By a 3-2 margin, the Dallas County commissioners approved an amendment to the sale of the former Parkland Memorial Hospital on Tuesday. As it stands now, developer Sam Ware of Dreien Opportunity Partners is set to finalize purchase of the hospital next month with plans to turn it into a mixed-use campus.
The deal, Parkland says, is very favorable to the county hospital economically and will allow it to build a new clinic and garage on its current campus.
However, commissioners Elba Garcia and John Wiley Price disagreed, voting against approval of the amendment. Garcia and Price advocated for Parkland negotiating for more favorable terms, such as free parking. The narrow passage of the amendment (County Judge Clay Jenkins and commissioners Mike Cantrell and Theresa Daniel voted in favor) did not surprise Ware.
“When you go and sell of one of your largest assets, there will be varying opinions,” Ware says. “It’s important that you’ve got a diverse board [of commissioners]; it’s representative of your constituents.”
Says Paul Leslie, Parkland general counsel: “We’re very pleased with the approval of the amendment to the original agreement. When we talk about something that’s good for Parkland, it’s good for Parkland’s patients … and taxpayers.”
The amendment includes three elements that separate it from the initial agreement: parking solutions, additional compensation, and economic security.
Between the time of the initial agreement and Tuesday’s amendment, Parkland realized its increased parking needs and negotiated with Ware to lease 560 parking spaces at a rate of $3.75 per spot, a steal for anyone familiar with parking in central Dallas. The former Parkland campus has about 3,000 parking spaces total.
Secondly, the original purchase price of $82 million increased to $83.3 million. “I can understand that people think it has greater value now than it did eight months ago [under the original agreement] with our creative re-purposing,” Ware says.
Lastly, the structure of the deal changed from its original format, which was a typical payment-for-title structure. Under the new amendment, Ware will pay $72 million of the $83.3 at the time of closing. The remaining $10 million will be financed for one year, with an interest rate of 10 percent. As collateral, Parkland will hold the title to 5 of the most valuable acres within the 38-acre campus.
Though there will be cash flowing both ways—Parkland is also leasing back about 400,000 square feet within the old campus for 36 months—Leslie says the deal is a win for Parkland. “This whole transaction is intended to generate resources for Parkland management to build a new clinic and additional parking on our side of street by the new hospital,” Leslie says. The deal furthers Parkland’s mission to convert resources into value, and put that value back into the hospital, he says.
And the sale-leaseback—though Parkland’s rent is about 30 percent of market rates, according to Ware—gives Ware some options. “This short-term sale-leaseback is a real benefit to us,” Ware says. “Having NOI [net operating income] coming in gives us time to perfect the product type.”
Ware says the deal will be final next month, at which time he’ll start soft demolition on the parts of the campus not occupied by Parkland.
“We want to make sure we have a harmonious relationship [with Parkland] because we’re going to ask them for things we need, and they’re going to ask us for things they need,” Ware says. “When you have a good working relationship, that’s easier.”