Carter Validus Mission Critical REIT II to Close Offering November 27, 2018
July 27, 2018 | James Sprow | Blue Vault
On November 27, 2017, a follow-on offering by Carter Validus Mission Critical REIT II of up to $1,000,000,000 in shares of common stock was declared effective by the SEC. As of July 25, 2018, the REIT is offering shares of Class A common stock, Class I common stock and Class T2 common stock in its follow-on offering. As of July 23, 2018, the REIT had accepted investors’ subscriptions for total gross proceeds raised of $86,924,000 in this follow-on offering.
The REIT plans to terminate the follow-on offering on or about November 27, 2018, the date that is 12 months following its effective date. The REIT increased its offering price effective September 30, 2017, from $10.00 per Class A share to $10.20, and Class I shares from $9.162 per share to $9.273.
Blue Vault estimates the REIT has raised over $1.71 billion, including proceeds from its DRIP, in its initial and follow-on public offerings through July 23, 2018. From the date of the REIT’s initial public offering in May 2014, the REIT raised $70.3 million in 2014, $411.1 million in 2015, $337.7 million in 2016, and $418.3 million in 2017. Through June 2018, the REIT’s 2018 sales have totaled approximately $68 million, excluding DRIP.
Carter Validus Mission Critical REIT II, like its predecessor nontraded REIT program Carter Validus Mission Critical REIT, has an investment strategy that is unique among nontraded REITs. Both programs have invested in two distinct types of commercial real estate properties: data centers and health care. These two industries are defined as “mission critical” because the properties are selected by the REITs to be among the most important properties occupied by their respective companies, essential to the operations of their tenants. The data center and health care sectors are projected to be the highest growth sectors in the U.S. economy.
At March 31, 2018, Carter Validus Mission Critical REIT II owned 44 healthcare properties and 27 data center properties. In April 2018 the REIT acquired an additional healthcare facility, bringing the healthcare portfolio total to 45, with a total aggregate area of over 2.9 million square feet. The 27 data centers had an aggregate area of an estimated 2.2 million square feet. For Q1 2018, the REIT was paying cash distributions on its Class A shares at the rate of 6.40% based upon the initial offering price, and 5.68% on its Class T shares, net of servicing fees. The distribution rate on its Class I shares was 7.04%
Data Centers
Data centers are specialized buildings that house and operate mission critical computer operations including servers, storage devices, routers and fiber optic transmission equipment. Data centers generally serve as the backbone to our internet-based economy, the cloud, mobile computing and virtually all activities involved with using a TV, computer, tablet or mobile device. After acquiring a property, CVMC REIT II serves as the landlord and the tenants take responsibility for operations and improvements, as well as the cost and maintenance of equipment inside the data centers that help keep their companies running.
The volume of data worldwide is expected to double every two years according to Insidebigdata.com1. Spending on Cloud infrastructure is projected to increase from $50 billion in 2016 to $228 billion by 2026 according to Cisco Global Cloud Index, 2015-20202. The most powerful drivers of this growth and their respective annual growth rates from 2016 to 2021: internet traffic 24%, mobile data traffic 48%3, global data center traffic (27%) and global cloud traffic (30%)4.
Healthcare
With national spending at approximately $3 trillion per year, healthcare is one of the largest sectors of the U.S. economy and is expected to represent nearly 20% of the U.S. economy by 2025. From 2016 through 2025, healthcare spending is projected to grow by 5.6% annually, driven in part by America’s aging population, corresponding demand for higher consumption of healthcare services and the expected increases in the number of insured Americans due to the continued implementation of the Affordable Care Act. CVMC REIT II’s healthcare acquisition efforts will focus on mission critical healthcare properties (acute care hospitals, post-acute care and long-term care facilities) that serve as revenue-generating centers for the underlying physicians/hospitals.
By 2024, nearly 1 in every 5 dollars spent in the U.S. will be spent on healthcare.5 Representing 15.2% of the population, patients 65 and over generate nearly half of all diagnostic treatments and tests, and more than one-third of all healthcare expenditures nationwide.6
Carter Validus Mission Critical REIT
The earlier Carter Validus sponsored nontraded REIT program, Carter Validus Mission Critical REIT, Inc., closed its public offering In June 2014 after raising over $1.7 billion in proceeds, including DRIP. The REIT consistently paid distributions at the rate of 7.00% based upon its $10.00 offering price and paid a special distribution of $3.00 per share in February 2018, related to the sale of a portfolio of data center properties and a Miami medical center. In January, the REIT had announced that it was exploring the potential sale of its remaining portfolio.
For more information on Carter Validus Mission Critical REIT II, Inc., visit: www.cartervalidus.com
Sources: SEC, Blue Vault, Carter Validus
1Insidebigdata.com, The Exponential Growth of Data, February 2017.
2Cisco Global Cloud Index, 2015 – 2020.
3Cisco Visual Networking Index: Forecast and Methodology, 2016-2021.
4Cisco Global Cloud Index, 2015 – 2020.
5National Health Expenditure Projections, 2014-24: Spending Growth Faster Than Recent Trends.
6US Census Bureau, October 2017.
Learn more about Carter Validus on the Blue Vault Sponsor Focus page
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