By Gerardo R. Partido
Variety News Staff

VARIOUS stakeholders involved in the Guam Hospital Development Forum gathered yesterday at the Hilton to discuss various financing options for the group’s proposed new hospital.
The Guam Hospital Development Forum is a private sector initiative that wants to develop a privately owned and managed hospital on island.
Pete R. Sgro Jr., the chairman of the Guam Hospital Development Forum, said the intent is not to replace the Guam Memorial Hospital, but rather to supplement it and complement the services already offered in Guam’s only civilian hospital.
Initial project budgets have been estimated at between $116 million and $126 million. The question now is whether the proposed new hospital will have a non-profit or a for-profit ownership structure.
Tom Foley, who made a presentation on the forum’s financing options, said the following are among the financing options available for the forum:
* For many stand-alone projects, FHA 242 mortgage insurance is the only long-term low interest rate borrowing source available to for-profit hospitals;
* Non-profit hospitals can avail themselves of tax-exempt bond financings at attractive rates relative to the taxable market;
* Credit enhanced tax-exempt debt is the lowest cost of capital for any hospital and particularly attractive for a start-up facility;
* HUD is the only viable credit enhancement vehicle for non-rated caliber hospitals seeking municipal bond financing; and
* The U.S. Department of Agriculture is not applicable for municipal bond deals.
Foley has experience with financing and investment successes throughout Hawaii and the mainland U.S. He just completed work on the CNMI bond issue worth $100 million and is in the final stages of a multi-lender deal for a large Hawaii transportation company worth $112 million.
He said if the new hospital’s forecasted feasibility is strong, a for-profit venture with local participation makes the most sense in raising the equity and managing the facility.
“Unfortunately, the initial forecasts we reviewed appear to be overly optimistic. There are upfront costs, under funding equity levels, accelerating demand and mismatched financing techniques,” he said.
But he pointed out that FHA 242 mortgage insurance has been employed for both for-profit and non-profit start-up hospitals.
HUD financed projects have ranged from $7 million to $850 million and include construction and permanent financing while USDA hospital financings have never exceeded $24 million and do not include construction funding.
Thus, Foley said FHA 242 is an excellent choice to finance the proposed hospital project, while the USDA may be able to provide limited grant money.
“If the hospital is a non-profit, FHA 242 mortgage insurance can also credit enhance tax-exempt bonds, while the USDA cannot. High yield municipal bonds are another option for non-profit financings,” Foley said.
Sgro assured the assembled forum that his group is not rushing things and is closely examining all the available financing options.
He did say that two hospital groups — Trinity Help and Adventist Help — have responded to the new Guam hospital business plan launched by the forum earlier this year.
“One of them is even willing to send people here already to train our medical personnel,” Sgro said.
Among those who attended yesterday’s forum meeting were several senators, officials from Guam’s medical community, and representatives of the Guam Memorial Hospital, the Guam Chamber of Commerce, and the Mayor’s Council of Guam.