L.A. Firm to Buy Hospital Portion of Hillcrest Project

A Los Angeles real estate firm has agreed to purchase the hospital portion of a major redevelopment project now under construction in Hillcrest, further evidence of growing investor interest in rehabilitative care clinics.

American Health Properties, a publicly owned real estate investment trust that owns 20 hospitals in 12 states, has agreed to pay $25.2 million to developer Oliver McMillan for the 110-bed facility now under construction.

The rehabilitative care hospital is due to be completed in late 1991, along with the rest of Village Hillcrest, a $75-million mixed-use project in which the clinic is to be situated. The project, which will occupy most of the block bordered by Fifth, Sixth, University avenues and Washington Street, will also include a five-screen movie theater, several restaurants, offices and a 750-car underground parking garage.

The clinic will specialize in providing rehabilitative care for severly disabled patients, including victims of strokes, heart attacks and severe head and spinal injuries. American Health Properties President Robert Diener said Monday that his firm will lease the facility to Continental Medical Systems of Mechanicsburg, Pa., which will operate the unit.

The Hillcrest project is one of several new rehabilitative care units added to the San Diego health care market in recent months. Alvarado Hospital and Medical Center opened an 80-bed facility in June and Sharp Cabrillo Hospital opened a 20-bed unit in October 1989.

The stand-alone rehabilitative care facilities generally receive more favorable reimbursements from health insurers than do acute care or general hospitals that try to provide rehabilitation care because the specialized units are more cost-effective, said Dene Oliver, a principal in the Oliver McMillan development firm.

American Health Properties’ Diener said his company is investing in San Diego because of the area’s high population growth rate and because of the project’s proximity to both Mercy Hospital and UC-San Diego Medical Center, both of which are located within several block of the Hillcrest project.

San Diego is also an attractive place for health care facility developers because of its appeal as a retirement destination to senior citizens, a prime element of the units potential market, said Linda Ollis, associate administrator of Grossmont Hospital, which has operated a 30-bed rehabilitative unit since 1977.

The Village Hillcrest project, which will total about 300,000 square feet of building space, features a “stair step” design, Oliver said, that will rise from two stories in height along Fifth Avenue to seven stories along Washington Street. Project architect is Buss, Silvers, Hughes & Associates in association with Ken Ronchetti, both of San Diego.

Of American Health Properties’ other hospitals, only the Tarzana Regional Medical Center is located in California. The real estate investment trust, whose stock is traded on the New York Stock Exchange, has $450 million in assets and was one of the stock market’s best performing trusts last year by virtue of its 39% return to shareholders, Diener said.

Continental Medical Systems, whose stock is traded publicly over the counter, is the nation’s largest operator of rehabilitative care facilities with a total 2,500 beds in 15 facilities either in operation or under construction, Diener said.