Companies & People: Caddis launches $150M MOB fund

Mega investment firm Invesco is one of the investors, industry sources say

By John B. Mugford

The medical office building (MOB) sector continues to see a wave of new investors entering, or looking to enter, the space.

Although healthcare real estate (HRE) firm Caddis is hardly a new name in the sector, it has launched an equity investment fund that represents a new strategy for the Dallas-based owner, developer, property manager and owner of healthcare facilities.

As we reported in the December 2017 edition of Healthcare Real Estate Insights™, Caddis announced Dec. 6 that it had closed on its first-ever investment fund to acquire MOBs, with an aim of acquiring fixed-income core assets nationwide.

We are now learning more about that venture.

According to a Delaware limited partnership filing, Caddis Acquisition Fund I LP was formed Oct. 5, 2017.

A Dec. 5, 2017, Form D offering statement filed with the U.S. Securities and Exchange Commission (SEC) says that the fund’s first sale to investors took place Nov. 21, 2017.

The SEC filing also said that the fund had raised more than $33 million to that point from 88 investors, and ultimately planned to raise $150 million. The minimum investment is $20,000, according to the offering statement.

By the time of the Dec. 6 news release, however, the firm said it had already raised $130 million and had aggregated a 12-asset MOB portfolio.

Caddis Acquisition Fund I LP secured an initial MOB portfolio by acquiring 12 MOBs previously owned by Caddis affiliates for a total of $111 million, according to the news release.

Seven of the MOBs are in Texas, two are in Georgia, two are in South Carolina and the other is in Florida. Caddis officials said the firm planned to close by year-end on three additional MOBs to add to the fund, for which it would pay a total of $56 million.

Caddis has not officially identified of any of the investors. But industry sources tell HREI™ that one major investor is Atlanta based Invesco Ltd. (NYSE: IVZ), an independent investment management firm which had, as of Jan. 10, 2018, $937.6 billion in assets under management on behalf of clients worldwide.

If that is correct, it is believed to be the first time Invesco has invested in healthcare real estate.

Regardless of who the investors are, Caddis’ CEO Jason L. Signor says that, Caddis Acquisition Fund I represents an “overall strategy of focusing on long-term ownership and capitalizing on the many opportunities available in the strong medical office building market.”

He added that the new fund is looking to acquire MOBs using a “low-leverage strategy” in which plans to target a 55 percent loan-to-value average.

“This new investment vehicle enables Caddis to purchase assets all cash and to acquire debt at a later date,” Mr. Signor said in the Dec. 6 news release,.

“We are adjusting to prevailing market conditions by creating an income structure versus a gain structure, enabling us to stay highly competitive thanks to a lower cost of capital.”

The company now has a goal of investing from $200 million to $300 million annually in MOB acquisitions during the
next five years.

As noted above, fundraising for the fund looks to be going well for the company.

“Caddis has already obtained $130 million in committed equity for fund acquisitions, which we expect to double in the next 12- plus months,” said Lance M. Hardenburg, a partner and the company’s executive VP of transactions.

Creating the fund is the latest in a series of initiatives that the company has undertaken since its founding as Caddis Partners LLC in 2008.

At that time, the firm was regionally based, focused mainly on the Texas market.

In 2014, with its footprint growing across the Southeast and Southwest, the company rebranded itself as Caddis Healthcare Real Estate, or simply, Caddis.

By then it had developed and/or acquired about 2 million square feet of medical assets valued at $500 million based on purchase price. The company was also adding a number of well-known and experienced HRE professionals to its leadership team.

It was also about that time that the company entered the senior housing healthcare sector, launching its Heartis brand focused on assisted living and memory care facilities.

To date, the company has developed, including projects under development, about 20 Heartis facilities.

Overall, Caddis’ portfolio of MOBs, senior housing facilities and other medical properties now tops 3 million square feet of developments and acquisitions for a total value topping $1 billion.

In addition to its headquarters in Dallas, Caddis now has offices in Atlanta, Houston and Phoenix. It also has a growing presence in the Midwest, where it has developed Heartis communities in Illinois and Wisconsin.

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