The high-end Forest Park Medical Center concept may have failed as a business strategy, but it’s garnering interest in bankruptcy.
Sabra Health Care REIT Inc., which eventually invested $284.4 million in the hospitals, felt that the tony feel of the hospitals with natural lighting, resort décor and private rooms would attract an upscale clientele. It did, but because the hospitals focused on private insurance patients and eschewed – at least initially – Medicare or Medicaid patients, they did not have the volume of other similar hospitals.
Forest Park Medical Center first opened in Dallas in 2009, then opened the Fort Worth location last year in the new Clearfork development. There were also locations in Southlake, Frisco and San Antonio.
The Dallas and San Antonio locations have closed and the locations in Fort Worth, Southlake and Frisco all filed – separately because they were chartered individually – for Chapter 11 bankruptcy. The Frisco location was sold for $96.25 million and taken over by Hospital Corporation of America and rebranded. The owner of the hospital in Southlake – Griffin-American Healthcare REIT III – owns the land and will sell the operational assets, but in Fort Worth the operating company and the owner of the real estate have field bankruptcy separately, entangling the sale in more legal hoops.
Forest Park Medical Center at Southlake LLC, meanwhile, has reached an agreement with Methodist Health System, through which Methodist will acquire substantially all of the hospital’s assets for $9 million in cash plus the assumption of certain liabilities, all totaling $17.6 million. The transaction, still subject to bankruptcy court approval, is expected to close by late May.
“From our first visit with the [Forest Park Southlake’s] board, to this moment, we have been impressed with the physicians and staff of the hospital. Southlake is a beautiful, growing city and region. If Methodist Health System is fortunate enough to partner with Forest Park Medical Center at Southlake, we believe the result will be a world-class hospital in which the community can take great pride,” said Methodist Health System President and CEO Stephen Mansfield in a news release.
While the fate of Forest Park Medical Center at Fort Worth may not be known until later this month, the bankruptcy court has approved bidding procedures for the sale.
The current owners of the operating company, Sabra Health Care, announced April 24 that the bankruptcy court had approved bidding procedures and an auction date of May 12 for the sale of FPMC Fort Worth Realty Partner LP’s real estate. FPMC is the borrower for the Forest Park Medical Center at Fort Worth’s construction loan.
The two bidders appear to be Texas Health Resources, based in Arlington, and Methodist Health Systems, based in Dallas, which owns the Mansfield Methodist Medical Center, according to court documents and people familiar with the proceedings.
According to Sabra, on April 20, 2016, FPMC and Texas Health Resources executed a purchase and sale agreement whereby, subject to bankruptcy court approval and customary closing conditions, THR will purchase the Fort Worth hospital and the medical office real estate for $112 million. The bankruptcy court approved this THR bid as the stalking horse bid in the auction process, which basically serves as a floor for all offers.
THR owns 24 hospitals, while Methodist’s only foray in Tarrant County was in Mansfield. If it acquires both Southlake and the Forest Park Fort Worth facility, it would greatly expand its presence on the western side of the Metroplex.
Other bids for the auction are due by May 10. If additional bids are received, an auction will take place May 12, with a hearing scheduled for May 19 to approve the sale to the successful bidder.
As of April 22, 2016, the outstanding principal balance on the Fort Worth construction loan was $60.8 million. Another $8.8 million of accrued and unpaid interest and fees remained outstanding, according to a Sabra news release.
“We are pleased with the continued progress on our Forest Park assets,” said Rick Matros, CEO and chairman of Sabra. “The outcome is happening as we have consistently said it would. Whether the stalking horse bid wins or not, we expect that the proceeds generated from the sale of the Fort Worth real estate will result in an approximately 12 percent return on our investment in the Fort Worth hospital.”
The Fort Worth location is a 54-bed acute care hospital, developed by the Neal Richards Group of Dallas.
In the Forest Park Medical Center at Southlake agreement, Haynes and Boone, LLP is serving as Forest Park Medical Center at Southlake’s legal advisors and FTI Consulting is serving as interim management and financial advisor. Methodist is advised by Phoenix Effect, LLC and VMG Health.