offering memorandum - loopnet€¦ · vascular surgery, facial plastic surgery and many more....
TRANSCRIPT
/Offering Price$3,765,000
Year One Cap Rate10.06%
OFFERING MEMORANDUMRegal Court Medical Office Building
27472 & 27750 Schoenherr Road, Warren, MI 48088
INVESTMENT HIGHLIGHTS 03
PROPERTY DETAILS 05
TENANT PROFILE 16
FINANCIAL OVERVIEW 19
MARKET OVERVIEW 24
COMPARABLE SALES 27
CUSHMAN & WAKEFIELD 225 West Wacker Drive Suite 3000 Chicago, IL 60606
TABLE OF
CONTENTS
INVESTMENT
CONTACTS
Cushman & Wakefield’s Healthcare Capital Markets team, as exclusive marketing advisor, is pleased to present the Regal Court Medical Office Building in Warren, Michigan opportunity.
Offers should be presented in the form of a non-binding Letter of Intent, spelling out the significant terms and conditions of the Purchaser’s offering including, but not limited to, 1) asset pricing, 2) due diligence and closing time frame, 3) earnest money deposit, 4) a description of the debt/equity structure, and 5) qualifications to close. Offers should be delivered to the attention of the investment contacts below.
GINO LOLLIO Managing Director (312) 338-7061 [email protected]
SCOTT NIEDERGANG Managing Director (312) 338-7060 [email protected]
KYLE SEYCHELAssociate(312) 424 [email protected]
GARRETT KEAISSenior Managing Director(248) 358- [email protected]
U.S. Healthcare Capital Markets
Local Broker of Record
www.cushwake.com 3
Price: $3,765,000
Year One Cap Rate10.06%
Year-1 NOI: (April 2020 - March 2021) $$378,631
Rental Escalations: Varies (see rent roll)
Base Term: Varies (see Rent Roll)
Lease Structure: Varies (see Rent Roll)
Landlord Responsibility: Varies (see Investment Overview)
Industry Sector: Healthcare
Tenants: Mendelson Orthopedics, Ascension Medical Group Michigan, and Advanced Breast Care Center
Investment Highlights
• Two Adjacent Multi-Tenant Medical Office Buildings Totaling 40,181 Rentable Square Foot with 83% Occupancy
• Most Leases are Triple-Net (NNN) with an Average Rent of $14.59 Per Square Foot Per Year
• Tenants Include: Mendelson Orthopedics, PC, Ascension Medical Group Michigan, Advanced Breast Care Center, PLC, and Ascension Macomb-Oakland Hospital
• Approximately 41% (16,360 SF) of the Subject Properties’ Square Footage is Leased to Ascension Affiliated Practices
• Ascension Medical Group is a Physician-Led National Provider Network that Includes 6,500 Employed Providers, Spanning 16 States and the District of Columbia, and is One of the Leading Networks in the Country
• Mendelson Orthopedics, PC Employs 21 Physicians Who Specialize in the Diagnosis and Treatment of Conditions that Affect the Musculoskeletal System, Including Athletic Injuries
• Advanced Breast Care Center, PLC Specializes in Mammography, Breast Health, Breast Cancer, and Women’s Health
• Ascension Macomb-Oakland Hospital Consists of One Hospital with Two Campuses: Warren and Madison Heights
• Subject Properties are Strategically Located in a Medical Pocket Directly Off Walter P Reuther Freeway (U.S. Interstate 696)
• The City of Warren, Michigan Is 13 Miles North of Detroit
• 2018 Population Within a Five-Mile Radius of the Subject Properties Is 351,814
• 2018 Average Household Income Within One Mile of the Subject Properties is $65,601
www.cushwake.com 4
Investment OverviewCushman and Wakefield’s Healthcare Capital Markets team is pleased to present Regal Court Medical Office Building (The Subject Property) in Warren, Michigan, located approximately 13 miles north of Detroit, Michigan.
Regal Court Medical Office Building is comprised of two adjacent medical office properties located at 27472 Schoenherr Road and 27750 Schoenherr Road. Collectively the buildings contain 40,181 rentable square feet and are 83% occupied.
