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September 17, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

Crystal Run Healthcare sells Newburgh facility for $32.5 million

A Crystal Run Healthcare outpatient facility in Newburgh has been sold to a Wisconsin private equity fund for $32.5 million.

Crystal Run built the 3-story, 65,000-square-foot medical-office building in 2014, with financial assistance from the Orange County Industrial Development Agency.

Crystal Run and Hammes Partners of Brookfield, Wisconsin, signed the deed a year ago but didn’t record the transaction until December.

The health care network did not respond to questions about the transaction or about whether the deal has anything to do with its new affiliation with Montefiore Health System.

“We can’t make any comments right now,” said Hammes spokeswoman Allison Steinhafel, in declining to discuss the acquisition.

The building is at 1200 Route 300, also known as Union Avenue, in Newburgh. Part of the property is also in New Windsor.

CRH Realty VIII, a Crystal Run affiliate, bought the 8.1-acre site in 2014 for $2.85 million. It budgeted $26.1 million for the project but ended up spending about $30 million and building a larger facility, according to Laurie Villasuso, the IDA’s chief operating officer.

The IDA approved $1 million in sales tax relief, a 10-year tax abatement plan worth an estimated $801,218, a $186,000 mortgage tax exemption and a lease-leaseback agreement.

The project was expected to create 200 construction jobs, 237 permanent jobs, a $20.2 million yearly payroll and $46.5 million in receipts.

Crystal Run was on track for job creation, Villasuso said, with 209 full-time equivalent jobs at the end of 2016, the first year of the tax abatement plan.

She said the outpatient facility has been a success, not only for creating jobs but in providing excellent health care to the community. The project has probably spurred economic activity around the facility, she said, as patients and families stop next door for a snack at Dunkin’ Donuts or work in their weekly shopping at the nearby Walmart.

The IDA consented to the new deal with HP Newburgh 300, a Hammes Partners company.

Nothing much has changed for the IDA. No new benefits were conferred to the new property owner. As long as Crystal Run continues to run a medical facility and employs doctors and support staff, the IDA is happy.

Hammes has invested exclusively in health care real estate since 2001, particularly in outpatient facilities.

“This attractive, durable market segment provides direct exposure to the health care industry, which represents over 17 percent of U.S. GDP,” the company’s website states.

Hammes first invested in the region in 2015, when it paid $43 million to Bedford RD Properties, a physician-owned property in Mount Kisco. The two buildings include 120,000 square feet of space.

Hammes paid about 91 percent more than the doctors paid when they bought the buildings in 2003 for $22.5 million.

The private equity funds are marketed to wealthy individuals and to institutional investors such as state pension funds, endowments, foundations and insurance companies.

Crystal Run was founded in 1996 and has become a dominant health care provider in the Hudson Valley and lower Catskills. It has 22 offices in Orange, Rockland, Sullivan and Ulster counties and in New York City. It employs more than 400 doctors.

Montefiore, based in the Bronx, bought a 33 percent interest in a new Crystal Run holding company. The health care enterprises describe their arrangement as a collaboration by which they will share technology and services, giving patients broader access to specialists, better health care and lower costs.

Their partnership formally began on Jan. 1.

Seven doctors who are among 133 physicians-partners in the previous Crystal Run practice have sued the company, claiming that the terms of the Montefiore deal are unfavorable to them and to patients.