The University of Mississippi Wellness Centers have lost $516,000 eight months into the fiscal year. JJ obtained the "financial statements" through a public records request. The wellness centers are the former Courthouse racquet clubs and fitness centers.
The actual losses are worse than the net amount. The wellness centers lost $850,016 from July 2016 to March 2017. However, the loss is mitigated somewhat by an annual gift of $500,000 from the seller of the courthouses. The gift is pro-rated for eight months to yield $333,333.
UMMC purchased the six Courthouses from John Black in 2014. UMMC soon closed the Byram location. UMMC closed the downtown and Northtown locations last month. Only the locations in Brandon, Flowood, and Madison remain open.
The income statements state that the wellness centers had revenue of $2 million in FY 2017 (not including the annual gift) and expenses of $2.9 million. However, the projected revenue was $2.7 million (p.3). UMMC projected to lose $666,672 on the wellness centers for the first eight months of FY 2017 but that excludes the $333,333 gift. Thus actual losses are running $183,344 above projections.
JJ reported on the purchase of the Courthouses in November 2015:
JJ obtained a copy of the purchase agreement for the sale of the Courthouse to UMMC through a public records request. However, the term "sale" must be loosely used because much of the transaction appears to be a donation. The contract is posted below. Earlier post and copy of purchase agreement. Some observations of the transaction are:
*The Courthouse owed $9,259,786 on a note held by Trustmark in December 2014.
*The "consideration for the assets shall be equal to the amount of the debt" mentioned above.
*UMMC paid a price that did not exceed the average of two appraisals.
*The owner of the Courthouse transferred $4.8 million to UMMC as a gift at closing.
*The owner will pay another $5 million to UMMC in $500,000 annual payments for ten years.
*The annual payments are to be used for operations, capital spending, and offset of losses.
*Attorney William Smith, III of Watkins Eager handled the transaction.
*Courthouse was transferred to UMMC free of all debts.
*Closing Costs were split between buyer and seller. The seller paid the attorney's fees, debt, and required donations. The buyer paid its own attorney's fees, recording fees, and title insurance. They paid their own closing costs that they incurrred.
*The agreement was signed by Dr. James Keeton (UMMC), John L. Black, Jr., and John L. Black, III. *UMMC spent $9.2 million for the purchase of the Courthouses.
Kingfish note: JJ would love to publish an itemization of the expenses and revenues. However, UMMC did not provide such documents because the actual operation of the fitness centers was off-loaded to a Chicago-based management company.
UMMC issued this press release in December 2014:
The University of Mississippi Medical Center will acquire the Courthouse fitness centers under an agreement approved Monday by the board of the Mississippi Institutions of Higher Learning. The transaction, part purchase/sale and part gift, will give UMMC immediate presence in the field of medically related health and wellness programs.
Owned by Madison businessman John L. Black Jr., Courthouse Racquet and Fitness includes four fully owned fitness centers in Brandon, Byram, Flowood and north Jackson as well as leased facilities in Madison and downtown Jackson.
UMMC will spend approximately $9.2 million for the Courthouse, which is the amount of debt carried by the business. However, as part of the broader agreement, Mr. Black will make a $4.8 million gift to UMMC by year-end. He will make additional $500,000 gifts annually over the next 10 years, for a total of $5 million.
UMMC plans to operate the centers as an integral part of the health-care continuum, recognizing that adequate exercise and proper nutrition are a cornerstone of good health and disease prevention.
“This is really about our mission to achieve a healthier Mississippi,” said Dr. James E. Keeton, vice chancellor for health affairs and dean of the School of Medicine. “We can treat people once they get sick, but that’s only half the job. We also have to encourage them to be healthy and stay healthy. That’s been a gap in what we can offer. We’re grateful to John Black for enabling us to do this.”
Keeton added that it’s important that trainees in UMMC’s six health professions schools be exposed to this wellness model as part of their training.
The board also approved UMMC’s agreement with Power Wellness Management, LLC, to manage the six facilities. In the five-year contract, UMMC will pay Power $144,000 per year as a base management fee. In addition, Power will be eligible to receive an incentive fee based on financial performance.
Current Courthouse employees will become employees of Power Wellness Management and the number of staff is expected to increase in the first year to implement the wellness model.
Power is a Chicago-area firm that partners with hospitals and health-care systems to create, develop and operate medically integrated wellness centers. Among their academic medical center clients are Loyola University and Rush University Medical Center, both in Chicago.
UMMC expects to invest about $1.3 million in upgrades to the facilities during the first year of ownership. Based on financial projections, the business is expected to operate at a loss for 2015 and to produce excess revenue over expenses in subsequent years.
The appraised value of the four owned Courthouse properties, based on the average of two appraisals, is $10,545,000.
Mr. Black, through his Lexington Foundation, has previously partnered with UMMC on a program to enhance Medical Center employees’ health and fitness status. The “Get Healthy” program offers free family memberships to the Courthouse and access to personal trainers to 40 employees over 12 weeks. The program has been in place since 2011 and engaged more than 400 UMMC employees.
Keeton said he was impressed by Mr. Black’s philanthropic spirit.
“It’s nice to think that people who have been successful in life care enough about Mississippi to do things like this,” he said.
Here is what is intriguing. UMMC renovated the downtown location since the purchase. The Lakeland Drive location has been left to wither on the vine. Guess which one was shut down by UMMC?
Keep in mind that the Courthouses no longer pay property taxes since they were purchased by the government.