Investors own interests in assets that are part of the Salus portfolio of GSA properties. Salus places each property it owns in a separate entity, providing investors with complete transparency about their investments. Specifically, these investments are ownership interests in buildings leased to federal agencies that are purchased for between $10 million and $100 million. These facilities are normally too expensive for individual investors or are inaccessible because of the complexity of the GSA build-to-suit process. Salus is able to source and select these properties in off-market transactions because of carefully managed, long-term relationships the firm possesses with those parties that are directly involved in the selection, award and construction of GSA properties.
Salus acquires these properties using 65-percent to 75-percent loan-to-value financing and structures them as Limited Partnerships. In some cases, Salus will accept a Tenant in Common structure (TIC) provided that the TIC is a substantial equity partner. Investors receive monthly cash distributions based on a priority return, along with annual distributions of any profits in excess of the priority return. The average priority return before depreciation has been 7.5%; the average annual cash on invested cash was in excess of 10% in 2008. While there can be no guarantees and past performance is no gurantee of future performance, similar returns are expected for 2009. Investors also gain ownership in a real estate asset that is intended to appreciate in value. The annual payments made on a building’s loan principal enable investors to consistently increase their equity stake in the property.
While there is no public market, investors who wish to exit the program may do so through the sale of all or a portion of their interest at any time. In these instances, Salus retains a right of first refusal to match any offer received. Should an investor find it necessary to sell their interest, Salus customarily offers it on a pro-rata basis to those partners who already have an interest in the property.