Hospital tries to buy bankrupt retailer's building

Filed under: Real Estate | Tags:,

Memorial Hospital had been considering adding new Wards – Montgomery Wards, that is. Hospital management received the nod of approval last week from the board of trustees to enter into negotiations to purchase the soon-to-be-vacant Montgomery Wards building at 2420 E. Pikes Peak Ave.

The discount retailer said Dec. 28 it was filing bankruptcy proceedings, announcing it would close 250 stores nationwide. The approximately 160,000-square-foot store has been holding liquidation sales for several weeks.

“Negotiations is kind of a nice term,” said Michael Schrader, executive director of Memorial Hospital. Schrader said the trustee who has been appointed by the bankruptcy court in Chicago to handle Wards’ assets has been notified of Memorial’s interest in “buying the building under certain terms,” but the trustee has not yet responded. Hospital officials assumed that “if there were assets they (Wards) were going to sell they would be interested in getting rid of those as soon as possible,” Schrader said Tuesday, noting they have been advised that bankruptcy proceedings are often protracted.

What Schrader and other Memorial officials didn’t know was that a bloc of major retailers that includes Sears, Target, Wal-Mart, Kohl’s and Home Depot announced Tuesday its intent to purchase all 250 stores at auction.

When contacted Wednesday, hospital spokeswoman Rita Burns said The Business Journal’s information was the first Memorial officials heard of the sale.

The deal raised about $400 million for Wards and $60 million for New York-based Kimco Realty Corp., which owns many Wards properties.

Chuck Knittle, vice president of corporate communications for Wards, said that no retailers have actually purchased the stores yet.

“Kimco was the high bidder – they were bidding for designation rights,” Knittle said. “They didn’t buy the real estate – they will market it and have the right to designate who they will convey it to.”

So, despite the intentions of much bigger investors, Memorial may not be completely excluded from purchasing the building, which was built in 1964 and has since undergone two major renovations.

Schrader said the hospital stood to benefit from the purchase on several levels.

“We currently lease or own, scattered throughout the city, about 140,000 square feet. Our intention would be to bring all our scattered, nonclinical services under one roof.”

Memorial’s finance and human resources departments are two examples of those services that could move into the building. An added benefit, he said, was parking. “We all park across the street at Printers Park (Medical Plaza). We run a bus service … about 18 hours a day,” he said, noting that the Wards facility would be on the Memorial Hospital bus line, making it convenient for employees who must commute between the various facilities.

Schrader was unable to disclose the price the hospital was considering offering for the building but said the hospital would eventually realize a cost savings as a result of the purchase. He noted that the hospital could expect to recoup its costs and break even within seven to 10 years, considering the cost of the building and renovations compared with the cost of renting.

If the hospital is unable to buy the building, it won’t necessarily seek other space.

“The information is (now) before the trustees,” said Memorial’s Burns. “We’ll have to wait and see what happens. Buying the building was a target of opportunity that arose unexpectedly. We don’t have a Plan B, other than to continue with what we have.”