HIGHGATE PARTNERS Offering Memorandum WellStar Medical Center 4480 North Cooper Lake Road SE Smyrna, Georgia 30082
Wellstar Medical Center Side of Building 2
WELLSTAR MEDICAL CENTER 4480 North Cooper Lake Road SE Smyrna, Georgia 30082 Table of Contents 01. EXECUTIVE SUMMARY Investment Summary Property Aerials Property Photographs Property Overview 02. TENANT SUMMARY Tenant Summary Rent Roll 03. FINANCIAL OVERVIEW Financial Assumptions Existing Lease Expirations Cash Flow Projections Contact: ANDREW MURPHY Senior Vice President, Healthcare Investment Sales Direct: 770.913.3950 Email: amurphy@ackermanco.net BEAU TERRELL Direct: 404.272.0970 Email: beauterrell@highgatepartners.net
CONFIDENTIAL DISCLAIMER This Offering Disclaimer was prepared by Ackerman Further, Ackerman & Co., Highgate Partners, the Owner & Co. and Highgate Partners solely for the use of and its employees disclaim any and all liability for prospective purchasers of the real property listed representations and warranties, expressed and implied, in this offering. Neither the Broker nor ( Owner ) contained in or for omissions from the Memorandum or makes an representation or warranty, express or any other written or oral communication transmitted or implied, as to the completeness or accuracy of the made available to the recipient. Analysis and verification of material contained in the Offering Memorandum. the information contained in the Offering Memorandum is solely the responsibility of the prospective purchaser. Prospective purchasers of the Property are advised (i) that changes may have occurred in the physical or This Offering Memorandum is confidential. By accepting financial condition of the Property since the time this the Offering Memorandum, you agree (i) that you will hold Offering Memorandum was prepared and (ii) that the and treat the Offering Memorandum and its contents in projections contained herein were made by Broker the strictest confidence, (ii) that you will not photocopy and not by Owner and are based upon assumptions of or duplicate any part of the Offering Memorandum, (iii) events beyond the control of Broker and Owner, and that you will not disclose the Offering Memorandum or therefore may be subject to variation. No representation any of its contents to any other entity without the prior is made by Ackerman & Co. and Highgate Partners authorization of the Owner, and (iv) that you will not or the Owner as to the accuracy or completeness use the offering Memorandum in any fashion or manner of the information contained herein, and nothing detrimental to the interest of the Owner or Broker. contained herein is or shall be relied on as a promise or representation as to the future performance of the Property. Although the information contained herein is believed to be correct, the Owner and its employees disclaim any responsibility for inaccuracies, and expect prospective due purchasers diligence in to verifying exercise independent all information. such
01 EXECUTIVE SUMMARY.. Investment Summary.Property. Aerials.. Property Photographs.. Property Overview WELLSTAR MEDICAL CENTER
EXECUTIVE SUMMARY 6 The Sales Team of Ackerman & Co & the Highgate Partners exclusively presents this opportunity to acquire WellStar Medical Center a 14,218-square-foot, 100% leased, Class "A" medical office building located in Atlanta, Georgia. WellStar occapies 50% of the building with the following practices: WellStar Urgent Care and WellStar Allergy & Immunology. WellStar recently renewed for five years, commencing January 1st, 2018. In addition to WellStar, the other 50% of the building is leased to Dr. Patrick dentistry, who recently doubled in size (37% of the building) and extended his lease out until December, 2025. The remaining square footage is leased to an OBGYN who recently renewed until 2021. The tenants enjoy a successful practice because of the locations strong demographics, superior payer mix in the area, and the large patient base within the market. INVESTMENT HIGHLIGHTS: Exceptional Credit - WellStar Hospital Superior Location and High Barriers to Entry Strategic Location for WellStar Hospital Limited Physical Responsibilities for New Landlord Long Term In-Place Lease with an Average Remaining Lease Term of 6.51 Years High Traffic Counts of 35,000 VPD Exceptional Credit: WellStar Hospital WellStar Medical Center, located in INVESTMENT PROFILE SQUARE FEET: 14,218 SF OCCUPANCY: 100% IN-PLACE NOI: $266,144 CAP RATE: 7.40% DEBT STRUCTURE: Market Free and Clear ASKING PRICE: $3,596,540 AVERAGE REMAINING LEASE TERM: 6.51 Years
