Industry Pulse (March 2006)

NEW YORKAnother major institutional player with large sums of capital intends to start investing in medical office buildings (MOBs). The latest entry is JPMorgan Investment Management Inc., which could invest up to $125 million in MOBs. The news was heard during a conference last month in New York, where Granite Partners LLC hosted, “Breaking New Ground: The Escalating Flow of Capital to Medical Real Estate.” At the one-day conference, various sources indicated that JPMorgan has started a new fund with the intention of investing as much as $500 million into certain “alternative” property types. Of that total, between 20 and 25 percent – up to $125 million – could be invested in MOBs. JPMorgan executives declined to comment further. At the conference, however, executives with the firm indicated that the company would likely form joint venture (JV) partnerships in acquiring medical properties.

ANN ARBOR, Mich. The University of Michigan Board of Regents voted Feb. 17 to approve a schematic design and an expanded $523 million budget for construction of its new the 1.1 million square foot, 264-bed C.S. Mott Children’s and Women’s Hospital in Ann Arbor. The budget was increased by $25 million to cover the costs of another 100,000 square feet of space and the costs of achieving Leadership in Energy and Environmental Design (LEED) certification. The replacement hospital, which is slated to open in spring 2011, is being designed by Dallas-based HKS Architects Inc.

PORTER COUNTY, Ind. – The board of trustees of Porter County’s county-owed Valparaiso Hospital has created a task force to explore the idea of building a replacement hospital. The task force is charged with determining the scope of the project, advising on whether to involve partners in the project and looking at possible ownership structures. Trustee board members have indicated that a new facility could cost as much $300 million. The board already has its eye on a 60-acre site in the area.

INDIANAPOLIS –Clarian Health Partners and physician group Arnett HealthSystem announced plans to jointly build a new $180 million, 150-bed for-profit hospital in Lafayette, Ind. Groundbreaking is scheduled for this spring with completion targeted for 2008. As part of the plan, Clarian would own 60 percent of the Lafayette hospital and Arnett would hold a 40 percent share. Clarian has partnered with physicians before. It opened a $170 million for-profit hospital in Avon, Ind., in 2004 and a for-profit $285 million facility in Carmel, Ind., last year. Clarian also recently embarked on a five-year development agreement with Morgan Hospital & Medical Center in Martinsville, Ind., that could include joint capital improvement projects. Martinsville has previously announced plans to develop a 77-bed patient tower, and it has 35 acres on the western edge of Johnson County.

CHICAGOOfficials at Northwest Community Hospital recently presented plans to local planning officials for an expansion project that would include a 200-bed, 246,000 square foot patient tower and an eight story parking garage. The target date for completing the project is 2010. No financial details were available.


OCONOMOWOC, Wis.Pabst Farms Development LLC in is hoping that Aurora Health Care doesn’t build a new medical center a 43-acre site it wants for part of its proposed 1,500-acre planned community. Pabst Farms wants the land for a retail project that would be a focal point of the project. But, the developer is contractually bound to sell the property to Aurora if Aurora wants it, and the system hasn’t ruled out the site, which it has been eyeing since at least 2001. That plan and a 2004 alternate plan for 53 acres in nearby Summit, Wis., are both tied up in litigation because government officials refused to approve the projects. Pabst Farms says it won’t move ahead with the retail plan until the hospital question is resolved. Waukesha County (Wis.) Circuit Court is scheduled to hold hearing on the matter later this month.

COLORADO SPRINGS, Colo.Penrose-St. Francis Health Services announced Feb. 16 plans for a new approximately $200 million, 350,000 square foot, 158-bed hospital on 45 acres 45 acres. The new St. Francis Medical Center is to be financed by the system’s owner, Catholic Health Initiatives. Groundbreaking is slated for late summer and completion by early 2008.

SALT LAKE CITY, Utah – University of Utah Hospitals and Clinics have been given revenue bonding authority of up to $90 million for the second phase of an expansion project at the University of Utah Hospital. The bonding authority, granted by the university board of regents, doubles the funding authority available and is expected to accelerate the start date for the project by one year. The second phase –part of an expansion program totaling $120 million – would add about 135 to 150 rooms at the facility. Construction is expected to begin later this year.

