EX-99.1 3 mainstreethealthinvestment.htm EXHIBIT 99.1 Exhibit
EXHIBIT 99.1    



Mainstreet Health Investments Announces US$425 Million Transformational Acquisition of 42 US Property Portfolio, New Strategic Investor and Name Change

Toronto, November 17, 2017 Mainstreet Health Investments (TSX: HLP-U) ("Mainstreet" or the "Company") today announced that it has entered into definitive agreements with Tiptree Inc. (NASDAQ: TIPT) (“Tiptree”) and certain subsidiaries, to acquire Care Investment Trust, LLC (“CareIT”) (the “Transaction”) for an aggregate purchase price of approximately US$425 million (the “Consideration”). CareIT owns a portfolio of 42 seniors housing and care properties comprising 3,718 suites/beds in attractive markets across the United States (the “Portfolio”). Furthermore, Mainstreet intends to change its operating name to Invesque Inc., which will provide the Company with a unique and recognizable name.

Transformative and Strategic Acquisition

Attractive and Strategic Portfolio Acquisition: The Portfolio is comprised of 35 high quality independent living, assisted living and memory care properties and seven skilled nursing facilities located in growing markets across 11 states. The Portfolio is expected to add eight new states to Mainstreet’s existing platform and strengthens its presence in three states in which it currently owns properties. The Portfolio consists of 24 properties leased to operators under long-term triple-net leases and 18 operating properties in joint venture arrangements with seniors housing operators in which Mainstreet will own the majority of the real estate and the operations.

Enhanced Scale and Investment Platform: The Transaction increases the scale and scope of Mainstreet’s investment platform to comprise 80 properties with 8,536 suites/beds across the United States and Canada, a 2.6x increase compared to Mainstreet’s initial public offering in June 2016. The Company’s pro forma asset value is expected to increase to US$1.2 billion.

Transaction Significantly Improves Diversification: The Transaction further diversifies the Company’s operator relationships and geographic footprint. Mainstreet is expected to add eight new operators to its roster of high-quality operating partners and reduce the concentration of its largest operator Symphony, from 56% to 32%. Furthermore, assuming completion of the Transaction, Mainstreet will operate in 18 states and provinces and its concentration in the State of Illinois will be reduced to 31% from 54%.

Increases Exposure to Private Pay Sector: The Portfolio primarily consists of private pay independent living, assisted living and memory care properties that represent approximately 80% of the Portfolio’s suites/beds. Following the completion of the Transaction, Mainstreet’s portfolio will be comprised of approximately 52% independent living, assisted living and memory care suites and 48% skilled nursing and transitional care beds.

Attractive Transaction Metrics: The Consideration represents a going-in capitalization rate of approximately 7.7%. Mainstreet is funding the equity portion of the Consideration through the issuance of Mainstreet common shares directly to Tiptree.

Validation of Embedded Value and Addition of New Strategic Investor: 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.

Accretive Transaction: The Transaction is expected to be accretive to the Company’s 2018E Adjusted Funds from Operations (“AFFO”) per share. The Company also expects to achieve additional synergies over time from operational efficiencies and debt consolidation, neither of which are included in the Company’s underwriting and financial analysis.

Scott White, the Company’s CEO stated, “We are excited to announce the acquisition of CareIT and deliver on our strategic plan to grow our platform, diversify our portfolio and provide significant value for our shareholders. 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.”

Rick Turner, the Company’s Chairman added, “This transaction is a significant achievement for our company and we are excited to announce this acquisition as we continue to deliver on our growth strategy. We expect to continue acquiring high quality properties with strong operators in growing markets.”

Michael Barnes, Tiptree’s Executive Chairman stated, “We are excited to partner with Scott and his team through the combination of our two platforms. We look forward to working together to further create value and upside for both companies’ shareholders.”

Investor Presentation

An investor presentation describing the transaction will be made available on the Company’s website at http://www.mainstreethealthinvestments.com/investor-events-presentations/.

Transaction Overview

The consideration to be paid to Tiptree on closing of the Transaction will consist of the issuance of approximately 16.8 million Mainstreet common shares at a fixed issuance price of US$9.75 per common share (the “Equity Consideration”), subject to certain adjustments. Following the completion of the Transaction, it is expected that Tiptree will own approximately 34% of Mainstreet’s issued and outstanding common shares. In addition to the Equity Consideration, the Company will assume approximately US$261.2 million of in-place property level mortgage financing (the “Debt Financing”) with a weighted average interest rate of approximately 4.7% and a weighted average term to maturity of 4.9 years. Approximately US$114 million of the Debt Financing matures within the next three years, providing the Company with an opportunity to consolidate the property level mortgages into a corporate facility and achieve improved administrative and pricing synergies. The Company’s pro forma leverage will be approximately 57%.

