Actus Group is leading a significant initiative in the social infrastructure sector within the United States by collaborating with a joint venture equity investor to establish the first Master Limited Partnership (MLP) or Real Estate Investment Trust (REIT) focused on essential social services. The project holds an estimated total transaction value of $81 million, comprised of $39 million in equity and $42 million in debt. Actus is poised to close this transaction by the end of 2017 and is actively seeking long-term equity partners to expand its venture.
The portfolio targeted by Actus includes treatment properties specifically designed to facilitate essential services in behavioral health, housing for veterans, community corrections, educational facilities, and various social services that cater to underserved populations. The company intends to leverage triple net leases over extended terms of 10 years with periodic rental escalators, ensuring stable cash flows and strong returns. A considerable growth potential lies within the rapidly expanding market for behavioral healthcare, with demographic trends indicating a burgeoning need for these services.
The business model addresses supply constraints in a fragmented ownership landscape, where numerous assets exist without clear stewardship. Actus aims to capitalize on this with a robust pipeline of acquisition opportunities while forming strategic partnerships to consolidate and enhance their asset base. The organization’s strong management background, particularly in community corrections and behavioral health, positions Actus as a unique player in a market with significant barriers to entry.
Highlights
- 🏗️ First MLP/REIT in Social Infrastructure: Actus Group is pioneering the first MLP or REIT focused on social infrastructure in the U.S., marking a significant investment innovation.
- 💵 Strong Financial Backing: The initiative boasts a total transaction value of $81 million, funded by a blend of equity ($39 million) and debt ($42 million).
- 📈 Stable, Long-Term Cash Flows: The portfolio consists of long-term leases (typically 10 years) with built-in escalators, ensuring reliable revenue streams.
- 💡 Market Demand Surge: There’s a massive anticipated growth in the need for essential behavioral health services, driven by increased awareness and supportive legislation.
- 📊 Diverse Portfolio Strategy: Actus Group is focused on maintaining a diversified portfolio by targeting multiple segments within the social infrastructure space, including education, housing, and community services.
- 🔑 Strategic Partnerships: Actus targets collaboration with strong operators within its facilities, enabling shared growth and enhanced operational effectiveness.
- 🛠️ Investment in Under-Served Markets: This initiative emphasizes ethical investment by addressing gaps in care and improving the quality of life in communities through essential services.
Key Insights
- 🌍 Changing Landscape in Social Infrastructure: The trend towards investing in social services is gaining momentum as demographics shift, with a notable rise in individuals needing mental health and addiction services. Actus is placing bets on this transition by aligning its portfolio strategically towards behavioral healthcare, which has a projected market size of $16.3 billion.
- 🏭 Barriers to Entry Enhance Value: The social infrastructure sector presents significant zoning and regulatory hurdles that deter potential competitors. Actus aims to capitalize on this by building relationships with key government and community stakeholders to secure operational maintainability. This strategic initiative is set to position Actus advantageously in a space with limited competition.
- 💰 Robust Cash Flows: Actus’s business model benefits from triple net lease structures, where tenants are responsible for most property expenses. This arrangement fosters significant cash flow consistency, fostering higher profitability with reduced operational burdens on the management team.
- 📉 Fragmented Ownership Provides Opportunity: With approximately 200,000 facilities in the U.S. social infrastructure sector displaying fragmented ownership, Actus is ideally situated to acquire undervalued properties, allowing for consolidation that can elevate portfolio value as the company increases operational scale.
- 🌱 Demand for Affordable Housing: Rising challenges in affordable housing, especially for underserved populations such as veterans and survivors of domestic abuse, create a fertile ground for investment in transitional housing solutions. Actus will not only fulfill an ethical commitment but also tap into the economic potential of such developments.
- 📈 Attractive Market Metrics: Operating within a fragmented market allows Actus to negotiate acquisitions at advantageous cap rates (10%+). This positioning provides ample opportunities for value uplift as the firm scales its operations and increases tenant diversification.
- 📊 Evolving Government Support: Growing bipartisan support for mental health and social services funding signifies a precedent for long-term investment security in properties managed under Actus’s portfolio, validating the company’s strategic direction towards social impact investing.
By being at the forefront of the evolving landscape of social infrastructure investment, Actus Group not only addresses critical community needs but also taps into robust financial growth potential, establishing itself as a leader in this niche and vital sector.
View Actus Group Overview