PRINCE FREDERICK, MD-At healthcare real estate conferences throughout the country, it's rare for news to break during the panel discussions. For the most part, healthcare real estate professionals or health system executives who take part talk openly about past, publicly announced deals or their real estate strategies – not pending deals.

However, during a session at a recent healthcare facilities conference in San Francisco, one panelist, a hospital owner's representative, revealed that the health system was in the midst of selling, otherwise known as monetizing, a portfolio of medical office buildings.

That owner's representative, Monty Suder, is with the 128-bed Calvert Memorial Hospital.

Panel moderator Scott Evans, an investment banker with Knoxville, TN-based Realty Trust Group who is representing Calvert in the transaction, said: “You're in the middle of a very significant portfolio transaction right now. It's not completed yet so this is about as real-time as we can get.”

The panel session, “Financing Models for Healthcare Real Estate,” included other health system executives who talked about why their systems decided to sell healthcare real estate in recent years.

Suder reported that Calvert's reasons for monetizing six MOBs included that:

• It enables the system to focus on its core business.
• It reduces the risk of Stark Law violations and inurement issues.
• It provides cash for future capital needs without jeopardizing its bond rating.
• It pays off an existing MOB mortgage.
• It improves capital-to-debt ratios.

The hospital has a 72% market share in its primary area and ratings of “A3” from Moody's and “A” from Fitch. The portfolio has 199,700 square feet and is 98 % occupied.

"When we started the decision to monetize, it was all about applying capital to our core business,” Suder said. “Our core business has never been real estate investment; it was merely to provide space to our physicians.”

He further added that once the decision was made to sell, it was up to the hospital's board to find a partner both to own the buildings and to help fund future capital projects. “Everybody had to be happy or none of us would be happy,” Suder noted.

Suder traveled to healthcare real estate along the East Coast owned by potential buyers of the Calvert Memorial portfolio, perusing the buildings' upkeep and talking to tenants. “What I discovered was that the buildings owned by some of these public or private companies are maintained better than when the hospital owns them,” he reported, “and I thought we maintained our buildings pretty well.”

As Calvert Memorial prepares to sell the portfolio, it is hoping to use some of the proceeds to expand its campus, perhaps having additional buildings developed or financed by its new third-party partner.

“Our long-term strategic plan for our campus is to do assisted living, independent living and a nursing home,” Suder said. With its healthcare real estate near full capacity, the system might need more medical office space in the future as well.

John B. Mugford is the Editor of Healthcare Real Estate Insights™, the nation's first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.