EXECUTIVE SUMMARY 7 Atlanta, Georgia is leased primarily to WellStar Hospital, a not-for-profit healthcare leader for patients living in all areas of Atlanta. WellStar is one of the largest employers in the Atlanta area with 20,000 employees and services roughly 950,000 patients a year. WellStar currently operates eleven hospitals in the Atlanta area and their Cobb location is just down the road from the WellStar Medical Center. Superior Location and High Barriers to Entry WellStar Medical Center is located in the heart of many new and expanding subdivisions in the west Cobb County area. Within a five mile radius, the population is over 195,000 comprised of 76,000 households. That being said, WellStar Medical Center is services the medical needs of this in-town, affluent sub-market with an outstanding payer mix. number of ways one being the substantial capital invested by the hospital and secondly, their desire to expand their foothold in this bustling market. Limited Physical Responsibilities for New Landlord WellStar Medical Center is a Class B medical office building that was built in 2007 and sits on 1.017 acres. Recently constructed, this asset will require minimal capital exposure over the hold period due to the current age of the building and the superior construction. The building is two-stories, brick and glass with a steel frame. WellStar Medical is located on the East-West Connector and is highly visible with a traffic count of over 35,000 cars per day. The East-West Connector is a heavily traveled highway allowing quick and easy access from surrounding major sub-markets. With such quality visibility and superior access, WellStar medical center is one of the premier medical office buildings servicing patients in this area. Strategic Location for Well Star Hospital WellStar Medical Center has been identified by WellStar as both a strategic location for their healthcare brand and a location that can service a strong patient base. In fact, the immediate area surrounding the building has been recognized for its superior demographics and its outstanding patient base. This location is one of eleven hospital locations in which WellStar has focused on its efforts to growing their already expansive healthcare presence. WellStar has committed themselves to the building in a WELLSTAR MEDICAL CENTER S Cobb Dr SMYRNA 280 280 East-West C onnector Ridge Rd Atlanta Rd SE S Cobb Dr 285 C umberland Pwky SE P
EXECUTIVE SUMMARY 8 PROPERTY AERIAL RESIDENTIAL EAST-WEST CONNECTOR WELLSTAR MEDICAL CENTER RESIDENTIAL N COOPER LAKE RD COOPER LAKE RD RESIDENTIAL EAST-WEST CONNECTOR 35,000 VPD
EXECUTIVE SUMMARY 9 PROPERTY OVERVIEW LOCATION: NE corner of East-West Connector and North Cooper Lake Road Smyrna, GA 30082 ADDRESS: 4480 North Cooper Lake Road SE Smyrna GA 30082 BUILDING SIZE: 14,218 SF, 2-story all-brick medical building YEAR BUILT: Constructed in 2007 MAJOR TENANTS: WellStar Allergy & Immunology Center WellStar Urgent Care Dr. Patrick Dentistry OCCUPANCY: 100% LOCATION SUMMARY: AREA HOSPITALS: WellStar Medical Center fronts the East-West Connector in Cobb County. The East-West Connector is a divided lane highway designed to give commuters from West Cobb quicker access to Interstate 75, Marietta GA, and the Cumberland Mall Area. WellStar Medical is located approximately three miles south of WellStar s Cobb County Hospital at Austell Road. The property also is in the vicinity of Emory Adventist Hospital, which is located two miles away on South Cobb Drive.
