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Bea: Rochester projects not a distraction

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Jim Leute
April 25, 2013

— Mercy Health System's top executive said his involvement in a multimillion-dollar hotel project in Minnesota is not affecting his work in Janesville.

Javon Bea, Mercy's president and chief executive officer, has been linked for months to two projects in Rochester, Minn., which is the home of Mayo Clinic.

The most significant is the $230-million acquisition of four hotels that surround Mayo Clinic. The hotels are the Kahler Grand, Rochester Marriott, Kahler Inn & Suites and Residence Inn Rochester. Together, they total 1,230 rooms, about 75 percent of Rochester's downtown hotel rooms.

The deal also included a laundry business that serves the local health care and hospitality sectors.

The other project involves the development of a parcel across from Saint Marys Hospital, about nine blocks to the west of Mayo Clinic. Developers there are planning a $40 million hotel project.

Bea, who lives about 15 miles north of Rochester, said a California-based real estate investment trust sold the hotels to a group of investors in January.

A professional management company operates the properties, he said.

Bea said the new investors, who live outside the Rochester area, hired him as a liaison between the investors and the management company.

"What they really asked me to do, with the title of kind of a board chairman, is to be the sponsor between the owners and the management company," Bea said, noting he has a 40-year background in health care, including work at both Mayo and Saint Marys.

The 61-year-old Bea also said the owners believe that national recognition for service that he and Mercy Health System have earned would help in Rochester.

"They want me to establish the expectation with the management company to raise the service level," he said.

Media reports in the Rochester area indicating a financial commitment of at least $145 million from either him or his family are wrong, Bea said. Instead, his stake in the $230 million project is about 1 percent, he said.

"It's really nobody's business," Bea said. "It's not a public company.

"There's no way that I can be the guarantor of $145 million. I don't have those assets."

Bea said he is listed in financial filings as a "sponsor." That, he said, basically makes him the public face of the investment group, which wants to remain anonymous. For example, Bea's name is attached to the liquor license for the hotel properties.

A review of those filings shows that Bea and his wife are indeed listed as sponsors of the borrowers.

The borrowers are listed as KAH 20 2nd Avenue LLC, KINN 9 3rd Avenue LLC, MAR 1st Avenue SW LLC and RES 441 Center Street LLC, all Delaware limited-liability companies incorporated on Dec. 14, 2012.

Bea said his work in Minnesota is not distracting him from his responsibilities to Mercy Health System, which he joined in 1989 when it was a standalone hospital in Janesville.

"It's something I chose to do with my extra time," he said.

Bea said he spent more time managing an office building he owned in Janesville in the early 1990s than he has on the Minnesota project.

"Mercy is my legacy, and—you can laugh at this—but I'm hoping it's a key part of my ticket into heaven," Bea said. "Besides creating thousands of new jobs, we have saved thousands and thousands of lives and decreased injuries.

"The bottom line is that I would never let anything slack at Mercy because it's my legacy."

Bea said Mercy's board of directors is aware of his involvement in the Rochester projects.

"The majority of my compensation is performance-based," he said. "So if I don't perform, I don't get paid."

For the fiscal year that ended June 30, 2011, Bea received total compensation of $3.7 million, according to Mercy's most recent tax filings.

Board Chairman Rowland McClellan said the board is aware of Bea's involvement in Rochester and has discussed it, but not to any great extent.

"We took the position that it's his personal business, and as long as he's effective in running the organization, we're not concerned," McClellan said. "I've talked with him in depth, and I'm very comfortable that the amount of time he's spending on it is negligible."

McClellan said Bea is an interesting man, one whose relaxation is his work.

"I generally supervise him, and it's my job to make certain he's providing the leadership for the organization to perform effectively, and he's doing that in spades," McClellan said.

Regarding reports that key Mercy employees have been associated with the projects in Rochester, Bea said any consulting work is not done on Mercy's time or payroll.

McClellan said he has seen nothing to indicate Mercy employees are working inappropriately on the Rochester projects.

"I was hired to run Mercy Hospital," Bea said. "But by going way beyond and developing the health system that we did and creating thousands of new jobs and $1 billion in new revenue through programs and services, we've built a health system that has elevated the care and quality for this area.

"The biggest thing I can do for this area is to provide a level of health care at an efficiency and quality level that would be second to none, and that's what we're doing."



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