Analysis of Investments

Healthcare Portfolio 3

Inland

Healthcare Portfolio 3 from Inland Private Capital is an all-cash investment in three medical office buildings. The tenants are Fresenius Medical Care (Chicago, IL) and Starling Physicians (Hartford, CT & New Britain, CT). Fresenius operates a chain of well known dialysis centers across the United States and internationally. Starling Physicians is a specialty physician practice in Connecticut and is a well known practitioner in their local market. 

Investment Highlights

  • Yr. 1 Cash-on-Cash 5.00%
  • Initial Occupancy 100.00%
  • Est. Time Horizon None YEARS
  • Current Cash Flow
  • Yr. 1 Cap Rate to Investor 5.72%
  • Investor Purchase Price $29,121,408
  • Total Offering Size $29,121,408

Loan Information

N/A

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

Tenant Information & Lease Terms

This offering consists of a total of three medical office properties located in two different states. Tenants Include:

1. Starling Physicians - This tenant does not have a credit rating from S&P or Moody's. Two properties in this portfolio are occupied by Starling Physicians. The lease terms are for a term of 15 years and are both NNN. They were formed as the result of a merger between Grove Hill Medical Center and Connecticut Multispecialty Group. 

2. Fresenius Medical Care - This tenant has a credit rating of Baa3 from Moody's. They operate a dialysis and kidney care center. They provide care for over 310,000 patients at over 3,600 locations internationally. The remaining lease term is for 14.5 years and is a NN lease.

Key Positives

  • The Illinois property, which is operated by Fresenius Medical Care has an investment grade credit rating and a guaranteed lease from their corporate company.

  • Inland has placed $1.4 Million is a reserve account. This is a significant amount that can be used for tenant improvements as well as capital expenditures at the properties. The anticipated needs over a 12 year period is $1.1 Million.

  • There is no risk of foreclosure from a lender due to the offering not having a loan.

  • Population averages above 6 figures across the portfolio.

  • Annual rent bumps are contracted into the leases at the properties which have a long 15 year term.

Key Risks to Consider

  • The Connecticut properties are older builds, being completed in 1950 and 1966. Because they are older there may be more needed capital improvements. The leases are NNN at the CT properties which places these expenses under the responsibility of the tenant.

  • The CT tenants (Starling Physicians) do not have a credit rating from Standard and Poor's or Moody's. This increases the risk of default on rent payments for this tenant.

  • Starling Physicians is a newly formed corporation in 2016, however was formed from well known corporations in CT.

  • The CT properties have been found to have Asbestos containing materials present. These were found in good condition, but represent a threat if they are not maintained properly.

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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