Invesque, the real estate investment company headed up by former Mainstreet executives, is continuing to rapidly expand. It has re-located to a new headquarters building in Carmel, Indiana and is planning to add 39 jobs by 2024, as it drives toward a total portfolio in excess of $2 billion.
The firm is already on pace to achieve that target, Invesque CEO Scott White told Senior Housing News.
At the time of its initial public offering on the Toronto Stock Exchange in June 2016, the company held about two-dozen assets, mostly skilled nursing buildings. Since that time, the portfolio has grown to 104 properties across 20 U.S. states and in Canada. Its net operating income is about 45% skilled nursing and 45% private-pay senior housing, with the remainder being medical office buildings; the company also maintains a small investment in some developer partners.
There is some pressure to gain scale at a fast clip, White said, because the health care industry as a whole is consolidating and that extends to post-acute care and senior housing.
“Large guys are going to a certain degree dictate the rules, that’s why we need to grow at the fast pace we are — a smart, strategic, but reasonably fast pace,” he said. “We want a seat at that table, [to ensure] that our cost of capital is appropriate and that we’re among the influencers.”
White believes Invesque can deploy at least $400 million a year on acquisitions and achieve a $2.5 billion gross book value by the company’s fifth year.
He and other Invesque executives have some experience in assembling a large real estate portfolio. They were involved in creating HealthLease, which was another real estate investment company that traded on the Canadian exchange. It was sold to Welltower (NYSE: WELL) — then known as Health Care REIT — for $950 million in 2014.
However, one difference between Invesque and HealthLease is their relationship with Carmel-based Mainstreet, a developer of post-acute care facilities. Mainstreet founder and CEO Zeke Turner also was the CEO of HealthLease. Turner also initially was on the board of Invesque, which began under the name Mainstreet Health Investments.
But Turner departed the board about a year ago, and the real estate investment company rebranded about two months after his exit. Since that time, Mainstreet has had setbacks in its plans to launch facilities that it dubbed Rapid Recovery Centers.
Mainstreet and Invesque continued to share the same office space until Invesque’s headquarters move last May, with White now reporting that the firms are completely separate — though Invesque continues to own some of Mainstreet’s post-acute care facilities.
A forever portfolio
Invesque’s strategy is to keep building a diversified portfolio anchored by strong operating partners. Currently, it is working with 20 operators. The company is attracted to regional operators with between five and 50 buildings and that have been around for 10 years or longer, but White is also open to national players that empower local leaders.
Invesque is not rigid in terms of deal structure. Most of its properties are owned on a triple-net lease basis, but 21 assets are in joint ventures. More could be coming.
“You need to look ahead and see where the industry is going, and realize that operators need creative deal structures,” White said. “We’re open to working with our operators.”
Investment decisions are also being made with an eye toward the big picture and the long term. Knowing that the demand for senior living and skilled nursing is not set to peak until the baby boomers hit 80 to 85 years of age, White is not overly concerned about present-day occupancy challenges.
“How full those buildings are on any given day doesn’t matter to me in a big way, as long as there’s a place for them in the larger health care continuum,” he said.
By diversifying across the health care spectrum, Invesque should be able to weather downturns in any one segment until the age wave hits. If particular parts of the portfolio underperform in the meantime, this possibility is not ruffling White’s feathers. He wants to build a “forever portfolio” with investors who look beyond quarterly financials.
“I tell my investors, analysts, and now the media, we aren’t necessarily the right investment for you if you think we’re going to outperform on any given quarter,” he said. “I pound the table and say, this is a long-term investment.”
Written by Tim Mullaney