Two new developments point to signs of financial distress at Mainstreet.
First, a former Mainstreet executive is suing the Carmel, Indiana-based organization, alleging that it terminated him in November 2017—“in plain violation” of his employment contract and “without cause”. The move, the plaintiff claims, was made so that Mainstreet could save money, as it was facing a “severe financial crisis.”
Ned P. Rule, who served as managing director of investments for Mainstreet Capital Partners LLC starting in September 2015, filed the suit in the U.S. District Court in Indianapolis on March 7.
All the while, an unopened transitional rehabilitation facility developed by Mainstreet is facing foreclosure after falling behind on monthly interest payments.
Avana Capital, an Arizona-based commercial lender, last week moved to foreclose on the $17.5 million Healthcare Resort of Wichita in Kansas, according to a Wednesday report in the Wichita Eagle.
The 94-bed facility had initially been slated to open in 2016, but remained vacant as of Tuesday after a complex series of transactions that have brought multiple owners and potential operators.
In short, Mainstreet executed a planned sale of the property to Invesque, the investment firm formerly known as Mainstreet Health Investments, in 2016.
A purported deal to have the Ensign Group (Nasdaq: ENSG) operate the facility fell through, and Mainstreet bought it back from Invesque with the help of a loan from Avana, according to the Eagle.
Invesque and Mainstreet both have Zeke Turner in common; Turner founded both of the Carmel, Ind.-based companies. He’s no longer involved with Invesque, which focuses primarily on real estate investment, but remains the CEO of Mainstreet.
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Mainstreet gained prominence in the industry by developing hotel-like facilities as part of its “healthcare resort” model. More recently, it has moved to a new concept dubbed “Rapid Recovery Centers” — also a higher-end rehabilitation facility, designed to improve outcomes and reduce lengths of stay. It plans to operate these facilities through its Mainstreet Health arm.
But Mainstreet has run into problems in recent months, pulling out of the Arizona market in March and laying off 70 workers. At the time, Turner told Skilled Nursing News that the company remained committed to the Rapid Recovery Center model.
“We have three centers open in Texas right now and are scheduled to open five more over the next 12 months,” Turner said at the time. “This is already a huge undertaking and commitment, which did contribute to the Arizona decision.”
Avana reportedly claims that Mainstreet violated the terms of its loan on the Wichita facility by not finalizing a deal to have Americare Systems take over operations—while also informing Avana in March that it would no longer cover its monthly interest payments.
Turner told the Eagle that a pending transaction will “resolve the issue at hand,” while also declining to provide specifics.
“I’m certain we’ll get it resolved,” Turner said.
Written by Alex Spanko