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Mainstreet Health to Double in Size with $425 Million Investment

TSX-Listed Company Partnering with Tiptree to Acquire Care Investment Trust
November 20, 2017
Toronto Stock Exchange-listed Mainstreet Health Investments is spending US$425 million to approximately double the size of its portfolio as part of a new expansion that will see it rebrand as Invesque Inc.

The Carmel, IN-based company (TSX: HLP-U), which will have about 5% of its portfolio north of the border after the latest deal, has agreed with NASDAQ-listed Tiptree Inc. and certain subsidiaries to buy Care Investment Trust. CareIT owns a portfolio of 42 seniors housing and care properties that includes 3,718 suites/beds in markets across the United States including in Atlanta, Baltimore, Dallas, Philadelphia, Richmond, South Carolina, Tampa, Upstate New York and Washington, D.C.

The name change will take effect January 4, 2018 after a special meeting of shareholders the day before. The company says the new brand complements its growth strategy while establishing a unique identity to avoid confusion with other companies with similar names.

Mainstreet Health believes the Tiptree deal will enhance its scale and platform and noted the 80 properties and 8,536 suites it will have on a pro forma basis will make it 2.6 times larger than when the company went public in June 2016. Its pro forma asset value is expected to increase to US$1.2 billion.

The portfolio it is purchasing includes 35 independent living, assisted living and memory care properties and seven skilled nursing facilities across 11 states, adding eight new states to Mainstreet's existing platform while strengthening its presence in three states in which it currently owns properties.

The deal includes 24 properties leased to operators under long-term triple-net leases and 18 in joint venture arrangements with seniors housing operators in which Mainstreet will own the majority of the real estate and the operations.

The deal diversifies the company's operator relationships and geographic footprint, as Mainstreet is expected to add eight new operators to its roster and reduce the concentration of its largest operator, Symphony, from 56% to 32%. Once the deal goes through, Mainstreet will operate in 18 states and provinces and its concentration in the state of Illinois will be reduced to 31% from 54%.

"We believe this transaction and the addition of Tiptree as another cornerstone investor will bolster our position in the market and position Mainstreet for the next phase of its growth. This transaction is further evidence of the embedded value in our platform, with a sophisticated investor making a significant investment in our company," said White.

Upon closing, Tiptree will become Mainstreet's largest shareholder with an ownership interest of approximately 34%. Tiptree will receive Mainstreet shares based upon a fixed issuance price of US$9.75 per common share.

The going in capitalization rate on the deal is 7.7% with Mainstreet funding the equity portion of the consideration through issuance of its common shares directly to Tiptree.

The deal already has the support of 44% of Mainstreet's common shareholders and is expected to close in the first quarter of 2018.

Garry Marr, Toronto Market Reporter  CoStar Group   
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