Analysis of Investments

CS1031 Morganton MOB

Capital Square Realty Advisors

This offering contains a single-tenant net-lease property leased to Fresenius Medical Care in Morganton, North Carolina.  

Investment Highlights

  • Yr. 1 Cash-on-Cash 5.60%
  • Initial Occupancy 100.00%
  • Est. Time Horizon 10 years YEARS
  • Current Cash Flow
  • Yr. 1 Cap Rate to Investor 5.58%
  • Investor Purchase Price $6,956,000
  • Total Offering Size $2,956,000

Loan Information

Loan has a 10-year term with the first 5-year's interest only and fixed interest at 4.84%.

 

  • Yr. 1 DSCR 1.96
  • Loan-to-Offering 57.50%
  • Hold Period DSCR 1.79

Tenant Information & Lease Terms

The property is leased to Bio-Medical Applications of North Carolina d/b/a Fresenius Medical Care. Fresenius is a provider of products and services for people with chronic kidney failure. Dialysis is a vital blood cleansing procedure that substitutes the function of the kidney in case of kidney failure. Fresenius Medical Care has a senior secured credit rating of Baa3 by Moody's with stable outlook and an issuer rating of Ba2. 

The lease has a term of 15-years and 10% rent increases every 5-years. There are three 5-year renewal options. The lease is NN.

Key Positives

  • Strong investment grade tenant and gaurantor.

  • Long term 15-year net-lease with 10% rent bumps every 5-years. 

  • North Carolina is a CON state.  This means there must be a demonstrable demand for the service(s) provided by the tenant for the city to allow them to operate.  

Key Risks to Consider

  • The lease is a double-net lease which requires the landlord to cover certain expenses, roof and structural, at the property.  The building is new, but should there be unexpected repairs or replacement needed this could overcome the limited reserves set aside by the sponsor from equity. 

  • The cap rate to investors is much lower than what local brokers consider an acceptable cap rate for this type of asset. 

Investment Sponsor Information

Capital Square Realty Advisors

Capital Square 1031 is a national real estate investment and management company. The firm sponsors institutional-quality real estate exchange programs that qualify for tax deferral under Section 1031 of the Internal Revenue Code. Capital Square uses the Delaware Statutory Trust (DST) structure to make quality real estate available to a larger number of investors.

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