Property Details
Stabilized Occupancy  Stabilized Cashflow  NOI Growth 
Asset Profile
Core Plus

Spectrum Schools Sale-Leaseback Portfolio

Oakland MSA Submarkets, CA

Educational Property

This deal is oversubscribed

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Wellness Real Estate Partners New York, NY
Wellness Real Estate Partners
  • IRR 16.8%
  • Equity Multiple 2.64x
  • Hold Period 10 Years
  • Minimum Investment $25K
  • Year 1 Cash on Cash 8%
  • Stabilized Cash on Cash 23.5%
  • First Distribution Nov 2019
  • Distribution Frequency Monthly
  • Asset Profile Core Plus
  • Loan-to-Value 65.2%
  • Current Occupancy 100%

About this Property

Join the Waitlist today to reserve your spot

The Sponsor is under contract on the portfolio and finalizing confirmatory due diligence items prior to going “non-refundable” on the deposit. Soon the Sponsor will open the Waitlist on a “first-come-first-serve” basis, based on the order in which investors joined the Waitlist. At that time, the Sponsor will finalize investor documentation.

Why This Property?

Patrick Haynes, Wellness Real Estate Partners: "This is a true sale-leaseback transaction with the current operator, Spectrum Centers Inc, which has been operating out of each of the portfolio locations for over 20 years and has been in business for over 40 years. As part of the transaction, Spectrum will enter into a 20-year, absolute-NNN-lease (meaning no landlord obligations). So, with regards to the properties themselves, they have served, and, based on the lease structure (which grants the tenant no outs whatsoever over the 20-year term and has a parent company unconditional lease-guarantee), are expected by Spectrum and its parent ChanceLight Inc. to continue to serve their purpose well going forward."

"The assets themselves have been maintained well and are in excellent condition. No material capital improvements are required as part of this transaction. Additionally, the submarkets of each of the portfolio assets stand to benefit significantly from continued Bay Area growth eastward providing investors with the potential upside not accounted for in the pro forma."



Why Do You Like This Strategy?

Patrick Haynes, Wellness Real Estate Partners:

  1. "Non-cyclical fundamentals. Wellness Real Estate Partners is focused on investment opportunities with non-cyclical fundamentals given current market dynamics. Our Tenant, Spectrum Centers Inc, is 100% funded by the school districts for which it provides critical special education services for their most in-need/disabled children. This demand is inherently non-cyclical as it is, on a very basic level, a function of a region’s population. In that, these Bay Area markets are growing and we expect Spectrum will continue to be one of the main providers of these special education services for the districts they serve and for California overall."
  2. "Attractive Tenant profile. The Tenant has a long, established track record and is one of the largest providers of “nonpublic school” special education services in California (it has been operating out of each of the portfolio locations for over 20 years and has been in business for over 40 years). With its parent company ChanceLight Inc recently receiving private equity backing, coupled with the reality that special education enrollment is growing, we expect to see Spectrum to continue to grow its footprint nationally, further enhancing the credit of what is today an established operator with an excellent track record."
  3. "Unique transaction dynamics. Due to the portfolio’s secondary market locations and transaction size, it fell into the “too big for the small guy, too small for the big guy” investment profile. A transaction of this size is a substantial investment for most local or regional investors but is still too small to attract most institutional investment firms. This, combined with the specialty behavioral health use (which was poorly articulated in the broker package but is a use, and has a Tenant profile, with which the sponsor is familiar), provided Wellness with an excellent opportunity to acquire the assets at what they believe represents a significant discount to replacement cost (~$250 psf) and at attractive lease economics (7.9% cap with 3% contractual annual escalations, 20-year term)."



How Are You Mitigating Risks?

Patrick Haynes, Wellness Real Estate Partners:

  1. "First, by acquiring at a total basis that represents a significant discount to replacement cost and at a lease rate that allows Spectrum to maintain a meaningful EBITDAR** coverage ratio of >2.5x post-transaction (coverage which we anticipate grows as Spectrum grows)."
  2. "Second, through a lease structure that requires that all of Spectrum be our Tenant, not a subsidiary entity comprising one or a few of its operations – but the entire company which has over $65m in revenue and ~$10.5m in EBITDA, and requires an unconditional lease guaranty for the first 10 years of the lease from Chancelight Inc, Spectrum’s parent company."
  3. "Third, by procuring attractive 10-year fixed rate acquisition financing with no pre-payment penalty which both mitigates interest rate risk while also providing total flexibility in terms of refinancing timing (or exit). The pro forma assumes a Year 5 refinancing projected to return the majority of investor capital (~75%) based on conservative refinancing assumptions (10% debt yield / >1.5x DSCR). The Sponsors have assumed full personal recourse on the acquisition financing in order to optimize the execution."
**EBITDAR represents EBITDA before rent/lease costs.

About this Property

Join the Waitlist today to reserve your spot

The Sponsor is under contract on the portfolio and finalizing confirmatory due diligence items prior to going “non-refundable” on the deposit. Soon the Sponsor will open the Waitlist on a “first-come-first-serve” basis, based on the order in which investors joined the Waitlist. At that time, the Sponsor will finalize investor documentation.

Why This Property?

