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School ends negotiations with top Long Island College Hospital bidder


By Daniel Geiger, Crain's New York Business
Posted: May 6, 2014 - 5:00 pm ET
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The State University of New York on Monday said it was unable to reach a contract agreement with Brooklyn Health Partners on the redevelopment of money-losing Long Island College Hospital.

The two had a deadline of May 5 to reach an agreement. SUNY, which owns the Cobble Hill, Brooklyn hospital, said it would move on to the next highest-ranked bidder. The announcement is the latest twist in a saga that has cost the state hundreds of millions of dollars to keep a near-empty hospital open.

"Following good faith negotiations over the last thirty days," SUNY said in a statement, "[it] is unable to execute a satisfactory contract agreement with BHP. SUNY remains unwavering in its commitment to protecting community health care services and a viable long-term solution for LICH. Therefore SUNY is moving forward with the second highest scoring proposal consistent with the Request for Proposal and the court-ordered settlement."

That means developer Donahue Peebles, whose proposal to buy the Cobble Hill complex and turn it into a mix of housing and outpatient clinics was rated No. 2 in a scoring process, is up to negotiate with SUNY.

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BHP had won the right to negotiate exclusively with the hospital's owner, but the firm lost the support of Mayor Bill de Blasio and the unions that represent LICH employees, who doubted the feasibility of the proposal after SUNY indicated it was unlikely to reach an agreement.

BHP, in turn, sued SUNY, alleging it had negotiated in bad faith, only to be told by a state judge to return to the negotiating table. Brooklyn Health Partners said on Friday that it was "prepared to close its transaction" with SUNY on May 5.

Now that SUNY has moved on, BHP may yet sue the university system. On Monday evening, a spokeswoman for the would-be developer said it was "currently meeting with its attorneys to determine its next course of action."

Meanwhile, the spotlight turns to Peebles, a Florida real estate investor who has had limited experience in New York City real estate and no experience operating medical facilities. He came in second place in the bidding process and would have the chance to buy LICH. Unlike BHP, Peebles' health care partner, North Shore-LIJ Health System, would be eligible for a temporary license to operate LICH after SUNY shuts it down. That is expected to happen May 22.

Peebles bills himself as the biggest African-American real estate developer in the country. Last week, in an interview with CNBC, he said he'd be interested in buying the Los Angeles Clippers from owner Donald Sterling, whose racist comments led to his lifetime ban from the NBA.

Peebles' previous forays into New York have produced mixed results. In 2009, he lost a bid to develop an electronic casino-gaming facility and restaurant and bar at the Aqueduct Race Track. Malaysian casino operator Genting won the racino contract. Peebles made his first deal in the city last year, when his firm won an auction to buy the city-owned office building 346 Broadway for about $160 million. At the time, he told Crain's that he planned to convert the property into a hotel with residential condos above.

For LICH, Peebles' firm put together a well-regarded plan to turn the facility into a mix of nonhospital medical space and residential apartments, more than 30% of which he has pledged to build as affordable housing—a ratio that other bidders in the hotly contested auction immediately rushed to match. Peebles also has claimed that his plan will employ more minority- and women-owned development partners than the other bidders.

Now that Peebles is in the spotlight with LICH, rivals for the project have been quick to point out his controversies. The city's Department of Investigation, for instance, is looking at Peebles' hiring earlier this year of Tawan Davis, a former executive at the city's Economic Development Corp. who was part of the city team that sold Peebles 346 Broadway. The investigation is being done ostensibly to look at whether the hiring in any way could present a conflict of interest for Davis, though the city Department of Investigation declined to comment.

Several sources familiar with that investigation say that the inquiry alone doesn't suggest any wrongdoing. And a spokesman for Peebles presented a letter from the City Conflict of Interest Board in April in which it expresses an opinion that Davis' hiring was appropriate as long as he does not work on the 346 Broadway project for Peebles.

"SUNY ends negotiations with top LICH bidder" originally appeared on website of Crain's New York Business.


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