Health properties owner Invesque Inc. (IVQ-U-T) continued its aggressive expansion on Friday morning, announcing it will acquire Canadian-owned Mohawk Medical Properties Real Estate Investment Trust for approximately $180 million.
Mohawk REIT and its subsidiary, Mohawk Medical Operating Partnership LP which is also part of the transaction, own 14 multi-tenant medical office buildings in seven markets throughout Canada and the U.S. Mohawk Realty Advisors Ltd. and its affiliates will continue to provide asset and property management for the properties.
Invesque has been on an extensive buying spree since changing its name from Mainstreet Health Investments Inc., on Jan. 3, more than doubling its portfolio to 103 properties in just two months.
“This acquisition allows us to establish a strong investment platform within an important and growing asset class of health care,” said Scott White, Invesque’s chief executive officer, in the release announcing the sale.
“Our strategic relationship with Mohawk reinforces our demonstrated ability to identify best-in-class partners while diversifying Invesque’s portfolio across the care continuum. This is an exciting day for us as we launch a new platform and execute on our investment strategy.”
Invesque is based in Carmel, Ind.
The company divides its MOB assets into three classes, and after the closing will have 35 “skilled nursing” facilities, 54 in the seniors housing sector and 14 which it terms “strategic healthcare”.
The acquisition is subject to the usual closing conditions, including the approval of at least 66 2/3 per cent of Mohawk REIT shareholders, as well as approval from the Toronto Stock Exchange.
The Mohawk portfolio
The Mohawk portfolio is comprised of more than 545,000 square feet in Alberta, Ontario, New York, and Florida and is one of the largest portfolios of medical office properties in Canada.
Mohawk Medical Properties REIT is based in Toronto and has specialized in health care real estate acquisition and management. It was formed in September 2012 by Sean Nakamoto and Andrew Shapack, formerly of GT Canada Medical Properties REIT, Northwest Healthcare Properties and TD Securities Real Estate.
“The founders and principals of Mohawk, Sean Nakamoto and Andrew Shapack, are pioneers in the Canadian medical office space and we are pleased to establish this partnership, expand the initial portfolio through future acquisitions, and continue to create shareholder value,” said Adlai Chester, Invesque’s chief investment officer, in the release.
“We believe the Mohawk team has the expertise to drive continued performance at the properties as well as find and implement attractive opportunities going forward.”
In addition to the investment in the portfolio, Mohawk will provide Invesque with future opportunities to acquire any similar MOBs sourced by Mohawk.
Mohawk has provided comprehensive, asset management services that included strategic planning, financial reporting, valuation analysis, investor relations, mortgage financing, capital expenditures, and dispositions. Additionally, Mohawk Realty provides medical specific, property management and leasing services for medical practitioners.
Benefits for Invesque
Invesque said the deal provides the following benefits:
* Strategic Diversification: The acquisition expands the company’s geographic footprint into Alberta with three properties and increases its presence in Ontario with eight properties, Florida with two properties and New York with one property. Acquiring the properties also significantly diversifies the company’s investment basis into a new asset class (approximately 10% of total net operating income).
* Attractive Metrics: The properties are occupied by multiple physician tenants with established medical practices. The portfolio has historical occupancy greater than 90%, strong initial yield, and annual tenant retention of greater than 80% with more than 400 physicians practicing throughout the portfolio.
* Embedded Shareholder Value: The equity portion of the transaction will be funded through the issuance of common shares to Mohawk REIT unitholders at a fixed price of US$9.75 per share.
The acquisition will be funded through a combination of new debt, cash on hand, and an issuance of common shares at US$9.75 per share in exchange for Mohawk REIT’s current unitholder equity of approximately US$37 million.
Other recent moves by Invesque
Invesque has been undergoing a huge expansion in the past few months, including its US$425-million acquisition of Care Investment Trust from Tiptree Inc. The transaction, which closed on Feb. 1, comprised 42 properties and doubled Invesque’s overall holdings.
The company made two other deals in February, both in Texas.
On Feb. 12 it closed on a three-property memory care portfolio in Garland, Grapevine and McKinney for US$21.5 million. Those communities are in the Dallas area.
On Feb. 23 it announced the acquisition of two post-acute transitional care facilities from Mainstreet Property Group, LLC for US$51.9 million. The properties are located in San Antonio and Webster.
Invesque Inc. is a North American health care real estate company with a growing portfolio of high-quality properties located in the United States and Canada and operated by best-in-class health care, senior living and care operators primarily under long-term leases and joint ventures.
Invesque partners with industry leaders to invest across the health care spectrum.
As at Feb. 23, the company said it’s properties comprised more than 9,000 beds in facilities in 19 states and one Canadian province.