H2C Leads Real Estate Monetizations for Yuma Regional Medical Center
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About Yuma Regional Medical Center
Yuma Regional Medical Center is the largest primary care and specialty care medical group in Yuma County. What began in 1958 as a 75-bed community hospital has now become a 406-bed acute care facility that offers comprehensive, state-of-the-art medical care and services to the residents of Yuma and the surrounding communities. The System employs a staff comprised of 2,400 people, of which over 550 are medical practitioners. YRMC’s primary value is “Patients Come First” and its approach to care is Patient- and Family-Centered. The advanced medical care and treatment options offered to patients have brought YRMC national recognition. The System generated operating revenues of $528.2 million in fiscal year 2019. Learn more at www.yumaregional.org.
About H2C Securities Inc.
H2C is a strategic advisory and investment banking firm committed to providing superior advice to healthcare organizations and related companies throughout the United States. H2C’s professionals have a long track record of success in healthcare mergers and acquisitions, capital markets, real estate, and restructuring transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value.
Securities and services offered through H2C Securities Inc., member FINRA/SIPC, a registered broker-dealer and an indirect subsidiary of Fifth Third Bank, National Association. All rights reserved. Securities and services offered through H2C Securities Inc.: Are Not FDIC Insured; Offer No Bank Guarantee; May Lose Value; Are Not Insured by any Federal Government Agency; Are Not a Deposit.
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NEW YORK - Hammond Hanlon Camp LLC’s (“H2C”) real estate team served as the exclusive advisor to Yuma Regional Medical Center (“YRMC” or the “System”) on the monetization of an 11-property healthcare real estate and administrative office portfolio (the “Portfolio”) located throughout greater Yuma, Ariz.
The Portfolio totaled 266,407 square feet and included eight medical office buildings (“MOB”) and three non-clinical properties. YRMC entered into a lease for all 11 properties. Lease terms ranged from five to 20 years, with a weighted average lease term of 14 years. Nine properties in the Portfolio are located within two miles of YRMC’s hospital campus. The eight clinical MOBs featured a diverse service mix, including cancer care, women’s health, outpatient surgery, primary care, pediatrics, laboratory, and urgent care.
YRMC is a 406-bed, not-for-profit hospital and healthcare organization located in Yuma, Ariz., that benefits from a unique market position as the only acute care provider within a 65-mile radius. The Portfolio monetization coincides with the System’s ongoing strategy of further strengthening its balance sheet through extracting cash tied up in real estate and reinvesting in its core area of business to provide the highest level of health care.
In addition to the Portfolio, H2C led the System’s monetization of its staff housing complex, a seven-building, 84-unit apartment community, through a partial sale/leaseback to a regional multifamily investment company. Known as “Sonora Sunset,” the seven-building desert-style community was developed in 2004 and is used as a key “recruiting tool” to house nurses, residents, and seasonal providers due to Yuma’s seasonal population boom, when the city’s population grows by 40 percent for five to six months each winter. Through the transaction, which closed for $7.925 million, YRMC was able to generate cash from a non-core asset, offload management responsibilities, mitigate its responsibility for capital expenditures, and gain flexibility in its revolving need to lease and occupy units.
“As a result of H2C’s experience and competitive marketing process, we were able to maximize sales proceeds, shed responsibilities of real estate ownership, and achieve a positive impact to our financial statement,” said David G. Willie, CFO at YRMC. “Owning real estate in specific locations used to dictate where we provided services, but going forward, we will be more nimble to locate services where needed and not just because we own a physical building.”
Through a highly competitive, thorough, and disciplined process, H2C attracted a number of submissions for the Portfolio from a diverse group of investors—both regional and national. The structure of this transaction enabled YRMC to tailor its lease terms by property and retain strategic control over key assets through ground leases while obtaining optimal sale terms. The transaction comes at a time when many health systems have sought to optimize real estate footprints and position themselves for success utilizing an “asset-light” strategy.
“YRMC is a forward-thinking and leading provider of healthcare that has embraced an ‘asset-light’ approach to its real estate, preferring to lease, not own, buildings. This approach provides the System ultimate flexibility without sacrificing control and enabled the System to extract cash from its real estate portfolio at a time when pricing is at record levels,” said PJ Camp, Managing Director at H2C. Email PJ.
H2C Vice President Matthew Tarpley added, “While the Portfolio wasn’t located in a Top-50 MSA, there was no shortage of interest, as investors were attracted to the opportunity by having a chance to partner with a well-respected and strong regional health system. The diversity among asset types within the Portfolio enabled us to maximize value by leveraging a diverse group of investors and ultimately bring this to a close with an institutional healthcare real estate firm.” Email Matthew.
The transactions followed a Developer Selection Process conducted by H2C that resulted in the signing of a development agreement by YRMC. The System selected a developer to build and fund a pipeline of medical office buildings and a clinic as it optimizes its real estate footprint.
Notably, the closing marked H2C’s fifth medical office portfolio transaction closed in 2020.