Analysis of Investments

Healthcare Portfolio 6

Inland

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.

Investment Highlights

  • Yr. 1 Cash-on-Cash 5.75%
  • Initial Occupancy 100.00%
  • Est. Time Horizon None YEARS
  • Current Cash Flow 5.75%
  • Yr. 1 Cap Rate to Investor 5.65%
  • Investor Purchase Price $90,546,717
  • Total Offering Size $53,713,732

Loan Information

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-Offering 40.68%
  • Hold Period DSCR 2.73

Tenant Information & Lease Terms

Founded in 2002, Tulsa Spine is the guarantor of a true triple-net (NNN) lease on the Tulsa building. 

Aurora Healthcare, Inc is guaranteeing a triple-net (NNN) lease on the Wauwatosa building. Aurora Healthcare, Inc was established in 1984 and now consists of hospitals, clinics, and pharmacies throughout thirty communities. Moody's rated Aurora an Aa3 rating on its long-term obligation.

Key Positives

  • 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.

Key Risks to Consider

  • 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. 

Investment Sponsor Information

Inland

The Inland Real Estate Group of Companies, Inc. ("Inland"), is an industry leader and one of the nation's largest commercial real estate and finance organizations. As a business incubator, we specialize in creating, developing and supporting Inland member companies that provide commercial real estate-related services and alternative investment funds, including limited partnerships, institutional funds and non-listed and listed REITs.

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