EXPERT OPINION: A Conversation with Zeke Turner

January 21, 2013

In this "Expert Opinion" interview, Zeke Turner, Chairman and CEO, Mainstreet Property Group., discusses new developments in assisted living, skilled nursing, partnerships, REITS, Medicaid, and more....

Paul Zeke TurnerWatch the video      Read the transcript

Paul Ezekiel “Zeke” Turner, 35, is the Founder and CEO of Cicero, Ind.-based Mainstreet, one of the nation’s most innovative health care developers, and the Chairman and CEO of HealthLease Properties REIT, a Toronto-based Real Estate Investment Trust.
Mr. Turner founded Mainstreet in 2002, when he was just 25 years old.  Named to Inc. Magazine’s list of the 500/5000 Fastest Growing Companies in America for the past three years, Mainstreet developments are Healthcare Resorts™, offering guests concierge-based health care in a hotel-like atmosphere.  Mr. Turner and his team took HealthLease Properties REIT public with a $121 million offering on the Toronto Stock Exchange on June 20, 2012. Mainstreet holds an indirect interest in the REIT and is currently its largest shareholder. 
Mainstreet’s Next Generation™ designs include multiple social destinations, restaurant-style dining, spacious private rooms and baths, and oversized therapy/wellness areas. In addition to an active acquisition strategy, Mainstreet and HealthLease currently have a development pipeline for 2013 of more than 20 properties, representing over $500 million in new product development.
Prior to establishing Mainstreet, Mr. Turner worked on Wall Street with Citigroup Corporate and Investment Banking (formerly Salomon Smith Barney). With Citigroup, Mr. Turner worked in both the Latin America and Health Care groups in New York and in Mergers/Acquisitions in São Paulo, Brazil.

Mr. Turner has served on the Board of Directors for the Indiana Health Care Association (IHCA) and currently serves on the Board of Directors for the Indiana Family Institute, an organization dedicated to promoting strong families in Indiana. He is a member of Cicero Christian Church, the American Health Care Association (AHCA), the National Investment Center for the Seniors Housing and Care Industry (NIC) and the Urban Land Institute (ULI).
 

 

Contact Information:
Zeke Turner
Founder & CEO
Mainstreet Property Group
Phone: 317-420-0205
Fax: 317-420-0206
zturner@mainstreetcap.net
http://www.mainstreetcap.net/



 
Watch the video of the interview: 
 

 

Read the interview transcript:

Steve Monroe
There's been a lot of new development in the skilled nursing and assisted living market. New product is obviously very popular with the consumer and I have with me today Zeke Turner. He's the chairman and CEO of Mainstreet Property Group, which is embarking on a major new development campaign to bring quality properties to the consumer.

Zeke, why did you start Mainstreet 10 years ago?

Zeke Turner
I'd like to come up with some altruistic reason, but really more than anything else, I saw an investment opportunity in the senior space. I was 24 years old at the time. I had a career in Wall Street and decided to look for an area that was fairly straightforward, where I felt like we could invest. What I found was operating in the real estate side of this business and then triple-net leasing to operators made a lot of sense. And, obviously, some large REITs had done it before and I, no secret, just copied that model for several years.

Steve Monroe
You're developing senior housing properties, but you also buy them, you will buy and triple-net lease. What are you doing more of today? On the development side?

Zeke Turner
We're doing a lot of new development and I wouldn't mind if we did 100% new development in our projects. We get the high quality assets that are designed for the future of this industry, especially for the baby boomers coming through. But we're looking for acquisitions, as well, and if we can find high quality properties, particularly that meet with our portfolio—our average age in our portfolio is just eight years old, and we have over 70% quality mix in the portfolio—so we're not in a hurry to go out and buy properties that we feel like are going to dilute that overall value of that platform. But if we can find good properties to buy and work with good operators, we'll do that, as well.

Steve Monroe
In 2011, you added about $100 million worth of properties. What's the number going to be for 2012 and what do think for this year?

Zeke Turner
We're ramping that up substantially in that we have 25 projects that we're tapping for the next 18 months, which represents almost $400 million worth of development value. I think that we are today now the largest developer of skilled nursing in the United States and we'd like to continue to be in that space.

Steve Monroe
Right know you're managing just one of your properties. That's not part of your goal, to increase any management, just purely develop and triple-net lease?

