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Invesque sells Canadian MOBs to Appelt, Centurion

UPDATED: Invesque Inc. (IVQ-U-T) is continuing to divest non-core properties, selling a nine-buil...

IMAGE: IMAGE: Invesque logo.UPDATED: Invesque Inc. (IVQ-U-T) is continuing to divest non-core properties, selling a nine-building healthcare portfolio in Ontario and Alberta to Appelt Properties Inc. and Centurion Asset Management.

Appelt and Centurion paid $94.3 million for the assets, which comprise 357,000 square feet of space.

Seven of the buildings (280,000 square feet) are in Ontario and the other two are in Alberta (77,000 square feet).

Centurion acquired a 75 per cent stake in the properties. Appelt will manage the facilities.

Ontario and Alberta properties

Four of the properties are located in the Ottawa area, with the other Ontario properties in Belleville, Stratford and Vaughan. Appelt reports 70 per cent of the portfolio revenue is derived from these assets.

The other buildings are in Edmonton and Medicine Hat, Alta.

The buildings are 70 per cent leased, representing a value-add opportunity for what Appelt calls its “active management style.”

The current roster of medical and healthcare tenants includes a mix of general practitioners, specialists, radiology, laboratory uses and ancillary healthcare service providers.

“The pandemic has demonstrated the importance of high-quality healthcare and has led the industry into a surge of growth and transformation. With a population that is living longer and requiring more healthcare resources, we anticipate the demand for medical services will continue to increase,” said Centurion president and CEO Greg Romundt in announcing the acquisition.

“We are pleased to partner with Appelt Properties on this acquisition. With our combined expertise, this portfolio will be stabilized and increase in value through rental income and recoverable expenses.”

This is the third acquisition of medical office assets by Centurion.

“Extremely rare” healthcare portfolio

Appelt said the acquisition makes it Canada’s fastest growing healthcare real estate landlord/manager. Appelt, which has offices in Kelowna and Toronto, now holds over 1.1 million square feet of MOB space across Canada.

“As active managers who know the medical space well, we believe that finding a value-add opportunity like this is extremely rare,” said Greg Appelt, founder and CEO of Appelt, in the announcement. “As a company we are well-positioned to unlock significant value in the current vacancy as well as prime development lands.”

Founded in 2010 by physician Greg Appelt, Appelt Properties is an operator and developer of healthcare real estate across Canada. Its platform focuses on optimizing practitioner mix and medical service providers to maximize patient access to healthcare delivery.

Since its founding, Appelt has grown AUM by 39 per cent annually, according to company data, through a combination of active management, development and opportunistic value-add acquisitions.

Prior to the acquisition, Appelt owned and managed 10 properties comprising nearly 750,000 square feet and had over $400 million under development across Canada.

In addition to its healthcare holdings, the company owns the 103-apartment mixed-use The Shore, and has a 300-unit multiresidential mixed-use project under development at 350 Doyle Ave., in Kelowna.

Invesque focusing on seniors housing

For Toronto-based Invesque, the transaction continues a plan to reposition its portfolio to focus on private-pay seniors housing. It said the sale represents a price of $265 per rentable square foot and a five per cent cap rate on trailing NOI.

In the previous few weeks, Invesque divested another MOB in Orlando for US$9.85 million and sold interests in two 55-plus communities in New York. In April, it sold a number of other assets in New York and Texas for an aggregate of US$193 million in sales so far in 2022.

Invesque chairman and CEO Scott White said in a statement the transactions were “completed at favourable pricing.”

“We have been very active over the past year executing on our strategy to simplify our story, simplify our portfolio, and simplify our balance sheet,” said White in the announcement. “The recently closed transactions allow us to continue de-levering and simplifying the balance sheet and further positions the Invesque portfolio toward being predominantly private pay seniors housing.

“The sale of the majority of our medical office portfolio represents a simplification of our portfolio, which will allow our team to focus on value creation in our remaining private pay seniors housing communities.”

BMO Capital Markets acted as financial advisor to Invesque in connection with the sale of the Canadian medical office properties.

Following the completion of these transactions, the company’s portfolio consists of 83 properties with approximately 5,700 units, 7,800 beds, and 190,000 square feet of medical office buildings across 18 states and one Canadian province.

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