[U]niversity of Vermont Medical Center is seeking state permission to make a $22.1 million property purchase in South Burlington.
The hospital has been leasing the two medical buildings, on Tilley Drive in the Mountain View Business Park, at a combined cost of more than $2 million annually.
In documents filed with the Green Mountain Care Board, hospital administrators said the cost of purchasing the property, including mortgage and operating costs, would almost immediately be lower than the costs of continuing the lease agreement.
“The project is purely a financial transaction. It is unrelated to the quality of patient care,” hospital documents say. “However, the financial savings associated with the project will free up financial resources for UVM Medical Center to continue to reinvest in patient care and quality improvement initiatives.”
The larger of the two buildings, at 192 Tilley, serves as UVM Medical Center’s orthopedic specialty center and includes related radiology services.
The building at 62 Tilley houses cardiology, cardiac rehabilitation, endocrinology and pain management services.
Both are owned by Burlington-based Pizzagalli Properties LLC, documents show. Under the terms of its lease agreement with Pizzagalli, UVM has an option to purchase the buildings.
The buildings are “two of our most expensive leased properties,” hospital administrators wrote. Base rent alone is $1.88 million per year, and there are building management fees and other leases on top of that.
UVM Medical Center will finance 85 percent of the purchase price. Even with the cost of borrowing factored in, “the cash flow for the buildings turns favorable in the second year after the acquisition,” when compared with the projected costs of continued leasing, documents say.
The annual mortgage payment of $1.65 million would terminate after 15 years, “substantially increasing the positive cash flow associated with the acquisition,” administrators wrote.
In requesting care board approval of a certificate of need for the purchase, UVM noted that the medical center in 2014 submitted a proposal for a much larger, $52.6 million acquisition in the same area. The proposal included four buildings, five vacant lots and another 38-acre parcel.
That application eventually was withdrawn.
Given that the hospital since has undertaken a $187 million inpatient facility upgrade and a $151.7 million health network medical records project, “after careful consideration, we have decided to substantially narrow the scope of the property acquisition in South Burlington,” administrators wrote.
The Green Mountain Care Board has given preliminary approval to UVM Medical Center’s request for an expedited review of the South Burlington proposal. A final ruling will be made after the public comment period expires.
Care board rules provide for a faster review when an application “is likely to be uncontested and the proposed project does not substantially alter services.”
