Analysis of Investments
FSC Healthcare 1 DST
Four Springs Capital
This offering consists of 2 separate Fresenius Medical Care located in Lubbock, Texas and Carbondale, Illinois. Four Springs Capital has an option to UpREIT investors into their REIT. According to the sponsor investors will have the option to stay in the REIT or be bought out at fair market value.
Investment Highlights
- Yr. 1 Cash-on-Cash 5.25%
- Initial Occupancy 100.00%
- Est. Time Horizon 8 years YEARS
- Current Cash Flow
- Yr. 1 Cap Rate to Investor 5.75%
- Investor Purchase Price $10,000,000
- Total Offering Size $5,320,000
Loan Information
This offering has two loans which have 10-year terms, 3-year interest only, and fixed interest at 4.60%.
- Yr. 1 DSCR 2.6
- Loan-to-Offering 46.80%
- Hold Period DSCR 1.79
Tenant Information & Lease Terms
Both properties are leased to Fresenius Medical Care which is the world's largest integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure.
Texas: Expires 4/25/2029
Illinois: Expires 12/31/202
Both leases have 5-year options and have annual rent bumps of 1.7%. The Texas lease is NNN, while the Illinois lease is NN.
Key Positives
Illinois is a CON state. This means there must be a need for the medical retail facility before it is allowed to operate.
There are twelve and thirteen years remaining on the leases.
Fresenius is an investment grade company.
Key Risks to Consider
The Carbondale lease is a NN which leaves the landlord is responsible for any repairs necessary to the structure and roof. Such expenses can be costly, but it is worth noting that the building was renovated as recently as 2013 and, according to reports, a new roof was apart of that reonvation.
The sponsor UpREIT option of UpREITing leaves investor vulnerable to a non-arms length transaction when the Sponsor's REIT purchases the Sponsor's syndicated DST. Without a floor to protect investors FMV could be low, but advantageous to the REIT.
Investment Sponsor Information
Four Springs Capital
According to the sponsor's website: "Four Springs Capital Markets is the distributor of Four Springs TEN31 Xchange sponsored DST product offerings and private offerings of both debt and equity for Four springs Capital Trust, an internally managed real estate investment trust.
Four Springs TEN31 Xchange (FSXchange) is a real estate firm that provides customized tax deferred exchange solutions for real estate investors. FSXchange is a subsidiary of Four Springs Capital Trust (FSCT), a REIT that focuses on acquiring and managing a diversified portfolio of single-tenant commercial properties, including retail, industrial/warehouse, medical and other office buildings that have long-term double or triple net leases with credit worthy tenants."