About the Hospital Land

The SMMC hospital grounds occupy approximately 35 acres, of which 19 acres are carved out to collateralize the HUD-backed 242 Hospital Mortgage. Thankfully back in November of 1999, Jack and Nancy Kern, along with a few other named “donors,” in furtherance of the charitable purposes of Fayette Memorial Hospital (FMH), and in memory of Miles L. Moss and Edward H. Moss made a magnanimous donation, via a Gift Deed, of 35.0 acres of land to FMH. It appears they also conveyed an additional 38.68acre adjacent tract to FMH via a General Warranty Deed. In February of 2002, Fayette Memorial Hospital, a Texas 501(c)(3) non-profit company, transferred both tracts of land to St. Mark’s Medical Center (SMMC), also, a 501(c)(3). Under IRS guidelines for tax exempt entities, upon dissolution, assets of the non-profit entity can only be transferred to another non-profit entity. From public records it is impossible to know if there was any consideration paid to FMH, but it is unlikely that funds were part of any consideration as they would then just have to give those funds to another non-profit entity. Should SMMC default and be forced to dissolve, they too will have to convey these assets to another 501(c)(3) entity.

What about the professional building? Well, that gets complicated. Apparently in April of 2005, St Mark’s Medical Center, a not-forprofit entity (Lessee), entered into a 99-year ground lease with MOB 2000, LTD, a forprofit Texas Limited Partnership (Lessor). MOB 2000 (Assignee) then assigned that lease to Two St. Mark’s MOB, LLC, a for-profit limited liability corporation (Assignee) for the specific purpose of developing a 31,000 square foot for-profit professional medical office building benefitting Two St Mark’s MOB, LLC. It appears GE Commercial Finance Business Property Corporation made a 5-year loan of $5.1 million to Two St. Mark’s MOB, LLC to build the professional building, and documents suggests that loan matured in September of 2021. It is unclear if or how it was paid off. The ground lease involves two tracts carved out of the 35-acre gifted parcel, one tract being 3.022 acres situated under the Medical Office Building, and a smaller .126acre tract closer to Hwy 77. In June of 2005 SMMC issued a Memorandum of Ground Lease. The ground lease has at least two interesting provisions. First, the Lessee is to pay SMMC a payment of just $9,750 for the lease annually for 30 years, thereafter escalating at 2.5% per year. For those without a calculator handy that is $812.50 per month to lease three acres on Hwy 77. Further, SMMC gave Two St. Mark’s MOB, LLC a Right of First Refusal to lease 15.04 acres for just $750 more a year. Fortunately, that option expired in 180 months which was May of 2020, and there is no recorded evidence that the option was exercised. The second interesting component of the land lease, is that SMMC signed a Master Lease Vacancy Agreement agreeing to lease any vacant space not leased at the end of construction from Two St. Mark’s MOB. SMMC is still bound by that agreement. That makes the 5-year development pro forma for a for-profit entity, built on almost free land, a no-lose situation. Then in September of 2016, Two St. Mark’s MOB, LLC assigned their leasehold interest to Rainier St. Mark’s Investors, LP, again a Texas for-profit limited partnership. The SMMC IRS 990s show in the Highest Compensated Independent Contractor section, a possible vacant lease payment of $522,392 in 2017, and payment of $522,392 again in 2018 to Rainier St. Mark’s Investors, LP. In January, February and March of 2022, under a series of amended Purchase and Sale Agreements, Rainier St. Mark’s Investors, LP transferred their right, title and interest in the land lease to Apex Investment Group, LLC., a limited liability for-profit company. The value of the Purchase and Sale Agreement, which is not subject to public disclosure is unknown.

SMMC still has almost 12 acres of unincumbered land as part of the original Gift Deed. The 38.68 acre tract of land to the south has recently sold. For those that are not familiar with this property, there are several negative aspects to the property zoned commercial, including a 3-acre LCRA power facility carved out of the eastern boundary of the parcel, and from that a large high tension power line that bifurcates the parcel and cannot be relocated. From aerial imagery, it also appears to have at least one other power easement crossing from the power station to the southwest corner that would have to be relocated. The aerial imagery also shows a water tower on the southeast corner that apparently has an easement that will likely result in that portion of the property just being transferred to the city. These features make the parcel very difficult to develop and commercial zoning prohibits residential construction. The Fayette County Appraisal District assesses the property at $661,940.

According to county clerk filings, this property was recently sold to CR 230, LLC. Documents show that a short term loan for $350,000 was initially established on May 17th, 2023 with a maturity date of October 26th, 2023, a little over five months. Records then indicate on May 23rd, 2023 a Warranty Deed was conveyed to CR 230, LLC, for additional good and valuable consideration. Then on the following day, May 24th, 2023, the lien on the land securing the original $350,000 note was released. The Secretary of State filing for CR 230, LLC. and the Release of Lien filed in the clerk’s office show that Mr. Alan Roberts is the signatory.

I believe the total additional consideration paid for this land, including the initial $350,000 loan, was at fair market value. A similarly sized parcel to the North of the hospital recently sold for a similar amount, even though it has frontage on three sides and none of the power easement challenges. For those that do not know Mr. Roberts, I am told he and his wife are long term supporters of the hospital all the way back to when it was Fayette Memorial Hospital, and it is my understanding that the Roberts played a significant role in raising funds necessary to construct SMMC back in 2005. I have personally delved into this transaction in some detail and I believe this transaction is above board, and was done to provide funding to hospital operations, fully in support of the hospital. The criticism on this particular transaction of both SMMC and Mr. Roberts is unfair and undeserved.

Sam Wilson is involved with the group planning to take over operation of St. Mark’s this fall.