Healthcare Portfolio 6
This offering is for two healthcare buildings.
The building in Oklahoma has Tulsa Spine & Specialty Hospital as the tenant with 1.5% annual rent bumps and eighteen-years left on the lease.
The building in Wauwatosa, Wisconsin has Aurora Health as the tenant with seventeen years left on the lease with rent escalations every five years.
- Year 1 Cash Flow 5.75%
- Initial Occupancy 100.00%
- Est. Time Horizon None
- Yr 1. Cap Rate to Investors 5.65%
- Investor Purchase Price $90,546,717
- Total Offering Size $53,713,732
The loan for the Tulsa building (yet to be finalized) is planned to be $20,993,034 with a ten-year term - interest only for the first 5-years. The loan has a 5.10% fixed interest rate with a DSCR of 1.25. A swap is planned to lower the interest rate to 4.85% fixed. No expected rule against prepayment.
The loan for the Wisconsin building is $15,840,000, interest only for the first five of a ten year term. After the planned swap, the loan will have a 4.16% interest rate. There's no planned prepayment penalty or DSCR cash sweep provision. The loans are not cross collateralized.
- Yr. 1 DSCR 3.0
- Loan-to-Value 40.68%
- Hold Period DSCR 2.73
Aurora Health has strong revenue, rated investment-grade by Moody’s (Aa3).
Low leverage financing.
Both buildings are in good locations with strong demographics
Triple-net (NNN) leases
There is a 17.8-year weighted average lease term remaining on the properties.
The Oklahoma property (which amounts to 72% of investor’s year-one NOI) has a guarantor who is not investment grade rated.
The Oklahoma property has the right of first offer with the partial ownership group.
The Oklahoma property’s lease and loan document are yet to be finalized. The sponsor reported that supplemental information should be released on 12/20, but that information is yet to arrive.
A part of Acute healthcare’s operations is facing increased competition from facilities who can provide similar outpatient and x-ray services. Although, this risk only affects a small portion of Acute’s business.
The health care industry is affected by unknown government healthcare policy.
Tulsa Spine’s parent company, Ardent Health, is not credit rated and their income statements from 2015-17 show that they have been close, but not profitable those years.
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