Transactions (August 2007)

Montecito makes three more buys

TWO OF THE ACQUISITIONS ARE PART OF JOINT VENTURE WITH ING CLARION

 

By John Mugford
Santa Barbara, Calif.-based Montecito Medical Investment Company (MMIC) is continuing its strong run of acquiring medical facilities, and along the way the company is entering new markets.

Montecito closed on three more acquisitions in July, including two purchases through its joint venture with New York-based ING Clarion Partners LLC. Together, MMIC and ING have a goal of acquiring 5 million square feet in the next year or so.

The recent acquisitions mark Montecito’s 22nd, 23rd and 24th in the last 13 months. It has now made seven joint acquisitions with ING Clarion.

MMIC’s three recent acquisitions are as follows (the first two were joint buys with INC Clarion):

■ Valley Parkway Health Center, a 70,058 square foot medical office building (MOB) located on three acres in Escondido, Calif.

■ Conroe Medical Arts and Surgical Plaza, a 68,832 square foot Class A MOB adjacent to the Conroe Regional Medical Center in growing Conroe, Texas, which is 30 miles north of Houston

■ Summit Medical Plaza, a three-building, 49,925 square foot Class A medical campus on 10 acres in Bayonet Point, Fla.

Valley Parkway Health Center is adjacent to Palomar Medical Center in Escondido, a city north of San Diego. Palomar is in the planning stages of a major remodeling project and the eventual building of the proposed Palomar Medical Center West.

According to a news release from INC Clarion, the sale price was $28 million, or about $400 per square foot. The seller was Beverly Hills, Calif.-based Cambra Realty. The building was constructed in 1989 and is 96 percent occupied. The cap rate was listed in news reports as 5.9 percent.

“Valley Parkway Health Center is MMIC’s second acquisition in California,” said Chip Conk, president and CEO of MMIC, in a news release. “This property fits our core criteria and is poised to benefit because of its irreplaceable Southern California location and its direct access to a very strong hospital system.”

In acquiring Conroe Medical Arts and Surgical Center for $18.3 million, Montecito Medical made its first entry into the Texas market. The Conroe Medical Arts and Surgical Plaza is located adjacent to the 360-bed Conroe Regional Medical Center.

Montecito officials say the building is 100 percent occupied with physicians, surgery centers and other general and specialty medical services. Dallas-based PM Realty Group is handling leasing and management of the property.

Summit Medical Plaza is located along the west coast of Florida, north of Tampa-St. Petersburg and about three miles south of Regional Medical Center Bayonet Point, which is part of the Nashville, Tenn.-based HCA Inc. network.

MMIC obtained $10.55 million in acquisition financing to acquire the three MOBs, according to a press release issued by Delray Beach, Fla.-based Dockerty Romer & Co., which arranged the financing. Des Moines, Iowa-based Principal Global Investors provided the financing on a non-recourse, five-year term loan. Craig Romer represented Dockerty Romer & Co.

According to Dockerty & Romer, the three buildings were constructed between 2000 and 2003; they are 94 percent occupied.

Cogdell Spencer

makes acquisition

in Syracuse, N.Y.

SYRACUSE, N.Y. – Charlotte, N.C.-based Cogdell Spencer Inc. (NYSE: CSA), a longtime owner and developer of medical facilities, recently closed on a $36.8 million acquisition of Central New York Medical Center in Syracuse. The six-story, 111,634 square foot building is on the campus of the Crouse Hospital, a 566-bed not-for-profit acute-care facility.

Central New York Medical Center will continue to be managed by Syracuse-based Pioneer Cos., a real estate management and operating firm. According to a statement from Cogdell-Spencer’s CEO, Frank Spencer, the firm has plans to expand its portfolio in New York and plans to continue working with Pioneer Cos. when the opportunity arises.

With the acquisition, Cogdell Spencer’s MOB portfolio now comprises 53 wholly owned properties, four joint-venture properties and 58 managed MOBs.

BremnerDuke buys

Atlanta properties;

to convert to medical

ATLANTA – BremnerDuke Healthcare Real Estate, the new healthcare unit of Duke Realty Corp. (NYSE: DRE), recently announced that it has entered the Atlanta market with the acquisition of Center Pointe I and II, a 363,778 square foot general office complex located in the “Pill Hill” area of the city. The sale price was not disclosed.

BremnerDuke plans to convert at least half of the space to medical offices during the next three to four years, as the complex is situated in an area rife with medical facilities. The property is located adjacent to Saint Joseph Hospital; it is also close to Northside Hospital and Children’s Healthcare at Scottish Rite, among others. The seller was Perimeter 400 LLC.

The property – which includes one building with seven stories and one with 11 stories – includes 4 acres of developable land. The property is located just off U.S. Interstate 285, near Peachtree Dunwoody and Johnson Ferry roads. BremnerDuke officials say the area is in need of clinical, procedural and administrative office space for physician groups, hospitals and other related medical practices in the area.

BremnerDuke will provide property management services and will be in charge of renovating general offices into medical space when the leases of non-healthcare tenants expire.

Triple Net Properties

buys MOB complex

in Sugar Land, Texas

SUGAR LAND, Texas – Santa Ana, Calif.-based Triple Net Properties LLC announced that in late July it closed on the acquisition of Sugar Land Medical Center, a three-building MOB complex with a total of about 80,000 square feet of space. The acquisition was made on behalf of Triple Net’s tenant-in-common (TIC) investors; the price was not revealed.

