IBJNews

Mainstreet eyes more 'crowdfunding' for nursing homes

Back to TopCommentsE-mailPrintBookmark and Share

Carmel-based Mainstreet Property Group raised $1.8 million for its latest senior care project via the Internet in what could become a new financing tool to fuel the company’s growth.

The money for a new long-term care facility in Bloomington arrived in a little more than one month. It attracted investors from as far afield as California and New York, said Mainstreet CEO Zeke Turner.

The speed and breadth of the interest led Turner to conclude that raising money via “crowdfunding” could become a new part of the company’s growth strategy. It could even help the company boost its annual construction of nursing homes from $350 million to $500 million.

Mainstreet’s fast pace of construction, which is taking place in nine states, has been especially controversial in Indiana, where nursing home operators pushed legislation this year to institute a moratorium on new construction.

After suffering a last-minute defeat, due in part to the influence of Zeke Turner’s father, Rep. Eric Turner, Mainstreet’s competitors will likely push for the construction ban again next year.

But for now, Mainstreet has found yet another way to keep its construction binge humming.

“What we learned here is that this mechanism works,” Turner said Monday in an interview. “I’d be surprised if we don’t use something very similar to this” in the future, perhaps offering investors a stake in a portfolio of construction projects.

The initial test case was for a single, $13.3 million health care campus in Bloomington. Most of the capital was raised via traditional means—$10 million in bank loans. But the $1.8 million in investor contributions allowed Mainstreet to reduce its own contribution from a planned $1.8 million to $1.54 million.

Mainstreet reached investors by advertising on traditional media in Indiana and via the CrowdStreet website, a crowdfunding company based in Oregon.

Turner said Mainstreet spent less on Internet and media marketing than it would have paid in broker-dealer commissions if it had been raised in as a typical face-to-face private placement funding round. Broker commissions are roughly 5 percent, Turner said, implying Mainstreet spent less than $100,000 on marketing.

“It looks like a more efficient form of fundraising,” Turner said.

Mainstreet accepted investments only from accredited investors—those with annual incomes of at least $200,000 or assets (other than their primary residences) of at least $1 million.

Technically, that’s not the same thing as crowdfunding, which is the use of the Internet to market investments to even non-accredited investors. Crowdfunding of businesses became a possibility after the federal JOBS Act of 2012 struck down long-standing regulations that restricted the marketing of private investments.

The federal law, as well as a similar state law passed this year, also calls for extending the marketing of private investments to non-accredited investors—though the regulations allowing for that have yet to be finalized.

But Turner said the breadth of investor interest in the Bloomington project has led him to believe even non-accredited investors would be interested in future senior care deals marketed via the Internet. Most crowdfunding to date has focused on tech startups or more traditional real estate.

“I believe this is an indication that this is a broader source of capital,” Turner said.

On the Bloomington project, Mainstreet offered investors annual dividends of 10 percent while paying itself a $635,000 development fee. Mainstreet hopes to sell the Bloomington facility by mid-2015, which could boost investors’ returns to 14 percent.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
thisissue1-092914.jpg 092914

Subscribe to IBJ
ADVERTISEMENT