Franklin Farm Medical Center is a 24,000-sf medical office and surgical facility located in Herndon, Virginia. The medical center hosted the largest orthopedic physician specialty group in Virginia including four surgery suites and ancillary facilities. The building is adjacent to Franklin Farm Village Center which includes 30 brand name retail and dining facilities.
Acquired by Verity’s investment partners, the ownership worked with the major tenant in the building completing a long-term lease extension and supervised major improvements to the facility. The improvements included funding the construction of a complex outpatient surgery center along with building upgrades.
Selling building at 100% leased and achieving investors’ goal of 22% IRR on their investment.
Strategy was to reduce operating costs, hold asset and benefit from rental escalations. After 3 years of ownership, sell the asset at 100% leased and yield 22% IRR. The property was purchased for a base price plus cost of tenant buildout including a surgery center. The opportunity included a lease renewal with the primary tenant, an ambulatory surgery center, requiring the purchaser to take on and fund the construction of complex outpatient surgery center and building upgrades. Knowledge of the medical submarket helped Verity determined that this was a stable investment. Also, Verity understood the difficulty the tenant would have in replicating the required VA state surgery center permits. Given Verity’s experience of medical construction understand the costs and risks associated with this project and ensured the proper team and plan was implemented. Verity and the investment partners identified several opportunities to reduce redundant costs thereby lowering operating costs by 12%.
By leveraging our diverse service offerings, we were able to forecast market fluctuations and calculate accurate development and renovation costs for our clients. This give Verity a competitive advantage and contributed largely to the success of this investment opportunity. During the 3 years of ownership, the partners were able to achieve their goals of 100% leased and a 22% IRR on their investment.