Millions Flowing into Medical Real Estate

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As other commercial real estate sectors suffer, savvy investors like Prudential target healthcare

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We continue to acquire and develop even in these tough times and we have an equity source that believes in the management team and the assets that we’re buying and developing

Even as other commercial real estate sectors struggle, investors continue to pour hundreds of millions of dollars into recession-resistant healthcare real estate. Recent deals have included $250 million in new debt and $30 million in new equity from Prudential Real Estate Investors (PREI), and a separate effort to create a new $40 million medical real estate investment fund. Those stories were detailed in Page 1 articles in this month’s edition of the Healthcare Real Estate Insights newsletter.

The Chicago-based healthcare real estate firm, Lillibridge, recently obtained $250 million in debt with a variety of sources, and secured $30 million in equity from PREI, which is part of Prudential Financial Inc. (NYSE: PRU). The debt was used to refinance existing medical properties, while the fresh equity – PREI’s fourth venture with Lillibridge – is earmarked for additional medical real estate acquisitions and new developments.

“We continue to acquire and develop even in these tough times and we have an equity source that believes in the management team and the assets that we’re buying and developing,” Lillibridge CFO Joe Kurzydym told HREI.

Meanwhile, Nashville, Tenn.-based developer Oman-Gibson Associates says it is looking to raise $40 million from investors, and then leverage new medical real estate developments and acquisitions in the 40 percent to 50 percent range. As a result, the fund could invest up to $80 million to $90 million in healthcare real estate.

“We believe this allows us to take advantage economic conditions that exist today,” Tom Gibson, one of the firm’s principals, told HREI. “Healthcare is still viewed as a counter-cyclical play, and the markets that we’re going after – in the $1 million to $10 million range – are still relatively easy to finance because of the size. Many of the banks and institutions are shying away from mega-deals and the smaller deals obviously pose a lot less risk for both investors and banks. We think this is an opportunity for our company and the investors in the fund to take advantage of that.”

This month’s edition of HREI also includes coverage of the recent 2009 Medical Office Buildings (MOBs) and Healthcare Facilities Conference in Philadelphia, which was presented by BOMA International.

One BOMA MOB conference report focuses on equity investment in healthcare real estate. It features a panel discussion with Jeff Piehl of Cushman & Wakefield, P.J. Camp of Shattuck Hammond Partners, Clint Hinds of Kennedy Associates, Doug Ray of Seavest Inc., Dave Boitano of Nationwide Health Properties and Brian Mutchler of Harrison Street. The article provides an inside look at one of the biggest MOB deals ever.

Another extensive BOMA MOB conference article focuses on the capital market environment for healthcare real estate. It includes a panel discussion with John Winer of Seavest, Al Pontius of Marcus & Millichap, Malcolm Sina of DASCO Cos., Jim Moloney of Cain Brothers and Jeff Cooper of Savills LLC. The article explains why debt and equity capital remains more available for healthcare real estate than most other sectors.

Additional content in this month’s edition of HREI reports on recent medical office building (MOB) sales and leasing transactions, new outpatient and inpatient developments, and more.

For a complete copy of the current edition of HREI™, or for information regarding these articles or healthcare real estate in general, qualified media professionals may contact Murray W. Wolf, Publisher and Founding Editor, at (952) 746-4405.

About Healthcare Real Estate Insights

Launched in January 2003, Healthcare Real Estate Insights has come to be recognized as the most trusted source of news and trend information in the healthcare real estate development, financing and investment industries. This monthly, national, B2B newsletter offers sophisticated players the most comprehensive coverage in the industry available anywhere. For more information, please visit us at http://www.hreinsights.com.

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