Monday, November 26, 2007

Charter Behavioral Health Systems, the largest operator of privately run psychiatric hospitals and clinics, said yesterday that it planned to sell 53 of the 96 centers it operates.
Charter Behavioral, which is a unit of the Crescent Real Estate Equities Company, a Fort Worth-based company headed by the billionaire investor Richard E. Rainwater, had said that it was losing money at many of its psychiatric hospitals.
But federal officials are continuing to investigate the hospital chain for patient abuse and Medicaid fraud. Company officials, who have announced the closing of several Charter Behavioral hospitals in recent months, have said that those closings are unrelated to the federal inquiry.
Yesterday's announcement was a setback for Mr. Rainwater, who invested $400 million in 1997 to purchase a 50 percent stake in Charter Behavioral from Magellan Health Services Inc. That deal was structured to provide $50 million annually in rental income from the psychiatric hospitals to Crescent Real Estate, a real estate investment trust.
As part of that deal, the psychiatric hospital company was also supposed to pay some $80 million annually in franchise fees to Magellan, a health care company of which Mr. Rainwater is the largest single shareholder.
The psychiatric chain soon fell behind on its franchise fee payments and Magellan Health exercised an option in 1997 to cut the hospital chain's operating budget.
Ad for Crescent Real Estate, it said yesterday that its third-quarter earnings fell 38 percent, to $57.2 million, or 43 cents a share, from $91.7 million, or 62 cents a share, in the period a year earlier. The results reflect a $30.8 million charge to reflect the canceling of booked rent from the Charter hospitals.
Shares of Crescent Real Estate Equities rose 43.75 cents, to $16.875. Because of federal tax laws governing real estate investment trusts, Crescent Real Estate could not operate the Charter facilities without jeopardizing its favorable tax status. As a result, Mr. Rainwater and his associates created a separate public company, Crescent Operating Inc. whose shares fell 6.25 cents yesterday, to $3.9375.

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