Indianapolis—Mainstreet Property Group announced on March 25 that the board of directors of its affiliated REIT, HealthLease Properties Real Estate Investment Trust, has approved acquisition of 13 senior housing and care properties.
The properties, totaling 978 beds for an aggregate purchase price of approximately $141.7 million, are located in North Carolina, Pennsylvania and Virginia. They consist of four skilled nursing facilities encompassing 355 units, eights combination assisted living/Alzheimer’s facilities comprising 563 units and one stand-alone Alzheimer’s facility made up of 60 units.
The acquired properties are triple-net leased to tenants affiliated with leading national operators of assisted living, memory care and skilled nursing facilities, and they will be managed by those operators.
“With our public launch of HealthLease Properties REIT in June of 2012, an acquisition of this size is now possible because we have access to capital,” Zeke Turner, chairman and CEO of Mainstreet and HealthLease, tells MHN.
“Assuming this transaction is successful, we will have acquired more than $300 million of new properties in the last nine months alone. This transaction, in particular, is comprised of mostly brand new, high-quality facilities, which fits in line with our growth strategy of building the premier senior care portfolio in North America. We are by no means the largest REIT in existence, but we are building something very special that we believe will have staying power in a changing health care environment.”
Any transaction of this size brings with it challenges, and this was no exception, Turner adds.
“Purchasing newly built properties adds complexity,” Turner says. “All of the properties have leases in place, which is great security for us as a buyer. However, in a couple properties, the underlying operations are not yet stabilized. This requires additional levels of due diligence and demands an understanding of the development process. We are blessed in that our development company, Mainstreet Property Group, is now the largest developer of skilled nursing properties in North America. Having such depth of experience in development is a tremendous value when purchasing new portfolios like this one, and others we are reviewing.”
What will Mainstreet’s ownership mean for these facilities? According to Turner, the greatest value in transactions like this one is in the partnerships forged with the tenant operators.
“The best tenants look to us for strategic advice on growth, and will partner with us on additional new opportunities,” he says. “We are able to serve as a source of capital for their growth, including the potential to develop new properties. Adding new properties, or repositioning older properties, has the significant effect of improving a tenant’s overall portfolio value by increasing cash flow and reducing the overall average age of their properties.”