Analysis of Investments

FSC Healthcare 2

Four Springs Capital

Four Springs Capital Healthcare 2 is an investment in a medical office building occupied by one tenant located in Baton Rouge, Louisiana. The property is occupied and operated by Ochsner Clinic Foundation and the lease has a remaining term of 15 years. The lease is NNN.

Investment Highlights

  • Yr. 1 Cash-on-Cash 5.50%
  • Initial Occupancy 100.00%
  • Est. Time Horizon None YEARS
  • Current Cash Flow
  • Yr. 1 Cap Rate to Investor 6.09%
  • Investor Purchase Price $4,135,000
  • Total Offering Size $4,135,000

Loan Information

N/A

  • Yr. 1 DSCR 0.0
  • Loan-to-Offering 0.00%
  • Hold Period DSCR None

Tenant Information & Lease Terms

The investment has only one building occupied and operated by a single tenant. The tenant is Ochsner Clinic Foundation which has an investment grade credit rating from Moody's (Baa1) and Fitch (A-). They are one of the largest medical care providers in Louisiana. The term is for a remaining term of 15 years and has 15 additional years of extension options in 5 year increments. There are rent escalations scheduled each 5 years at 8% each.

Key Positives

  • The property is located in an area with strong population numbers and demographics. The property has 6 figure population in the 5 mile radius.

  • The lease was recently renewed and has favorable terms and rent escalations each 5 years of the 15 year term. These escalations are 8% each.

  • The property was recently renovated which will allow for less capital expenditures needed to maintain the property.

  • The tenant (Ochsner Clinic Foundation) has investment grade credit rating from both Fitch (A-) and from Moody's (Baa1).

Key Risks to Consider

  • This investment does not have a master lease which is a concern in a DST as there would be no ability to replace the tenant should they decide to leave for any reason. However, this property is occupied by a strong investment grade tenant which is the largest provider of healthcare in Louisiana and they should have no reason to leave the property.

  • Four Springs Capital manages a REIT and has fiduciary duty to act in the best interest of the REIT investors. This means that should the DST sell the property to the REIT it may not be sold for terms that would benefit the investors in the DST. This would represent a non "arm's length" transaction.

  • The upfront load on this investment is very high (19.01%).

  • The Cap Rate to investors is at a reasonable level (6.01%); however, it is low for the local Lawrenceville market which averages (6.5%).

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."

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