In April 2014, Mainstreet launched an offering for an investment opportunity in a mezzanine note targeting a 10% annualized cash yield, plus potential upside.
The underlying development project was a short-stay transitional care and assisted living facility consisting of a 66,197 square foot building with 100 beds. The property would feature world-class care, a rehab center, movie theater, salon, game room, on-site restaurants, and walking trails, among other amenities. Prior to this project, the City of Bloomington did not have a facility dedicated to post-acute care. Mainstreet believed the property would truly enhance the lives of those patients treated and cared for now and in years to come.
Capital raised from the mezzanine note investors, along with capital invested by Mainstreet and proceeds from a first mortgage, would be used to fund the land acquisition and construction costs of the property.
The anticipated project timeframe was 18-24 months, at which time Mainstreet expected to either sell or refinance the property, producing a special distribution to the mezzanine note investors equating to a 14% annualized rate of return when combined with all of the previously paid distributions to that time.
Mainstreet announced that it had agreed to form a partnership with Health Care REIT, Inc., which included a required purchase of the Bloomington project upon completion of construction. The partnership was officially finalized in November, with the sale anticipated for 2015.
Mainstreet reported that, as of year-end 2014, approximately 63% of the total anticipated project costs had been incurred. The project remained on budget in both timing and cost. Progress included completed exterior building masonry and roofing, as well as drywall in three wings. The certificate of occupancy was expected in May 2015, with the sale to Health Care REIT now projected for Q3 2015. Quarterly distributions at an annualized rate of 10% continued to be regularly paid out to investors.
In August 2015, the property was officially sold, triggering a distribution to investors consisting of invested capital, accrued interest at 10% per annum, and a 4% special distribution to achieve an overall 14% annual rate of return.
Successful development plan execution and a strategic partnership formation created the opportunity for Mainstreet to successfully exit the investment, achieving strong returns for investors in-line with the original offering.
*Net of the most onerous fees charged to clients of CrowdStreet Advisors, LLC, our registered investment advisor subsidiary; an investor’s actual returns on a realized investment may differ.
This report contains explanations of a series of events associated with the Mainstreet Bloomington offering that resulted in an approximate 12.1% (net of most onerous fees) IRR to investors (including those from the CrowdStreet Marketplace). Certain aspects of the report such as dates of major events and the final outcome are easily verifiable while others, particularly underlying reasons behind the sponsor’s business plan execution, are not.
The report partially relies upon the sponsor’s explanations, the information contained within sponsor-produced quarterly reports, and conference calls. This analysis is not an assertion of independently verified facts but, rather, is for informational purposes only, to convey CrowdStreet’s understanding of what transpired.
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