64030 Hwy 434 | Lacombe, Louisiana
The What and The Why
The Louisiana Heart Hospital (“LHH”) in Lacombe originally opened in 2003 as an acute care hospital specializing in cardiovascular care. Expansion work was completed in 2009. The main hospital building is now comprised of approximately 205,000 square feet and is flanked by medical office buildings on each side (note: the two MOBs were not a part of this acquisition), all of which is situated on a roughly 25-acre site. LHH filed for bankruptcy protection on January 30, 2017. In its last few years of operations, LHH was averaging losses of about $1.5M per month. The business, as such, was no longer viable or sustainable.
This property is strategically situated just off I-12, between Slidell, Mandeville and Covington. LHH is a modern healthcare facility, which was built to hurricane-proof specifications and is sufficiently elevated as to not be in danger of flooding – i.e. this location could also serve as an evacuation facility, if necessary.
In bankruptcy court, there is typically a judge, multiple attorneys, one or more debtors, and usually a multitude of creditors. All parties (other than the judge) feel as though they have some rightful claim to whatever the asset is and, at least on the part of the debtor, there’s typically an emotional attachment as well. However, one must recall that the asset has gotten to this stage because of a long period of mismanagement and/or poor decision making. The first challenge was navigating and negotiating through the court process. The second challenge was coordinating and exercising our normal due diligence processes in less than 30 days.
Our Strategy and Results
Gather as much information as quickly as you can and when you decide to go … GO!
After performing our standard due diligence, Stirling Properties (via Stirling Medical Lacombe, LLC) submitted a purchase offer with Solic – the court-appointed agent for the debtor – in the Eastern District of Louisiana federal bankruptcy court in early March of 2017 as the Stalking Horse bidder. We acquired this hospital and roughly 25 acres of land in May of 2017. We immediately executed a long-term lease with Ochsner to take the entire facility on a NNN basis. Subsequently, Ochsner partnered with Slidell Memorial Hospital and St. Tammany Parish Hospital to operate this facility.
We also coordinated with the St. Tammany Parish (STP) President and her team members during our brief due diligence period to make sure we were following proper protocol and to inform STP of the economic impact of our plans and their potential 20-year tenant(s) in the neighborhood.
The replacement cost of this type of facility, at this location, we estimated would have easily been north of $100M. We were able to get the entire property ‘as is’ for $23M. In teaming up with Ochsner, Slidell Memorial Hospital, and St. Tammany Parish Hospital, we were able to bring multiple healthcare networks and service providers together in one centralized location. This facility will no longer be utilized as a traditional acute care hospital. Current plans are to divide up the 205,000-square-foot building with the following uses: a) a 30-bed long-term acute care unit to provide intense specialized care for patients with serious medical conditions; b) a 25-bed skilled nursing facility to provide highly skilled medical care for patients working through a short-term rehabilitation or for those suffering from a chronic condition who need longer-term care; c) a 30-bed inpatient rehabilitation unit for patients who need intensive rehabilitative care in an inpatient setting to help them regain the highest degree of independence; and d) an occupational rehabilitation area.
Moreover, and of greatest significance here, we were able to bring this tremendous real estate asset back into commerce, thereby supporting the workforce and essential services of the entire Lacombe community … well into the next generation!