CMAX Stock Increases Over 10% Pre-Market: Why It Happened

By Amit Chowdhry ● Jul 13, 2021
  • The stock price of Caremax Inc (NASDAQ: CMAX) increased by over 10% pre-market. This is why it happened.

The stock price of Caremax Inc (NASDAQ: CMAX) – a technology-enabled provider of value-based primary care to seniors – increased by over 10% pre-market. Investors are responding positively to CareMax announcing it has entered into an exclusive advisory agreement with an affiliate of The Related Companies LP, one of the largest private owners of affordable housing in the United States.

Since 2011, CareMax employed a “Whole Person Health” approach that takes into consideration all facets of a patient’s health from in-house specialists to wellness activities to transportation. And this care is designed to treat the entirety of the patient, not just their individual medical conditions. CareMax’s blend of targeted technology and comprehensive and high-touch care has resulted in reduced costs, better clinical outcomes, and five-star patient quality scores.

Under the terms of the deal, Related will advise CareMax on opening new medical centers nationwide, including but not limited to within and proximate to affordable housing communities that may be owned by Related. And Related’s nearly 50 year history of serving historically underserved neighborhoods has created strong relationships with community leaders, government agencies, social service providers, and other affordable housing developers. Plus the program will target neighborhoods where commercial real estate has struggled in recent years leading to closed storefronts and landlords seeking tenants such as CareMax that community stakeholders are likely to embrace. The new centers are going to be operated by CareMax or its affiliates.

Originally launched as primarily an affordable housing developer, owner, and manager in 1972, today Related continues to be one of the largest developers and preservationists of affordable and workforce housing in the country.

CareMax’s de novo expansion is planned for covering multiple states from coast to coast where Related and other affordable housing developers have an aging population in need – many in federally recognized Naturally Occurring Retirement Communities. And this expansion dovetails well with the relationships that CareMax has established with leading national and regional payers who have requested CareMax’s help in addressing the need for senior-focused value-based care in urban settings.

As a result of this deal, CareMax is accelerating the speed and geographies in which it plans to open new medical centers and projects at least 15 new centers in 2022, approximately 25 new centers in 2023 and approximately 35 new centers in 2024. And CareMax believes that this pace can continue to accelerate in subsequent years. 

The initial 3 medical centers that CareMax plans to open as part of this agreement with Related will be located in the Bronx Terminal Market in Bronx, NY and Ocean Park Apartments in Far Rockaway, NY, both owned by Related, as well as on 106th Street and 3rd Avenue in East Harlem, New York — which is owned by a third party and was identified by Related. And the openings of these medical centers are planned for 2022.

As part of the deal, Related has bought $5 million of Class A common stock from CareMax at a price of $10 per share and has received warrants to purchase up to 8 million additional shares of CareMax Class A common stock at $11.50 per share. The warrants are or will become exercisable in connection with the opening of new medical centers for which Related has provided services; 6 million of the warrants are subject to redemption at $18 in line with CareMax’s existing public warrants. And the agreement is exclusive as to Related’s advisory services and has a term of 12 years. Bryan Cho, Executive Vice President at Related Companies, will join the CareMax Board of Directors.

KEY QUOTES:

“At Related, we aspire to innovate ways to enhance the quality of life for all of our residents and the communities we serve. Quality healthcare is essential for all communities to thrive. We chose CareMax to help expand their reach because their fully integrated model is uniquely positioned to address the systemic issue many low-income seniors face.”

— Bryan Cho, Executive Vice President of The Related Companies LP

“CareMax has been serving senior residents of affordable housing, including at one medical center embedded inside a senior housing community. Together with Related we saw that there is a profound nationwide need for medical and social care within and convenient to affordable housing communities. We engaged Related as our real estate advisors to assist us in locating our de novo medical centers directly within and near to these affordable senior communities nationwide.”

“We are excited to work with Related to introduce CareMax’s comprehensive, value-based, high-quality primary healthcare to seniors in new markets across the country. Related’s dedication to their residents and neighbors echoes the CareMax dedication to our patients – to do everything we can to improve their lives. The CareMax model reveals the inefficiencies and ineffectiveness of a fee for service system. We believe that CareMax’s proactive, data-driven approach to chronic disease management as well as our focus on the social determinants of health will improve patient outcomes in these underserved communities. We believe that our model is transformative, repeatable, and scalable.”

— Carlos de Solo, President and CEO of CareMax