Savannah Medical
WIP-Savannah Medical, LLC, “Savannah Medical” is a commercial real estate syndication around a pair of two-story multitenant medical office buildings. The 51,812 combined square foot buildings are located at 101 W. Mulberry Boulevard in Savannah Georgia.
The property was acquired at an 8.28% CAP rate, based on first year estimated operating income of $931,098, for a $11.25 million purchase price with an estimated replacement value of $15.5 million. Inspections during due diligence confirmed the excellent conditions of the Class A office buildings.
In 2021 the SelectFinCap team identified potential market mispricing around medical office spaces. The work from home trend, which was greatly accelerated by the COVID pandemic, was negatively impacting some office buildings, particularly those with tenants in the technology industry.
As a result, the entire office segment was viewed more negatively by many investors than other segments, such as industrial or multifamily, with generally lower pricing. However, the dynamics around medical offices were very different, versus other offices, and largely insulated from negative impacts of work from home.
Purchased in a public market transaction in October of 2021, Savannah Medical met or exceeded the SelectFinCap team’s investing criteria. Savannah Medical represented a stabilized asset with a 99.3% occupancy rate than had not fallen during the COVID pandemic. Stress testing showed the property would remain cash flow positive above a 40% occupancy drop.
Supply dynamics of Class A office space in Savannah’s top suburban submarket were very positive. The SelectFinCap team positively rated both the submarket, and the demographics and business climate of the broader metro of Savannah Georgia. Savannah Medical was judged to represent minimum downside potential with significant likely upside for investors.
Financial modeling around a six-year hold projected returns for an investor with a minimum $100,000 commitment at:
- Preferred Return: 9.0% (Projected initiating immediately)
- Internal Rate of Return (IRR): 14.1%
- Annual Return: 15.7%
- Cumulative Return: 93.96%
As of the end of the first half of 2022 the team has been able to meet or exceed its initial financial and operating goals.