Metro Puts Construction On Hold

May 28, 2004
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GRAND RAPIDS — Metropolitan Health Corp., more than nine months after breaking ground, has temporarily paused construction on a new $150 million hospital as two final options are explored for financing the project.

One of them, a financing package through the Federal Housing Administration, is generally used for projects that have yet to commence construction. As a result, in order to qualify for FHA financing, Metro Health has had to halt work on the hospital portion of the health-care village envisioned for a 170-acre on the Wyoming-Byron Township line.

Even with the halt in construction, Metro Health should still have the ability to complete the new hospital in time for the planned summer of 2006 opening, said Jim Childress, Metro's vice president of marketing and public relations. Construction on the hospital, with includes completing the steel work, has been running ahead of schedule, Childress said.

"It has no significant long-term effect on the project in any way," he said late last week. "Any time we lose can easily be made up."

As an FHA financing package is considered, Metro Health is working simultaneously on a traditional bond sale, the kind the health system was prepared to float last December.

Metro Health administrators, even with half of the bonds already committed, opted not to proceed with that sale. Their thinking was that by waiting and exploring other options, including offering fixed and variables rates, they could get better terms, Childress said.

"It did not appear we would be able to get as favorable a rate as we could if the timing was better," he said.

Passing on the bond issue in December is not reflective of Metro's credit worthiness, Childress said. Metro Health presently carries a BBB bond rating, he said.

In considering FHA financing, Metro Health potentially could save $60 million in financing costs, he said.

"We think we've found a creative option that could save the community a lot of money, and the consequences (of the delay) seem worth it," Childress said. "To us, it's the responsible thing to do."

The delay in construction, which could last for a couple months, affects only the hospital portion of the health-care village that the FHA would finance. Work on roads and infrastructure within the project site will continue, Childress said.

Without a financing package in place, Metro Health has paid for construction work thus far with cash reserves that enabled administrators to weigh their options.

"It's something where we've had the advantage of being able to look at options," Childress said.

The FHA since 1968 has provided low-interest, government-backed capital financing for more than 320 hospitals totaling $9.4 billion, according to the agency's Web site.

If the FHA financing doesn't work out, Metro Health will "very quickly" pursue a traditional bond sale, Childress said.

"We're moving on parallel paths," he said of the two financing options.

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