Analysis of Investments

Healthcare Portfolio 4

Inland

Inland Healthcare Portfolio 4 is an investment into four medical office buildings. They are occupied and operated by four tenants. They are located in Elmhurst, IL (Edward Elmhurst Health Ventures); Oklahoma City, OK (Surgical Hospital of Oklahoma); Dallas, TX (The Eye Academy of America) and Salt Lake City, UT (The Eye Institute of Utah). 

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 5.33%
  • Investor Purchase Price $39,990,338
  • Total Offering Size $39,990,338

Loan Information

N/A

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

Tenant Information & Lease Terms

This portfolio has a total of four tenants operating at four different locations. Each of the tenants are discussed below:

Edward Elmhurst Healthcare - A non-investment grade tenant operating as a provider of a variety of healthcare services. 

Surgical Hospital of Oklahoma - A non-investment grade tenant which operates a surgery center. The lease is guaranteed by their parent corporation, Surgical Care Affiliates which is a subsidiary of OptumCare.

Eye Academy - A non-investment grade tenant which operates a surgical and eye care center.

The Eye Institute of Utah - A non-investment grade tenant which operates a leading eye care center in the mountain west region. They have a state of the art LASIK surgery center at the property, which operates out of the second floor of the Utah Property.

Key Positives

  • There is no risk of foreclosure on this property due to it not having a loan and being an all-cash investment.

  • The properties are all located in different markets with different tenants which reduces mitigates risk due to diversification.

  • The weighted average lease term remaining on the properties is for another 14.8 years which is longer than the anticipated hold period of 10 years.

  • Inland has used conservative underwriting assumptions on this portfolio. They have underwritten at below appraised values as well as growing their operating expenses at a rate higher than their effective gross revenue.

Key Risks to Consider

  • The property in Chicago is not located adjacent to a hospital. Each of the other properties has a hospital within a mile of the subject, however the Chicago property has a hospital 6.3 miles and 9 miles away.

  • None of the tenants in the portfolio have an investment grade rating from any credit rating agency. This increases the probability that they may default on their lease payments.

  • Inland is not placing adequate operating reserves into their reserve account. The Property Condition Reports state that the immediate repairs necessary require $225,000 and Inland is only placing $215,000 in upfront reserves. They are also projected to be short about $350,000 in reserves over the lifetime of the investment according to the PCR.

  • The cap rate to investors on this investment is low (5.33%).

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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