In April of 2016, we entered into our eighth joint venture with Centum Health Properties. In this investment, we acquired two, two story buildings that were comprised of 69,375 square feet with frontage on both Loop 101 and Princess Drive in Scottsdale, Arizona. The buildings were acquired for $16,000,000 with initial investor equity of $5,750,000. The equity was paired with a $12,200,000 loan with the excess proceeds available to support the scheduled tenant improvements and leasing costs over the first 5 years (estimated at approximately $1,2M). These additional dollars will enable the investment to reach long term stabilization without additional equity from the Investors.
At the time of acquisition, the buildings had twenty-seven suites ranging from approximately 426 to 6,363 square feet with twenty-two of those suites occupied. The buildings were approximately 89.0% occupied with 37% of the leases expiring five years or more into the future. The building has a strong mix of tenant specialties including a sleep lab, allergy and asthma clinic, vein care, ophthalmology, skin cancer and dermatology, oral surgery, dental, reproductive medicine, chiropractic, digestive health and a cardiology.
The initial strategy was take advantage of the under market lease rates that had been secured during the most recent downturn, but increasing the lease rates on renewals and provide aggressive incentive packages to secure new tenancies.
The average annual cash-on-cash return to the Equity Investors over the initial five years is projected at 9.99% with an Investor IRR, using a 5-year scenario, of just over 14.27%.