Patrick Haynes, Wellness Real Estate Partners: "This is a true sale-leaseback transaction with the current operator, Spectrum Centers Inc, which has been operating out of each of the portfolio locations for over 20 years and has been in business for over 40 years. As part of the transaction, Spectrum will enter into a 20-year, absolute-NNN-lease (meaning no landlord obligations). So, with regards to the properties themselves, they have served, and, based on the lease structure (which grants the tenant no outs whatsoever over the 20-year term and has a parent company unconditional lease-guarantee), are expected by Spectrum and its parent ChanceLight Inc. to continue to serve their purpose well going forward."

"The assets themselves have been maintained well and are in excellent condition. No material capital improvements are required as part of this transaction. Additionally, the submarkets of each of the portfolio assets stand to benefit significantly from continued Bay Area growth eastward providing investors with the potential upside not accounted for in the pro forma."



Why Do You Like This Strategy?

Patrick Haynes, Wellness Real Estate Partners:

  1. "Non-cyclical fundamentals. Wellness Real Estate Partners is focused on investment opportunities with non-cyclical fundamentals given current market dynamics. Our Tenant, Spectrum Centers Inc, is 100% funded by the school districts for which it provides critical special education services for their most in-need/disabled children. This demand is inherently non-cyclical as it is, on a very basic level, a function of a region’s population. In that, these Bay Area markets are growing and we expect Spectrum will continue to be one of the main providers of these special education services for the districts they serve and for California overall."
  2. "Attractive Tenant profile. The Tenant has a long, established track record and is one of the largest providers of “nonpublic school” special education services in California (it has been operating out of each of the portfolio locations for over 20 years and has been in business for over 40 years). With its parent company ChanceLight Inc recently receiving private equity backing, coupled with the reality that special education enrollment is growing, we expect to see Spectrum to continue to grow its footprint nationally, further enhancing the credit of what is today an established operator with an excellent track record."
  3. "Unique transaction dynamics. Due to the portfolio’s secondary market locations and transaction size, it fell into the “too big for the small guy, too small for the big guy” investment profile. A transaction of this size is a substantial investment for most local or regional investors but is still too small to attract most institutional investment firms. This, combined with the specialty behavioral health use (which was poorly articulated in the broker package but is a use, and has a Tenant profile, with which the sponsor is familiar), provided Wellness with an excellent opportunity to acquire the assets at what they believe represents a significant discount to replacement cost (~$250 psf) and at attractive lease economics (7.9% cap with 3% contractual annual escalations, 20-year term)."



How Are You Mitigating Risks?

Patrick Haynes, Wellness Real Estate Partners:

  1. "First, by acquiring at a total basis that represents a significant discount to replacement cost and at a lease rate that allows Spectrum to maintain a meaningful EBITDAR** coverage ratio of >2.5x post-transaction (coverage which we anticipate grows as Spectrum grows)."
  2. "Second, through a lease structure that requires that all of Spectrum be our Tenant, not a subsidiary entity comprising one or a few of its operations – but the entire company which has over $65m in revenue and ~$10.5m in EBITDA, and requires an unconditional lease guaranty for the first 10 years of the lease from Chancelight Inc, Spectrum’s parent company."
  3. "Third, by procuring attractive 10-year fixed rate acquisition financing with no pre-payment penalty which both mitigates interest rate risk while also providing total flexibility in terms of refinancing timing (or exit). The pro forma assumes a Year 5 refinancing projected to return the majority of investor capital (~75%) based on conservative refinancing assumptions (10% debt yield / >1.5x DSCR). The Sponsors have assumed full personal recourse on the acquisition financing in order to optimize the execution."
**EBITDAR represents EBITDA before rent/lease costs.

Offered By

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Assets Under
Management

Currently
$70.62MM less than 10 assets
Exited
N/R No asset count reported
Portfolio LTV
65%  
Historical
Realized Returns

Total IRR
N/R  
Equity Multiple
N/R  
Annual Cash
12.6%  
Years Of
Experience

As Principals
10+ years  
In Business
1 years  
Size
2 Staff  
* All information is reported by Wellness Real Estate Partners.
Assets Under
Management

Currently
$70.62MM less than 10 assets
Exited
N/R No asset count reported
Portfolio LTV
65%  
Historical
Returns

Total IRR
N/R  
Equity Multiple
N/R  
Annual Cash
12.6%  
Years Of
Experience

As Principals
10+ years  
In Business
1 years  
Size
2 Staff  
* All information is reported by Wellness Real Estate Partners.

Financials

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Offering Financial

Sponsor Diligence Report

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Location Details

Oakland MSA Submarkets, CA

The Portfolio comprises four assets located in four greater Oakland California MSA submarkets: East Oakland, San Pablo, Concord, and Pittsburg. Each market has been experiencing growth as a result of the inevitable Bay Area expansion east due to its geographic constraints and the region’s exploding economic growth. Compounding this trend is the recent increase in economic development activity in the City of Oakland which expects to add up to 29,000 housing units and 14 million square feet of office space alone in its downtown alone. The region's overall significant positive net migration from other parts of California will continue to fuel economic expansion. The Portfolio assets are well situated in urban/suburban infill locations in markets that will benefit directly from the region’s continued push east. Please see the Investment Overview for specific detail on each asset’s submarket.

Documents

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Offering Agreement Documents

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