Clayton – For decades, Centene Corp. for managed healthcare at scale. Now one of the largest in its field, Centene is recalibrating for efficiency.
The shift in strategy brought an abrupt end this week to its plans to set up a headquarters on North Carolina’s East Coast, which impressed local leaders there, but delighted Wall Street. With 90% of its workforce now fully or partially remote, the company has quietly abandoned most of its extensive offices in St. Louis and across the country.
Perhaps the company had no choice: Investors wanted the company to cut costs and improve profit margins. With a new CEO at the helm, the company is aggressively shrinking its real estate portfolio across the country — moves that are likely to improve its bottom line but leave cities, like the St. Louis area, grappling with dozens of vacant office buildings.
People also read…
“Ensuring that Centene delivers on its margin expansion promises is something investors are taking very seriously,” said Julie Otterbach, senior equity analyst at Morningstar Research Services. “This management team seems to be taking it very seriously as well, which is appreciated.”
The East Coast campus wasn’t Sentin’s only victim. The company has already said it is no longer completing a $770 million expansion of its Clayton headquarters that would have added nearly a million square feet of office space, hundreds of condos or condos, retail stores, a 1,000-seat civic auditorium, and a hotel nearby South Hanley Avenue and Boulevard. Forsyth.
Centene has almost completely emptied its real estate footprint here—nearly 1 million square feet of office space—according to marketing materials marketing those properties for rental or subletting:
• Nearly 300,000 square feet in Chesterfield.
• 180,000 square feet in Des Perez.
• 100,000 square feet in Richmond Heights.
• 100,000 square feet at Creve Coeur.
• More than 60,000 square feet in St. Louis.
The company confirmed in a statement that it would vacate “several rented sites”, although it did not say which one. The Centene spokesperson also said it will retain its headquarters in Clayton, its operations center in Ferguson and its home health headquarters in St. Louis — although Advertising Marketing Handbook The entire building is for subletting.
It’s a turnaround from how the company previously operated, gobbling up any block of office space in the more than 75,000-square-foot area. Commercial real estate experts said it comes in the wake of the pandemic that has cooled the office market as companies reconsider their needs.
“The impact of Centene, along with the impact of COVID, is disastrous for the St. Louis market,” said Kevin McLaughlin of KMA Commercial Real Estate.
Centene offices are on the market at a time when St. Louis already has a surplus of office space.
“There’s a lot of competition you didn’t have three to five years ago,” McLaughlin said.
Centene’s extensive real estate portfolio was a product of its former CEO, Michael Niedorff, who spearheaded the initial plans for an East Coast headquarters that was to create 3,900 jobs in North Carolina.
For years under Neidorff, Centene succeeded by growing. Neidorff expanded the company from a $40 million health plan to a giant in the managed care industry, generating $126 billion in revenue last year. Neidorff took medical leave in February, and Sarah London was appointed as his replacement in March. Nieddorf died in April at the age of 79.
After years of acquisitions, investors have been looking for change. Analysts said that the company’s share price was below par compared to its peers. The company last year announced a plan to improve margins and get rid of non-core assets. After an activist investor intervened last year, the company agreed to reform its board of directors.
During an earnings report in July, Centene said it plans to reduce its local rental area by 70%, which it expects to save $200 million in rent each year.
“In my view, having two company headquarters is not a way to gain efficiency,” said Otterbach, an analyst at Morningstar.
The company also announced plans to sell a Spanish hospital and a company that operates radiology clinics in Slovakia and the Czech Republic.
Investors seem pleased with these moves. After news of Centene canceling plans for its East Coast headquarters, Wall Street reacted with enthusiasm: Centene stock rose 1.6% on Friday, to close at $96.90.
In Clayton, where officials are still dismantling a development agreement with the company, Mayor Michelle Harris said the company’s presence is a real positive for the area.
Her decision not to implement her East Coast campus has led to “some closure to the community” as Centene will not be leaving the St. Louis area.
“I hope their staff will come over for lunch at Clayton,” Harris said.
“Web maven. Infuriatingly humble beer geek. Bacon fanatic. Typical creator. Music expert.”