"We expect to be very active in this market in the very near future," says May, whose company acquired eight medical properties totaling 458,150 sf for $59.6 million from Advocate Health Care last year.
That deal involving assets in suburban Chicago, all but one connected to an Advocate hospital, was done with a $36-million bridge loan from Bank One, says chief financial officer James Hicks. The medical office portfolio was refinanced through an institutional lender in January for $40 million, at a 5.43% interest rate for a 10-year term, he adds.
While occupancy in Great Lakes REIT's 2.65-million-sf suburban Chicago portfolio averaged 80.9% to begin 2003, the medical office portion boasts a 99.1% rate, according to the company's supplemental report. President and chief operating officer Patrick R. Hunt predicts the REIT's portfolio should average just under 80% in 2003, and could end the year at 76%.
"We don't expect to see a significant recovery in demand in 2003," Hunt says.
However, 94% of the company's debt is at a fixed rate averaging 5.76%, Hicks reports. In addition to the company's $318.4 million in debt, Great Lakes REIT is in discussions on a line of credit ranging from $30 million to $35 million, which would be used for working capital or acquisitions, Hicks adds.
Meanwhile, Great Lakes REIT has budgeted $1 million for tenant defaults. In addition to Legion Insurance Co., which leases 58,000 sf at Milwaukee Center, two other tenants leasing about 20,000 sf also are having financial difficulties.
"They hold a very minor amount of square footage in the portfolio," Hicks says. "Anecdotally, Lucent Technologies used to be a great tenant. Today, they're not by virtue of what's happened to their operations. Hopefully there aren't any surprises out there for us."
Legion Insurance Co. is expected to remain current on its rent through 2003 even though the Pennsylvania Department of Insurance has recommended the company be liquidated, according to Great Lakes REIT.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.