In January of 2017, we entered into our 10th joint venture with Centum Health Properties and acquired the 49,847 square foot, four building multi-tenant medical complex in Anthem, Arizona for $213 per square foot. The buildings were leased to twelve tenants that ranged in size from approximately 1,346 to 9,768 square feet with a strong mix of tenant specialties including Immediate Care (Honor Health), physical therapy, cardiology, pediatrics, laboratory services, primary care and dental. At the time of acquisition, the buildings were 94.4% leased with approximately 50% of the leases extending out for over 5 years in term.
The project was acquired for $10,600,000, which was considerably less than replacement cost. We raised initial investor equity of $3,825,000 and secured permanent financing from a national lender in the amount of $8,745,000. The excess dollars were utilized to fund the scheduled building and tenant improvements that were budgeted over the first 5 years (approximately $1,320,000) as well as an initial reserve account for tenant improvements after year 5 (approximately $129,000). The average annual cash-on-cash return to the Equity Investors over the initial five years was projected at 8.29% with an Investor IRR, using a 5-year scenario, of 15.30%.
The initial strategy was to acquire the building at a price of $213 per square foot, secure leases for the remaining vacancies with long term leases at current market rates and successfully renew the current tenants as their leases approach expiration. This strategy would enable us to capture the remaining value in an already diverse rent roll and produce solid cash flow for our investors well into the future.