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Summer-2024

CoxHealth Class A Institutional Office

By: SIOR Report

Springfield, MO


TRANSACTION TYPE & DETAILS

Date: January 31, 2024

Transaction Type: Investment & Owner Occupant Sale Transaction Collectively

Property Type: Class A Institutional Office

Size: 268,413 sq. ft.

Client Objectives:
  • Present a portion of the asset for lease or the sale of the entire asset as either an investment, to an owner occupant or buyer that could do both.
  • Lease and/or sale of asset.
  • Capitalize on the sale of a rare, institutional-quality, sizable Class A asset in a market where buildings of this size and caliber are scarce.
Transaction Profile:
  • The sale was a combination of an investment and owner-occupant transaction. The buyer, CoxHealth, is a regional healthcare system located in Springfield, Mo. that will owner occupy approximately 60,000 sq. ft. of the property, and they will retain JPMorgan Chase as a tenant in the remaining 208,000 sq. ft.
  • At 268,413 sq. ft., this property is the largest privately-held office building in the city. As the only true institutional campus-style office complex, it represents the largest building footprint size in the city of any privately held office. (For reference, the average building size within the city limits is less than 8,000 sq. ft.)
  • The building’s amenities include pre-cast construction, curtain wall glazing, dual feed power from local power plants, and full-service employee cafeteria for 1,200 employees, auditoriums, recreation rooms, training rooms, interior full-service security, and employee walking/bike trails and volleyball courts.
  • Seller generated an IRR of 45+% and a 1.9 times return on invested capital over a two-year hold period.
  • The sale provided the buyer a unique opportunity to purchase a very large first-class institutional office building in close proximity to their headquarters for a fraction of new construction costs, and retain the world’s largest bank as a tenant.
During a time when many investors are struggling with office properties, Sentinel was able to deliver outstanding returns on this investment. Holding the property for less than two years, the firm was able to generate a property-level IRR of 45% and produce a 1.9X return on invested capital, resulting in one of the most profitable office transactions in the nation over the past several years. - Sentinel Net Lease (Seller)
Challenges:
  • Despite representing Sentinel Net Lease, Ross Murray’s existing decades-old relationship with CoxHealth created the opportunity for this transaction. This allowed for an honest and open discussion to help navigate the significant challenges, and complexities that come with a transaction with this many variables and of this size. If not for the existing relationships, determination, and trust, this transaction would not have been possible.
  • There were complexities due to the fact that the property was being sold to a buyer that intended to use a portion of the building, which had only recently been given up by the existing tenant who intends to remain in the vast majority of the property, and that Tenant happens to be the largest bank in the world, JP Morgan Chase. There were many discussions between the JPMC team, the buyer’s team, and the seller’s team to make this happen.
  • The need for confidentiality was of paramount importance. With many people involved, including a board of directors, both the buyer’s and the seller’s teams did a masterful job to keep the transaction moving while remaining confidential, which can be challenging in a smaller market.
The opportunity to add this much capacity, in this location, comes at a great time for CoxHealth. This expansion positions us well to continue meeting our community’s needs. - Max Buetow, CoxHealth (Buyer), President & CEO
Notable Accomplishments:
  • The building’s proximity to the current CoxHealth Hospital Main Campus, which is just blocks away, made it an opportunity for CoxHealth (the buyer) to expand within the same Medical Mile corridor. They had an immediate need for bulk space and had been contemplating new construction when the property became available. The building acquisition costs were a small fraction of replacement costs. JPMC Chase remains in place as a tenant within the majority of the building providing significant cashflow for CoxHealth.
  • The successful sale has allowed for job retention, and job growth for our community in a time when many large office buildings in other markets are becoming vacant.
  • Due to its size and large relative proportion of the entire local office market, it was very important that the building remain occupied. Otherwise, it could potentially become a drag on the entire office market, which could have a ripple effect. Fortunately, the Springfield office market has remained resilient, and thrived post-pandemic, with a sub 5% vacancy rate, and transactions such as this keep that trending positively.

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