02 TENANT OVERVIEW.. Tenant and Hospital Summary.. Rent Roll WELLSTAR MEDICAL CENTER
TENANT OVERVIEW 11 TENANT AND HOSPITAL SUMMARY WELLSTAR HOSPITAL Well Star is a not-for-profit healthcare provider with over 11,000 medical professionals to meet the health demands of the ever expanding population needs. For more than half a century and three generations, WellStar has grown to a superior network and has received accolades from some of healthcare s top organizations such as the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). In Atlanta, WellStar Health Systems provides quality healthcare to the northwest portion of the city in Bartow, Cherokee, Cobb, Douglas, and Paulding counties. Hospitals in these counties include WellStar Cobb Hospital in Austell, WellStar Douglas Hospital in Douglasville, WellStar Kennestone Hospital in Marietta, WellStar Paulding Hospital in Dallas, WellStar Windy Hill Hospital in Marietta and WellStar Vinings Health Park in Smyrna. In close proximity to these Hospitals, satellite health care providers such as WellStar Unguent Care, WellStar Allergy & Immunology Center, WellStar Physicians Groups,WellStar ObGyn and other WellStar specialists are located to provide medical care to the neighborhoods surrounding the Hospitals. The Atlanta WellStar has been consistently spotlighted by leading publications and organizations, including: Atlanta s Top 25 Employers by the Atlanta Business Chronicle Top Companies for Women in 2006 by Woman Magazine Top 100 Integrated Health Networks by Modern Healthcare Magazine and Verispa Highest Ranked Health Systems in Georgia by Surveillance Data Inc. (SDI)
TENANT OVERVIEW 12 RENT ROLL TENANT NAME TYPE & SUITE NUMBER LEASE DATE & TERM FLOOR SQUARE FEET BUILDING SHARE RATE & AMOUNT PER YEAR PER MONTH CHANGES ON CHANGES TO CPI & CURRENT PORTERS WAGE MISCELLANEOUS MONTHS TO ABATE PENT TO ABATE DESCRIPTION OF OPERATING EXPENSE REIMBURSEMENTS IMPRVMNTS RATE AMOUNT COMMSSNS RATE AMOUNT ASSUMPTION ABOUT SUBSEQUENT TERMS FOR THIS TENANT COMMENTS Well Star Urgent Care Office, Suite: 100 Jan-2007 to Dec-2012 192 Months 5,000 35.17% $22.97 $114,850 $1.91 $9,570.83 Jan-2014 Jan-2018 Jan-2019 Jan-2020 Jan-2021 Jan-2022 $22.97 $24.59 $25.08 $25.58 $26.10 $26.62 - - - NNN with cap on OPEX Base Year Stop on RE Taxes - - Market None Well Star Allergy & Immunology Office, Suite: 101 Jan-2007 to Dec-2022 192 Months 2,110 14.84% $26.80 $56,548 $2.23 $4,712 Jan-2014 Jan-2018 Jan-2019 Jan-2020 Jan-2021 Jan-2022 $26.80 $24.59 $25.08 $25.58 $26.10 $26.62 - - - NNN with cap on OPEX Base Year Stop on RE Taxes - - Market None Well Star Rheumatology Office, Suite: 201 Jan-2007 to Dec-2017 105 Months 2,526 17.77% $26.26 $66,333 $2.19 $5,528 Jan-2014 $26.26 - - - NNN with cap on OPEX Base Year Stop on RE Taxes - - ReAbsorb None Patrick Family Dentist Office, Suite: 201 Jan-2018 to Nov-2025 96 Months 2,526 17.77% $24.00 $60,624 $2.00 $5,052 Jan-2019 Jan-2020 Jan-2021 Jan-2022 Jan-2023 Jan-2024 Jan-2025 $24.48 $24.97 $25.47 $25.98 $26.50 $27.03 $27.57 - - - 2018 Base Year Stop - - Market None Patrick Family Dentist Office, Suite: 210 Jun-2008 to Dec-2025 211 Months 2,692 18.93% $24.00 $64,608 $2.00 $5,384 Jun-2016 Dec-2019 Dec-2020 Dec-2021 Dec-2022 Dec-2023 Dec-2024 Dec-2025 $24.00 $24.48 $24.97 $25.47 $25.98 $26.50 $27.03 $27.57 - - - Base Year Stop - - Market None
