www.AtlasStark.com | PO Box 6309 Raleigh, NC 27628 | 919.289.1338

OFFERING MEMORANDUM

MEDICAL OFFICE BUILDING | RALEIGH, NC

TABLE OF CONTENTS

Executive Summary…………………………………………………………………………………….………………….……..

8 Cash Flows………..……………………...……………………………………………………………………………………..….

Property Details…………………………………………………………………………………………………………………...

Financial Summary……………………...……………………………………………………………….……………………….

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EXECUTIVE SUMMARY | OPPORTUNITY

BACKGROUND

Atlas Stark Holdings is pleased to present for your consideration the Wake Dialysis Cen-

ter and NC Nephrology medical office building located at 3604 Bush Street in Raleigh,

NC.

The lease at this building is corporately guaranteed by Fresenius Medical Care (FMC),

the largest provider of dialysis care in the world. The second floor of the Wake Dialysis

Center is home to the headquarters of NC Nephrology Associates, the pre-eminent

nephrology practice in the Research Triangle Region of North Carolina. As NC Nephrol-

ogy doctors act as the Medical Directors of Record for Fresenius, the co-location of

these tenants incentivizes both parties to remain at this location long-term.

DEAL TERMS

The Seller’s priorities are overall value and the potential buyer’s ability to close in a

timely fashion. Asking price is $10.1M.

Trey Adams

Atlas Stark Holdings LLC

919.289.1338 ext. 101

tadams@atlasstark.com

Jon Keener

Trustwell Property Group

919.696.2196

jon@trustwellgroup.com

Location RSF 12-mo. forward NOI

Wake Dialysis Center (1st floor) 22,775 RSF

NC Nephrology Associates (2nd floor) 8,532 RSF

Total building 31,307 RSF $663,120.58

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Opportunity to purchase the Wake Dialysis Center, a 31,307 RSF

medical office building in the rapidly growing Research Triangle

Region of North Carolina.

Triangle Region is experiencing rapid growth in population and de-

mand for dialysis care

Investment stability due to government regulations & strength of

medical office sector

Key location for Fresenius’ corporate strategy

National, credit-worthy tenant Fresenius Medical Care, who provides

a corporate guarantee to the Clinic lease.

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INVESTMENT HIGHLIGHTS Total Square Footage 31,307 GSF

NOI $663K

Asking Price $10.1M

Base Term Remaining 5 years

Renewal Options 2 (5-year)

Certified Stations 50

EXECUTIVE SUMMARY | INVESTMENT HIGHLIGHTS

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EXECUTIVE SUMMARY | INVESTMENT HIGHLIGHTS

TRIANGLE REGION EXPERIENCING RAPID GROWTH IN POPULATION AND DEMAND FOR DIALYSIS CARE

The Triangle Region has seen unprecedented growth in the last decade, with Raleigh being consistently named among the Fastest Growing Cit-

ies in the United States. (#14, US Census Bureau, 2017). This growth, which has spread throughout the region, makes the current market for real

estate incredibly favorable to investors and owners alike. Coupled with low financing rates still attainable for qualified purchasers, this environ-

ment has led to a rapidly dwindling supply of high quality investment properties.

The population growth is also evident in the region’s dialysis numbers. NC Nephrology’s dialysis patient population is growing by five percent (5%)

annually.

INVESTMENT STABILITY DUE TO GOVERNMENT REGULATIONS & STRENGTH OF MEDICAL OFFICE SECTOR

The medical sector has been an especially attractive investment market, as investors pursue the stability of long term professional leases associ-

ated with medical office buildings. Capitalization rates continue to be very strong for medical office buildings. Within the MOB category, dialysis

centers are the strongest group trading nationally at an average of 6.13% (Stan Johnson Co. Pulse Report June 2017), which speaks to the stabil-

ity and longevity of these buildings in terms of value.

Dialysis properties in North Carolina have another degree of inherent stability due to the state government regulations surrounding the Certifi-

cate of Need (CON) process. The cumbersome CON process effectively prevents local competition and enhances the quality of even short-

term leases because of the difficulty in simply moving a CON, let alone being granted a new one. In the last twenty-five (25) years Fresenius has

relocated only two (2) facilities in this region.

Since the federal government began covering dialysis treatments in 1973, federal underwriting of dialysis treatment has grown to $34B, or ap-

proximately 1% of the total Federal Budget as of 2016. With government regulations protecting the locations and the government payment

structures protecting the operators ability to support these locations, the Wake Dialysis property represents a particularly unique and attractive

opportunity for commercial investors in this growing market.

