REIT Targets User-Owners for High-Vacancy Assets

"Given the low interest rates now, we've seen stepped-up interest from users who want to own their own building," explains chief investment officer Raymond M. Braun during the REIT's recent second-quarter conference call. "The bottom line is we'll do whatever it takes to maximize the return to shareholders and cull our portfolio whenever we can to reinvest in buildings that provide a better risk-reward scenario."

Although the 266,910-sf Centennial Center in Schaumburg, the 149,494-sf Lisle Executive Center in that west suburb both had more than 60,000 sf of space available at the end of the second quarter, neither are on the block, Braun tells GlobeSt.com. "Centennial Center is one of our trophy properties," Braun says. "We're looking at smaller properties to sell."

Meanwhile, the 96,219-sf Arlington Ridge Service Center in Arlington Heights ended June with the worst occupancy rate in the REIT's entire portfolio at 37.3%. The only other building that was half empty was the 92,612-sf Highpoint Business Center in west suburban Wood Dale, where 46,954 sf was available.

However, those buildings are overshadowed by 198,042-sf One Park Plaza on Milwaukee's northwest side, where nearly 81,000 sf was available at the end of the quarter. Net operating income there has plunged 75% to $298,000 during the first six months of 2002.

One targeted acquisition is Advocate Health Care's eight-building package of medical office buildings, seven of them attached to a hospital. The deal is expected to close at the end of next month, Braun says.

The REIT's management team has experience in medical properties, he says, and it was extremely favorable. "Doctors simply do not move, especially when they have the convenience being able to make hospital rounds from their office," adds chairman and chief executive officer Richard A. May.