Zeke Turner
Yes, in the early years we bought a property out of bankruptcy and decided we would manage it for a while and turn it around and then eventually take it to a third-party operator. We're in it a little longer than we expected, but we're in the process of transitioning that out right now. But we don't have any interest in being in operations. What we want to do is, either joint ventures or partnerships with good operators, ultimately be able to help them in their strategic goals while being involved in the real estate.

Steve Monroe
Well, let's talk about one of your joint venture partners. Mid-2012, you partnered with LCS and this is I guess a unit of Life Care Services in Iowa. You're going to be developing with them or they're going to be operating short-term rehab and high-end assisted living facilities. How did that come about with LCS?

Zeke Turner
We have the highest level of respect for them as an organization. They're already one of the largest operators across all of senior housing and care. We saw an opportunity to take a group that has great systems, high quality people, high quality operations and partner with them on really an innovative, next-generation type of facility, which we see ample opportunity in the market for. As we go into secondary markets, even some urban markets, we see great opportunity for that rehab-therapy-focused area and then private pay on the assisted living, to put new product out there that the consumer actually desires. And ultimately interacted with LCS and came to the conclusion that we are so aligned as organizations that we wanted to do this formally going forward into a strategic development agreement.

Steve Monroe
How many properties do you think you'll do, let's say this year with them?

Zeke Turner
We have four on the table right now. We're in discussions to see what that might look like going forward, get our feet set on these four.

Steve Monroe
Are those four in Indiana?

Zeke Turner
Four in Indiana, that's correct. We're actually actively involved in about five or six other states right now in that development pipeline. So there's probably a better than average chance that we're going to look to grow this at a pretty heavy pace going forward.

Steve Monroe
That's a fair amount of development. You also have a significant interest in a newly-public REIT in Canada, HealthLease Properties, which went public last summer on the Toronto Exchange. What's your involvement with the REIT and how is that relationship going to work going forward?

Zeke Turner
So, we are the largest shareholder of the REIT to date. We actually sponsored that REIT and we are the ones that took it public. For us, really, as a private real estate investment company, we're always challenged in terms of our access to capital. And the public REIT market is really the most efficient form of capital in terms of real estate. So what we want to be able to do is take our innovative intellectual property and designs on the development side and be able to pair that with more longer-term financing on the REIT side and come up with more of a symbiotic relationship there that could carry us forward.

Now, because of this REIT, we have access to capital at a fairly high degree and the REIT has appetite for a lot more business.

Steve Monroe
So you're going to develop the properties. Most likely the REIT or someone else will then take you out, triple-net lease and you'll have an operator in there.

Zeke Turner
Correct. The REIT can also develop on its own balance sheet and there's a whole relationship set up there to manage the fiduciary responsibility to shareholders. But, ultimately, if those things work well together, then both companies should do quite well.

Steve Monroe
If you have $400 million of development coming up, that's an interesting statement saying you're probably the largest developer right now of skilled nursing, because I don't know many people who are doing a whole lot of it.

Zeke Turner
Well, that's been a big problem that not only do you have the demographic wave that everybody is always talking about, the Silver Tsunami, if you will, but the average age of properties, particularly in the skilled space, keeps getting older and older. So the consumer is less inclined to choose that product. We know from our own research what the receptiveness rate is for the consumer in terms of a nursing home product. So what we have is a gulf that's existing there between those two things and it's creating unbelievable opportunity to develop in the skilled nursing space.

However, you have these real and perceived risks that exist inside that industry which has kept people really away from it for some time. And anytime a whole market's moving away from something or is uncertain about it, for me that looks like opportunity where we can step in, figure it out and do it in a much better way than other people can.

Steve Monroe
Well, I would hate to be that 40-year-old skilled nursing facility in the community where you're building one of your new ones. They're going to have a little bit of trouble going forward.

Zeke Turner
Well, what we're seeing, actually, is what developed in the hospital market, the sub-acute market or network is starting to grow and develop, much like the hospital fashion has of creating these networks throughout states or regions. And, ultimately what's happening is you're getting this tiered system of that acute rehab therapy provider. And then you're getting the older properties starting to fill the role of the traditional long-term care. They're actually working fairly well in that they get full occupancy as the Medicaid residents typically are rolling off to there with maybe a little bit of quality mix in there. Whereas the new properties are running 100% quality mix.

Steve Monroe
That's definitely the way to go, especially if you have high end assisted living as part of it.

Zeke Turner
Correct.

Steve Monroe
Well, good luck in all your development. Hopefully, the financing markets will stay strong and look forward to seeing how it all pans out in the next few years.

Zeke Turner
Thank you.


 

 

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