We bought a half leased medical office building for 55/sf (~1/4th replacement cost) in a prestigious suburb of a declining MSA. Normally we want growth tailwinds but this suburb had been growing and is a
Why’d we buy-
-Able to structure long term sale leaseback from seller (hospital system)
-Huge lot, building had excess land and a great exterior
-Priced as if building was 48k sf when we knew it was 54k sf.
Deal execution-
-remodeled lobby to modernize building
-attracted two tenants, one of which full floor user bringing us to 95% occupancy via huge ti package we budgeted in on the front end
Financing-
-structured earn-out on the front end such that when we hit lease-up we refid out all our initial equity +10%
We’ll likely sell the deal later this year, but if not the building throws of 250k/yr in cf