In a move that took many local officials and hospital supporters by surprise, the owners of Bayonne Medical Center admitted last week that they had sold the building and land to an Alabama-based real estate investment trust for $58 million.
In a press release issued on Feb. 23, the management of Bayonne Medical Center said the hospital has entered into a long-term real estate agreement with Medical Properties Trust (MPT), a major United States real estate investment firm headquartered in Birmingham, Ala.
“MPT has now purchased the buildings and property in which the Bayonne Medical Center is located for $58 million, and the hospital has a minimum operating lease of 45 years,” according to the press release. “Under the terms of the agreement, the BMC refinanced its existing debt and, in addition, has access to a significant amount of capital for continued improvement in its infrastructure and essential projects, including a major remodeling of its emergency department.”
“These owners needed money to buy the new [Hoboken] hospital.” – Gary La Pelusa
MPT, according to the BMC release, has assets in excess of $1 billion and is a publicly traded trust, owning buildings and property of 58 other hospitals in 22 states across the U.S. It maintains long term leases with those hospitals.
“Our agreement with MPT is a win-win transaction for MPT, the BMC, and the greater Bayonne community,” the BMC’s management said in its release. “The success of this transition for MPT is tied to the continued success of Bayonne Medical Center and its efforts to grow the hospital’s operations. The hospital and community will benefit greatly from the investment in infrastructure and enhancements in care, for which the transaction provides capital.”
One of the major challenges facing the state budget and New Jersey hospitals, the release went on to say, is the need for capital, and the investment of outside capital in New Jersey by MPT is very significant and positive for the state.
“We hope this is part of a trend of outside capital believing New Jersey to be the great place in which to invest,” the BMC’s management said.
Some people connected with the BMC said this deal is likely tied to the financing of the purchase of former Hoboken University Medical Center, but could not elaborate as to how. Some principles of the BMC are in negotiations with the city of Hoboken for the purchase of the Hoboken hospital.
A spokesperson for Mayor Mark Smith said City Hall became aware of the purchase of the center by Medical Properties Trust only this past Friday, Feb. 25, when a real estate transfer came through the tax office.
“Bayonne Medical Center’s decision to leverage their property to acquire capital funds for infrastructure improvements and facility enhancements is not at all unusual,” said City Business Administrator Steve Gallo in an official release. “Many corporations avail themselves of these types of financing transactions. We are advised that the current owners of the facility will now become tenant operators under the terms of a 45-year lease. Further, they have assured us that they intend to continue to operate the facility, and they will use the funds to improve the Medical Center.”
BMC has been making money
IJKG Opco LLC, of Iselin, N.J., purchased Bayonne Medical Center in early 2008, spending about $33 million for the purchase and to absorb a significant portion of the hospital’s prior debt.
Although BMC formally announced bankruptcy in March of 2007, the acute care facility had been in trouble for several years – with the closing of the maternity ward in August of 2006 as one of the most visible signs of the decline.
Since then, BMC has made a profit, showing a $10 million gain in the first year of operation and more since. Some of this has come as a result of canceling money-losing contracts with popular insurance carriers.
A surprise to a lot of key people
Former Bayonne Councilman Gary La Pelusa, who was one of the key players in providing money from the city as a band-aid that allowed BMC to remain afloat until it was purchased by the current owners early in 2008, said he was startled by the news of the most recent sale and questioned what the $58 million will be used for.
He said he suspected the funds will be used to help purchase Hoboken University Medical Center, which some of the owners of Bayonne Medical Center are currently in negotiations to buy.
“This happened now for a reason,” he said. “These owners needed money to buy the new hospital, and it appears this is the way they will get it.”
Key to BMC’s turnaround were givebacks from the hospital’s unions, including a downsizing of the staff. The sale of the property has raised concerns about how much interest the out-of-state owners of the hospital property will have in maintaining the local hospital.
Jeanne Otersen, policy director for the New Jersey Health Professionals and Allied Employees, questioned why state officials were not notified of the sale.
Even key advisors to BMC’s current management said they had no prior knowledge of the deal, such as staff members for former U.S. Attorney Robert Torricelli, whose office provides lobbying and other services to BMC.
Al Sullivan may be reached at email@example.com.