Jackson County sues its own Community Hospital and the Chancellor has sealed the case….

The more I peel back this onion the more it stinks folks and we’re not talking about chump change either. I start at the beginning of this disaster, when Singing River Hospital went hat in hand to the Mississippi Department of Health needing to update its Certificate of Need (CON).

MDH staff analysis of amend… by on Scribd

The takeaway from the above is back in 2008 Singing River Hospital needed more office space and had vacant land available on the hospital’s campus to add a 55,000 square foot medical office building that was estimated to cost just over $13,000,000 equipped. Johnson Development of Alabama was hired to do the design and build.

Next up we jump ahead eleven years to January 2019 when Singing River MOB, LLC sues the Hospital and Jackson County for back rent.

Singing River MOB LLC v Jac… by on Scribd

Paragraph 10 concisely summarizes the financial terms:

The SRHS Subleases consist of four twenty-five year leases for: an “Imaging Space” with a current annual lease payment of $341,965.11, an “Option Space” with a current annual lease payment of $118,601.28, a “Multi-Use Space” with a current annual lease payment of $612,322.25, and a “Wellness Space” with a current annual lease payment of $666,366.34. These amounts are calculated according to the “Rental” section of each sublease.

Excuse me while I do some ciphering…..(naught from naught equals…..) Here we go, the annual rental payment for the building is $1,736,254.98. That annual rental payment divided by the building’s square footage results in a price price square foot of over $31. Commercial leases on the West side of the Mississippi Gulf Coast go for about $12/square foot and I’m told reliably that in down town New Orleans there is space available for $18/square foot but in Pascagoula, when Chris Anderson was Singing River’s CEO the going rate was evidently a bit more.

Let’s do some more math shall we. $1,736,254.98 times 25 years equals $43,481,374.50, which is not a bad return on a $13 million dollar investment. Maybe this is why last year Jackson County sued its own Community Hospital and Singing River MOB, LLC in Chancery Court to void the lease. We’d never know about this case however had it not been removed to Federal Court because Chancellor Neil Harris has sealed the case, concealing the proceedings from the taxpaying public. Following the is sealed complaint obtained from PACER where it is not under seal:

Jackson County v SHRS et al (SEALED) by Slabbed on Scribd

Jackson County’s legal theory is that the entity Singing River MOB, LLC was not listed as a party to the ground lease between the County, the Hospital and Johnson Development thus the lease is void. Normally all we would have to do is check the filings in such a case to see how much support their argument has in case law, the applicable statutes, etc. but Slabbed can’t do that because the after the case was remanded from Federal Court back to Jackson County Chancery it was sealed.

Luckily we do get a glimpse of other side’s position because after Singing River MOB removed the Jackson County Chancery Court lawsuit to Federal Court they filed an answer and counter-claims and those are below:

18cv237Answer-Counterclaims by Slabbed on Scribd

As I indicated this case was since remanded to Jackson County Chancery so there is no telling how these arguments have evolved through time.

That Federal Lawsuit Singing River MOB, LLB filed to get the back rents I linked above, something strange happened because the County’s answer was due on May 1, 2019 but on April 29, 2019 Singing River MOB, LLC did a Rule 41 voluntary dismissal so this brings us back to the sealed Chancery Court matter. The very fact the case is sealed has people talking in the Jackson County legal community wondering exactly what kind of misdeeds from the past the Board of Supervisors are trying to keep swept under the rug. I do know this the now haircut hospital retirees are the ones paying the price for the financial jackassery and in a final insult they’re deprived of any chance at closure because of the secrecy but that has been the way this whole thing has unfolded from the start.

Let’s recap:

In a number of questionable real estate transactions consummated in 2007/2008/2009 SRHS enters into a three way leaseback transaction where the Health System agree to pay over time $43,481,374.50 for around $14,000,000 worth of building and equipment. This back solves to an annual discount rate of approximately 12%, a very high cost of capital for a governmental agency. The financial projections provided to the Mississippi Department of Health to justify the new building were the stuff of fantasy and now the “the lease continues to cause SRHS financial struggles” according to the Board of Supervisors complaint, which is now sealed from public viewing despite the fact that two of the three parties involved are local governmental entities.

There is something about rotten real estate deals being dumped on the taxpayers that defines Jackson County politics to the T from the Cedar Point land swindle to Singing River Hospital’s forays into the real estate world.  There were too many professional involved here for a deal this bad to be cut out of simple incompetence. Too bad the people paying the salaries of the Supervisors and Judge Harris do not get a seat in the Courtroom to see for themselves the ugly underbelly of how these kind of deals unfold.

We are going to have more on this as time allows.