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EXECUTIVE SUMMARY | INVESTMENT HIGHLIGHTS

KEY LOCATION FOR FRESENIUS’ CORPORATE STRATEGY

This property is operated under an exclusive Certificate of Need (CON), which is owned by Fresenius Medical Care. In order to apply for a CON,

the utilization rate for each dialysis center county-wide must exceed 80% (or 3.2 patients per station). FMC tries to keep utilization rates at their

locations in North Carolina below this threshold in order to limit competition from entering the market. This property is an important hub location

for implementing this strategy. There are several methods that FMC uses to manipulate utilization rates at their hub locations to expand their busi-

ness without facing competition including:

• Per CON law, FMC can move stations to other new locations in order to expand to different areas in a county. With 50 certified stations,

Wake Dialysis Clinic serves as a primary hub for expansion in the region. FMC transfers stations certified under this CON to new satellite loca-

tions then applies for new stations at this hub location after utilization rates rise again.

• FMC can add stations to existing clinics by applying for expansion once an 80% utilization rate at an individual clinic has been achieved. If a

property increases the number of stations but keeps the same number of patients, this will drop the utilization rate at that facility.

• FMC can move patients to other new locations. If FMC moves patients to new locations without increasing the number of stations, the utiliza-

tion rate will drop at that facility.

Certified Stations In-Center Patients Utilization Rate

(June 2017) Patients Per Station

Wake Dialysis Center 50 196 98.00% 3.92

FMC IS A NATIONAL CREDIT TENANT

This lease is corporately guaranteed by Fresenius Medical Care.

Listed on both the Frankfurt Stock Exchange (FME) and New York Stock Exchange (NYSE: FMS), Fresenius is the world’s leading provider of products

and services for people with chronic kidney failure. The company generates net revenue of over $17.9 billion.

During 2016, the company cared for more than 310,473 dialysis patients at their 3,654 proprietary clinics located in 45 countries worldwide. Frese-

nius is also the leading provider of dialysis products including dialysis machines, dialyzers and disposable accessories made at their 37 manufactur-

ing sites around the globe. Fully fifty percent (50%) of the world’s operating dialysis machines are produced by Fresenius. In January 2015, Frese-

nius was upgraded to "Investment-Grade" credit by Standard and Poor's. They currently have a rating of BBB- with a stable outlook.

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EXECUTIVE SUMMARY | INVESTMENT HIGHLIGHTS

Source: https://fmcna.com/

Waltham, US

GLOBAL LEADER

3,654 Clinics

310,473 Patients

46,529,154 Dialysis Treatments

17,911 Revenue in $M

110,530 Employees

Bad, Homburg, GER

Hong Kong, CN

37 Production sites

UNITED STATES

50+ STATES AND

TERRITORIES IN OUR NETWORK

2 DECADES OF HEALTHCARE LEADERHIP

60,000+ US EMPLOYEES

190,000+ US PATIENTS SERVED

2,200+ US DIALYSIS CLINICS

26M ANNUAL

HEMODIALYSIS TREATMENT EQUIVALENTS

IN NORTH AMERICA

Waltham, US

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PROPERTY SUMMARY

Wake Dialysis Center is the primary hub for the growth of FMC’s operations in the Trian-

gle. FMC transfers stations certified under this location’s CON to new satellite centers

then applies for new stations at this hub location after utilization rates rise again. This pro-

cess allows FMC to add stations and locations within the CON process with better suc-

cess, and helps limit competitors from entering the market.

In 2016, FMC renewed their NNN lease and completed interior renovations to their

space. The current lease runs through 2023 and has two (2) five (5)-year renewal options.

This building includes a separate office suite on the second floor leased by NC Nephrol-

ogy Associates, who act as the Medical Directors for this clinic as well as three others in a

regional portfolio. NC Nephrology offices are on a full service gross lease.

PROPERTY DETAILS Owner Dialysis Owners, LLC

Address 3604 Bush Street Raleigh, NC

Total Building Size 31,307 GSF

Year Built 1992

Wake Dialysis

Rentable Square Feet 22,775

Type NNN

Current Rent PSF $22.55 (2.5% annual escalation in July)

Expiration 6/30/2023

Renewals Two (2) Five (5)-year

Certified Stations 50

Patient Utilization Rate 98.00% (June 2017)

NC Nephrology Offices (2nd Floor)

Rentable Square Feet 8,532

Type Full Service Gross

Current Rent PSF $22.50 (no escalation)

Expiration 6/30/2021 (likely will be extended to 6/30/2023)

Renewals None

Combined NOI (12-month forward) $663,120.58

PROPERTY DETAILS | WAKE DIALYSIS & NC NEPHROLOGY

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This property is located

right off the I-440 Beltline in

Raleigh, NC. It is adjacent

to the growing medical

office hub surrounding

Duke Raleigh Hospital, and

in close proximity to major

residential, retail, entertain-

ment, and job centers

such as North Hills.

