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Beaumont Health zeroes in on Southfield for new headquarters By KIRK PINHO and JAY GREENE

Beaumont Health is in the market for at least 360,000 square feet of office space in Southfield for a new corporate headquarters with 2,500 employees.

Details of the long-discussed plans for a so-called "shared services building" are revealed in a request for proposal obtained by Crain's last week that says the health system is in the market to do a $60 million-plus project. The move would cap a consolidation effort for Michigan's largest hospital chain following its 2014 three-system mega-merger.

And more formal moves could come soon, as the RFP says interviews of prospective contractors to design the space are scheduled for Aug. 21 and the project is expected to be awarded by the end of the month.

While the specific location is not discussed in the RFP, dated Aug. 2, four real estate sources familiar with the negotiations have said Beaumont is strongly considering a deal to lease 350,000 square feet of available space or outright buy the First Center Office Plaza on Northwestern Highway and move employees there. The sources requested anonymity because the deal is not complete.

That comes after backing away from previously considered locations such as the former Federal-Mogul Corp. headquarters and Raleigh Officentre as possible locations because they were too small, the sources said. At one point, Beaumont had the Federal-Mogul buildings under contract.

Beaumont declined to make its CEO, John Fox, or another executive available for an interview for this story and only issued a short statement:

"Beaumont Health is looking at multiple sites in Oakland County. Our leadership says, 'We are looking at lots of options,'" Robert Ortlieb, a spokesman for Beaumont, said in a statement.

Fox said in a previous interview with Crain's that he is looking for a new corporate headquarters location. During that interview, he declined to specificy an area, but said it could be multiple locations.

"I don't want to increase real estate speculation" and drive up costs, Fox said. At that time, it was clear he wanted the new single-location headquarters building close to one of Beaumont's eight hospitals, which are in Grosse Pointe, Dearborn, Taylor, Royal Oak, Trenton, Farmington Hills, Wayne and Troy.

Revealed in the RFP are details the eight-hospital system has declined to publicly disclose, including a 2018 time frame for a potential consolidation of its employees from multiple locations throughout Southeast Michigan and planned capital expenditures.

"With eight hospitals, 5,000 physicians and 35,000 employees from three different founding organization [sic] the owner is reorganizing all the administrative non-campus specific staff into a single location," the RFP reads.

"The vision of Beaumont Health senior leadership is to offer an open, collaborative, supportive and flexible space that provides a healthy work environment to their staff."

Adell property

But perhaps the oddest aspect of Beaumont's effort is a claim by a millionaire broadcasting entrepreneur that Crain's has not been able to independently verify.

Over the course of an eight-hour period Aug. 7, Word Network owner Kevin Adell told Crain'sthat Beaumont wanted to build a new corporate headquarters on property he owns in Novi. He also provided a transcript of text messages he said he received from a Beaumont broker he says prove as much. Later in the day, Adell sent Crain's a copy of a letter to the broker threatening to sue him for backing out of a deal.

Adell said in interviews last week that Beaumont planned to buy 19 acres of vacant land he owns to build a corporate headquarters in Novi at I-96 and Novi Road. A spokesman said in an email that Adell "has sold 19 acres in Novi for $19 million to a major, major local business."

Carolyn Wilson, Beaumont's COO, said in a statement last week only that it "is looking at multiple sites in western Oakland County."

But, "to date, no offers have been made on any properties."

Adell said Randy Thomas, the president and CEO of Commerce Township-based Insite Commercial who does some brokerage work for the hospital system, approached him about buying the 19 acres of his 23-acre property for $19 million.

However, an Adell spokesman later that day provided Crain's a letter from Adell's attorney, Michael Alan Schwartz of Schwartz PLLC in Farmington Hills, that was sent to Thomas threatening legal action and saying that "your client has backed out of the purchase."

"As evidence that your client was actually desirous of purchasing the property, not only did you indicate that the principals of your client were going on a site inspection of the property, but further that they were satisfied with the price, of one million dollars per acre, that you were asking," the letter dated Aug. 7 letter reads.

Thomas confirmed to Crain's that he received the letter but declined further comment. He is also listing close to 200 acres of Beaumont-owned land for sale in Commerce Township (34.6 acres), Independence Township (63 acres) and Canton Township (97.3 acres).

It's not the first time Adell has made claims about tenants or users for the former Novi Expo Center property.

In 2013, when he held a press conference there, he said the Cleveland Clinic was interested in the site. The clinic's director of communications at the time, Angie Kiska, however, said there were no plans for a Novi location.

Employees scattered

Beaumont Health, which in 2014 merged with Oakwood Healthcare and Botsford Hospital, has corporate employees scattered throughout the region at multiple properties, including the five-tower Southfield Town Center. It's not known how many offices it has nor how many square feet it leases from landlords. Beaumont declined to provide that information.

The First Center Office Plaza is currently owned by Iron Point Partners LLC, according to CoStar Group Inc., a Washington, D.C.-based real estate information service.

Iron Point paid $66 million for the 640,000-square-foot, four-building property in October 2007, according to CoStar. It is managed and leased to tenants by Bingham Farms-based Core Partners LLC, which declined comment. A message left late last month with Gene McQuown, an Iron Point executive, was not returned.

Earlier this year, it underwent a multimillion-dollar renovation that brought new water features, furniture, flooring, LED lights and plants to the 34-year-old property.

According to a second-quarter market report from the Southfield office of Newmark Knight Frank, the 17.2 million-square-foot Southfield office market is 23.6 percent vacant with an average asking rent of $21.31 per square foot for Class A space and average asking rent of $18.42.

Merger pays off

The merger has paid off for Beaumont, which is still working to integrate the three systems.

For the fiscal year 2016 that ended Dec. 31, Beaumont Health enjoyed an operating income increase of 43 percent to $200.6 million for a 4.6 percent margin, compared with $140.7 million the prior year. Net revenue grew 6.7 percent to $4.4 billion. Beaumont has projected net savings from the merger over three years to be more than $134 million.

Beaumont is metro Detroit's second-largest system by revenue at $4.4 billion, somewhat behind $5.7 billion Henry Ford Health System, which includes $2.4 billion in health premium revenue. Comparing just net patient revenue, Beaumont is ahead of six-hospital Henry Ford, $4.1 billion to $3 billion.

Over the past three years, Beaumont has spent an average of $218 million each year in capital projects, doubling the average annual capital expenditures of five of the six other competing health systems in Southeast Michigan. Detroit Medical Center has spent an average of $170 million per year, but that is based on a purchase agreement to spend $850 million over five years by its current owner Tenet Healthcare Corp.


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