TENANT OVERVIEW 13 RENT ROLL, CON T. TENANT NAME TYPE & SUITE NUMBER LEASE DATE & TERM FLOOR SQUARE FEET BUILDING SHARE RATE & AMOUNT PER YEAR PER MONTH CHANGES ON CHANGES TO CPI & CURRENT PORTERS WAGE MISCELLANEOUS MONTHS TO ABATE PENT TO ABATE DESCRIPTION OF OPERATING EXPENSE REIMBURSEMENTS IMPRVMNTS RATE AMOUNT COMMSSNS RATE AMOUNT ASSUMPTION ABOUT SUBSEQUENT TERMS FOR THIS TENANT COMMENTS Physicians Weight Loss Office, Suite: 220 Oct-2007 to Jan-2021 160 Months 1,436 10.10% $23.46 $33,689 $1.96 $2,807.38 Feb-2016 Feb-2017 Feb-2018 Feb-2019 Feb-2020 $23.00 $23.46 $23.93 $24.41 $24.90 - - - Base Year Stop - - Market None Physicians Weight Loss Office, Suite: 221 Sep-2009 to Jan-2021 137 Months 454 3.19% $23.46 $10,651 $1.96 $888 Feb-2016 Feb-2017 Feb-2018 Feb-2019 Feb-2020 $23.00 $23.46 $23.93 $24.41 $24.90 - - - Full Service: Pays no expense reimbursement. - - Market None Total Occupied SqFt 14,218 Total Available SqFt 0.00%
03 FINANCIAL OVERVIEW.. Financial Assumptions.. Existing Lease Expirations.. Cash Flow Projections WELLSTAR MEDICAL CENTER
FINANCIAL OVERVIEW 15 FINANCIAL ASSUMPTIONS GLOBAL Analysis Period Commencement Date July 1, 2017 End Date June 30, 2027 Term Area Measures Building Square Footage (RSF) 10 Years 14,218 SF Consumer Price Index (CPI) 3.00% Vacancy Loss[1] 5.00% REVENUE ASSUMPTIONS Market Rent Growth 2018-3.00% 2019-3.00% 2020-3.00% 2021-3.00% 2022-3.00% 2023-3.00% 2024-3.00% 2025-3.00% 2026-3.00% 2027-3.00% MARKET LEASING - 2ND GENERATION Retention Ratio 80% Lease Term 7 Years 2017 Annual Market Rent All Suites $24.50 PSF Rent Adjustment 2.00% Annually Expense Recovery Type Modified Gross 2017 Tenant Improvements New $19.00 PSF Renewal $8.00 PSF Weighted Average $10.20 PSF Commissions New 6.00% Renewal 3.00% Weighted Average 3.60% EXPENSE ASSUMPTIONS Growth Rates Operating Expenses 2.00% Capital Reserves 2.00% Property Taxes 2.00% Property Taxes Reassessed No Management Fee (% of EGR) 3.00% Downtime New Weighted Average [2] General Property Notes [1] A vacancy loss of 5.00% has been assumed for this analysis; WellStar suites have been excluded. [2] The weighted average downtime has been rounded to the nearest whole month. 6 Month(s) 1 Month(s) Operating Expense Source 2016 P&L 2017 Capital Reserves $0.10 PSF
FINANCIAL OVERVIEW 16 EXISTING LEASE EXPIRATIONS FISCAL YEAR ENDING NUMBER OF SUITES RENTABLE SQUARE FEET EXPIRING ANNUAL [1] CUMULATIVE [1] 2018 0 0 0.00% 0.00% 2019 0 0 0.00% 0.00% 2020 0 0 0.00% 0.00% 2021 2 1,890 13.29% 13.29% 2022 0 0 0.00% 0.00% 2023 2 7,110 50.01% 63.30% 2024 0 0 0.00% 0.00% 2025 0 0 0.00% 0.00% 2026 2 5,218 36.70% 100.00% 2027 0 0 0.00% 100.00% 2028 0 0 0.00% 100.00% 2029 0 0 0.00% 100.00% Subtotal 6 14,218 100.00% 100.00% Vacant 0 0 0.00% 100.00% TOTAL 6 14,218 100.00% 100.00% LEASE EXPIRATIONS RENTABLE SQUARE FEET 20,000 15,000 10,000 5,000 0 18 19 20 21 22 23 24 25 26 27 28 29
FINANCIAL OVERVIEW 17 CASH FLOW PROJECTIONS (Beginning 7/1/2017) FISCAL YEAR ENDING - JUNE 30 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 FY 2018 Potential Gross Revenue $/SF/YR Base Rental Revenue $24.33 $345,914 $348,022 $354,446 $363,253 $372,834 $387,778 $402,668 $410,720 $429,714 $448,689 $459,071 Absorption & Turnover Vacancy 0.00 $0 $0 $0 ($4,343) $0 ($17,333) $0 $0 ($13,900) $0 ($5,341) Scheduled Base Rental Revenue 24.33 345,914 348,022 354,446 358,910 372,834 370,445 402,668 410,720 415,814 448,689 453,730 Expense Recoveries 3.55 50,467 45,562 48,995 59,053 76,051 70,944 73,951 77,753 91,881 112,588 114,737 WellStar Electricity 1.70 24,240 24,846 25,467 26,104 26,757 27,426 28,111 28,814 