27472 Schoenherr Road, Warren, Michigan contains 30,093 SF of rentable area and is 80% occupied by three tenants which include: Mendelson Orthopedics, PC, Ascension Medical Group Michigan, and Advanced Breast Care Center, PLC. Mendelson Orthopedics, PC is an award-winning orthopedic practice that has served the Warren community for more than 40 years. Mendelson Orthopedics, PC occupies three spaces within this building for physical therapy, administration, and a call center. The practice occupies three locations and employs 21 physicians who specialize in the diagnosis and treatment of conditions that affect the musculoskeletal system, including athletic injuries. Advanced Breast Care Center specializes in mammography, breast health, breast cancer, and women’s health. Ascension Medical Group Michigan is a member of the Ascension Michigan Breast Care Program which is NAPBC and American College of Radiology accredited. Subject properties are strategically located in a medical pocket directly off Walter P Reuther Freeway (U.S. Interstate 696)
27750 Schoenherr Road, Warren, Michigan contains 10,088 SF of rentable area and is 89% occupied by Ascension Macomb-Oakland Hospital. This component of the Subject Property is part of a larger 16,530 SF medical office building of which 6,442 SF is condominiumized and owned by a separate entity, Woods Cardiovascular. Ascension Macomb-Oakland Hospital is one hospital with two campuses: Warren and Madison Heights. Warren’s campus is a 376-bed hospital with a newly constructed 3-floor build up, providing patients and families 220 private beds. The award-winning hospital is renowned for cardiovascular services, thoracic surgery, chest pain treatment, stroke treatment, and joint, spine and cardiovascular services. St. John Macomb-Oakland Hospital, Madison Heights Campus, is a 159-bed acute care, osteopathic teaching hospital that is affiliated with Michigan State University’s College of Osteopathic Medicine and the Kirksville College of Osteopathic Medicine. The hospital offers a full range of medical and surgical services and conducts medical research as part of university-directed programs. Ascension Macomb-Oakland Hospital uses this space for their partial hospital program for substance abuse treatment.
Most leases are triple-net (NNN) leases in which they are responsible for their pro-rata share of real estate taxes, insurance, and common area maintenance. One tenant is under a modified gross lease in which they are responsible for their pro-rata share of increases over the base year real estate taxes, insurance, and common area maintenance. The average rent is $14.59 per square foot per year with a weighted average lease term remaining of 1.73 years.
The adjacent building to the south of 27472 Schoenherr Road, not included in the offering, houses Ascension Macomb-Oakland services for physical/occupational/speech and pool therapy, neurological recovery systems, Oakland primary care, Cornerstone preferred hospitalists administration.
2018 population within a five-mile radius of the subject properties is 351,814 and the 2018 average household income within one mile of the subject properties is $65,601.
Property DetailsN
89% OCCUPANCY
1995 YEAR BUILT
10,088 SF* GROSS SQUARE FEET
+/- 266 PARKING SPACES
0.69 AC LAND AREA
27550 SCHOENHERR RD, WARREN, MI
80% OCCUPANCY
1960 / 1992 YEAR BUILT / RENOVATED
31,500 SF GROSS SQUARE FEET
27472 SCHOENHERR RD, WARREN, MI
+/- 266 PARKING SPACES
3.99 AC LAND AREA
Not Included in OfferingNot Included in Offering
* The Subject Property is part of a larger 16,530 SF medical office building of which 6,442 SF is condominiumized and owned by a separate entity, Woods Cardiovascular. (See shaded area in orange)
www.cushwake.com 6
27550 Schoenherr Road
www.cushwake.com 7
27550 Schoenherr Road
www.cushwake.com 8
27472 Schoenherr Road
www.cushwake.com 9
27472 Schoenherr Road
www.cushwake.com 10
27472 Schoenherr Road
Vacant
Suite 150Ascension Medical Group
Michigan
Suite 170Mendelson Orthopedics, PC
Suite 140Mendelson Orthopedics, PC
Suite 130Mendelson Orthopedics, PC
Suite 108Advanced Breast Care Center,
PLC
Suite 120Advanced Breast Care Center,
PLCVacant
Suite 100Mendelson Orthopedics, PC
www.cushwake.com 11
27550 Schoenherr Road
Suite 250Ascension Macomb-Oakland Hospital
Suite 200Woods Cardiovascular Condo
NOT INCLUDED IN OFFERING
www.cushwake.com 12
27550 Schoenherr Road
Suite 200Woods Cardiovascular Condo
NOT INCLUDED IN
OFFERING
www.cushwake.com 13
WALTER P REUTHER FWYWALTER P REUTHER FWYE ELEVEN MILE RDE ELEVEN MILE RD
SCH
OE
NH
ER
R R
DSC
HO
EN
HE
RR
RD
Nearby Healthcare Facilities
Macomb Neurology Associates and Sleep Center
696
376-bed care facility
St. John Macomb-Oakland Hospital (Warren Campus)
27550 Schoenherr
Rd
27472 Schoenherr
Rd
- Physical/Occupational/Speech and Pool Therapy- Neurological Recovery SystemsOakland Primary CareCornerstone Preferred Hospitalists Administration
www.cushwake.com 14
St. John Macomb-Oakland Hospital
159-bed care facility
St. John Macomb-Oakland Hospital (Madison Heights
Campus)
376-bed care facility
St. John Macomb-Oakland Hospital (Warren Campus)
www.cushwake.com 15
Regional Map
13 miles
www.cushwake.com 16
ABOUT ASCENSION MACOMB-OAKLAND HOSPITALSt. John Macomb Hospital and St. John Oakland Hospital merged in 2007 to become St. John Macomb-Oakland Hospital – one hospital, two campuses.
