MISHAWAKA, IN—A portfolio of medical office buildings hittingthe market in Indiana, just outside of Chicago, could result in oneof the most “significant” MOB portfolio transactions to occur inthe Midwest in “quite some time.”

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According to Erik Foster and MikeWilson of the Chicago office of Toronto-basedAvison Young, interest is strong from a variety ofinvestor types, including national and international capitalsources.

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Perhaps the main reason for the strong interest, they say, isthat Franciscan Alliance, a 13-hospital healthsystem with a AA credit rating from Standard & Poor's, occupiesabout 90 percent of the space. Other independent physicians andgroups occupy space as well, giving the portfolio a total occupancyof about 93 percent.

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The brokers also note that Mishawaka, IN-based Franciscan,formerly the Sisters of St. Francis HealthServices, has annual revenues of $2.4 billion and occupies85 percent of the portfolio's space on long-term leases. The sellerhas not been disclosed; Wilson notes that it is not the healthsystem.

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As one of the largest Catholic-based health systems in theMidwest, Franciscan, whose market stretches from Greater Chicagodown to Indianapolis, continues to expand with acquisitions ofphysician practices as well as new real estate developments. One ofthose new developments includes an MOB in the Northwest IndianaPortfolio that's set to open this month as part of an existingmedical mall in Munster, just outside ofChicago.

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In addition to the three buildings in the medical mall, theother buildings, all offering multiple specialties, are in theIndiana cities of Schererville,Dyer and Hammond—all of which areconsidered part of Greater Chicago. The MOB in Hammond is acrossthe street from a hospital, the Franciscan St. MargaretHealth–Hammond. The other buildings are in off-campuslocations.

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As far as the brokers are concerned, the portfolio offersstability with Franciscan as the long-term tenant, and it providesinvestors with an opportunity to take advantage of the paradigmshift in healthcare delivery brought on by the PatientProtection and Affordable Care Act (PPACA).

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“This offering represents a microcosm of the new healthcaredelivery model under the Affordable Care Act, with large systemsexpanding through acquiring top physician groups and pushing moremulti-specialty care facilities off of the primary campus toambulatory sites near the patient base,” says Mr. Wilson.

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Other members of the Avison Young team marketing the portfolioare Phil Palmer, principal, and DavidKrasnoff, a debt specialist and senior VP.

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