Hospital, city disagree on land value

DOWNEY - Downey Regional Medical Center, in an effort to obtain collateral that would help it emerge from Chapter 11 bankruptcy, recently made two offers to purchase the city-owned land the hospital sits on but negotiations never progressed past initial discussions, city and hospital officials confirmed this week. The hospital offered $1.5 million for the eight acres last fall, and a revised offer last month in which a court-appointed appraiser would determine the land's fair market value, city attorney Yvette Abich Garcia said. Both offers were rejected. "As you can see under the Hospital's proposal, the determination of fair market value would be placed solely in the hands of a court-appointed expert appraiser and the Bankruptcy Court with very little input from the City who owns the land," Garcia wrote in an e-mail to this newspaper. "As we mentioned in our correspondence to the Hospital, this proposal would not ensure that the City was getting the best price for the land and would do very little to protect the interest of the Downey taxpayers." Mayor Luis Marquez said the initial offer of $1.5 million fell well short of the land's appraised value of $10 million, and added that a sale would require approval by Downey voters. Rob Fuller, chief operating officer at Downey Regional, said the hospital's offer was based on the city's reversionary interest under the ground lease between the hospital and city. "The city's view of the value of the lease was as if the property was on the market right now," Fuller said. "Our view is that the land holds no economic value to the city, so we were pretty far apart...I think the reversionary interest is worth about $500,000." Fuller objected to the city's stance that a deal be approved by voters. "I'm not interested in pursuing a six-month long political campaign just to complete a real estate deal. We don't have time to do that," he said. "The city sells lots of land without voter referendums. It doesn't necessarily make sense to me." On July 19, 1983, Downey voters approved a 99-year ground lease between the city and Downey Regional Medical Center, which was at the time known as Downey Community Hospital. Under terms of the lease, the hospital would lease the property at 11500 Brookshire Avenue from the city for $1 a year. Similarly, Mayor Luis Marquez said voters should have final say on whether to sell the land and terminate the lease. "We want to have a top-notch hospital in our community but selling the land to Downey Regional Medical Center for only $1.5 million would almost certainly be challenged in court," Marquez said. "It could be looked at as a gift of public funds." Fuller said the hospital is "moving on" from efforts to purchase the property and will instead use its lease rights as collateral for a loan. A judge will rule on the hospital's reorganization plan in June or July, he said. "We'll just go on with our merry life," Fuller said. "The city doesn't want to accommodate us for whatever their reason, or at least not easily." Downey Regional filed for Chapter 11 bankruptcy protection in September 2009 as it sought "financial stability, the tools for crafting a very successful future, and immediate protection from lawsuits and creditors' actions," the hospital said in a press release at the time. The hospital was also working to fix "literally thousands of problems with its financial systems at the same time it was transitioning to a new business model..." Presbyterian Intercommunity Hospital of Whittier and the Daughters of Charity Healthy Systems both attempted to purchase Downey Regional at separate times, but those deals fell through.