NORTH HILLS

1M+ SF office

2 luxury hotels

1,300+ residential units

120+ retail / restaurants

MEDICAL OFFICE

SUBMARKET

TRADER JOES

COSTCO WHOLESALE

NORTH HILLS

34 acre expansion

WAKE DIALYSIS 3604 Bush Street

WEGMANS

Under construction

PROPERTY DETAILS | WAKE DIALYSIS & NC NEPHROLOGY

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CASH FLOWS | WAKE & NC NEPH.(12 MONTH FORWARD NOI)

Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Totals

Fresenius Rent 22,775 43,867.97$ 43,867.97$ 43,867.97$ 43,867.97$ 43,867.97$ 43,867.97$ 43,867.97$ 43,867.97$ 43,867.97$ 43,867.97$ 43,867.97$ 43,867.97$ 526,415.64$

Fresenius Op Exp 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 56,937.48$

Wake Nephrology Rent 8,532 16,000.00$ 16,000.00$ 16,000.00$ 16,000.00$ 16,000.00$ 16,000.00$ 16,000.00$ 16,000.00$ 16,000.00$ 16,000.00$ 16,000.00$ 16,000.00$ 192,000.00$

Wake Nephrology Op Exp

Total Rent 59,867.97$ 59,867.97$ 59,867.97$ 59,867.97$ 59,867.97$ 59,867.97$ 59,867.97$ 59,867.97$ 59,867.97$ 59,867.97$ 59,867.97$ 59,867.97$ 718,415.64$

Total Op Exp 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 4,744.79$ 56,937.48$

Optg. Exp. Reimbursements

Ut ility Reimbursements 7,519.00$ 7,738.00$ 7,884.00$ 8,103.00$ 7,008.00$ 6,935.00$ 7,300.00$ 8,176.00$ 9,417.00$ 8,249.00$ 7,081.00$ 7,154.00$ 92,564.00$

Total Income 72,131.76$ 72,350.76$ 72,496.76$ 72,715.76$ 71,620.76$ 71,547.76$ 71,912.76$ 72,788.76$ 74,029.76$ 72,861.76$ 71,693.76$ 71,766.76$ 867,917.12$

OPERATING EXPENSES

Utilities

Electricity 4,800.00$ 5,000.00$ 5,300.00$ 3,800.00$ 3,500.00$ 3,500.00$ 4,000.00$ 4,100.00$ 3,900.00$ 3,700.00$ 4,000.00$ 4,500.00$ 50,100.00$

Water & Sewer 5,000.00$ 5,000.00$ 5,000.00$ 5,000.00$ 5,000.00$ 5,000.00$ 5,600.00$ 5,100.00$ 5,700.00$ 5,000.00$ 5,000.00$ 5,000.00$ 61,400.00$

Gas 800.00$ 800.00$ 800.00$ 800.00$ 1,000.00$ 1,500.00$ 1,600.00$ 3,700.00$ 1,700.00$ 1,000.00$ 800.00$ 800.00$ 15,300.00$

Cleaning & Trash Removal

Janitorial

HVAC - Maintenance Contract 815.10$ 815.10$ 815.10$ 815.10$ 3,260.40$

HVAC - Parts & Maintenance 221.39$ 221.39$

Elevators 991.88$ 991.88$ 2,000.00$ 991.88$ 4,975.64$

Property Tax 3,622.81$ 3,622.81$ 3,622.81$ 3,622.81$ 3,622.81$ 3,622.81$ 3,622.81$ 3,622.81$ 3,622.81$ 3,622.81$ 3,622.81$ 3,622.81$ 43,473.71$

Common Area Maintenance & Management

Bldg Engineer 150.00$ 150.00$ 150.00$ 150.00$ 600.00$

Mgmt. Fees 802.24$ 802.24$ 802.24$ 802.24$ 802.24$ 802.24$ 802.24$ 802.24$ 802.24$ 802.24$ 802.24$ 802.24$ 9,626.90$