Ascension Macomb-Oakland Hospital, Warren Campus, is a 376-bed facility offering a full array of medical and surgical specialties, including Centers of Excellence in cardiovascular services, including open heart surgery, cancer care, and neurosciences. Warren Campus offers a wide range of inpatient and outpatient services, including Physical Medicine and Rehabilitation, Women’s Health and cancer treatment through Webber Cancer Center. Warren Campus has earned the prestigious three-star rating from the Society of Thoracic Surgeons and is an Accredited Chest Pain Center with Percutaneous Coronary Intervention. The hospital is an Advanced Primary Stroke Center, and has been recognized as a Blue Cross Blue Shield Blue Distinction Center for joint replacement, spine, and cardiovascular services.
The Madison Heights Campus offers a full range of adult medical and surgical services provided by board-certified physicians with a majority having university appointments. Madison Heights Campus conducts medical research as part of university-directed programs in family practice, emergency medicine, otolaryngology, gastroenterology, orthopedics, urology, ophthalmology, and cardiovascular care.
Madison Heights Campus is a 159-bed acute care, osteopathic teaching hospital that is affiliated with Michigan State University’s College of Osteopathic Medicine and the Kirksville College of Osteopathic Medicine. The hospital offers first-rate residency training in emergency medicine and serves as the base hospital for the Madison Heights and Hazel Park fire and EMS personnel. A new pharmacy also serves associates and the community.
Tenant Profiles
As one of the leading non-profit and Catholic health systems in the U.S., Ascension is committed to delivering compassionate, personalized care to all, with special attention to persons living in poverty and those most vulnerable. In FY2019, Ascension provided $2 billion in care of persons living in poverty and other community benefit programs. Ascension includes approximately 150,000 associates and 40,000 aligned providers. The national health system operates more than 2,600 sites of care – including 150 hospitals and more than 50 senior living facilities – in 20 states and the District of Columbia, while providing a variety of services including clinical and network services, venture capital investing, investment management, biomedical engineering, facilities management, risk management, and contracting through Ascension’s own group purchasing organization.
Website: https://www.ascension.org/
www.cushwake.com 17
FISCAL YEAR 2018 (ENDED JUNE 30, 2018)Ascension Medical Group (AMG) continues to evolve as a high-performing national provider network. Fiscal year 2018 represented significant development and progress across a broad spectrum of organizational objectives — everything from quality to growth.
Against the backdrop of the quadruple aim, AMG continues to play a critical role in Ascension’s Advanced Strategic Direction. There are many examples of how this work is manifested including milestones in Access, Quality, Provider Recruitment, Operations, Continuity of Care and strengthening its market position across 16 states, including the District of Columbia. Following are some highlights.
Ascension Medical Group Michigan is a Medical Group that has 45 practice medical offices located in 1 state 23 cities in the USA. There are 102 health care providers, specializing in Maxillofacial Surgery, Family Medicine, Obstetrics/Gynecology, Cardiac Surgery, Thoracic Surgery, Neurology, General Surgery, Plastic And Reconstructive Surgery, Nurse Practitioner, Internal Medicine and more, being reported as members of the medical group. Medical taxonomies which are covered by Ascension Medical Group Michigan include Dentist, Geriatric Medicine, Nurse Practitioner, Pediatric Orthopaedic Surgery, Gynecology, Oral and Maxillofacial Surgery, Surgical Oncology, Colon & Rectal Surgery, Vascular Surgery, Facial Plastic Surgery and many more.
