Invesque Inc. (TSE: IVQ.U) sold a five-property portfolio with a $93 million price tag to The Ensign Group, marking an end to the owner/operator relationship between the two companies.
Invesque, which went public in June 2016 with skilled nursing making up 75% of its portfolio, continues to divest from the sector with nursing homes now at just over 35% of its pro forma net operating income (NOI) as of the third quarter ending Sept. 30.
As of Sept. 30, the Carmel, Ind.-based company had 112 properties in its portfolio, 28 of which were skilled nursing properties.
“This portfolio sale is another step in executing our active portfolio management plan,” Invesque CEO and Chairman Scott White said in the press release announcing the deal on Tuesday. “The strategic disposition, at extremely favorable pricing, will help us strengthen our platform with reduced leverage, increased liquidity and will provide a portion of the paydown of the debenture in January.”
Stifel analysts considered the pricing to be attractive, especially considering that industry occupancy is still significantly lower than pre-COVID levels
“On a per bed basis, the 580 bed portfolio is valued at $160,000 per bed,” according to a note published by Stifel on Nov. 16.
The analysts felt the deal fit with Invesque’s current strategic direction of reducing its portfolio exposure to SNFs in favor of private pay senior housing assets.
The portfolio includes a four-property skilled nursing portfolio with 436 beds operated by Ensign as well as a 144-bed assisted living community operated by The Pennant Group. The portfolio is located in California, Kansas and Arizona.
The properties are subject to long-term triple-net leases and were sold at a price that represents a capitalization rate of 7.2%.
Cap rates for the most desirable, Class A nursing facilities in core locations averaged 10.9%, according to CBRE’s Summer 2021 Seniors Housing & Care Investor Survey.
“As part of our portfolio management strategy, we constantly evaluate our portfolio and selectively exit assets to streamline our focus and to allocate capital to create maximum value for our stakeholders,” White added in the press release.
Invesque already transitioned four SNFs in May to Cascade Capital Group, and sold four more earlier this year.
The portfolio sold to Ensign was part of Invesque’s Jaguarundi Ventures, LP, a joint venture between Invesque and Magnetar Capital. Invesque has a 65% ownership interest in Jaguarundi.
The sale will provide Jaguarundi with approximately $22 million of net proceeds after the repayment of outstanding debt and transaction costs.
The deal comes weeks after Ensign (Nasdaq: ENSG) announced the formation of a captive real estate investment trust (REIT) as the company plans to continue to expand into new states.
Analysts with Stifel noted the deal signaled that Ensign plans to broaden its scope now that it has a captive REIT structure to work with as the pricing was higher than a typical turnaround acquisition the company has done in the past.
“We think Ensign will execute on more real estate transactions in the coming quarters,” the note said. “The company is in a unique position to consolidate in the post-COVID world.”
Companies featured in this article:
