Mainstreet Health Investments Inc. Announces Sale Leaseback Of Senior Living & Post Acute Portfolio With The Ensign Group Inc.
March 15, 2017
TORONTO–Mainstreet Health Investments Inc. (TSX:HLP.U) (the “Company”) announced today it has entered into a definitive agreement to acquire two post-acute/skilled nursing facilities and a senior living community (collectively, the “Properties”) from The Ensign Group Inc. (NASDAQ: ENSG) (“Ensign”) for a purchase price of approximately US$38 million. Upon closing the transaction, the Company will lease the properties to Ensign under an absolute net master lease with an initial 20-year term and CPI-based annual escalators. The properties are located within high density neighborhoods within the Los Angeles and Phoenix metro markets.
“The transaction would represent our first acquisitions in California and Arizona, further diversifying our portfolio, and is consistent with our growth strategy of owning senior living and care properties with leading operators like Ensign, one of the largest operators in the country” noted Scott White, the Company’s Chief Executive Officer. “And we are thrilled about strengthening our relationship with them.”
“Mainstreet Health Investments has been instrumental in orchestrating this important transaction that would strengthen our balance sheet and further enable us to continue our strategy of disciplined growth” said Chad Keetch, Executive Vice President and Secretary of Ensign. “In addition, these are great properties in great markets, and we are excited to continue serving each of these communities for decades to come.”
Upon closing the transaction, the Company’s portfolio will expand to 38 properties with over 4,800 beds across nine U.S. states and one Canadian province. In conjunction with the transaction, the Company has agreed to release Ensign from its lease obligations on three transitional care facilities in Kansas and Texas under development (the “Development Properties”). These state-of-the-art post-acute facilities are purpose built for short-term transitional care patients and will be subsequently leased to one or more operators. Under the income support agreement (the “Income Support Agreement”) entered into when the properties were acquired by the Company, Mainstreet Property Group, LLC, the developer of the properties, is required to make monthly payments to the Company until new tenants are identified and their leases commence. The Company is in active discussions with a number of replacement operators.
The proposed transaction is subject to certain closing conditions, including satisfactory completion of due diligence. There can be no assurances that any such conditions will be satisfied or that the transaction will be consummated.
