PHC’s $64 Million Man
There is no Peninsula Hospital Center any longer, and there hasn’t been a hospital on the Beach 51 Street site since April, when the state closed the hospital’s clinical laboratory and the bankruptcy trustee closed the hospital for good.
A year ago, in the August 19, 2011 edition of The Wave, the headline blared that PHC was on “The Brink of Extinction,” because its sponsor, the giant medical service company MediSys, pulled its people and funding and walked away.
Now, a year later, with the hospital closed for several months, with all of the furniture, machines, meds and supplies sold off by the trustee, the Federal Bankruptcy Court for the Eastern District of New York has been asked by that trustee, Lori Lapin Jones, to sell all that is left to a nursing home magnate who already runs two nursing homes in Rockaway and who, with two partners, is buying the properties under four limited liability corporations that are mired in secrecy. According to court papers filed with Bankruptcy Judge Elizabeth Stong on August 9, Jones proposes to sell the properties to “four affiliated entities formed by Michael
Melnicke, Leo Friedman and Joseph Brunner.”
Those papers show that Cardiff Bay LLC, which is registered to a Manhattan address, will buy the nursing home assets, while Beach 50th Street LLC will buy the nursing home real property, both for a total of $16,650,000. The hospital real property will go to Beach Channel Drive Holdings LLC, which is registered in Albany (New York) as is Beach 50th Street LLC. The cost for the hospital shell is $6,250,000. The clinic property, which presently houses a school program run by the Addabbo Family Health Center, will go to Beach 53rd Street LLC, which is registered in Albany as well. All of the four LLC’s were set up during the month of July apparently specifically to buy the PHC properties.
While Jones says that she will still hold an auction in September for the properties should a higher bidder with a valid ability to buy the properties come along. Despite that, she told Judge Stong that she wanted to get approval for the sale to Melnicke and his partners in order to “expedite” the process as much as she could.
“A prompt sale of the assets, properties and clinic property is essential to preserve and maximize values for the benefit of the debtors’ creditors,” she says in her court papers.
The company hired by Jones to shop the properties initially identified 86 entities that might be interested in the properties and sent them a bid solicitation letter. Papers show that 26 entities showed an interest.
A decision was made to sell the properties to one bidder rather than multiple bidders.
Jones says that she received “significant bids” from two bidders and that “parallel negotiations” were held with the two.
She then decided that “the purchaser’s offer was the highest and the best offer received,” and moved to sell the properties to Melnicke and his partners.
“Notwithstanding [the agreement], it is contemplated that the proposed sale will be tested by an additional solicitation process and auction during which the higher or better offers will be considered,” Jones added. That auction will be held sometime in September, and the date is not expected to be announced to the community.
Melnicke is a former board member of the Peninsula Hospital Center. In 2006, he was given an award by the hospital’s trustees for his good work for the institution.
He is the owner and administrator of five nursing homes and the operator of a sixth, two of which are in Rockaway – The Rockaway Care Center and the Park Nursing Home.
His facilities together contain approximately 1,540 beds.
The agreement says that Melnicke does not have to assume any of the present collective bargaining agreements with the employees still working for the nursing home, but he does have to honor seniority and will have to “bargain in good faith with the applicable unions.”
The agreement also has a restrictive covenant that provides, in the event the proposed purchaser of the hospital real property fails to acquire the assets of the nursing home, or does not acquire them simultaneously, that the purchaser shall get the hospital with the covenant that restricts him from using any portion of the hospital real property as a skilled nursing facility, or otherwise obtaining any right to locate any nursing home beds at the location.
There is a similar restriction on the use of the clinic property.
While it is clear that Melnicke and his partners cannot use the hospital property as a nursing home, it is unclear as to what he has in mind for the property.
Repeated calls to Melnicke at his Rockaway businesses went unreturned.
Calls to the offices where his four LLC’s are registered found answering machines, and those calls were never returned as well.