Tenant Profiles
ADVANCED BREAST CARE CENTER, PLCDr. Gohel is a board certified general surgeon with a special interest in treating breast cancer and breast diseases. He is currently Chief of General Surgery at St. John Macomb Hospital. He is a member of numerous prestigious organizations such as the American College of Surgeons, American Society of Breast Surgeons, Macomb County Medical Society and Michigan State Medical Society.
Dr. Gohel’s office offers complete breast care services with an emphasis on minimally invasive surgery. His office based procedures include ultrasound guided Mammotome, needle core biopsy, breast cyst aspiration and insertion of Mammosite/SAVI (for partial breast radiation). Dr. Gohel also does stereotactic breast biopsies at St. John Macomb Breast Center. He is the only surgeon who performs stereotactic breast biopsies at St. John Macomb Breast Center.
Website: https://www.ascension.org/
www.cushwake.com 18
ABOUT MENDELSON KORNBLUM For more than 40 years, Mendelson Orthopedics has committed to exceptional patient care in the treatment of bone and joint conditions. The practice has won the TOP DOCS award from Hour Detroit Magazines. Mendelson employs 21 physicians who are experts in the diagnosis and treatment of conditions that affect bones, joints, muscles, cartilage, ligaments, and nerves. They also have experience treating athletic injuries, including damage to tendons and the musculoskeletal system. The practice occupies three locations outside of Detroit - two in Warren, Michigan and another in Livonia, Michigan.
Tenant Profiles
SERVICES: • Diagnosis and treatment of orthopedic-related conditions or injuries: includes the neck, back, shoulder, arm,
elbow, hand, hip, knee, foot, and ankle• Surgical expertise: back and neck surgery; shoulder surgery; hand and wrist surgery; hip surgery; knee surgery;
foot and ankle surgery• Surgical specialties: minimally invasive procedures; total joint replacement; reconstruction; arthroscopic• Advanced procedures for spine surgery:minimally invasive; X-stop procedure; kyphoplasty procedure• Non-surgical treatment of joint, muscle, and bone disease and pain: osteoporosis, pediatric and adult arthritis;
connective tissue disease; autoimmune diseases; fibromyalgia; bursitis/tendonitis; gout• Non-surgical treatment for acute back/neck pain: therapeutic spinal injections for herniated discs and pinched
nerves• Sports injuries: musculoskeletal and ligaments• e-Technology: advanced, state-of-the-art digital X-ray imaging; electronic medical records
Website: https://www.mendelsonortho.com/
www.cushwake.com 19
Rent Roll
Tenant PropertySquare
Feet
Percentage Building
Share
Tenant
SinceLease
Comm. Lease Exp.Base Rent
Per SFMonthly
Base RentAnnual Base
Rent
Annualized
Base RentRental
Escalations Escalation DatesLease Type Options
Mendelson
Orthopedics, PC27472 16,826 41.88% 2011 10/31/2017 6/30/2021 $12.00 $16,826 $201,912 $204,015
$0.50/SF in Jan 2021
Jan 2021 - $12.50/SF NNNNone
Remaining
Vacant 27472 5,907 14.70% – – – – – – – – – – –
Ascension Medical Group Michigan
27472 2,855 7.11% 2011 7/1/2019 6/30/2024 $13.50 $3,212 $38,543 $39,410 3.00% Annually
July 2020 - $13.91/SF July 2021 - $14.32/SF July 2022 - $14.75/SFJuly 2023 - $15.19/SF
Modified Gross
None
Advanced Breast Care
Center, PLC (an
Ascension affiliated practice
27472 4,505 11.21% 2011 1/1/2017 4/30/2023 $13.50 $5,068 $60,818 $62,263
$0.35/SF in May 2020 & 2021
$0.50/SF in May 2022
May 2020 - $13.85/SFMay 2021 - $14.20/SF May 2022 - $14.70/SF
NNNNone
Remaining
Ascension
Macomb-
Oakland Hospital¹
27550 9,000 22.40% 1995 2/1/2016 1/31/2021 $19.75 $14,811 $177,731 $155,1972.00% Annually (No Escalations
Remaining)– NNN
None
Remaining
Vacant 27550 1,088 2.71% – – – – – – – – – – –
Rentable Square Feet: 40,181 100.00% WALT: 1.56 years $14.69 Avg. Total: $479,003 $460,885
¹ Note: 1,006 SF Subleased to Dr. Anthony Petrilli, M.D. (an Ascension affiliated physician).The annual base rents listed above represent each tenant’s annual rent during the lease year as of April 01, 2020. In other words, the annual rent is static and not annualized, as it is in our cash flow analysis.