Upon closing of the Transaction, subject to certain conditions set out in a governance and investor rights agreement (the “Governance and Investor Rights Agreement”), Tiptree will have the right to nominate one board member and one board observer (with no voting rights) to Mainstreet’s Board of Directors (the “Board”), which, upon the closing of the Transaction, will be comprised of a total of six board members. Also pursuant to the Governance and Investor Rights Agreement, Tiptree has agreed to a 24 month standstill (the “Standstill”) and to restrictions on the sale of its Equity Consideration for a period ranging from 6 months to 18 months. The Standstill prohibits Tiptree from taking certain specified actions without Mainstreet’s approval, including among other things, launching a takeover bid or increasing its ownership in Mainstreet.

The Transaction is subject to obtaining certain regulatory approvals, including Toronto Stock Exchange (“TSX”) approval, Mainstreet shareholder approval and other customary closing conditions, including consents of certain third parties. In accordance with Section 604(d) of the TSX Company Manual, the Company will initially seek shareholder approval for the issuance of the Equity Consideration by way of written consent of selected shareholders holding more than 50% of the issued and outstanding Mainstreet common shares. In that context, certain shareholders who together, currently own approximately 44% of Mainstreet’s common shares, have entered into voting support agreements in favor of the Transaction and have agreed to provide consents. If the Company is unable to obtain the balance of the requisite consents, the Company intends to call a meeting of shareholders to seek the foregoing approval. Assuming the requisite consents are obtained from shareholders, and customary regulatory and closing conditions are satisfied, the Transaction is expected to be completed during the first quarter of 2018.

Overview of Tiptree Inc.

Tiptree is a diversified holding company with a long-term value creation investment philosophy with a focus on scalable, sustainable and growing businesses and investments. Tiptree is aligned with shareholder interests and has a keen focus on growing shareholder value. Tiptree invests in multiple industry sectors with a focus on real estate, insurance, asset management and specialty finance.

CareIT Portfolio Details

The Portfolio is comprised of 35 independent living, assisted living and memory care properties with 2,962 suites and 7 skilled nursing properties with 756 beds. The Portfolio has an attractive quality mix with more than 80% of revenue expected to be derived from private pay funding sources. The Portfolio is located in attractive and growing markets throughout the Eastern and Southern United States and the properties are similar in quality to Mainstreet’s existing portfolio. The Portfolio consists of 24 properties leased to operators under long-term triple-net leases and 18 operating properties in joint venture arrangements with operators in which Mainstreet will own the majority of the real estate and the operations.
 
Geographic Footprint(1)
 
State
Number of Properties
Skilled Nursing Facility
Independent Living 
Assisted Living
Memory Care 
Total Suites / Beds
 
 
(#)
(#)
(#)
(#)
(#)
(#)
 
Georgia
10
726
--
92
100
918
 
Pennsylvania
8
30
--
525
214
769
 
Virginia
6
--
2
310
87
399
 
New York
4
--
202
106
25
333
 
South Carolina
4
--
22
237
24
283
 
New Jersey
2
--
104
177
--
281
 
Tennessee
2
--
68
193
15
276
 
Texas
1
--
176
--
--
176
 
Maryland
3
--
--
68
72
140
 
Louisiana
1
--
--
64
13
77
 
Florida
1
--
--
66
--
66
 
Total
42
756
574
1,838
550
3,718
 
(1)
On a consolidated basis.

Mainstreet Pro Forma Portfolio Details

The Transaction represents a significant expansion of the Company’s portfolio, increasing the number of properties from 38 to 80 and the number of suites/beds from 4,818 to 8,536. The Transaction improves the Company’s operator, geographic and property-type diversification. The Company’s EBITDARM coverage following completion of the Transaction will be approximately 1.6x. The tables below provide a more detailed breakdown of the Company’s pro forma portfolio.


Property Type(1)
Property Type
Current
Pro Forma
Number of Suites / Beds
% of Total
Number of Suites / Beds
% of Total
 
(#)
(%)
(#)
(%)
Skilled Nursing Facility
2,681
56%
3,437
40%
Assisted Living
1,126
23%
2,964
35%
Independent Living
200
4%
774
9%
Memory Care
171
4%
721
8%
Transitional Care
640
13%
640
8%
Total
4,818
100%
8,536
100%
(1)
On a consolidated basis.


