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Group Seeking Medical Offices Spends $67M On Jacksonville Office Tower

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An Atlanta group scooped up a downtown Jacksonville tower for $67 million after seeing an opportunity where others saw a run-of-the-mill office asset.

ShareMD LLC, a medical property owner and operator, bought the 22-story 841 Prudential on the Baptist Medical Center campus from Chicago-based real estate investor GEM Realty Capital Inc.

841 Prudential was marketed as a traditional office asset for administrative users, but ShareMD — with help from The Easton Group brokerage arm Easton & Associates in Doral — saw the potential for clinical office uses.

“That was the value that we saw in the building. Everyone else was valuing it just as a professional office but we said, ‘Well, because of the proximity to Baptist and the geographic location, there is a unique opportunity to reposition the building to medical office to achieve higher rents and fill the vacancy,’ ” said Elliot LaBreche, The Easton Group vice president who represented ShareMD in the purchase.

LaBreche closed the transaction Feb. 20. CBRE Group Inc. represented seller GEM Realty.

“841 Prudential was nearly 80% occupied when sold with 15% of that already used by health care providers uses such as neurologists and pediatricians,” LaBreche said.

ShareMD wants to retrofit the vacant space concentrated on the lower floors to medical offices, meaning 35% of the building would become clinical space. If other vacancies open in the administrative space, ShareMD plans to reposition that space to increase the medical uses at 841 Prudential.

“While repositioning requires upfront spending, it’s expected to pay off later. Clinical offices command rents that are 10-15% more than traditional office rents,” LaBreche said.

ShareMD’s plans a $7 million investment to convert offices for clinical users. 841 Prudential has the advantage of undergoing a $6 million renovation two years ago. On the demand side, the Baptist campus faces natural growth constraints. It’s bound by the St. Johns River to the north and Interstate 95 and the Acosta Expressway on other sides. This leaves 841 Prudential well-positioned to absorb health-related growth.

“ We are talking to a very large orthopedics group that is affiliated with Baptist right now,” LaBreche said.

The larger Jacksonville medical office market is healthy with citywide occupancy slightly less than 95%, the highest nationally, according to Maryland-based medical office research company Revista.

The riverfront 841 Prudential has 500,000 square feet of leasable space on a 6.5-acre lot. It was built in 1955 as the city’s first skyscraper. Some of the larger tenants already are medical companies with administrative offices. They include Baptist, University of Florida Health and One Call, which connects injured workers with health care providers.

ShareMD is on a medical buying spree, spending $100 million in four months. The company is focusing on key markets such as Orlando, Tampa, Fort Lauderdale and Miami, where two purchases totaled $33 million. Its business model of building out clinical space benefits doctors as well as patients. ShareMD leases its clinical space short-term by the half-day, day, week or month, giving health care providers an opportunity to expand their geographic footprint and reach more patients.

“We are excited to be in South and North Florida and look forward to rounding out our Florida portfolio with additional assets over the coming months,” George Scopetta, president and managing partner of ShareMD, said in a news release. “With an aging baby boomer population, a burgeoning demand for health care services and insurance companies favoring outpatient care, we think the timing is perfect to execute our business plan in Florida. The opportunity is endless.”

 

Source: DBR

Two Years After $88 Million Buy, Nicklaus Children’s Wants To Sell Miami Medical Center

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Nicklaus Children’s Hospital plans to sell the failed Miami Medical Center, a specialty hospital that Nicklaus Children’s bought just over two years ago for $88 million, after deciding to focus its growth strategies on more outpatient clinics and its own Coral Terrace campus.

The decision to sell the building follows a year of financial instability, layoffs and administrative changes. At the time of the purchase, in December 2017, questions surrounded the financial underpinnings of the deal. That included questions about the nonprofit Nicklaus Children’s financial interests in the for-profit ventures associated with the Miami Medical Center. Miami Medical Center, located near Miami International Airport, closed in October 2017.

Matthew Love, who took over as chief executive officer on an interim basis in June last year, also announced this week that he will begin serving as the hospital’s permanent CEO. Love said he couldn’t answer questions about the relationship between the nonprofit hospital and the for-profit ventures because much of the arrangement predated his time with the hospital.

Before the bankruptcy filing, one of Miami Medical Center’s biggest investors was Nicklaus Children’s, which served as shareholder, lender and manager of the hospital through a venture called Miami Hospital Holdings. In March 2018, the company that operated Miami Medical Center filed for Chapter 11 reorganization, listing $21.4 million in assets and $67.3 million in liabilities.

Love said the hospital has retained an outside consulting firm to help with the sale, and that Nicklaus Children’s board signed off on the decision to sell. The CEO declined to list a specific price for the facility but said Nicklaus Children’s would sell the building for the “best price we can get.”

“The sale makes sense with Nicklaus Children’s growth strategy,” Love said. “When you talk about expansion and growth, it doesn’t always have to be brick and mortar. Miami Medical Center was right down the street. What I’m not really interested in is replicating high-end services — those are expensive.”

Sal Barbera, a former healthcare executive who now teaches healthcare administration at Florida Atlantic University, said he thinks the decision to sell the building goes beyond growth strategies and has more to do with the hospital’s current financial condition.

“They need to unload that asset, they need the cash,” Barbera said. “They didn’t buy it that long ago.”

In 2014, Nicklaus Children’s — when it was still an investor — signed on to guarantee up to $70 million of financial obligations related to Miami Medical Center. When the private hospital defaulted on its debts, Nicklaus Children’s paid a total of $14 million in 2017 and 2018, according to an analysis by Fitch Ratings.

During 2018, Nicklaus Children’s also funded $7 million of Miami Medical Center’s operating costs as part of its obligations. Miami Medical Center’s bankruptcy was finalized in January 2019.

The company that invested in Miami Medical Center was partly owned by a for-profit corporation whose officers were made up of Nicklaus Children’s board members and executives, including former CEO Narendra Kini, former CFO Timothy Birkenstock and April Andrews-Singh, a senior vice president and general counsel.

Love, the current CEO, said he is hopeful that the Florida Legislature’s deregulation of hospital building guidelines will make the facility attractive to out-of-state healthcare providers or providers from elsewhere in the state.

“What I’m interested in us doing is focusing on the fundamentals,” Love said. “We’re the best pediatric healthcare provider in Florida, and we need to focus on that. That’s who we are.”

 

Source: Miami Herald