Transactions (October 2006)

Cogdell buys property manager Consera

LAST MONTH’S ACQUISITION INCREASES HEALTHCARE REIT’S MANAGEMENT PORTFOLIO

By John Mugford

 

CHARLOTTE, N.C. – Cogdell Spencer Inc., a publicly traded, self-managed real estate investment trust (REIT) that concentrates on medical properties, recently acquired 100 percent ownership of Columbia, S.C.-based Consera Healthcare Real Estate LLC.

Consera is a property management firm that concentrates on healthcare real estate, namely medical office buildings (MOBs). At the time of the acquisition, Consera had 38 properties with about 1.6 million square feet in its management portfolio. The properties are located in South Carolina, Virginia, Kentucky and Florida.

Following the acquisition, Cogdell Spencer’s management portfolio totals 109 properties with about 5.5 million square feet. The number of employees at the combined company is now 114.

Cogdell Spencer (NYSE: CSA) says Consera will be a division of the overall firm. Consera’s CEO, Susan Dorr, will continue to run Consera. Ms. Dorr will also join Cogdell Spencer’s executive committee. In addition, John Lumpkin, Consera’s chairman, will become a senior executive advisor to Cogdell Spencer. Ms. Dorr and Mr. Lumpkin will be limited partners in Cogdell Spencer.

Cogdell Spencer was a long-time, private developer and owner of medical properties in the Southeastern part of the United States before choosing to go public as a REIT in October 2005. When it was founded back in 1972, Cogdell Spencer was one of the first development firms in the country to be solely dedicated to medical properties.

Today, the company’s portfolio consists of MOBs, ambulatory surgery centers and diagnostic centers. The company has 50 wholly owned properties and five joint venture properties.

HCP closes on massive

$5.2 billion acquisition

of CNL Retirement
LONG BEACH, Calif. – Health Care Property Investors Inc., a publicly traded real estate investment trust (REIT), reported in recent weeks that it has completed its previously announced acquisition of CNL Retirement Properties Inc. (CRP) – a transaction estimated at $5.2 billion.
Under the terms of the deal, which was announced in May, CRP will become a subsidiary of Long Beach, Calif.-based Health Care Property Investors (NYSE: HCP). The $5.2 billion price tag includes the assumption of about $1.7 billion in CRP debt.

Prior to the acquisition, HCP was already the country’s largest healthcare REIT; CRP was the third largest. With the transaction now complete, HCP’s portfolio consists of more than 800 healthcare properties with an estimated aggregate value of $11.5 billion.

The portfolio that HCP acquired in the CRP deal comprises about 20 percent medical office buildings (MOBs) and 80 percent senior living facilities, mostly private pay, assisted living, independent living, and continuing care retirement communities (CCRCs).

Marin, Calif., district

to assume control

of Sutter hospital

GREENBRAE, Calif. – Marin Healthcare District, which is based in Greenbrae, Calif., will take back control of 235-bed Marin General Hospital from Sacramento, Calif.-based Sutter Health in 2010.

The future transfer of ownership is the result of a settlement recently approved by a judge in Marin County. Sutter began managing Marin General in 1996 and had entered an agreement to do so through 2015. But the agreement was signed before California lawmakers passed Senate Bill 1953, which mandates hospitals to meet certain seismic safety requirements.

Under the settlement, Sutter will pay the district $30 million, and the district will assume financial responsibility for the seismic upgrades.

Louisiana district

voters approve sale

of hospital to Iasis

WEST MONROE, La. – Voters in the health district in Ouachita Parish have overwhelmingly approved the proposed $82.5 million sale of Glenwood Regional Medical Center to for-profit Iasis Healthcare of Franklin, Tenn. The voters, who are part of Hospital Service District No. 1, approved the sale by a 7-to-1 margin. The hospital is located in West Monroe, La.

The transaction still requires the approval of Louisiana’s attorney general and must meet other closing conditions.

Should the sale proceed as approved by voters, Iasis would be a system composed of 15 acute-care hospitals in six states. It also operates a rehabilitation hospital and three surgery centers. Glenwood Regional would be the company’s first hospital in Louisiana.

 

Community Health

terminates acquisition

of Forum Health

YOUNGSTOWN, Ohio – Community Health System (CHS) of Brentwood, Tenn., has reportedly terminated its letter of intent to purchase Forum Health of Youngstown, Ohio. Forum Health is a not-for-profit system that includes two acute-care hospitals, a rehabilitation hospital and a children’s hospital in the Youngstown area.

In August, the companies announced that they had signed a non-binding letter of intent for the transaction. Terms of the pending sale were not disclosed at the time.

But in recent weeks Forum announced that CHS had terminated the agreement. A Forum spokesperson said CHS gave no explanation, adding that Forum had been in the early stages of due diligence for the transaction.

Forum is in the midst of a financial recovery, and last year it hired turnaround firm Wellspring Partners to help whittle down its operating losses of between $40 million and $60 million. For 2006, its operating loss is projected to be under $12 million.
Tenet agrees to sell

two more hospitals

to systems in Florida
DALLAS – Dallas-based Tenet Healthcare Corp. (NYSE: THC) recently announced that it and its subsidiaries have agreed to sell two hospitals in Florida as part of the company’s ongoing turnaround effort.

