Waiver paves way for Wellmont to sell building on Hawkins hospital campus

Jeff Bobo • Feb 23, 2009 at 12:00 AM

ROGERSVILLE — A significant percentage of Hawkins County commissioners are still opposed to relinquishing the county’s reversionary right to 1.6 acres on the Hawkins County Memorial Hospital campus, clearing the way for Wellmont Health System to sell an office building there.

But the proposal garnered three more votes than it did when it failed in December and was approved Monday evening by a tally of 13-8.

In December, Wellmont sent one attorney to try to explain the reason and the impact of the proposal, and it failed by a single vote. Monday night, Wellmont sent two attorneys to try to explain the situation — but some commissioners admittedly were still confused.

The first Wellmont attorney to address the commission was Gary Miller, who pointed out that Wellmont has invested $10 million in the Hawkins County facility since being awarded a 40-year lease of HCMH in 2000.

Part of that investment was a new medical building completed in 2001, which is the same building Wellmont now plans to sell to Grubb and Ellis Real Estate Investment Trust for a reported $2.3 million.

HCMH owns the entire 9.8-acre hospital campus and original buildings and is governed by a board of directors independent of Wellmont.

Wellmont owns the two buildings it has constructed on campus since 2000 and holds the lease on the rest of the hospital campus including the ground beneath its two new buildings.

When Hawkins County deeded the property to HCMH in 1995, it included a reversionary clause in the deed which states that if the property is “sold by a second party or no longer used for a hospital” the title automatically reverts back to Hawkins County. That reversionary clause carried over when Wellmont leased the facility in 2000.

The resolution approved Monday removes the reversionary clause from only the 1.6 acres that the medical building being sold sits on. That was a term demanded by Grubb and Ellis.

HCMH still owns the land, no matter what happens to the building. Wellmont is selling the building and subleasing the property the building sits on.

Contrary to what the commission was told by Wellmont in December, however, Miller said the approximately $2.3 million that Wellmont would raise through the sale of the building won’t necessarily be invested back into the Hawkins County facility.

Miller told the commission Wellmont will lease the building back from the Grubb and Ellis and continue using it as a medical building, but will likely use the money from the sale to “restructure and retire debt.”

The second Wellmont attorney to address the commission monday, Bill Argabrite, told the commission that the HCMH board of directors recently approved an extension of Wellmont’s 40-year lease to 70 years, or 2070. That will also be the length of Grubb and Ellis’ sublease on the 1.6 acres once the building sale is finalized.

“What Grubb and Ellis is asking is that it have the assurance that the sale of the medical office building will not trigger the reversionary clause,” Argabrite said. “Their lawyers were concerned that the language we looked at from the deed says that if any part of the hospital campus is sold, the title reverts back to Hawkins County. What Grubb and Ellis is saying is, if we’re spending approximately $2.3 million to buy this building, we want to be sure Hawkins County will not say that triggers the reversionary clause.”

Argabrite added, “The only exception that Grubb and Ellis would like assurance on is that if the hospital itself is no longer operated as a hospital, that Grubb and Ellis not be required to use the office building for medical purposes. As long as that hospital stays in place, Grubb and Ellis will use that office building for medical office space.”

Commissioner Kenneth Long said this was the most confusing issue to come before him in all of his years on the commission.

Those in favor of the resolution wanted it made clear that the waiver of the reversionary right doesn’t cause HCMH to lose its ownership in the 1.6 acres, and that was stated specifically in an amendment to the resolution which was also approved by a vote of 13-8.

Commissioner Virgil Mallett was among those opposed to the resolution. Mallett said he had not heard from any of his constituents who were in favor of the proposal. Mallett said most people, like him, “are not versed in the law” and don’t understand the proposal.

“To us it’s appearing as if you’re giving it away,” Mallett said.

There have been other concerns expressed by commissioners that the buyer of the building might turn the building into apartments or some other non-medical use.

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