2012-10-19 / Top Stories

No Bids For PHC Property

Melnicke Gets Hospital, Nursing Home, Clinic for $24 Mil
By Howard Schwach

At the end, nobody but Michael Melnicke and his partners wanted the former Peninsula Hospital Center.

With the October 4 deadline for bids come and gone, no new bids for the former hospital building, the nursing home or the clinic property were recorded by bankruptcy trustee Lori Lapin Jones.

On Monday, the property was officially sold to nursing home magnate Michael Melnicke and his two partners, Leo Friedman and Joseph Brunner, for the sum of $24 million.

In late August, Jones moved in Judge Elizabeth Stong’s court to allow her to sell all of the real property to Melnicke, who already runs two nursing homes in Rockaway and who, with his two partners, is buying the properties under four limited liability corporations that are mired in secrecy.

In her court papers, Jones said that she was looking for a quick sale so that the creditors’ claims could finally be satisfied.

“A prompt sale of the assets, property and clinic property is essential to preserve and maximize values for the benefit of the [PHC] creditors,” she wrote to Stong. “With respect to PHC, the hospital has been closed for months and the plan of closure has been implemented.

The hospital’s operating certificate has been surrendered, all medical records have been transferred to CitiStorage for indexing and future patient access, the remaining accounts receivable have largely been collected and all tangible personal property has been liquidated. The trustee has minimized the continued cost of maintaining the hospital and clinic properties but cash collateral is diminishing. A prompt sale of the hospital property and clinic property is essential.”

Jones added that the nursing home is also losing money and that there “is an erosion of cash each month.”

She asked for a receivership status for Melnicke to take over both the income and the expenses of the nursing home at the time of sale rather than waiting for the state to approve the sale, which could take several months.

“Such a deal would obviate the risk of additional operating losses for the trustee and preserve cash for the estate,” she argued.

According to court papers filed with Judge 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.

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 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 LLCs were set up during the month of July apparently specifically to buy the PHC properties.

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.

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.”

Rumors continue to swirl around the question of what will happen to the property.

The most prominent is that Melnicke plans an assisted living facility for the abandoned hospital building and clinic.

Rumors cannot be substantiated, however, because Melnicke has so far declined to comment on his plans for the property.

Repeated calls to Melnicke at his Rockaway businesses went unreturned.

Calls to the offices where his four new LLCs are registered revealed answering machines, and messages left on those machines were never returned.

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