One of the hospitals is Parkway Regional Medical Center, a 382-bed acute-care hospital in North Miami Beach, Fla. The buyer would be the Public Health Trust of Miami-Dade County, which operates the Jackson Health System.

While the agreed upon sale price was not immediately released, Tenet is expected to garner pre-tax proceeds of about $35 million from the transaction.

In early October, Tenet also announced that a subsidiary has signed a definitive agreement to sell Hollywood Medical Center, a 324-bed acute care hospital in Hollywood, Fla. The buyer would be the South Broward Hospital District, which operates the regional Memorial Healthcare System. Tenet’s pre-tax proceeds from the pending sale are expected to be about $32 million. The transaction is expected to close by Nov. 30.

Tenet is in the midst of divesting a number of hospitals as part of its turnaround effort. In June, the system identified 11 hospitals slated for divestiture, including Parkway Regional and Hollywood Medical Center.

In addition, Tenet recently completed the sale of four hospitals: Cleveland Clinic Hospital of Weston, Fla., to Cleveland Clinic; as well as Kenner Regional Medical Center, Meadowcrest Hospital and Memorial Medical Center, all in the New Orleans area. The buyer is New Orleans-based Ochsner Health System. Tenet’s pre-tax proceeds from those four sales were expected to be about $138.5 million.

Discussions and negotiations with potential bidders for the remaining six hospitals are ongoing.

LifePoint agrees to sell

two recently acquired

West Virginia hospitals

BRENTWOOD, Tenn. – LifePoint Hospitals Inc. (Nasdaq: LPNT) of Brentwood, Tenn., recently announced that it has deals in place to sell two West Virginia hospitals that it acquired this past summer. LifePoint had acquired the hospitals in July from Nashville, Tenn.-based HCA Inc. (NYSE: HCA). At the time, LifePoint officials indicated the company did not intend to keep the two West Virginia hospitals.

The company intends to sell the 194-bed St. Joseph’s Hospital in Parkersburg to privately held, Dallas-based Signature Hospital Corp. Also, LifePoint intends to sell the 114-bed St. Francis Hospital in Charleston to Thomas Memorial Hospital, a not-for-profit based in South Charleston.

Terms of the deals were not disclosed. Both transactions require Certificate of Need (CON) approval from the West Virginia Health Care Authority before they can close.

LifePoint, which operates 52 hospitals, including the two that would be sold, says it will use the proceeds to pay off debt.

Maryland developer

looks to be high-bidder

for ailing D.C. hospital

WASHINGTON – Carl Jones, a Maryland developer and a relatively unknown figure in the Washington, D.C., healthcare industry, could become the future owner of troubled Greater Southeast Community Hospital.

Mr. Jones, who has a background in engineering and currently owns an investment firm in Clinton, Md., looks to be the highest bidder for the hospital currently owned by Scottsdale, Ariz.-based Doctors Community Healthcare, a for-profit hospital company.

According to news reports, details of the pending sale still need to be worked out and Mr. Jones has indicated that he would recruit a healthcare company to run the day-to-day operations of the hospital.

According to Doctors Community Healthcare, the 40-year-old hospital needs an infusion of at least $188 million in staff and capital improvements. The hospital is considered by many observers to be critical to the livelihood of residents in the southeast area of the city.

Mayor Tony Williams has set aside up to $80 million for improvements at Greater Southeast Community Hospital and at Howard University Hospital. However, the D.C. Council has noted that it will only grant city funds to the hospital if it is operated by a not-for-profit system.

Mr. Jones has a reputation for investing in neglected properties, renovating them and then selling. He is currently in the due diligence stage and has not provided details concerning his proposed acquisition. q

FOR THE RECORD

The University of Pittsburgh Medical Center (UPMC) is poised to take ownership of the 355-bed Mercy Hospital of Pittsburgh. UPMC recently struck a deal with the hospital’s owner, Pittsburgh Mercy Health System, and its parent, Catholic Health East. Net proceeds from the transfer of ownership will result in a contribution of $100 million to the Sisters of Mercy. Officials hope to complete the transaction by the end of the year. Mercy has faced a declining patient population in recent years and has posted an operating loss of $42 million over the last three years. UPMC has agreed to make capital investments in the hospital…  Carraway Methodist Medical Center, a 288-bed hospital in Birmingham, Ala., recently filed for Chapter 11 bankruptcy protection. The filing came just a week after an announcement that Scottsdale, Ariz.-based Doctors Community Healthcare Corp., a for-profit operator, intends to acquire the hospital. Doctors Community, a six-hospital system, emerged from Chapter 11 in 2004. As part of Carraway’s Chapter 11 proceedings, a U.S. bankruptcy court in Birmingham expects to review the pending sale and solicit competing offers. Carraway says the sale to Doctors is expected to close within a couple of months, pending the court’s action. q