Analysis of Investments

Senior Care 2 - AZ

Madison Realty Companies

Madison Realty Companies Senior Care 2 - AZ is an investment into two senior care facilities that are located in the Phoenix, Arizona area. The properties offer memory care and assisted living and have a total of 69 units and 91 beds.

Investment Highlights

  • Yr. 1 Cash-on-Cash 6.65%
  • Initial Occupancy 87.00%
  • Est. Time Horizon None YEARS
  • Current Cash Flow
  • Yr. 1 Cap Rate to Investor 8.01%
  • Investor Purchase Price $14,800,000
  • Total Offering Size $8,600,000

Loan Information

The total loan is for $6,200,000 and is from SunWest Bank. The loan is for a term of 7 years fully amortizing on a 25 year schedule. The interest rate is variable with 2.75% + the 7-year SWAP rate. The floor on the interest rate is 4.75%.

  • Yr. 1 DSCR 2.66
  • Loan-to-Offering 41.89%
  • Hold Period DSCR 2.82

Tenant Information & Lease Terms

The portfolio has a total of two properties. Both accept Medicaid and Medicare as forms of payment. Leases are generally month to month, but may be signed and negotiated on an individual basis.

Key Positives

  • The senior population in the area is projected to grow during the next 5 years near both properties.

  • At the Mesa property it is projected to grow 1.79% in the 1-mile, 2.02% in the 3-mile, and 2.45% in the 5-mile.

  • At the Apache property it is projected to grow 0.91% in the 1-mile, 1.55% in the 3-mile and 2.11% in the 5-mile.

Key Risks to Consider

  • The year 1 underwriting assumptions are aggressive. Compared to the trailing 12 months, EGR is expected to grow 2.20%, Operating Expenses decrease by over 3.5% and this leads to a total Net Operating Income growth of 14.71%.

  • Madison is projecting to have 100% economic occupancy during their hold term. This means they will need to maintain this 100% occupancy for the entire hold term in order to pay their stated cash flow distributions to investors.

  • There are competing properties that are located in each of the local markets that the properties are located in. There is also vacant land that is able to be developed into more competitive properties.

Investment Sponsor Information

Madison Realty Companies

According to the sponsor's website: "Madison Realty Companies is a private real estate firm with expertise in acquiring income producing real estate. We were founded over 20 years ago. Each member of our senior executive team has 30 plus years of individual experience. We have acquired and managed over six billion dollars of U.S. real estate in over 30 states.

Our clients are institutions, individuals and foreign investors who are seeking risk adjusted, attractive rates of return.

Safety. We purchase properties below market value. This provides us a margin of error.

Upside. We upgrade or expand properties to add value to our investors' capital and increase cash flows."

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