29,534 30,273 31,030 Total Potential Gross Revenue 29.58 420,621 418,430 428,908 444,067 475,642 468,815 504,730 517,287 537,229 591,550 599,497 Vacancy Loss (0.47) (6,678) (6,773) (6,926) (3,180) (8,495) (8,540) (8,584) (8,813) (2,434) (10,562) (5,465) Effective Gross Revenue 29.11 413,943 411,657 421,982 440,887 467,147 460,275 496,146 508,474 534,795 580,988 594,032 Operating Expenses Property Taxes (2.93) (41,656) (42,905) (44,193) (45,519) (46,885) (48,291) (49,738) (51,232) (52,769) (54,351) (55,982) Insurance (0.75) (10,678) (10,999) (11,330) (11,670) (12,018) (12,381) (12,750) (13,135) (13,528) (13,933) (14,352) Janitorial Service (0.54) (7,631) (7,864) (8,097) (8,340) (8,590) (8,849) (9,115) (9,388) (9,669) (9,958) (10,257) Trash Removal (0.23) (3,328) (3,429) (3,530) (3,637) (3,745) (3,857) (3,974) (4,092) (4,215) (4,343) (4,472) Elevator Maintenance (0.21) (3,014) (3,105) (3,197) (3,296) (3,393) (3,495) (3,598) (3,709) (3,818) (3,933) (4,052) HVAC Maintenance (0.29) (4,120) (4,245) (4,370) (4,503) (4,636) (4,778) (4,919) (5,068) (5,218) (5,376) (5,536) Electrical Maintenance (0.01) (138) (141) (144) (150) (153) (158) (164) (167) (173) (178) (185) Fire & Life Safety (0.06) (792) (815) (840) (864) (892) (918) (945) (973) (1,003) (1,033) (1,064) Pest Control (0.04) (619) (639) (658) (676) (698) (719) (740) (761) (785) (809) (832) Landscaping (0.49) (7,013) (7,226) (7,440) (7,664) (7,896) (8,131) (8,375) (8,628) (8,884) (9,153) (9,425) Electricity (3.11) (44,167) (45,492) (46,856) (48,262) (49,712) (51,202) (52,738) (54,320) (55,949) (57,627) (59,359) Water/Sewer (0.30) (4,266) (4,392) (4,525) (4,659) (4,801) (4,943) (5,093) (5,245) (5,402) (5,564) (5,731) Telephone/Internet (0.32) (4,484) (4,620) (4,757) (4,900) (5,049) (5,198) (5,356) (5,514) (5,681) (5,852) (6,028) Management Fee (0.87) (12,418) (12,349) (12,659) (13,228) (14,014) (13,808) (14,884) (15,254) (16,045) (17,428) (17,822) Interior Repairs and Maintenance (0.13) (1,788) (1,845) (1,898) (1,953) (2,014) (2,074) (2,137) (2,200) (2,267) (2,334) (2,405) Exterior Repairs and Maintenance (0.12) (1,687) (1,737) (1,787) (1,843) (1,896) (1,955) (2,013) (2,074) (2,136) (2,199) (2,266) Total Operating Expenses (10.40) (147,799) (151,803) (156,281) (161,164) (166,392) (170,757) (176,539) (181,760) (187,542) (194,071) (199,768) Net Operating Income 18.72 266,144 259,854 265,701 279,723 300,755 289,518 319,607 326,714 347,253 386,917 394,264
FINANCIAL OVERVIEW 18 CASH FLOW PROJECTIONS (Beginning 7/1/2017), CON T. FISCAL YEAR ENDING - JUNE 30 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Leasing And Capital Costs Tenant Improvements 0.00 0 0 0 (21,698) 0 (86,595) 0 0 (69,445) 0 (26,685) Leasing Commissions 0.00 0 0 0 (13,949) 0 (55,667) 0 0 (44,642) 0 (17,155) Capital Reserves (0.10) (1,444) (1,487) (1,529) (1,578) (1,624) (1,672) (1,725) (1,774) (1,829) (1,882) (1,940) Total Leasing And Capital Costs (0.10) (1,444) (1,487) (1,529) (37,225) (1,624) (143,934) (1,725) (1,774) (115,916) (1,882) (45,780) Operating Cash Flow 18.62 264,700 258,367 264,172 242,498 299,131 145,584 317,882 324,940 231,337 385,035 348,484
FOR MORE INFORMATION, PLEASE CONTACT: ANDREW MURPHY BEAU TERRELL 770.913.3950 amurphy@ackermanco.net 404.272.0970 beauterrell@highgatepartners.net Ackerman Medical Highgate Partners 2017 Ackerman Medical. All rights reserved. Ackerman Medical is a registered trademark of Ackerman & Co. All others are the trademarks of their respective companies.