www.cushwake.com 20
Operating Statement
Income 2018Year 1
(Apr 2020 - Mar 2021)Per SF
Scheduled Base Rental Income $454,470 460,885 $11.47
Expense Reimbursement Income
CAM 267,064 130,045 3.24
Insurance (included in CAM above) 2,951 0.07
Real estate Taxes (included in CAM above) 89,669 2.23
Management Fees (included in CAM above) 16,423 0.41
Total Reimbursement Income $267,064 $239,089 $5.95
Woods Cardiovascular ¹ $16,125
Potential Gross Revenue 721,534 716,099 0.00
General Vacancy (33,695) 0.00
Effective Gross Revenue $721,534 $682,404 $16.98
¹ Woods Cardiovascular contributes to CAM expenses for its use and benefit of the Subject Property parking lot.
www.cushwake.com 21
Operating Statement
Operating Expenses 2018Year 1
(Apr 2020 - Mar 2021)Per SF
Accounting $2,000 2,040 0.05
Landscape 11,440 11,669 0.29
Repairs & Maintenance* 108,195 36,880 0.92
Waste Removal 6,816 6,952 0.17
Snow Removal 22,900 23,358 0.58
Utilities - Electric, Gas, Meter, Water, Telephone 69,575 70,967 1.77
Janitorial 12,038 12,279 0.31
Insurance 3,606 3,678 0.09
Real Estate Taxes 109,583 111,775 2.78
Management Fee 24,000 3.3% 20,472 3.0% 0.51
Other Expenses - Non Reimbursable 3,630 3,703 0.09
Total Expenses $373,783 $303,773 $7.56
Expenses as % of EGR 51.8% 44.5%
Net Operating Income $347,751 $378,631 $9.42
*The reported expense for Repairs & Maintenance in 2018 is abnormally high due to several capital expenditures including sanding and repainting of the entire exterior, replacement parts for several HVAC systems, significant interior work due to flood damage in 2018, and new sealing/paint on the parking lot. Additionally, these are expenses that would not be passed through to the tenant.
www.cushwake.com 22
Pricing Details
Summary
Price $3,765,000 Down Payment $1,329,986 35%
Price Per Sq Ft $93.70
Cap Rate 10.06%
Unleveraged IRR 15.75%
Leveraged IRR 30.82%
Gross Leasable Area (GLA) 40,181 SF
Lot Size 4.15 Acres
Year Built/Renovated 1960/1992
Occupancy 82.59%
Debt Assumptions
Loan-to-Value 65%
Interest Rate 4.25%
Term 5 Years
Amortization 25 Years
Loan Cost 0.5%
Lease-Up Reserve Required*
IncomeYear 1
(Apr 2020 - Mar 2021)Year 1 / SF
Scheduled Base Rental Income $460,885 $11.47
Total Reimbursement Income 51.9% $239,089 $5.95
Woods Cardiovascular CAM $16,125 $0.40
Potential Gross Revenue $716,099 $17.82
Vacancy Allowance (5.0%) ($33,695) ($0.84)
Effective Gross Revenue $682,404 $16.98
Less: Operating Expenses 44.5% ($303,773) ($7.56)
Net Operating Income $378,631 $9.42
ExpensesYear 1
(Apr 2020 - Mar 2021)Year 1 / SF
CAM $162,105 $4.03
Insurance $3,678 $0.09
Real Estate Taxes $111,775 $2.78
Management Fee $20,472 $0.51
Other Expenses - Non Reimbursable $5,743 $0.14
Total Expenses $303,773 $7.56
www.cushwake.com 23
Cash FlowFor the Years Ending Year 1 / SF Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Mar-2021 Mar-2022 Mar-2023 Mar-2024 Mar-2025 Mar-2026 Mar-2027 Mar-2028 Mar-2029 Mar-2030
Rental Revenue
Potential Base Rent $11.80 $474,047 $550,182 $565,661 $575,460 $597,521 $613,377 $626,291 $639,529 $674,670 $690,721
Absorption & Turnover Vacancy -0.25 -10,125 -38,805 0 -5,458 -4,858 0 0 -12,035 -32,652 0
Free Rent -0.08 -3,038 -16,132 0 -1,092 0 0 0 0 -13,496 0
Scheduled Base Rent 11.47 460,885 495,244 565,661 568,910 592,663 613,377 626,291 627,493 628,523 690,721
Other Tenant Revenue
Total Expense Recoveries 5.95 239,089 238,153 267,921 271,372 279,724 288,745 295,941 296,272 296,511 319,220
Total Other Tenant Revenue 5.95 239,089 238,153 267,921 271,372 279,724 288,745 295,941 296,272 296,511 319,220
