The Lakewood, NJ-based Diversified Capital was wired the funds yesterday, immediately after the Tarrant County Commissioners Court approved the acquisition of the 8.2-acre asset at 1401 S. Main St. The property abuts John Peter Smith Hospital, which has been in an expansion mode and needs additional parking. County officials say the site's use will be determined later.

"We were working a $30-million redevelopment, but as construction costs started to rise in the past three years, the risk-reward ratio was moving against us," Bruce Stern, vice president of business development for Diversified Capital, tells GlobeSt.com about the off-market deal. "When JPS approached us with a fair offer to buy the property as is, we decided to forego the redevelopment opportunity and take a healthy profit in a short period of time with no risk."

Stern credits G.K. Maenius, Tarrant County administrator, with putting buyer and seller together. "The county administrator really is to be commended for thinking out of the box to get this hospital back into use for the county," Stern says.

St. Joseph Hospital was the oldest facility in Fort Worth, built in 1883 by the railroad and operated since 1885 by the Sisters of Charity of the Incarnate Word in San Antonio to provide services for the indigent. It then transitioned to Columbia HCA, which closed it in 1995 and then sold it to Heritage Geriatric Housing Development Inc. that, in turn, lost it in a foreclosure sale to Diversified Capital.

The deal's chief stumbling block was modifying a deed restriction imposed by Columbia that barred use as a hospital. Stern says medical uses of some type will now be possible after five years.

"I am glad it is going to be used for health care because it is an extension of what we were doing," Sister Frances, one of two nuns who worked at the facility and who still live in Fort Worth, says in a press release issued by the county after the deal was funded.

Diversified Capital had completed due diligence for the redevelopment by the time JPS knocked on its door in April. Asbestos removal and demolition will take about $2 million, according to Stern. "We were able to provide JPS with a tremendous amount of due diligence and I think that made the decision easier," he says. "We had fully vetted the project."

Stern says the two-story parking garage alone would cost nearly $6 million to replicate. "The value they're giving to the taxpayers of Tarrant County, if they did nothing else, is they're acquiring 550 parking stalls that are immediately available," Stern points out.

Diversified Capital got the property for less than $2 million at a public auction on the courthouse steps. The plan was to redevelop it with residential, retail and office space. "It makes us feel good that the property will be back in the hands of the people carrying on that mission of St. Joe's," Stern says.

Since Diversified bought the site, JPS has completed a tower on the adjacent land as part of a large-scale expansion of its campus. The plan includes a 221,000-sf hospital, 100,000-sf medical office building and 1,000-space parking garage. The pickup from Diversified gives JPS unobstructed control of its blocks.

Stern says the 1031 exchange proceeds most likely will be redeployed in Texas. "We'd love to find another investment opportunity in Tarrant County," Stern says. "Nothing would make me happier to find a redevelopment opportunity in Tarrant County--and the more challenging, the better."