How IHC Handles Lease Agreements

Wally:
What’s the average length of the leases, your tenants that stay there? How long are they generally there?

Mike Jones:
Our tenants, our residents in our communities are not on leases that are longer than any more than month-to-month. So they’re all on month-to-month resident agreements. We don’t necessarily call them leases. We call them resident agreements…

Wally:
Okay.

Mike Jones:
… because it includes not only room and board but also their care needs. I know that’s scary for a lot of real estate investors, but it’s something where you have to realize we’re moving in seniors with needs. So we’re talking about assisted living and memory care where moving is very difficult on a senior. I have grandparents who recently passed away who were in a community who like many elderly like to complain, but they also couldn’t move. And they were in a good community and were well-cared for. So they stayed until they passed, and that’s typically what we find.

Wally:
My father was in one here in Denver area for a couple years. And wonderful facility, very, very well-run. And he referred to it as a prison, of course. Prison with a five-star chef.

Mike Jones:
Right.

Wally:
I think giving up control is tough at whatever age you are.

Mike Jones:
That’s exactly right.

Wally:
A lot of our listeners aren’t familiar with how a lease works and they’ll think with a DST… There’s certain rules of a DST that you can’t change the lease on it. So part of that with any multifamily or senior or student housing ends up being you have one lease agreement with a master lease. Who is that? Is that affiliated organization then for the master lease? How are you guys structured with that?

Mike Jones:
So as sponsor, we set up an entity as a master tenant, and we essentially triple net lease. So we take care of everything at a community on behalf of the investors and make a rent payment. So the distributions in any DST investment is our stated rent payment to the investors themselves. And one of the things unique about Inspired Healthcare Capital is in our DST offerings is we have, as sponsor, guaranteed the lease payments in all of our DSTs to date.