portfolio similar to what its management team did with HealthLease—a publicly traded Canadian real estate investment trust for which Mainstreet Property Group was the external management company. That company went public in 2012, grew to 53 assets and was sold to Health Care REIT (now Welltower) for $950 million, as part of an overall $2.3 billion transaction.
“We’re delivering on the promise we made to investors,” White says. “It was a transformative transaction for us and it took a lot of hard work to put it together. This team moves fast.”
Mainstreet Investments maintains a development relationship with the private company Mainstreet, under which the private company is required to inform the public company of all development opportunities.
Written by Elizabeth Ecker