Mainstreet's Turner to sell REIT in $2.3B deal

August 13, 2014
Zeke Turner is founder and CEO of Mainstreet Property Group. (IBJ photo)

Carmel-based entrepreneur Zeke Turner has agreed to sell the real estate investment trust he started two years ago for $950 million in order to focus on his original nursing home development company, Mainstreet Property Group.

HealthLease Properties REIT, which Turner leads as CEO, announced Wednesday that it will be sold to Ohio-based Health Care REIT Inc., along with 17 projects Mainstreet has under construction that are valued at $369 million. The Toledo, Ohio-based company, also known as HCN, also has agreed to form a development partnership with Mainstreet for 45 future senior care campuses, which the companies value at $1.4 billion.

In all, the deal is worth more than $2.3 billion.

“At Mainstreet, we’re grateful and humbled to team up with such a great partner as HCN to lead the nation in the development of post-acute health care properties,” Turner said in a prepared statement. “Americans deserve better choices for their health care and this partnership is built to offer just that.”

The deal still requires the approval of Health Care REIT’s shareholders. It is anticipated to close in the fourth quarter.

HealthLease Properties, which is listed on the Toronto Stock Exchange, owns 51 senior care facilities in Canada and the United States, including 12 in Indiana. In second-quarter results announced Tuesday, the company’s revenue and profit doubled from the previous year, to $17.6 million and $5 million, respectively.

Mainstreet, which has sold several of its senior care projects to HealthLease, has been the fastest-growing company in the Indianapolis area over the past three years. Revenue skyrocketed to more than $66 million last year.

HCN, the largest U.S. health-care landlord by market value, said it will pay $14.20 per share in Canadien dollars for HealthLease, 31 percent more than HealthLease's closing stock price Tuesday.

HealthLease shares rose 31 percent, to $14.19 (Canadien) each Wednesday morning. Health Care REIT shares climbed 2.1 percent, to $64.90.

Real estate companies are seeking to take advantage of the growing demand for medical services and senior housing as the U.S. population ages. Last week, NorthStar Realty Finance Corp. agreed to buy Griffin-American Healthcare REIT II for about $3.4 billion. In June, Ventas Inc., the country’s third-biggest health-care REIT by market value, said it would acquire American Realty Capital Healthcare Trust Inc. for $2.6 billion.

Health Care REIT’s purchase demonstrates the company’s “integral role in the health-care delivery continuum,” CEO Tom DeRosa said in a prepared statement. “We are connecting leading health systems, post-acute providers and seniors-housing operators to deliver integrated health-care delivery platforms that will improve the quality of care, create operating efficiencies and reduce costs.”

HealthLease has 53 senior-housing and health-care properties concentrated in North Carolina, Indiana and Alberta, Canada. The 17 communities Health Care REIT is acquiring in the Mainstreet deal are under the Next Generation brand and include a mix of post-acute and assisted-living beds and rehabilitation space. They are located primarily in the Indianapolis, Denver and Kansas City, Missouri, metropolitan areas.

About 75 percent of Mainstreet Property Group is owned by Mainstreet Capital Partners, which is 50-percent owned by Indiana House Speaker Pro Tem Eric Turner, father of Zeke Turner.

The elder Turner was subject of an ethics probe this year after he worked quietly to defeat a proposed ban on the construction of new nursing homes, a law that would have cost his business millions in future revenue. An ethics panel cleared him of wrongdoing but urged lawmakers to strengthen disclosure rules.


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