News and Analysis (March 2008)

Lillibridge looks for partner(s)

FIRM LOOKS TO RECAPITZALIZE ITS MASSIVE PORTFOLIO

By John Mugford

During the past several weeks, Healthcare Real Estate Insights™ has learned from several sources involved in healthcare real estate that Chicago-based Lillibridge is in the process of looking for new capital partners, or a partner, to invest in its large portfolio of medical office buildings (MOBs).

The sources, who spoke on the condition of anonymity, told HREI™ that any potential transaction would not be a sale but a recapitalization similar to one that Lillibridge completed in 2004 with one of its portfolios, or tranches, of properties. Lillibridge officials could not be reached for comment before this edition went to press.

For this potential recapitalization, sources say, Lillibridge is offering an investment opportunity in five separate tranches of properties. One source said potential partners could either invest in one tranch, or multiple tranches, even all five. Lillibridge’s total portfolio of co-owned and managed properties reportedly has about more than 5 million square feet of space and could be worth about $1 billion, according to several sources.

At least three sources say that Lillibridge is looking to recapitalize the portfolios because a large investor, the California State Retirement Teachers Retirement Association (CalSTRS), is looking to reap its gains on the investment and reinvest its money elsewhere. At least a couple of sources say that another investor, Heitman, is also looking to reinvest at least some of its investments and gains from Lillibridge properties.

“These are huge investors that are constantly monitoring where their money is and what their returns are,” says one source. “It’s just what they do and they are not isolated from what happens in the capital markets. If their equity is generating 3 percent (in one aspect of their investments), that changes what they need to do in the rest of their portfolio.”