The lawsuits may go on, but the facilities that once belonged to the physician-owned chain of six hospitals In Texas are now in new hands. Each filed for Chapter 11 bankruptcy protection at different times, beginning in September 2015, and were sold in separate auctions.
On February 18, Sabra Health Care REIT (NASDAQ: SBRA) unloaded Forest Park Medical Center at Frisco for $96.25 million to HCA North Texas, a subsidiary of HCA (NYSE: HCA). The REIT had paid $119.8 million to acquire the 54-bed hospital in October 2013. The hospital initially relied on out-of-network fees for procedures, but that revenue stream dried up as insurance companies created their own in-network contracts. The facility sought Chapter 11 protection in September 2015, and at the time of the sale to HCA North Texas, Sabra said it expected to see a loss in Q1:16 of $30 million to $35 million on its investments in the Frisco hospital, and an $18.5 million debtor-in-possession loan it provided to keep the hospital operating until it found a buyer. HCA reopened the hospital on March 31 as Medical City Frisco.
HCA North Texas also picked up the 84-bed Forest Park Medical Center in Dallas on May 31, for $135 million, from FPMC Realty Partners III and BT Forest Park Realty Partners. The outstanding balance on the Dallas mortgage loan before the September 2015 Chapter 11 filing was $110 million before interest, with $14.6 million in interest and fees, according to Sabra, the lender to FPMC Realty Partners. In a statement released on May 31, Sabra said it expects to fully realize all outstanding amounts upon closing of the sale, “which would result in a 10.4% annualized rate of return on our investment” and reduce its pro-forma leverage to 5.17x.
On April 27, Methodist Health System announced it would pay $17.9 million for the 54-bed Forest Park Medical Center in Southlake, even as it was bidding to acquire Forest Park Medical Center in Fort Worth. The purchase price includes $9 million for the hospital operator’s assets plus the assumption of $8.6 million in debt for a 51% ownership stake. The physician-owners would still hold a 49% interest.
By reaching this agreement, the Southlake hospital avoided a bankruptcy auction, since Methodist was the only party to sign a letter of intent. The facility’s landlord, GAHC3, owned by Griffin-American Healthcare REIT, provided the operator a $16.3 million line of credit during the bankruptcy proceedings, and will maintain ownership of the property. Griffin-American acquired the real estate in November 2014 for $128 million.
So what became of the Fort Worth hospital? Texas Health Resources, a large, faith-based not-for-profit health system, added Forest Park Medical Center Fort Worth to its stable of 27 acute-care and short-stay hospitals. The winning bid of $121 million included $116.5 million for the hospital and another $4.5 million to the operating company for the releases necessary to take full control and begin operations. In a separate deal, Texas Health purchased all the equipment at the facility. The hospital is expected to become licensed as a department of Texas Health Southwest Fort Worth, which is located less than five miles away.
Forest Park Medical Center in San Antonio (54 beds) went to its lender, Texas Capital Bank (NASDAQ: TCBI), for $58.2 million. In September 2015, Texas Capital Bank issued a notice of foreclosure after FPMC San Antonio Realty defaulted on a $68.3 million loan. The bank posted the facility for foreclosure again in October after it didn’t go to auction, at which point FPMC filed for bankruptcy protection to avoid being sold. The facility closed abruptly on October 15, 2015. The $58.2 million was the only bid made at the foreclosure auction, and is about $10 million less than FPMC San Antonio Realty Partners owed Texas Capital Bank and a small group of lenders. The facility was appraised at $94 million.
St. David’s HealthCare, which is majority-owned by HCA, acquired the Forest Park Medical Center in Austin on May 13. This hospital filed for Chapter 11 bankruptcy protection in January 2016, and had been empty since construction finished in 2015. St. David’s paid $135 million for the 146,381-square foot hospital, an adjacent 80,000 square foot medical office building and a 500-space parking garage. The hospital has 40 patient rooms, including 12 VIP rooms, 10 operating rooms, a six-bed ICU and an emergency department. Austin-based St. David’s intends to operate the facility as a specialty surgery hospital, which will be part of the campus of St. David’s North Austin Medical Center.
All that is left are lawsuits, including one filed by a group of physicians in Kansas City, Kansas, who raised some $4 million to launch a Forest Park Medical Center there. It was never built, and allegedly, some of their original investment money has gone missing.