Capital Medical Center property sale, lease details emerge

Capital Medical Center, a 110-bed hospital in west Olympia.
Capital Medical Center, a 110-bed hospital in west Olympia. Capital Medical Center

The local details of a recent business transaction between the parent company of Capital Medical Center in west Olympia and an Alabama-based real estate investment trust have been revealed in public documents disclosed with the state Department of Health.

The documents shed light on an eye-popping sale and lease-back arrangement for the west Olympia hospital, including a $100 million purchase price.

A spokeswoman for the hospital deferred comment to a corporate spokeswoman, who referred The Olympian reporter to a news release.

The larger business deal between the holding company of Capella Healthcare — the Tennessee-based parent company of Capital Medical Center — and the REIT, Medical Properties Trust of Alabama, was finalized Sept. 1.

In that deal, Medical Properties paid $900 million in cash to acquire Capella’s hospital properties as well as a minority ownership position.

Related to that deal, a Sept. 9 letter of intent “in connection with the proposed sale and lease back of the real property and assets of Capital Medical Center” was submitted to the state Department of Health’s certificate of need program.

The letter of intent triggers a review process by the state, said Janis Sigman, the certificate of need program manager.

The state does this to ensure that the new owners will provide quality care, are financially viable and are meeting their responsibilities for providing regional charity care, she said. A more detailed application about the sale is expected within six months of receiving the letter of intent, Sigman said.

The letter of intent essentially breaks down the purchase and lease-back arrangement between the buyer, Medical Properties Trust — identified as MPT of Olympia-Capella LLC — and the Capella subsidiary that owns the hospital.

The proposed purchase price in the Sept. 9 letter was $100 million, while a proposed annual sublease “starts at $8 million a year.”

“Capital Medical Center will continue to provide the same services presently provided at Capital Medical Center, including but not limited to, the provision of both inpatient and outpatient hospital services,” according to the letter.

Capella President and Chief Executive Michael Wiechart said in a statement that the $900 million sale proceeds will allow the company to “take care to the next level” and “fuels our longterm growth plans.”

As for spending plans at Capital Medical Center, spokeswoman Julie Leydelmeyer said earlier this year that the hospital wants to increase its operating rooms to seven from five, a project estimated to cost $16 million, she said.