The US Bankruptcy Court approved the sale last week and the new ownership is arranging for the continued operation of both of these programs, the hospital's clinics and other medical services under new management. GlobeSt.com has learned that the Skilled Nursing Facility is operated on the site of the 333,000-sf Main Campus that is being sold to Sunset and the Lombardi Home Health Program is a home care program "so little to no space is needed to operate the business in the ordinary course."

According to CIT, the transaction, when completed, will be "one of the first successful sales and restructurings of medical services at a hospital slated for closure by the Berger Commission," a non-partisan panel created by former Gov. George Pataki and the New York State Legislature to review the regional and local supply of hospital and nursing home beds throughout the State. Natalie Wilensky, managing director of CIT Investment Banking Services, Real Estate, tells GlobeSt.com that the transaction is subject to Department of Health approval and is expected to close in Q4 2008. "Much work was done in advance of an auction to involve DOH in the bidder prequalification process and gain certain assurances that the buyer and its operating partners would likely pass DOH approval requirements."

She notes that "this deal is a great example of how financially stressed institutions can effectively monetize real estate assets and restructure services so that business continues and community needs are served." As far as reasons for selling, Wilensky says that upon learning that the Berger Commission would recommend that Victory close as a hospital and its 240 acute care beds be decertified, Victory filed for Bankruptcy protection in November 2006. "At the time of filing, Victory's liabilities exceeded its assets; hence, unsecured creditors wanted assets sold to repay debts." She says that in June, 2007, CIT was engaged as the real estate advisor by both the debtor and the Official Committee of Unsecured Creditors to sell the real property and the related businesses "for the benefit of creditors."

Wilensky says that the hospital, through CIT, sought proposals from "qualified bidders, operators and real estate owners for redevelopment plans, with a preference for those that provided for the continuation of certain medical services at the site."

As far as interested buyers, Wilensky notes that following "extensive financial and real property due diligence," CIT prepared and sent a Request for Proposal to more than 160 parties, including Healthcare REITS, developers, medical operators and real estate owners. Approximately 40 letters of interest and confidentiality agreements were signed with these entities to gain access to a secured, web based due diligence site. In late August, she says, CIT presented "best and final bids" to Victory's Board of Trustees and in October thru December, CIT, together with its clients, prequalified certain bidders with the DOH, "as medical certificates of need can not be transferred without DOH approval."

In January, 2008, a stalking horse contract was negotiated and signed with an entity for an all asset sale, which includes the "real property and related medical businesses," and an auction was held on March 31. Wilensky tells GlobeSt.com that three entities were financially qualified to participate in the auction; each signed a purchase and sale agreement and posted deposits and Sunset came out as the "successful bidder."

Sunset was attracted to the all asset sale, Wilensky says, because the hospital is "strategically well located in Brooklyn," where it has served the communities of Bay Ridge, Fort Hamilton and Dyker Heights for 100 years. "With an approximately 333,000-sf main campus sitting on 1.5 acres across from Dyker Beach Golf Course and Poly Prep Country Day School, it is an excellent piece of real estate."

Wilensky adds that Sunset, which is controlled and owned by a real estate entrepreneur and owner, has successfully leased property to hospitals and medical service providers. "Therefore, they believed that medical services could be profitably provided at the site," she says. "They will reconfigure services at the site once they finalize a hospital partner for urgi-care operations and renovations and upgrades will be forthcoming."