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Deal OK’d for St. Vincent’s Hospital site

Deal OK’d for St. Vincent’s Hospital site

Crain’s New York 4/7/2011

By Barbara Benson

Bankruptcy court signs off on controversial, $260 million plan to sell closed hospital’s assets to Rudin real estate family and letting North Shore-LIJ build emergency health facility.

The U.S. Bankruptcy Court for the Southern District of New York approved the $260 million sale of Saint Vincent Catholic Medical Center’s Manhattan campus, including the 1960s-era O’Toole Building on Seventh Avenue, to the Rudin family and the North Shore-LIJ Health System.

The bankrupt hospital system last month proposed selling its campus to the Rudins and handing the O’Toole Building over to North Shore-LIJ to create a health center and emergency department. The plan was controversial in the sense that some community members insisted only a full-service hospital should be built at the site. Other neighbors objected to the Rudin family’s plan to build a 300-unit condo tower on part of the site.

The deal approved Thursday afternoon was an attempt “to create a long-term health care solution serving the lower downtown New York community with the building of this critical care center—we had to balance the interests of a wide range of constituents involved in Saint Vincent’s court-supervised restructuring process,” said Mark Toney, the hospital’s chief restructuring officer and a national managing principal at Grant Thornton.

“While Saint Vincent’s continues to be saddened by the ultimate closure, we are pleased that we could collectively provide an opportunity to bring a 21st Century, new health care model to the area,” he said.

North Shore-LIJ’s critical care center will include a freestanding emergency department with a staff of more than 300, with the capacity to treat 72,000 patients annually. As part of the transaction, North Shore-LIJ will invest $110 million in overhauling the O’Toole property, including a $10 million contribution by the Rudin family to offset redevelopment costs. The Rudins also will develop new residential and retail space on the east side of Seventh Avenue and build a park on the triangle parcel of land.

A rival group had filed an objection to that plan with the court, saying it was talking to an unnamed New York City-based real estate developer and an unnamed New York City medical center and medical school that would buy the campus for the same price as the Rudins. The rival group said its intent was to build and operate a hospital and develop the remainder of the property.

SVCMC opposed any delay in having the court approve its proposed $260 million deal. “Time is of the essence in consummating the sale,” the health system’s attorneys wrote in recent court documents. “[The transaction] must be approved and consummated in the time frame set forth in the amended contract in order to maximize the value of the property [for SVCMC’s creditors].”

The rival group—composed of Dr. Robert Adelman, Dudley Gaffin and former City Councilmember Alan Gerson—sought an adjournment of today’s hearing for an additional 45 days, until May 23, while it “continues to solicit offers from major real estate investors and hospital operators that will better serve the communities” and generates more money for creditors.

But the group cited only one possible collaborator: the National Football League Alumni Association, which the trio said indicated “that they may like to be involved in establishing a hospital to treat their members [as well as the general public]. They would bring the NFL logo to any such development.”

The group argued that “as a matter of public policy” their proposals would be better for the local community, “so a delay of 45 days would not be harmful in totality.”

The group also made an emotional appeal in its court papers. “St. Vincent’s Hospital was founded in 1849, 162 years ago,” it noted, adding that an adjournment of 45 days while the group “seeks to establish a replacement hospital poses little harm to the debtors’ bankruptcy estate.”

In an affidavit filed Thursday, Mr. Gerson wrote that he had discussions “with high officials” of two major academic medical centers in New York City. “Both centers have expressed an ongoing interest in working with a developer to provide more medical and emergency care than the current plan proposes to provide.”

He added that he also spoke “with several, well-known developers about the St. Vincent’s campus. Several have expressed an interest in the site and, specifically, an interest in purchasing the site for more” money while still providing, at no cost, at least as much space for a medical facility.

Why have the mystery dealmakers only come forth now? Mr. Gerson said “they have not pursued their interest in the St. Vincent’s campus because they were given the impression that the proposal was ‘a done deal’ and that pursuing their interests would at best be a waste of time, and at worst could harm them by antagonizing parties which could inflict economic retribution.”

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