Fortis Property Group has completed the initial closing on a large chunk of the site of Long Island College Hospital (LICH) in Cobble Hill, but the final closing on the property may be years down the road.
The complex plan was overseen by state Supreme Court Justice Johnny Lee Baynes. It includes developing residential towers on the site of the former hospital, paying off debt and establishing a stand-alone Emergency Department and other medical services, and will roll out in three tranches.
Court documents refer to the process as a “trifurcated closing schedule” consisting of the “Initial Closing,” the “New Medical Site Closing,” and the “Final Closing.”
The Initial Closing
The Initial Closing, which completed last week, transfers to Fortis (from a holding company controlled by SUNY) the eastern portion of the hospital’s Othmer Pavilion on Pacific Street, along with the landmarked Polhemus Building on Henry Street, the parking garage on Hicks Street, and 14 other properties on Amity Street, Atlantic Avenue and other locations.
Fortis laid out half of the $240 million it is paying for the LICH site at last week’s closing (minus half its down payment of $24 million and possibly other monies). The rest of the money it owes will be paid at the Final Closing.
“Today’s closing marks an important step forward,” Fortis spokesperson James Yolles told the Brooklyn Eagle on Friday.
“We look forward to refining our redevelopment plans over the next couple of months through our work with Councilmember [Brad] Lander, other local elected officials and stakeholders, and the broader community,” Yolles said.
According to Commercial Property Executive (cpexecutive.com) , Madison Realty Capital is has provided Fortis with approximately $107.3 million of first mortgage financing for the first phase of the acquisition.
The New Medical Site Closing
The New Medical Site Closing will not take place until Fortis demolishes the hospital’s 12-story Fuller Pavilion and the Othmer Pavilion. Originally scheduled to take place no later than June 30, 2016, it could be delayed for months, as the Initial Closing was.
After the site is fully cleared, it will be handed to NYU Hospital Center. NYU will then start constructing a new medical building at the corner of Atlantic Avenue and Hicks Street.
NYU will be providing a 108,000 square-foot walk-in Emergency Department / ambulatory care clinic in the new five-story building. Its new address will be 70 Atlantic Ave. The clinic is expected to open in 2018.
The Final Closing
While NYU is constructing its new building, the holding company (called the Downstate at LICH Holding Company) will continue to own the hospital’s Henry Street Building and the Polak Pavilion. A portion of these premises will continue to be leased to Fortis. NYU will sublease this portion for its interim emergency department during construction of the new medical building.
The Final Closing will only take place after NYU moves its healthcare operations into the new building. Fortis will then take over the remaining property.
“It appears that the block between Henry and Hicks and Amity and Pacific Streets may be the last parcel to be redeveloped, only after NYU Langone relocates to their to-be-constructed building on Atlantic Avenue,” Laurel Burr, Cobble Hill Association’s membership secretary, told the Eagle on Tuesday.
Othmer Endowment and Other Debt
The agreement also covers the disposition of debt. Approximately $118 million of the $240 million purchase price will be used to defease Personal Income Tax (PIT) Bond debt, set aside a $2 million reserve fund, and replenish the $140 million Othmer Endowment, donated to LICH by Brooklyn Heights residents Donald and Mildred Othmer.
When SUNY acquired LICH, it agreed to replenish the Othmer funds. According to court papers, it is assumed that the proceeds of the sale will not be sufficient to permit SUNY to repay the endowment, however, which LICH and SUNY used to establish a Malpractice Trust and pay other LICH liabilities.
SUNY, however, will receive any money left over remaining in the LICH Liability Fund after paying liabilities, as well as any amounts remaining in the Malpractice Trust.
SUNY is obligated to replenish the Othmer Funds with these monies to discharge its obligations, according to court documents.
Clash Takes Toll on Cobble Hill
Officials and the Cobble Hill Association (CHA) have been proceeding with talks with Fortis in an attempt to reach some accommodation with the developer over the height and density of the buildings to come.
The sale and development battle has taken a toll on the neighborhood, however, even before one building is torn down.
At community meetings with Fortis over the summer, many in attendance made it clear they were still seething about the loss of their historic hospital.
“Have you considered the impact all these people will have on this sleepy little neighborhood?” asked one Cobble Hill resident. “We’re already inundated with construction and traffic. This is going to break the community.”
Fortis has presented two versions of its development plans. Both would bring 40-plus story skyscrapers to low-rise Cobble Hill.
The “as-of-right” option, which does not require public approvals, would include about 400 market-rate residential units. The rezoning or “ULURP” option would include 800-plus units along with affordable housing, space for a public school, increased park space and retail. Rezoning would require city review.
Tensions at CHA reached the boiling point last week after dissidents threatened to dump their longtime leader Roy Sloane in a special election on Sept. 10.
Last Wednesday Sloane tendered his resignation as first vice-president. Sloane has served on the CHA board almost continuously since 1980, but a number of members were unhappy with his strategy of engaging in dialogue with Fortis to shape the coming development, rather than taking stronger legal steps.
In his letter of resignation Sloane said the engagement process he backed, led by Councilmember Lander, offered the community the chance to “pre-shape both the ULURP and as-of-right options.”
“The danger of an out-of-scale skyscraper district in our low rise, historic community is very real – but, for me, the greatest tragedy would be for the Fortis development to leave a torn and divided community in its wake,” he said.
On Sept. 10 at 7 p.m. CHA will be meeting to elect a new board. The meeting will be held at the Cobble Hill Health Center, 380 Henry St.