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Centenary Health Centre's Medical/Retail Mall
February 26, 1996; Canadian FundRaiser
Centenary Health Centre became one of the first Canadian hospitals to get involved in a sizable entrepreneurial venture five years ago, when it began operating a three-storey 75,000-sq. ft. medical/retail mall directly linked to the hospital. The friendly semi-commercial atmosphere located at the main entrance of the hospital came with 20,000 sq. ft of rentable space - the bulk of it health-related retail. With over 30 physicians and a number of optometrists, opticians and dentists, The Court offers an after-hours clinic, pharmacy/drug store, foot care centre, private lab and hearing aid dispensary as well as a volunteer run gift shop, hair transplant service and restaurant/donut shop.
The concept has sparked a great deal of interest across the country. Speaking on charities operating a related/controlled business at the recent Infonex Conference, Gloria Zive, Vice President - Facilities, Continuing Care & Rehabilitation Programs, pointed out that not only did The Court provide an opportunity to keep the physicians close by and provide the consumer with one-stop shopping, but also tenants were impressed by proximity to the hospital, the convenience afforded physicians, surgeons and obstetricians, the direct benefit derived from the good name of Centenary, and the ease with which the staff could be developed as customers. In addition, of course, it created a way for the hospital to generate revenue.
Armed with strong board support, plenty of good advice from private enterprise, and non-Ministry of Health funding (i.e. parking lot revenue), the hospital forged ahead with the venture. "As the project became a reality, we capitalized up-front costs into the total cost of the project," said Zive. "However, timing did not work in our favour. It was planned in the late 1980s. In 1988, we reported construction bids of $11.8 million to our board. When we finally built in 1990, costs were up to $14.2 million. Even with delays, the economics of the project appeared fine, with the project seen as a long term venture. Then the recession kicked in, depressing rental rates and hence our revenue stream. Fortunately, interest rates declined too. Nevertheless, we feel very fortunate today having reached 97% lease-up and generating a positive cash flow."
Zive cited two competitive advantages that the private sector could not offer the hospital or its tenants. The bank gives Centenary a break on the cost of funds, and as a charity, the hospital and its tenants benefit from a reduced GST rate. The hospital rebate of 83% on GST paid applies to both The Court and its tenants, and this can also be passed on to physicians who might otherwise rent in a commercial building.
Although the project achieved what it set out to do, participants were cautioned that "this is not the sort of venture other organizations should rush to replicate. Every set of circumstances will, of course, be different and for us, financial return is definitely long term," Zive said.
"First impressions do not indicate an organization in need!" However, in non-financial terms expectations have been exceeded. A large array of new customer conveniences are now offered; the site has been physically enhanced; and inside a non-institutional atmosphere has been generated. Adds Zive, "On the other hand, it probably complicates our lives in traditional fundraising efforts. First impressions do not indicate an organization in need!" As for public accountability and profits from a related business, Zive listed the following fail-safe mechanisms at Centenary:

Monitoring of the financial and lease-up status by Centenary's Board;
Separate financial records, an annual audit and regular reporting to the Ministry of Health;
In giving approval for this project in 1988, the Health Minister at the time, Eleanor Caplan, make it quite clear that public funds cannot be used to support this project;
Continuing to meet lease-up conditions of Revenue Canada and zoning requirements of the City of Scarborough;
Profits up to a certain point are directed to the hospital bottom line; and beyond that are re-invested in the project.
Pointing out that the Centenary project is a business requiring professional financial management on an ongoing basis, and is undeniably a major undertaking by anyone's standards, Zive concluded her remarks by emphasizing that a charity operating a related business must have strong leadership and tenacity. For additional information, call 416/284-8131.