Developer Takes Advantage of Changing Health Care Industry in NY Metro Region
John Jordan | March 16, 2018
NEW YORK—If there is one real estate development firm that definitely saw the opportunities the health care sector could provide earlier than most, it had to be Simone Development.
The Bronx-based real estate investment company has developed high-profile residential and commercial properties in the Tri-State region. The firm, headed by President Joseph Simone, has a portfolio of 100 properties totaling more than five million square feet.
While the firm has engaged in health care construction for about 25 years, it has only been fairly recently that Simone became a major player in the New York metropolitan area in terms of health care construction.
Its impressive two million-square-foot health care portfolio is leased by numerous high-profile hospitals and medical providers including Montefiore Health System, Mount Sinai, St. John’s Riverside Hospital and a host of others located at properties on Long Island, Westchester, New York City, Northern New Jersey and Fairfield County, CT. Its portfolio includes the imaginative redevelopment of a former state psychiatric facility in the Bronx to the highly successful Hutchinson Metro Center to the reimagined Boyce Thompson Center in Yonkers.
The Boyce Thompson redevelopment project converted a long shuttered eyesore into a thriving mixed-use complex that features health care concerns such as St. John’s Riverside Hospital, which occupies a new two-level, 15,000-square-foot freestanding building for outpatient care and physician offices and WESTMED Medical Group that leases a new 20,000-square-foot addition constructed at the south end of the main building. Other healthcare tenants at the complex include ColumbiaDoctors, Riverside Dental Health, Westchester Gastroenterology, Juvanni Med Spa and Family Wellness Pharmacy. Recently, Starbucks and Japanese sushi restaurant ISO opened at the 85,000-square-foot complex that is now more than 90% leased.
Real Estate In-Depth talked with Simone to discuss the changing health care industry and how Simone has been able to grow its portfolio.
He explained that the concept behind Simone Healthcare’s growth has been “stay with what you know and what you do best.” Simone said that health care executives, while extremely knowledgeable in the medical field, in most cases find it nearly impossible to navigate through the many facets of real estate development and construction.
The veteran developer quipped, “By the way I think I would be relatively challenged if someone asked me to do surgery today, I don’t think it would work out to well.”
He continued that his firm literally takes on all facets of the real estate project from the inception to the ribbon cutting and beyond. In fact, in some cases Simone serves as the outsourced real estate division of the health care concern. Simone’s template is to own the real estate and lease the space long-term to the hospital or medical service provider.
“We do not think hospitals should own ambulatory facilities,” Simone said. “We think that is a silly waste of their capital… Rather than tie up their money in bricks, they can make a much higher return buying other hospital systems, buying other practices, equipment and technology. They will do far better.”
Simone Healthcare develops, sources, acquires and navigates their hospital or health care service provider clients through the planning and approval process, the design phase, the financing component of the deal and ultimately any leases and the management of the property as well once completed.
The New York metro region lagged behind most of the rest of the country in terms of health care consolidation and later capital investment, but Simone began to see opportunities emerge in 2001 when it started developing the Hutchinson Metro Center in the Bronx.
Simone theorized that the shakeout in the health care industry was caused in least in part by hospitals requiring fewer beds due to many medical procedures being performed on an outpatient basis. He said the impact of this trend did not affect the New York region at first due to its dense population, but eventually it led to hospital closures, mergers, etc.
The surge in capital investment in the health care field in the region Simone believes is in its early stages and has a good run left. In fact, he believes the region is in about the third inning of a nine-inning contest.
Simone, who said he has been in contact with just about every chief hospital and healthcare official in the tri-state region, said health care real estate is different from conventional real estate transactions in many ways. He noted that with lease deals with professional services firm or other non-medical users, the owner tells them when the space is ready, they turn on the lights and move in.
With health care users its different and more complex, due in part because the deal involves physicians, expensive equipment and patients. Simone said the health care concerns can’t just “populate the building overnight. It has to ramp up and that is why most of these medical professionals don’t move a lot. Because you are dealing with patients, physicians and equipment… So you have to stage it, you have to understand it and again it doesn’t move as fast as the real estate moves.”
Simone said that in some cases to make these deals work, the firm will literally sit down and help structure a financial plan that would include helping stage the space and also “ladder the rent” so that costs are more spread out, especially during the early part of the lease.