Top 10 States / Provinces(1)
State / Province
Current
State / Province
Pro Forma
Number of Suites / Beds
% of Total
Number of Suites / Beds
% of Total
 
(#)
(%)
 
(#)
(%)
Illinois
2,609
54%
Illinois
2,609
31%
Ontario
448
9%
Pennsylvania
1,075
13%
Pennsylvania
306
6%
Georgia
918
11%
Texas
302
6%
New York
590
7%
Kansas
282
6%
Texas
478
6%
New York
257
5%
Ontario
448
5%
California
202
4%
Virginia
399
5%
Arizona
179
4%
South Carolina
283
3%
Indiana
176
4%
Kansas
282
3%
Arkansas
57
1%
New Jersey
281
3%
Other
--
--
Other
1,173
14%
Total
4,818
100%
Total
8,536
100%
(1)
On a consolidated basis.







Top 10 Operators(1)
Operator
Current
Operator
Pro Forma
Number of Suites / Beds
% of Total
Number of Suites / Beds
% of Total
 
(#)
(%)
 
(#)
(%)
Symphony
2,715
56%
Symphony
2,715
32%
Ensign
569
12%
Greenfield Senior Living
1,065
12%
Autumnwood
448
9%
Traditions Senior Management
803
9%
Saber
306
6%
Heritage Senior Living
594
7%
Hearth
257
5%
Ensign
569
7%
Memory Care America
171
4%
Autumnwood
448
5%
Trilogy
70
1%
Royal Senior Care
409
5%
Providence
94
2%
Inspirit Senior Living
382
4%
Others
188
4%
Saber
306
4%
 
 
 
Hearth
257
3%
 
 
 
Others
988
12%
Total
4,818
100%
 
8,536
100%
(1)
On a consolidated basis.

Re-branding of Mainstreet Health Investments

Concurrent with the Transaction, the Company also announced that it is re-naming and re-branding itself as Invesque Inc. Management believes that the rebranding and related name change will eliminate any possible confusion around the use of the Mainstreet name and other entities that use a similar name. Invesque provides the Company with a unique and recognizable name. The Company seeks to establish a global brand and presence with a clearly defined name. The name change to Invesque Inc. will be effective on or about January 3, 2018, assuming approval by the Company’s shareholders at a Special Meeting of shareholders currently scheduled to be held on January 3, 2018 at 11:00 a.m. at 333 Bay Street, 34th floor, Toronto, Ontario, M5H 2S7 (the “Meeting”). Further information with respect to the Meeting can be found in the Notice of the Meeting to be filed on SEDAR at www.sedar.com.

Advisors

BMO Capital Markets is acting as exclusive financial advisor to Mainstreet in connection with the Transaction. BMO Capital Markets also delivered an opinion to the Board, subject to the assumptions and limitations contained therein, as to the fairness, from a financial point of view, of the Consideration to be paid pursuant to the Transaction. Goodmans LLP is acting as legal advisor to Mainstreet.

Cantor is acting as exclusive financial advisor to Tiptree and CareIT in connection with the Transaction. Morrison Foerster LLP is acting as legal advisor to Tiptree and CareIT.






CareIT Property List

#
Property Name
State
Operator / Manager
Ownership
Suites / Beds(1)
(#)
 
 
 