Bldg Maint 1,100.00$ 1,100.00$ 1,100.00$ 1,100.00$ 4,400.00$

Pest Control

Snow Removal

Landscape-Ext 489.25$ 489.25$ 489.25$ 489.25$ 489.25$ 489.25$ 489.25$ 575.00$ 575.00$ 489.25$ 489.25$ 489.25$ 6,042.50$

Landscape - seasonal

Insurance 5,396.00$ 5,396.00$

HOA Dues

Total Operating Expenses 18,792.67$ 15,714.30$ 16,014.30$ 17,571.28$ 14,414.30$ 20,310.30$ 20,179.40$ 17,900.05$ 16,300.05$ 17,671.28$ 14,714.30$ 15,214.30$ 204,796.54$

Net Operating Income 53,339.09$ 56,636.46$ 56,482.46$ 55,144.48$ 57,206.46$ 51,237.46$ 51,733.36$ 54,888.71$ 57,729.71$ 55,190.48$ 56,979.46$ 56,552.46$ 663,120.58$

1) Fresenius pays landlord a monthly estimate for TICAM ($4,744.79) that covers their pro-rata share (73%) of ALL operating expenses. This TICAM estimate includes taxes, insurance,

HVAC maintenance, HVAC repairs below $1,500, property management, building engineer, building maintenance, and landscaping. The landlord reconciles any surplus or defi-

cit at year end. This projection shows the estimate breaking even.

2) Fresenius’ monthly TICAM estimate does NOT include utilities. Fresenius pays a monthly reimbursement for their pro-rata share (73%) of electric and gas. They pay water and sew-

er separately.

3) NC Nephrology offices are on a full service gross lease. The landlord is responsible for covering NC Nephrology’s pro-rata share (27%) of all TICAM and utilities expenses.

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FINANCIAL SUMMARY | LEASE TERMS

Wake Dialysis (1st floor) NC Nephrology (2nd floor)

TOTAL BUILDING RSF 22,735 8,532

RSF 22,775 8,532

TYPE NNN FSG

CURRENT RENT PSF $22.55 $22.50

LEASE EXPIRATION 6/30/2023 6/30/2021 (working on extension to 6/30/2023)

ANNUAL ESCALATIONS Jul 1 (2.5%) None

RENEWALS Two (2) Five (5) Year None

OPTION RENT Fair Market None

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FINANCIAL SUMMARY | LEASE VS ACTUAL OPERATING EXPENSES

WAKE DIALYSIS NC NEPHROLOGY

Type NNN Full Service Gross

Property Taxes

Lease: Tenant reimburses landlord annually for its pro-

rata share (73%)

Landlord covers tenant’s pro-rata share (27%)

Actual (shown in cash flows): Included in a TICAM estimate that is paid monthly

then reconciled at year-end

Per lease

Insurance

Lease: Tenant pays direct for its own policy, and reim-

burses annually for its pro-rata share (73%) of land- Tenant pays direct for its own policy, and does

not reimburse annually for its pro-rata share (27%)

Actual (shown in cash flows): Included in a TICAM estimate that is paid monthly

then reconciled at year-end

Per Lease

HVAC maintenance

Lease: Tenant reimburses landlord annually for mainte-

nance- If repair cost is > $1500, landlord pays at its

sole expense

Landlord covers tenant’s pro-rata share (27%) but

tenant pays for any extraordinary usage

Actual (shown in cash flows): Included in a TICAM estimate that is paid monthly

then reconciled at year-end

Per Lease

Utilities

(water, electric, gas, sewer, etc.)

Lease: EITHER tenant reimburses landlord annually OR

tenant pays direct

Landlord covers tenant’s pro-rata share (27%)

Actual (shown in cash flows): Tenant reimburses landlord monthly for its pro-rata

share (73%)

Per Lease

General Maintenance

(Landscaping, snow removal, gutters, etc.)

Lease: Included in a TICAM estimate that is paid monthly

then reconciled at year-end

Not explicitly stated

Actual (shown in cash flows): Per lease (also includes property taxes, insurance,

and HVAC)

Landlord covers tenant’s pro-rata share (27%)

An analysis of the leases may cause confusion in how some operating expenses are actually being handled. Please refer to the chart below to understand these discrepancies.

For questions, additional due diligence information, or property tours please note the following contact information.

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CONTACT

Jon Keener

Trustwell Property Group

919.696.2196

jon@trustwellgroup.com

Trey Adams

Atlas Stark Holdings

919.289.1338 ext. 101

tadams@atlasstark.com