At former LICH site, developer runs into financial trouble

Eight years ago, many Brooklyn Heights and Cobble Hill residents, as well as elected officials and members of the medical profession, were up in arms about the sale of Long Island College Hospital’s campus to a developer whose plans included residential housing as well as a freestanding urgent care unit.

Now, that developer’s plans for the site appear to have hit a problem.

Lender Madison Realty Capital has initiated a Uniform Commercial Code, or UCC, foreclosure sale for equity interests, meaning ownership interest in a business entity, against Fortis Property Group on development sites at 350 Hicks St. and 91-95 Pacific St., according to The Real Deal, an industry website.

The site, where Fortis plans two condo buildings with 150 units, is part of an overall development known as River Park.

The Hicks Street Building, 1 River Park, is slated to be 20 stories high and contain 48 apartment. The Pacific Street building, known as 2 River Park, is slated to have 102 residential units, The Real Deal reported.

Soon after it won the bidding process for the hospital site, Fortis secured a $107 million “bridge loan” from Madison, according to Business Wire. A bridge loan is a form of short-term financing that can serve as a source of funding until a company secures more permanent funding. 

Two years later, Madison provided Fortis with a $297 million construction loan for these and one other condo building.

“Madison offered us an opportunity to leverage the property at a reasonably priced cost of funds relative to the dilution we would have taken if we brought in a partner,” Fortis’s Jonathan Landau was quoted as saying at the time.

A third building, the smaller 5 River Park at 347 Henry St., which is basically completed, is not part of the UCC foreclosure. Fortis’ website describes it as being 75 percent sold.

The foreclosure sale of the equity interests, “which would satisfy $47.7 million in debt,” is scheduled for Sept. 29, The Real Deal said. 

Fortis has also been active in other Brooklyn neighborhoods. Units at the new Dumbo condo building at 30 Front St., known as Olympia Dumbo, are “the most expensive dwellings in Brooklyn,” Fortis said on its own website in September 2021.

Former Hospital Had Troubled History

Throughout the 1990s, and even before, Long Island College Hospital, like many hospitals during that period, was in financial trouble. In 1999, it was purchased by Continuum Health Partners. However, under Continuum’s ownership, the hospital’s finances continued to be troubled.

In 2011, the State University of New York (SUNY) took over the management of LICH, and most observers hailed SUNY as the hospital’s savior. However, problems soon emerged. 

According to an article published in the Eagle several years later, “insurance companies didn’t pay for treating patients at LICH because SUNY never credentialed LICH’s doctors under SUNY’s auspices with the insurance companies.”  That means, in effect, that LICH was treating many patients for free. At the same time, the hospital kept incurring day-to-day expenses.

In late 2013, SUNY announced its intention to close LICH. This started a struggle that went both through the court system and on the ground — for example, patients were continuously being transferred out of the hospital, and at least at one point, the emergency room stopped accepting patients. There were constant protests at the hospital site.

Finally, in 2014, the SUNY trustees and the state Health Department closed the hospital.