ADA, Okla. – Chickasaw Nation officials recently announced plans to build a $135 million, 370,000 square foot, 70-bed replacement hospital in Ada. The new hospital would be about triple the size of the Chickasaw’s current Indian health facility.

WATERVILLE, Maine – Inland Hospital and its parent organization, Eastern Maine Medical Center, filed an LOI last month with the state for a new $150 million, 150-bed hospital in Waterville. The LOI is seen as a precursor to submitting a full CON application by the March 20 deadline for Maine’s next CON review cycle. A competing system, MaineGeneral Health, has also submitted a preliminary application for a $107 million addition and renovation project at Thayer Hospital in Waterville. The two systems explored the idea of collaborating on one Waterville project, but talks broke down in December.

ORLANDO, Fla.Nemours announced Feb. 13 that it will file a letter of intent (LOI) with the state Agency for Health Care Administration for expanded children’s medical facilities on in Orlando. The Jacksonville, Fla.-based system said it would submit a full Certificate of Need (CON) application by April 19. A determination is anticipated by mid-June. Initial plans were announced last July for the three-phase project on 28 acres of Nemours’ existing children’s healthcare campus. The total size of the three-phase project could reach 900,000 square feet. The first phase would include a $90 million clinic and outpatient surgery center, which would break ground this fall and would be completed by 2008. Phase two would include a $250 million to $300 million hospital. Nemours said phase three “may” include a research center, education center, conference center and on-site day care center. Atlanta-based Stanley Beaman and Sears and Winter Park, Fla.-based RLF Inc. are the project architects. Additional design services have been provided by the Palo-Alto, Calif.-based innovation firm IDEO.


SAN DIEGOGrossmont Healthcare District, which overseas Sharp Grossmont Hospital, is expected to decide this month whether to put on the fall election ballot a $225 million bond issue that would help to finance $325.6 million in seismic safety upgrades and new construction for the San Diego facility. The public board has plans for renovations, 90 additional patient beds, an MOB, a parking facility and other improvements. Two-thirds of voters would have to approve. The project would be the second phase of a three-phase master plan calling for more than $1 billion in capital improvements. The final phase, which would completed sometime after 2013, would involve the demolition of an existing hospital tower and the construction of a 108-bed replacement tower at a cost of $623.3 million.

LA JOLLA, Calif. – University of California San Diego (UCSD) Thornton Hospital in La Jolla recently received approval from the University of California Board of Regents for a $136.5 million construction project that includes a new cardiovascular center and emergency room. Construction is scheduled to begin in late 2007 with completion targeted for late 2009.

TEMECULA, Calif. – Pennsylvania-based Universal Health Services Inc. has received approval from Temecula city officials for its plan to build a new $100 million hospital in the community. The facility is scheduled to have two patient towers and a cancer center.

DUBLIN, Calif. – Kaiser-Permanente recently acquired a 58-acre site in Dublin for a planned 900,000 square foot hospital. The planned facility is one project in the company’s 10-year, $10 billion capital program in California that includes current hospital projects in the communities of Antioch, Modesto, Vallejo and Vacaville. The company has not yet announced a construction timetable for the Dublin project.


