Major Carter Validus REIT Tenant to Declare Bankruptcy
Carter Validus Mission Critical REIT Inc., a publicly registered non-traded real estate investment trust, disclosed that one of its major tenants, Bay Area Regional Medical Center LLC, is closing its operations this week and filing for bankruptcy.
Carter Validus Mission Critical REIT Inc., a publicly registered non-traded real estate investment trust, disclosed that one of its major tenants, Bay Area Regional Medical Center LLC, is closing its operations this week and filing for bankruptcy, according to a filing with the Securities and Exchange Commission.
Bay Area Regional Medical Center is the sole tenant of the $200 million general acute care hospital that shares its namesake.
Carter Validus Mission Critical REIT purchased a 60 percent interest in the medical facility for nearly $119 million in late 2014 and committed an additional $35 million for a future build-out. The property’s developer, an affiliate of Medistar Corporation, retained the remaining 40 percent interest in the 370,000-square-foot property.
On Friday, Bay Area Regional Medical Center CEO Stephen Jones Jr. informed the hospital’s 900-person staff that it will be closing its doors this Thursday following an inability to overcome “significant hurdles with managed-care [insurance] companies.”
Carter Validus Mission Critical REIT said that it is “actively communicating” with Bay Area Regional and will seek all rights and remedies to enforce the lease obligations, as well as any other agreements associated with its investment. The REIT also plans “to pursue all avenues to maximize stockholder value, which may include sale of the property or leasing of the building to a new tenant or tenants.”
Bay Area Regional invested approximately $200 million during the past five years during the hospital’s construction and operation, and plans to work with lenders on an orderly closing process, including the payment of its payroll obligations.
Bay Area Regional was the first hospital in Texas to achieve Center of Excellence for Hidden Scar Breast Surgery, Primary Stroke Center accreditation, and a Level III Trauma designation.
According to the SEC filing, Bay Area Regional’s Southeast Houston market share in the fourth quarter of 2017 was 12.6 percent, which ranked second to HCA’s Clear Lake Regional Hospital with a 36.6 percent market share.
Bay Area Regional Medical Center’s market share outpaced Memorial Hermann Southeast Hospital, Houston Methodist’s St. John’s Hospital, and UT Medical Branch Hospital, three large healthcare systems in the Houston market.
Memorial Hermann, Houston Methodist, and HCA Gulf Coast will host job fairs this week for the laid off hospital workers who were reportedly “blindsided” by the news, and patients are in the process of being moved to nearby hospitals.
Carter Validus Mission Critical REIT invests in net leased data center and healthcare assets and oversees a portfolio of 66 properties (3 data center and 63 healthcare properties) purchased for approximately $1.1 billion. The company’s offering, which was declared effective by the SEC in December 2010, closed in June 2014 after raising more than $1.7 billion in investor equity.
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