Stringent Underwriting and In-Depth Due Diligence
Our institutional healthcare knowledge, real estate experience and propensity to dig deeper allow us to discover value that others may miss and, in return, capture strong, risk-adjusted returns for our shareholders.
Great Bend Regional Hospital
Great Bend Regional Hospital is a 33-bed acute care hospital that was acquired for $24.5mm on March 31, 2017 via sale-leaseback from a physician ownership group. We later sold the property on December 20, 2018 for $32.45mm. Through analysis of tenant financials and multiple credit enhancements included in the new lease, we gained confidence in the physicians’ credit. Plus, we were not deterred by the rural location and small population. We saw the promise of profitable practice located in a critical service area that was eventually acquired by the University of Kansas Health System, a credit tenant. In December 2018, we disposed of this asset for gross proceeds of $32.45 million, achieving a 43% levered internal rate of return (IRR), a 24% unlevered IRR and generating a gain of approximately $8 million.
cCare
The property is a 20,230-square-foot medical office condo that is 100 percent leased to California Cancer Associates for Research and Excellence (cCare), the largest private full-service oncology and hematology practice in California. We aquired this property on July 12, 2018 for $11.8mm. We separated and analyzed the multiple sources of revenue at the property (rental income, recoverable OpEx and additional after-hours HVAC income) and compared the property to market comps to approve its relatively high purchase price/SF. We then extensively reviewed relevant condo association documents to acquire a minority stake in the association.
The Medical Center of Southeast Texas
The Medical Center of Southeast Texas is a 17-bed surgical hospital that was acquired from CNL Financial Group, an established alternative investment firm with $34 billion in assets under management, on October 1, 2019 for $33.6mm. The tenant is a subsidiary of Steward Health, the largest private for-profit health system in the United States. We thoroughly reviewed the checkered operational history of the property by doing a deep dive into current operator Steward Health and its then-parent company, the private equity firm Cerberus Capital, and included certain credit enhancements to limit our risk.
