Healthcare: Steward to sell, lease back Northwoods Medical Center in Taunton
Taunton —Steward Health Care System — the Boston-based for-profit medical group that purchased the former Morton Hospital and Medical Center this year — intends to sell and lease back the Taunton hospital’s Northwoods Medical Center building at 2007 Bay Street.
The decision to sell the building — adjacent to a plaza with BJ’s Wholesale Club and other businesses and restaurants — is part of a sale-leaseback strategy involving 11 medical buildings in the state, including two buildings formerly owned by St. Anne’s Hospital in Fall River.
“Technically it’s not a sale,” said Chris Murphy, spokesman for Steward. “It’s not like putting your house up for sale — it doesn’t get listed into a data base.”
What it does do, Murphy said, is produce a lump sum of capital to invest back into the 10 hospitals Steward has bought since the firm was formed in 2010.
In the case of Morton, that entails a commitment to invest at least $110 million over 10 years with more than $25 million coming within the first year.
In addition to technological improvements, Steward has agreed to eliminate $30.5 million of the formerly non-profit hospital’s unfunded liability debt, as well as repayment of $28 million in long-term debt.
“We’ve begun the process,” of approaching investors for a leaseback deal, Murphy said.
He declined, however, to estimate an asking price for the Bay Street property, formerly owned by Morton Property Inc.
The building at 2007 Bay St., according to the city assessor’s online data base, is valued at $5.25 million; the land has an assessed value of $1.07 million.
Murphy said the eventual sale-leaseback “will be invisible to the average patient” and will not create any disruption of patient care and physician services.
“There will be no change in MOBs (medical office buildings),” he added.
Murphy said Steward’s move is part of a national trend by operators of health care facilities looking to raise long-term capital.
He declined to specify the length of any future agreement of a sale-leaseback of Northwoods, other than to say that it will be for “decades.”
Murphy said it’s too soon to speculate if Steward will make it possible to reinstate the former Occupational Health Services, a program at Northwoods previously eliminated by Morton in order to save money.
“We’re now evaluating and prioritizing the hospital,” he said.
Dick Shafer, Taunton’s director of economic development, said sale-leaseback deals are commonplace in the world of mid to large companies.
He said one need look no further than the former Morton Hospital and Medical Center, which previously entered into a sale-leaseback deal with Atlas Investment Group for its Mill River Place medical building.
“It can be a good real estate deal as long as you’ve got the tenants,” Shafer said.
Murphy said with approximately 2,500 doctors in its physicians network, Steward is in a position to sustain and fill any vacancies in buildings that have been sold and leased back.
“We have a very reliable pool of tenants,” he said.
Steward Health Care System is owned by Cerberus Capital Management, a private equity firm.
Murphy said Steward’s purpose is to manage and operate hospitals, invest in infrastructure and recruit doctors. All the more reason, he added, that selling and leasing back secondary properties makes sense.
“We’re not in the real estate business; it’s not our mission,” Murphy said.