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Thursday, Mar 28, 2024

Second Investor Gets Involved in Hospital Sale

Shortly after the sale of Sherman Oaks Hospital to Prime Health Services Inc. was finalized in December, the company sold the financially struggling institution to Medical Properties Trust, which in turn leased it back to Prime for a period of 15 years, with a repurchase option. The transaction is somewhat uncommon, although some real estate investment trusts have been very successful in focusing on health care properties. Medical Properties Trust was formed in August of 2003 and began making investments in the second quarter of 2004. The company’s CEO, Edward K. Aldag, reported that with Sherman Oaks Hospital, the company completed almost $290 million in transactions. Since 2004, the company has invested slightly over $500 million. Medical Properties Trust has reported it expects to complete another transaction worth $10 million shortly, and will invest between $200 and $300 million by the end of this year. It paid $20 million to Prime for the hospital, which is what Prime initially paid. The company also plans to invest another $5 million in the hospital for improvements. Prime has an established history with Medical Properties Trust. Prime’s Chairman, Dr. Prem Reddy, built Desert Valley Hospital in Victorville, and in 2004 he took over Chino Valley Medical Center from bankruptcy. In 2005 he sold both facilities to Medical Properties Trust and leased both back on a long-term basis. Sherman Oaks Hospital officials and board members are hoping that new ownership will bring the hospital back from its financial precipice. For the past several years it’s struggled under the burden of more than $120 million in debt. Its operating margin grew worse over the past several years and the hospital has been unable to make the capital improvements necessary to attract more physicians and patients. This past year, the hospital lost over $5 million, but Reddy said that he expects to bring the hospital to at least a financial break-even position within a year.

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