Sugar Land Medical Center is located in Sugar Land, a growing western suburb of Houston with more than 75,000 residents. It is located near three major hospitals: Methodist Sugar Land Hospital, Memorial Hermann Katy and the under-construction St. Luke’s Sugar Land Hospital.

The MOB complex is about 97 percent occupied, with tenants that include Family Practice Associates, Memorial Hermann Hospital System, Fort Bend Surgery Center Inc. and Fort Bend Imaging Inc.

The seller was Park Medical Pavilion Ltd., which was represented in the transaction by Rudy Hubbard of Houston office of Transwestern Commercial Services. Kirk Danley and Eric Tupler of CBRE-Melody in Houston arranged financing, which was provided by La Salle Bank Corp.

In other Triple Net news, the firm has also acquired the three story, 76,000 square foot Old Line Professional Centre in Waldorf, Md., from Sunrise Properties LLC, North Charles Street LLC and Bryna II LLC.

The firm also purchased 1 and 4 Market Exchange in Columbus, Ohio. The buildings, constructed in 2001 and 2003, respectively, include a three-story, 56,000 square floor 1 Market Exchange building and a five-story 60,000 square foot 4 Market Exchange building. Both buildings have an occupancy rate of about 93 percent.

Triple Net also purchased the 153,000 square foot Church Street Medical Office building in Evanston, Ill. The building is 93 percent leased to multiple tenants including Northwestern University.

South Texas MOB

snagged by

Dallas firm

CORPUS CHRISTI, Texas – Provost Partners, a Dallas-based private equity firm, closed on its purchase of the 105,143 square foot Corpus Christi Medical Center. The eight-story building was owned previously by a privately held Corpus Christi-based physicians group called Medical Plaza Associates.

The building is currently 97 percent occupied, and includes tenants such as Cardiology Associates, Radiology Associates and the Corpus Christi Urology Group. Confidentiality agreements prevented the sale price from being disclosed.

DASCO in process

of buying MOB

in Panama City, Fla.

PANAMA CITY, Fla. – News reports out of Panama City indicate that Palm Beach Gardens, Fla.-based DASCO Cos. LLC is in the process of acquiring an MOB on the campus of 433-bed Bay Medical Center; the asking price was $12.3 million. In addition, DASCO might also acquire the adjacent HealthPlex, a health, fitness and rehabilitation facility with an asking price of $11.1 million.

Bay Medical Center officials say the hospital needs to sell the facilities in to order obtain financing for a planned $63 million, five-story patient tower with 200,000 square feet of space. The new tower would include 84 private rooms, 42 intensive care units and 18 progressive care units.

Ascension hospitals

might operate

strapped Md. system

WASHINGTON, D.C. – It looks as if Providence Hospital in Washington and St. Agnes Hospital in Baltimore might take over the operations of the financially ailing, Prince Georges County, Md.-based Dimensions Healthcare System and its six hospitals.

Providence and St. Agnes are part of St. Louis-based Ascension Health, and officials from the two hospitals recently toured four hospitals in the Dimensions’ fold. Dimensions has been under financial strains in recent years, and earlier this year the Maryland General Assembly ended its session without creating a solution to those financial woes.

Dimensions has been lobbying Prince Georges County officials for funding; hospital officials say the system only has enough cash to continue operating the facilities through early September.

Many state officials say Ascension Health, the country’s largest not-for-profit hospital chain, would be a good choice to run

Dimensions, a system that treats and admits a high number of uninsured patients. Ascension reports about $11.4 billion in annual operating revenue and has spent an estimated $704 million on low-income patients at its 73 hospitals and healthcare facilities nationwide. Providence Hospital has also been named as a potential operator of financially strapped Greater Southeast Community Hospital in Washington.

California hospital

looks to buy

MOBs on campus

HAYWARD, Calif. – While many hospitals are selling, or monetizing, MOBs, St. Rose Hospital in Hayward plans to buy three buildings near its campus for a total of about $8 million. The MOBs have a total of about 25,000 square feet of space.

Hospital officials say they plan to buy the office buildings to build stronger relationships with their physicians and to increase outpatient revenues. Officials also have plans to pump an additional $30 million into other hospital projects, such as building a new imaging center, adding 30 new impatient beds, and retrofitting the hospital to meet California’s seismic safety guidelines.

St. Rose officials say they are doing their best to make the hospital financially healthy. Two years ago, St. Rose borrowed $22.2 million through GMAC Financial Services to cover the price of splitting from its former parent company, Wichita, Kansas-based Via Christi Health System. Via Christi had been looking to sell St. Rose.

The hospital had a hard time finding a not-for-profit buyer, in part because many of its payer mix – about 49 percent of its inpatient admissions in 2004 were either uninsured patients or low-income patients covered by the California Medicaid program, known as Medi-Cal.

St. Rose officials say they would like to refinance the 2005 loan, either through taxable or tax-exempt funding. The hospital is reportedly considering an offer from GMAC and one from Cal-Mortgage.

The hospital needs to spend about $15 million to perform a seismic retrofit of the main hospital tower to meet the state’s 2013 deadline. Hospital officials would also like to add 30 private patient beds on the fifth floor of the main tower, a project estimated at about $9 million.

For the Record

Franklin, Tenn.-based St. Johns Imaging LLC recently acquired the 9,000 square foot Lyerly Building in Jacksonville, Fla., for $3.2 million. The building is located on 1.29 acres and is located three blocks from St. Vincent’s Medical Center. St. Johns Imaging, which is making its first foray into Jacksonville, is the operating arm of Nashville-based Outpatient Imaging LLC. GVA Advantis represented the buyer, while the seller, 2135 Riverside Investors Inc., was represented by Colliers Dickinson. q