SPRINGFIELD, MO., AND EDMOND, OKLA. — United Trust Fund (UTF) has completed two build-to-suit/sale-leaseback transactions with a total value of $203 million with Sisters of Mercy Health System. The properties include a 196,000-square-foot to-be-built orthopedic hospital in Springfield, as well as a 225,000 square foot to-be-built medical office building in Edmond, for which UTF simultaneously provided the capital.
Both of the transactions were structured as a forward funding build-to-suit/sale-leaseback, and the development cost is $111 million for Springfield and $92 million for Edmond.
Sisters of Mercy is one of the largest Catholic Health Systems in the U.S., and while they had a builder, they had other demands, according to Paul Domb, asset management with United Trust Fund, including:
- Funding of construction at low cost of capital;
- To sign a lease that would begin upon completion of construction at pre-determined rents based upon today’s low cost of capital;
- Immediate close;
- UTF to pay for everything in order to achieve favorable accounting treatment; and
- Certainty of closure.
“There are companies that understand and view this structure as a cost effective and balance sheet friendly means to expand their presence without any outlay of capital,” says Domb. “The result of this innovative sale leaseback is two brand new facilities where, how and when they want it. It is not only a trend due to the current low interest rate environment, but also a tried and true method. UTF has funded many billions of dollars into this sale-leaseback structure for more than 40 years.”
This unique and creative arrangement provided Sisters of Mercy construction financing at a very low cost, off -balance sheet treatment, along with a long term, low cost of leasing in accordance with their corporate objectives.
“Not only did we close on schedule, but we were able to save Sisters of Mercy a significant amount of money. UTF’s priority in any deal is to meet or exceed the demands of our clients,” added Fred Berliner, director of acquisitions for United Trust Fund.
— Dan Marcec