Craig C. Johnson, president and COO of Aries Capital's Phoenix office, says the 2.35-acre project at 20414 N. 27th Ave. is somewhat unique in that it's not going to be limited to medical tenants. "A bank next door will be taking additional space in this building. There's also an executive suite concept on the second floor, dedicated to physicians that are just coming in for a day or two," says Johnson.
Aries Capital structured $21.7 million in senior debt financing and Aries Real Estate Fund LLC kicked in $679,000 of debt, allowing developer Robert Key to begin construction. Johnson tells GlobeSt.com that the building is already 30% to 50% preleased.
Johnson says Key stopped preleasing once the loans were approved. "He didn't want to go any further with preleasing because he knew that groundbreaking would bring more people," the loan originator says, "and he could ask for higher rents if the building fills." As of now, the ask is $25 per sf, triple net, but Johnson says the quote could go as high as $28 per sf.
Johnson says Key had offers to sell the building before it started to come out of the ground although that's not his intention. "He's spending $23.6 million overall on this and has had offers to sell this north of $30 million," Johnson says.
Key's site is located in a high barrier to entry submarket on the north side of town where there isn't much land left for development. Deer Valley Medical Center will be just a half-mile from the John C. Lincoln Hospital at 19829 N. 27th Ave., where there is available development land.
"When you're there, you have the restriction of the hospital itself," Johnson explains. "Certain types of practices can't open there because of hospital restrictions and competition. But when you're half a mile away, like this is, you can open the door to any one, of any type."
Key's two loans have 18-month terms with interest-only payments. The loan-to-cost ratio is 95%, with the interest rate at prime plus one. The Weitz Co. LLC of Des Moines is the general contractor.
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