Total Tenant Revenue 17.42 699,973 733,398 833,582 840,282 872,387 902,121 922,232 923,765 925,034 1,009,940
Other Revenue
Woods Cardiovascular CAM 0.40 16,125 16,528 16,941 17,365 17,799 18,244 18,700 19,168 19,647 20,138
Total Other Revenue 0.40 16,125 16,528 16,941 17,365 17,799 18,244 18,700 19,168 19,647 20,138
Potential Gross Revenue 17.82 716,098 749,926 850,523 857,647 890,186 920,365 940,933 942,932 944,680 1,030,078
Vacancy & Credit Loss
Vacancy Allowance -0.84 -33,695 -33,571 -42,526 -39,713 -41,107 -46,018 -47,047 -44,046 -41,372 -51,504
Total Vacancy & Credit Loss -0.84 -33,695 -33,571 -42,526 -39,713 -41,107 -46,018 -47,047 -44,046 -41,372 -51,504
Effective Gross Revenue 16.98 682,404 716,355 807,997 817,934 849,079 874,347 893,886 898,886 903,308 978,574
Operating Expenses
Real Estate Tax 2.78 111,775 114,569 117,434 120,369 123,379 126,463 129,625 132,865 136,187 139,592
Insurance 0.09 3,678 3,770 3,864 3,961 4,060 4,161 4,265 4,372 4,481 4,593
Utilities 1.77 70,967 72,741 74,560 76,424 78,334 80,293 82,300 84,357 86,466 88,628
Non-Recoverable Utilities 0.09 3,703 3,796 3,890 3,988 4,087 4,190 4,294 4,402 4,512 4,625
Repairs/Maintenance 0.92 36,880 37,802 38,747 39,716 40,709 41,726 42,769 43,839 44,935 46,058
Roads/Grounds 0.87 35,027 35,903 36,800 37,720 38,663 39,630 40,621 41,636 42,677 43,744
Waste Removal 0.17 6,952 7,126 7,304 7,487 7,674 7,866 8,062 8,264 8,470 8,682
Janitorial 0.31 12,279 12,586 12,901 13,223 13,554 13,893 14,240 14,596 14,961 15,335
General/Admin 0.05 2,040 2,091 2,143 2,197 2,252 2,308 2,366 2,425 2,486 2,548
Management 0.51 20,472 21,491 24,240 24,538 25,472 26,230 26,817 26,967 27,099 29,357
Total Operating Expenses 7.56 303,773 311,874 321,883 329,622 338,184 346,759 355,359 363,722 372,274 383,161
Net Operating Income 9.42 378,631 404,481 486,114 488,312 510,896 527,588 538,527 535,164 531,034 595,413
Leasing Costs
Tenant Improvements 1.62 65,250 208,072 0 31,534 25,211 0 0 0 289,922 0
Leasing Commissions 0.78 31,532 79,224 0 16,276 22,534 0 0 0 140,105 0
Total Leasing Costs 2.41 96,782 287,296 0 47,810 47,745 0 0 0 430,027 0
Capital Expenditures
Capital Reserves 0.15 6,027 6,178 6,332 6,491 6,653 6,819 6,990 7,164 7,343 7,527
Lease-Up Reserve 8.06 324,000 110,700 0 0 0 0 0 0 0 0
Lease-Up Payout 0.00 0 -445,568 0 0 0 0 0 0 0 0
Total Capital Expenditures 8.21 330,027 -328,690 6,332 6,491 6,653 6,819 6,990 7,164 7,343 7,527
Total Leasing & Capital Costs 10.62 426,809 -41,393 6,332 54,301 54,398 6,819 6,990 7,164 437,370 7,527
Cash Flow Before Debt Service -$1.20 -$48,179 $445,874 $479,782 $434,011 $456,498 $520,768 $531,537 $527,999 $93,664 $587,886
www.cushwake.com 24
Detroit, Michigan
FAST FACTS
www.cushwake.com 25
MARKET OVERVIEW: MACOMB WEST The Macomb West submarket contains a slightly higher percentage of the metro’s office inventory than its eastern cousin at around 4.5%. Its geographic boundaries include all of Macomb County to the west of Hayes Road, which hosts more than 850,000 SF of office tenants in the manufacturing industry. More than half of this total belongs to General Dynamics—located off Mound Road to the south of Ford’s Sterling Heights Plant. Vacancies experienced a bit of volatility between a large drop in demand in 2014, which was countered by GM occupying most of the vacated space in 2015 as part of their Warren Tech Center development. Vacancies are continuing to tighten with the rate at just under 7%. Annual rent gains suggest strong demand with growth trending upwards at around 3%. Investment activity remains average with sales volume just below the historical average.
