Invesque Sees Bright Skilled Nursing Future Even as it Diversifies $1.4B Portfolio

Since going public two years ago, Invesque Inc. (TSX: HLP.U) — the former Mainstreet Health Investments — had steadily moved to diversify away from the skilled nursing assets that had previously dominated its portfolio. But that doesn’t mean that CEO Scott White has a bearish outlook on institutional care going forward.

“Definitively, there is a long-term place in the health care spectrum for skilled nursing,” White told Skilled Nursing News in a Tuesday interview. “Will it look like it does today? No. Every business evolves. There is no business that survives forever without evolution, without innovation.”

White’s comments come as the Carmel, Ind.-based real estate investment firm announced the planned addition of 39 jobs through 2024, a significant boost over its current headcount of around 25; the company also relocated its headquarters to a new space in Carmel back in May.

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The Indianapolis Business Journal first reported on the company’s expansion moves this week.

The move isn’t just indicative of Invesque’s recent growth push, which has seen it expand from 23 assets valued at about $425 million at the time of its initial public offering in June 2016 to 104 properties with a book value of $1.4 billion today, according to White. The company’s new digs represent yet another break from long-term care developer Mainstreet, with which Invesque had previously shared a management team.

While the two companies formally separated their leadership into two distinct units when the investment firm went public, they still both used the Mainstreet name until last November, when Mainstreet Health Investments formally rebranded as Invesque after closing on the $425 million acquisition of Care Investment Trust. The former partners continued to share the same office space until the move in May, with White now reporting that the firms are completely separate — though Invesque continues to own some of Mainstreet’s post-acute care facilities.

Diversification play 

White characterized Invesque’s strategy as long-term and asset-agnostic, with skilled nursing facilities generating 45% of its net operating income, senior housing properties pulling in another 45%, and medical office buildings (MOB) accounting for most of the remaining 10%; Invesque also maintains a small investment stake in some of its developer partners, White said.

The company made its initial foray into the MOB space back in May, when Invesque finalized a deal to acquire Mohawk Medical Properties REIT for $142 million. That transaction brought in 14 medical office buildings in two states and two Canadian provinces, which grew to 15 with a follow-on acquisition in the Buffalo, N.Y. suburbs in July.

Moving forward, White said Invesque plans to further level out the proportions of SNFs, senior housing facilities, and MOB in its portfolio — with an operator-focused approach that has less to do with specific regions and asset types, and more with finding solid partners.

“We’d much rather find the right operator and work with them on their strategy in terms of where they want to be. We want to be their long-term partners. Really, the operator is key to it,” White said.

In general, Invesque aims to work with smaller, regional operators with five to 50 properties — following a trend in the skilled nursing world that has seen landlords move away from national chains and toward nimbler providers that can adapt to local-level changes in state and county marketplaces.

“We do absolutely like regionally focused operators. We believe that health care is best delivered at the local level,” White said, adding that Invesque is also willing to work with national providers that empower regional leaders to operate with autonomy.

In addition, White’s firm seeks out operators that have been in business for around 10 years, with the idea that more mature players have figured out ways to roll with the changes that have swept seniors housing and care over the last decade or more.

“We’re not building a portfolio for this year or next year,” he said. “We’re building a forever portfolio, and we want operators that have had a long track record of success, that can demonstrate the ability to succeed through cycles.”

While White admitted that he can’t predict when the demographic wave of baby boomers will begin to benefit the skilled nursing industry — or what the skilled nursing facility of the future will look like exactly — he emphasized that he plans to see the surge in demand for long-term care services during his career. Home care will be an option for some seniors, but not all, White emphasized, while the SNF will continue to provide a lower-cost alternative to hospitals with a more supportive community of fellow residents that home health can’t offer.

And to meet that demand, Invesque will continue to look to the industry’s future, and not quarter-to-quarter variations in occupancy, White said.

“We’re investing in that massive wave of aging baby boomers. We’re investing in the demographics that suggest that a greater proportion of GDP will be spent on health care over the long term. And as such, we believe that a greater proportion of GDP will be spent on health care real estate,” White said. “We want to build that portfolio today, well ahead of that aging baby-boom demographic.”

Written by Alex Spanko

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