(%)
(#)
1
Greenfield of Fredericksburg
VA
Greenfield Senior Living
100%
38
2
Greenfield of Stafford
VA
Greenfield Senior Living
100%
62
3
Greenfield of Berryville
VA
Greenfield Senior Living
100%
65
4
The Woodlands Senior Village
NY
Calamar
75%
110
5
Forestview Active Living
NY
Calamar
75%
92
6
Park Terrace at Radisson
NY
Premier Senior Living
100%
65
7
Seneca Lake Terrace
NY
Premier Senior Living
100%
66
8
Heritage Hill
PA
Heritage Senior Living
80%
100
9
Cardinal Village
NJ
Heritage Senior Living
80%
202
10
Belle Reve Senior Living
PA
Heritage Senior Living
80%
92
11
Greenfield Residences at Monument Avenue
VA
Greenfield Senior Living
80%
64
12
Greenfield Residences of Arlington
TX
Greenfield Senior Living
80%
176
13
Greenfield of Oak Ridge
TN
Greenfield Senior Living
80%
127
14
Hudson Manor
FL
Royal Senior Care
80%
66
15
Magnolias of Easley
SC
Royal Senior Care
80%
56
16
Magnolias of Gaffney
SC
Royal Senior Care
80%
90
17
River Oaks
SC
Royal Senior Care
80%
62
18
Royal Oaks
SC
Royal Senior Care
80%
75
19
Greenfield Senior Living at Chesapeake
VA
Greenfield Senior Living
100%
74
20
Greenfield Senior Living at Bel Air
MD
Greenfield Senior Living
100%
52
21
Greenfield Senior Living at Cockeysville
MD
Greenfield Senior Living
100%
32
22
Greenfield Senior Living at Graysonview
PA
Greenfield Senior Living
100%
96
23
Greenfield Senior Living at Hagerstown
MD
Greenfield Senior Living
100%
56
24
Greenfield Senior Living at Cross Keys
NJ
Greenfield Senior Living
100%
79
25
The Birches at Newtown
PA
Heritage Senior Living
80%
115
26
Harbor at Harmony Crossing
GA
Royal Senior Care
65%
60
27
The Birches at Arbour Square
PA
Heritage Senior Living
90%
85
28
Oakwood Village Senior Living
LA
Traditions Senior Management
100%
77
29
Hilltop, an Inspirit Senior Living Community
VA
Inspirit Senior Living
90%
96
30
Greenfield Senior Living of Lansdale
PA
Greenfield Senior Living
80%
144
31
Foxbridge, an Inspirit Senior Living Community
TN
Inspirit Senior Living
90%
149
32
Hope Center Memory Care
GA
Phoenix Senior Living
90%
64
33
Calhoun Health Care Center
GA
Traditions Senior Management
90%
100
34
Chatsworth Health Care Center
GA
Traditions Senior Management
90%
120
35
East Lake Arbor Health Care
GA
Traditions Senior Management
90%
103
36
Fairburn Health Care Center
GA
Traditions Senior Management
90%
120
37
Grandview Health Care Center
GA
Traditions Senior Management
90%
60
38
Maple Ridge Health Care Center
GA
Traditions Senior Management
90%
74
39
Rosemont at Stone Mountain
GA
Traditions Senior Management
90%
149
40
The Willow, an Inspirit Senior Living Community
PA
Inspirit Senior Living
95%
67
41
The Palmerton, an Inspirit Senior Living Community
PA
Inspirit Senior Living
95%
70
42
Phoenix At Albany
GA
Phoenix Senior Living
100%
68
Total
 
 
 
87%
3,718
(1)
On a consolidated basis.

About Mainstreet Health Investments

Mainstreet Health Investments Inc. / Invesque is a health care real estate company with a portfolio of high quality properties located in the United States and Canada and operated by the best-in-class senior living and care operators. Our mission is to create long-term shareholder value while providing an investment opportunity that matters. For more information visit www.mainstreethealthinvestments.com.

For further information:

Scott White
CEO
swhite@maininvest.com
(201) 927-4758

Non-IFRS Financial Measures

FFO, AFFO and capitalization rate (which is a function of net operating income) are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. Such measures are presented in this news release because management of the Company believes that such measures are relevant in interpreting the purchase price metrics and performance of acquisitions. Such measures, as computed by the Company, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to the measures reported by such other organizations. Please see the Company’s most recent management’s discussion and analysis, which is available on SEDAR at www.sedar.com, for how the Company reconciles FFO, AFFO and net operating income to the nearest IFRS measure.

Forward-looking Information

This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to the business of the Company and the environment in which it operates. Forward-looking statements are identified by words such as "believe", "anticipate", “project”, "expect", "intend", "plan", "will", "may" "estimate", “pro forma” and other similar expressions. These statements are based on the Company's expectations, estimates, forecasts and projections and include, without limitation, statements regarding the completion of the Transaction and the timing thereof, the benefits of the Transaction (including the extent it will be accretive to the Company’s FFO and AFFO per share), the expectation that additional synergies will be achieved, the approval of the issuance of the Equity Consideration and going in cap rates. The forward-looking statements in this news release are based on certain assumptions, including that all conditions to completion of the Transaction (including obtaining the written consent of selected shareholders holding more than 50% of the issued and outstanding Mainstreet common shares or otherwise obtaining shareholder approval at a meeting of shareholders) will be satisfied or waived, and that the Transaction will be completed. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, risks that the conditions to the completion of the Transaction will not be satisfied or waived, that the Transaction will otherwise not be completed or that the Portfolio will not perform or be integrated as expected, as well as the factors discussed under the heading "Risk Factors" in the Company's annual information form available at www.sedar.com. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the Company assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.


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