INVESTMENT TRENDS: MACOMB WEST
The Macomb West Submarket averaged around 20 transactions annually since the start of the millennium. Sales volume tends to be close to $14 million per year despite the large number of transactions, which mainly include 1 & 2 Star assets. Trades over the past 12 months as of September accrued over $13.5 million in sales volume falling shy of reaching the historical average.
The highest sales volume since the recession was in 2015 with more than $27 million in transactions among 25 properties. Over half of its total came from the sale of the 35,000 SF Beaumont Medical Building to a New York City-based healthcare REIT. Its former Boca Raton-based owner never marketed the property and sold it 60 days after the buyers approached them. The $13.7 million deal also set the highest price per square foot record for a non-condo property in the submarket.
VACANCY OVERVIEW: DETROIT, MI Office deliveries in Detroit are the highest they have been this cycle. Indicative of the metro’s demand is the fact that fundamentals still remain strong. Net absorption over the last twelve months continues to overshadow new supply figures, keeping vacancies from spiking. The pipeline is robust with several large properties both proposed and underway. More than 1.4 million SF are underway which will comprise roughly 1% of the metro’s total inventory.
The CBD continues to steal the headlines, but suburban submarkets remain active. The CBD is undergoing a transformation that has inspired many high-profile tenants to relocate from the suburbs since the end of the recession. Quicken Loans blazed the trail, followed by firms such as Blue Cross Blue Shield of Michigan, and more recently Microsoft and Google. The top suburban submarkets in southeast Oakland County are also attracting increased amounts of leases.
Detroit, Michigan
www.cushwake.com 26
Income 1 Mile 3 Miles 5 Miles
<$25,000 858 13,814 35,920
$25,000 - $50,000 1,115 14,261 37,972
$50,000 - $75,000 956 11,165 26,977
$75,000 - $100,000 538 6,920 17,336
$100,000 - $125,000 416 3,647 9,586
$125,000 - $150,000 201 2,057 5,371
$150,000 - $200,000 184 1,222 3,919
$200,000+ 38 626 2,099
2018 Average Household Income $65,601 $58,242 $59,357
2018 Median Household Income $54,712 $47,305 $46,523
Households 1 Mile 3 Miles 5 Miles
2010 Census 4,358 53,002 137,9012018 Households 4,305 53,715 139,1792023 Projection 4,356 54,587 140,9812018 - 2023 Projected Growth 1.18% 1.62% 1.29%Owner Occupied (1.22%) 1.35% 0.93%Renter Occupied 3,726 38,724 100,541
Population 1 Mile 3 Miles 5 Miles
2010 Census 10,847 129,543 348,6552018 Population 10,704 131,317 351,8142023 Projection 10,822 133,431 356,1672018 - 2023 Projected Growth 1.10% 1.61% 1.24%
2018 Annual Consumer Spending 1 Mile 3 Miles 5 Miles
Apparel 5,870 69,974 187,888
Entertainment, Hobbies & Pets 8,430 95,819 246,487
Food & Alcohol 28,106 327,033 851,328
Household 14,802 159,954 421,320
Transportation and Maintenance 25,582 275,776 714,429
Health Care 6,401 70,775 178,316
Education & Day Care 5,520 60,176 161,804
Total Consumer Spending ($) 102,739 1,152,578 3,002,991
Demographics
Source: CoStar Group, Inc.
www.cushwake.com 27
COMPARABLE SALES /
1 2 3 4 5
Property Name Hamburg Professional CenterDequindre Professional
BuildingVillage Medical Center Bon Secours Internists Woodcreek Office Center
Property Address10020 E. Professional Center
Dr.37300 Dequindrea Rd. 8051-8057 Independence Dr. 25319 Little Mack Ave.
