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Mainstreet eyes more 'crowdfunding' for nursing homes

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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.

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  1. to mention the rest of Molly's experience- she served as Communications Director for the Indianapolis Department of Public Works and also did communications for the state. She's incredibly qualified for this role and has a real love for Indianapolis and Indiana. Best of luck to her!

  2. Shall we not demand the same scrutiny for law schools, med schools, heaven forbid, business schools, etc.? How many law school grads are servers? How many business start ups fail and how many business grads get low paying jobs because there are so few high paying positions available? Why does our legislature continue to demean public schools and give taxpayer dollars to charters and private schools, ($171 million last year), rather than investing in our community schools? We are on a course of disaster regarding our public school attitudes unless we change our thinking in a short time.

  3. I agree with the other reader's comment about the chunky tomato soup. I found myself wanting a breadstick to dip into it. It tasted more like a marinara sauce; I couldn't eat it as a soup. In general, I liked the place... but doubt that I'll frequent it once the novelty wears off.

  4. The Indiana toll road used to have some of the cleanest bathrooms you could find on the road. After the lease they went downhill quickly. While not the grossest you'll see, they hover a bit below average. Am not sure if this is indicative of the entire deal or merely a portion of it. But the goals of anyone taking over the lease will always be at odds. The fewer repairs they make, the more money they earn since they have a virtual monopoly on travel from Cleveland to Chicago. So they only comply to satisfy the rules. It's hard to hand public works over to private enterprise. The incentives are misaligned. In true competition, you'd have multiple roads, each build by different companies motivated to make theirs more attractive. Working to attract customers is very different than working to maximize profit on people who have no choice but to choose your road. Of course, we all know two roads would be even more ridiculous.

  5. The State is in a perfect position. The consortium overpaid for leasing the toll road. Good for the State. The money they paid is being used across the State to upgrade roads and bridges and employ people at at time most of the country is scrambling to fund basic repairs. Good for the State. Indiana taxpayers are no longer subsidizing the toll roads to the tune of millions a year as we had for the last 20 years because the legislature did not have the guts to raise tolls. Good for the State. If the consortium fails, they either find another operator, acceptable to the State, to buy them out or the road gets turned back over to the State and we keep the Billions. Good for the State. Pat Bauer is no longer the Majority or Minority Leader of the House. Good for the State. Anyway you look at this, the State received billions of dollars for an assett the taxpayers were subsidizing, the State does not have to pay to maintain the road for 70 years. I am having trouble seeing the downside.

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