Also In the Works

A 111,000 square foot replacement for Lompoc (Calif.) Hospital is moving through the city approval process. Lompoc Healthcare District obtained planning commission approval in February and is expected to go before the city redevelopment agency this month. The proposal involves a land swap with the city. A $74.5 million bond issue for the project was approved in September by 87 percent of voters. The district hopes to break ground by next month. San Diego-based NTDStichler is the architect… St. Joseph’s Hospital recently received approval from local officials to build a 150-bed, 300,000 square foot hospital in Lutz, Fla…. The Health Care District of Palm Beach County, Fla., last month approved plans for a new $52 million, 135,000 square foot, 70-bed regional hospital in the Glades, Fla., area. The exact location has not been determined, but the district says it is actively negotiating with the State of Florida and several landowners regarding the possible donation of 50 acres in the area. The district committed $40 million to the project, which will be a replacement for the outdated Glades General Hospital. It is anticipated that the remaining $12 million will come from state and federal grants and private donations… Some neighbors are organizing to oppose McKenzie-Willamette Medical Center’s proposal for a seven-story, 148-bed hospital and a four-story MOB on part of a golf course site in North Eugene, Ore. The plans by the Springfield, Ore.-based McKenzie-Willamette, which is majority owned by Triad Hospitals Inc. (NYSE: TRI), would require state CON approval as well as a variety of approvals from local government. Tampa (Fla.) General Hospital recently received a favorable court ruling in a challenge by local residents to its plans for a 167,000 square foot expansion project at its hospital campus… Matagorda County (Texas) Hospital District has decided to build a $35.99 million, 30-bed replacement hospital for Matagorda General Hospital in Bay City, Texas, rather than renovate the existing facility. An analysis by consultant American Health Facilities Development LLC found that renovation and expansion of the existing facility would have taken three years longer and cost nearly as much. Another consulting firm, Quorum Health Resources, performed a market assessment and provided financial forecasts. The district is now searching for a program manager, which will spearhead selection of an architect and construction manager for the two-year project. The district is working with rural hospital consultant Innovative Capital to pursue U.S. Department of Housing and Urban Development (HUD) Section 242 loan… Bryn Mawr (Pa.) Hospital has outlined plans for a expansion program that includes construction of a pair of MOBs totaling 257,000 square feet as well as a surface parking lo that might eventually become the site for a third MOB. The hospital plans to begin clearing the site this winter… Western Missouri Medical Center recently voted to postpone a planned expansion project at its facility in Warrensburg, Mo., a project that would have included expansion of labor and delivery services. The board announced that competitive pressures for physicians in the region led to the postponement… North Carolina provider Carolinas Medical Center is seeking state approval to increase the scale of its expansion plan. The center wants to add 19,369 square feet to a surgical tower project that has been approved at 146,800 square feet. The previously approved version of the project would cost $70 million with the additional work estimated to add $13.8 million to the cost… The Health Care District of Palm Beach County (Fla.) recently approved plans for a new $51.6 million, 70-bed hospital in the Belle Glade, Fla., area that would replace Glades General Hospital. The target date for completion is 2008… North Carolina provider WakeMed has received approval from state health officials to build a new 86,000 square foot, $21 million, 50-bed hospital in Lillington, N.C. The target date for completion is 2009… Newhall Memorial Hospital of Santa Clarita, Calif., is working to fend off neighborhood concerns over its long-term expansion plans during a series of public hearings this winter… Kentuckiana Medical Center LLC officials have indicated that Clarksville, Ind. is the provider’s preferred location for a planned 42-bed hospital… Wellmont Health System of Kingsport, Tenn., filed a CON application for a $94.4 million renovation of its 347-bed Wellmont Holston Valley Medical Center. It is anticipated that the Tennessee Health Services and Development Agency will hold hearings on the application in May. If approved, Wellmont says the project would be completed by May 2008… The U.S. Department of Veterans Affairs (VA) agreed to pay the Fitzsimons Redevelopment Authority about $17.2 million for a 24-acre parcel in Aurora, Colo., where it plans to build a new veterans hospital. The VA now needs to seek appropriations to fund the project and to complete preliminary analyses. That could be finished by August. The Fitzsimons project is the redevelopment of the former Fitzsimons Army Medical Center by the City of Aurora and the University of Colorado. In addition, the VA announced that it has signed a memorandum of understanding with Louisiana State University (LSU) to explore the feasibility of developing a joint teaching hospital and trauma center in downtown New Orleans. No further details were disclosed. Two VA hospitals and two LSU hospitals were severely damaged by Hurricane Katrina in September… LSU Health Sciences Center Shreveport Foundation has received approval from LSU to build a new 61-bed children’s hospital connected to the Shriner’s Children’s Hospital in Baton Rouge, La. q


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