CHP Wadsworth Medical Building

5920 S. Estes Street, Littleton, CO

Property Description

In November of 2014, we entered into another joint venture with Centum Health Properties and acquired a 21,447 square foot, two-story building in Littleton, Colorado for $93 per square foot, considerably below replacement cost.  At the time of acquisition, four of the eight suites were occupied by medical tenants, comprising 63% of the building square footage.  The suite sizes in the building range from 772 to 5,480 square feet.   

The building was acquired for $2,000,000 with initial investor equity of $1,600,000 and a preferred investor loan of $400,000.  The Preferred Loan is in first position before any equity distribution and has a coupon rate of 8% paid quarterly.  As the building was in very good condition at closing, very little common area upgrades were required.  Post closing, we also secured a line of credit with a local bank to support the additional capital needs as new tenants and lease renewals are secured.  The average annual cash-on-cash return on outstanding equity to the Equity Investors over the initial five years was projected at 22.12% with an Investor IRR, using a 5-year scenario, of 19.88%.

The initial strategy was to acquire the property at a discounted price of $93 per square foot, provide attentive, hands on management, complete some minor upgrades and re-stabilize the property with long term leases at current market rates, thus creating a diverse rent roll and solid cash flow. . Upon the completion of restructuring the leases, upgrading the building and reaching approximately 95% occupancy (which was initially projected to take 18 to 24 months), the building will be refinanced with a permanent loan.  It is projected that the proceeds from the refinance will retire all of the Preferred Loan and a majority of the Equity, which will boost the cash on cash returns on outstanding equity from 11.32% in year 2 to over 30% in year 3.