The Real Deal New York

Montefiore gets $1.2B in bonds

Dormitory Authority of the State of New York issued more than half of the bonds
By Danielle Balbi | August 13, 2018 07:00AM

110 East 210 Street (Credit: Montifore Health System)

UPDATED, Aug. 13, 9:00 a.m.: Montefiore Health System just landed a $1.2 billion financing deal.

The Dormitory Authority of the State of New York (DASNY) issued $685 million in bonds on a portfolio of the hospital system’s facilities in the Bronx, according to records filed with the city on Friday. And Montefiore issued $482 million in bonds on its own.

DASNY provided a series of 2018 30-year revenue bonds, which were used to pay down roughly $240 million in previous bonds from the Federal Housing and Administration and the Government National Mortgage Association, and reimburse MHS for $400 million in capital projects across its facilities, documents show.

“By offering a hybrid tax exempt/taxable financing structure, we are better able to deliver for our clients when they head to the market,” Gerrard Bushell, president and CEO of DASNY, said in prepared remarks.

The new bonds will also add about $600 million of cash to Montefiore Medical Center’s balance sheet, according to a report from Moody’s Investors Service.

Montefiore Medical Center is a subsidiary of MHS and consists of three facilities with 1,558 beds in the Bronx, including the Moses Campus at 110 East 210th Street. The parent organization runs 11 hospitals.

A spokesperson for the hospital system said that deal restructures most of its existing debt and, “embarking on this path positions Montefiore with a debt structure appropriate for health systems of its scale.”

The medical center has rapidly expanded in the last decade. It purchased Our Lady of Mercy Medical Center, integrating it into its Wakefield Campus, in 2008. It opened several facilities in Westchester in 2013 and now has a presence in Orange and Rockland counties.

Moody’s, which gave bonds a rating of Baa2, pointed to some of MHS’ affiliated hospitals that may experience losses despite state funding. The report cited “atypically high levels of Medicaid” and “a heavily unionized workforce” as ongoings pressures on the hospital system’s margins. Meanwhile, its teaching school, Albert Einstein College of Medicine, will require ongoing cash support.

In January, a subsidiary of PGIM Real Estate Finance provided nearly $300 million in FHA-insured financing for Montefiore’s various locations throughout the Bronx, property records indicate.

In May, Montefiore expanded its footprint in Simone Development Companies’ Hutchinson Metro Center in Pelham Bay to 453,000 square feet.

Update: This story has been updated to include a comment from DASNY, Montefiore, as well as further details of the financing package.