811 E South Blvd, Rochester Hills, MI
Sale Price $2,460,000 $2,212,500 $279,900 $1,000,000 $2,850,000
Sale Date 8/21/2019 3/8/2019 3/28/2019 1/16/2019 7/26/2018
Rentable SF 18,140 22,004 5,000 7,048 27,750
Cap Rate 8.70% 9.89% 10.00% – —
Year Built 2006 1985 1966 1995 (Renovated 2012) 1989
Price per SF $135.61 $100.55 $55.98 $141.88 $102.70
Notes
80% occupied at the time of sale by IHA Internal Medicine. The buyer was motivated to invest due to a fair return, high quality tenant, high
quality construction, and good potential for vacant space.
86% occupied at the time of sale by a variety of medical
office tenants.
100% occupied at the time of sale by a dentistry practice
and chiropractor.
100% occupied at the time of sale by four medical
tenants include Bon Secours Cottage Health Services and Pulmonary & Critical Care.
Lease rates average around $17.50 per square foot, triple
net.
www.cushwake.com 28
COMPARABLE SALES /
6 7 8 9 10
Property NameBloomfield Professional
CenterBloomfield Office Building Tech Arts Office Building APA Building Sterling Heights MOB
Property Address43494 Woodward Ave,
Bloomfield Hills, MI39520 Woodward Ave,
Bloomfield Hills, MI165 Kirts Blvd,
Troy, MI6060 Stoney View Dr, Shelby Township, MI
3058 Metropolitan Pky, Sterling Heights, MI
Sale Price $3,500,000 $3,900,000 $2,970,000 $1,500,000 $2,900,000
Sale Date 5/2/2018 3/7/2018 1/17/2018 1/10/2018 10/12/2017
Rentable SF 34,598 33,000 33,092 16,000 32,350
Cap Rate 10.00% 9.00% 8.50% — —
Year Built 1982 / 2001 1945 1986 2002 1975
Price per SF $101.16 $118.18 $89.75 $93.75 $89.64
Notes
The owner was motivated to divest the property because he will be relocating out-of-
state. The sale was purchased utilizing a 1031 Exchange.
The office building was at an 85% occupancy level at the
time of closing.
www.cushwake.com 29
COMPARABLE SALES /
www.cushwake.com 30
Offering Price
Financial Capacity to Perform
Contingencies
Proposed Capitalization Structure
Timing of Close
Experience in Similar Transactions
Offer Process/Timing
Accepting Offers - will be responded to as collected. No bid deadline scheduled. Offers should be received in writing at the following addresses:
Cushman & Wakefield’s Healthcare Capital Markets team will assist prospective investors in arranging accompanied on-site inspections. Any and all on-site inspections must be arranged through Cushman & Wakefield’s Healthcare Capital Markets team. Cushman & Wakefield’s Healthcare Capital Markets team reserves the right to accept a preemptive offer at any point in the marketing process.
ALL OFFERS MUST BE IN WRITING AND INCLUDE THE FOLLOWING:
The purchase price and capitalization rate based on the net operating income of $378,631
The source of the purchaser’s capital (including debt and equity)
The amount of earnest money deposit
A detailed list of contingencies, including but not limited to committee approvals, required to close the transaction
A detailed outline of the proposed schedule and timing for the due diligence period and closing
Investors are requested to bid based a purchase price based on the net operating income of $378,631. In evaluating offers, Ownership will consider all circumstances relating to each proposal, including but not limited to:
Gino LollioManaging DirectorDirect: (312) 338-7061Mobile: (239) [email protected]
Scott NiedergangManaging Director Direct: (312) 338-7060Mobile: (312) [email protected]
Evaluation Considerations
Gino LollioManaging DirectorUS Healthcare Capital MarketsDirect: (312) [email protected]
Scott NiedergangManaging Director US Healthcare Capital MarketsDirect: (312) [email protected]
Kyle SeychelAssociateUS Healthcare Capital Markets(312) 424 [email protected]
Garrett KeaisSenior Managing DirectorDirect: (248) [email protected]