Two medical buildings
put on market
The medical office buildings housing physicians at Kapiolani Medical Center for Women and Children, and Kapiolani Medical Center at Pali Momi could be sold in the coming months.
The sales are dependent upon the organizations' ability to find the right buyer, said Larry O'Brien, chief executive officer of the two facilities.
It would be the first time major inpatient health care facilities locally will undertake such a real estate transaction.
O'Brien said that like a growing number of hospitals, the organizations are having to look at ways to raise capital to fund a variety of construction, renovation and capital improvement projects.
After looking at its long-term plans, O'Brien said the organizations recognized they would need to raise a lot more capital to fund a variety of projects, which range from expanding emergency room and operating room facilities at Pali Momi to creating more space at the Women and Children's facility to house its long-term patients.
"I think all the facilities, if you look at the trends, are going to need some major capital," he said.
On the mainland, such sales have become increasingly commonplace, he said.
Given increased costs of providing medical services, the purchase of new technology and the projected future medical needs of the community, declining revenues will not be enough to cover all that is needed, O'Brien said.
"Health care is not generating enough capital so we are trying to anticipate in the next year what our facilities are going to need to look like," he said.
Physician office buildings adjacent to medical centers in many major cities have been built by hospitals, who then act as landlords and rent office space to doctors practicing at their facilities. Such is the case at Hawaii's other hospitals.
O'Brien said he doesn't yet know how much the properties would be worth but indicated the organization would retain title to the land underneath the buildings.
"We don't know yet in terms of value because we've just started talking to people," he said.
But whoever buys the buildings would need to have experience in similar ventures because of the nature of the health care business and physician needs, O'Brien said.
In the case of the Kapiolani Women and Children's facility, the hospital would also be a major tenant if the building is sold, because part of the hospital occupies about five of the 11 stories in the building. In that instance, the organization would ideally like some kind of partnership, O'Brien said.
Kapiolani also occupies some space at the six-story Pali Momi physician office building, but is more of a minor tenant, he said.
O'Brien said he has already met with physicians at both buildings to talk about the plan.
"We know they're nervous," he said.
O'Brien said he's not sure how long it will take to find the right buyer, or even if it's possible to find the right partner or investor.
"It could be anywhere from two to three months or it could take eight to nine months. It could also be something we don't end up doing," he said.