"It is a win-win for both of us," Cardenas says of the sale. "It solved some immediate capital needs that we had and the space needs that Children's had… This was good timing on both sides. We are excited by the opportunities it provides both of us."
While Cardenas says TMC does not have plans to sell other buildings as part of its long-term capital strategy, she adds, "You can never say never."
Hospitals more often sell medical office buildings to healthcare real estate investment trusts (REIT) rather than to directly to another hospital. In this arrangement, the seller typically leases some of the space back from the REIT so that the physician practices housed within can remain in place.
In 2008, Charlotte, N.C.-based Carolinas HealthCare System, an integrated system with 7,460 licensed beds and an annual budget exceeding $7.7 billion, sold several buildings to Healthcare Realty Trust, a Nashville-based REIT.
"We went through a process that involved all the stakeholders and carefully selected which properties to monetize," says Greg Gombar, Carolina's executive vice president and CFO. "… [We] monetized 15 medical office buildings in a tough real estate market, providing over $160 million."
"The capital raised was not specifically assigned, but went to fund the overall capital budget," he added, noting that some of the money went toward IT initiatives and building renovation projects.
Carolinas HealthCare does not have immediate plans to sell more buildings to generate capital, due in part, to the proposal for a new lease accounting standard issued by the Financial Accounting Standards Board and the International Accounting Standards Board in mid-May.