BUFFALO, NY (WKBW) - Mothballed Sheehan Memorial Hospital, an East Side anchor for decades, finally has a new owner and development direction, following a U.S. Bankruptcy Court-ordered sale of the Michigan Avenue complex.
As expected, an affiliate of McGuire Development Co., MCG Real Estate Holdings LLC, was awarded the rights to purchase the eight-acre property by U.S. Bankruptcy Court Western District Chief Judge Carl Bucki.
MCG Real Estate has agreed to pay $2 million and has a complete re-development plan for the property, which includes a five-story, 145,000-square-foot main hospital as well as a surface parking lot.
MCG Real Estate was the sole bidder for the property and had submitted its $2 million stalking horse bid earlier this fall.
Bucki approved the sale following a nearly three-hour hearing Thursday afternoon. The deal is expected to close by Dec. 4.
"Through bankruptcy there is realism," Bucki said.
James Dentinger, McGuire Development president, said tentative plans include moving anchor tenants UNYTS and Urban Family Practice into the facility. Additionally, McGuire may shift its own health care training center from Delaware Avenue to the site.
UNYTS had been scouting sites in the downtown area where it can consolidate operations, including a 55,000-square-foot facility on Broadway and 12,000 of leased space in Williamsville, where it houses its blood collection operation.
Urban Family Practice operates a West Side medical practice and had previously indicated it wanted to work with other providers to try to save Sheehan.
Schofield Residence, a tenant that has remained in the building while renovations are completed on a new site, is moving into new space Dec. 1.
Since the hospital closed in June, it has assumed all costs for utilities, security and upkeep of the building. McGuire has agreed to assume all utilities and security costs immediately.
Dentinger estimated that McGuire will invest as much as $7 million in redeveloping the property.
"That number may go up substantially, depending on other tenants we may get," he said.
Dentinger said McGuire is excited to have control of the property, which fits in with the nearby Buffalo Niagara Medical Campus and Erie Community College campus.
"It's just two blocks from the downtown core," he added.
Garry Graber, a partner with Hodgson Russ LLP, who represented Sheehan, said the $2 million sale price was an accurate reflection of the current marketplace. Initially, some had thought the property might fetch closer to $3 million.
Graber said 45 entities expressed interest in the complex, which was marketed internationally by New York City-based Madison Hawk Co. Of those, 15 were from New York state. Although several of the interested parties did walk-throughs of the property, none opted to pursue the property.
"I wasn't surprised by the interest, but I was surprised we didn't get another qualified offer," Graber said.
The key was McGuire's $2 million stalking-horse bid, which set the market price.
"To me, that was an accurate indication of what the property was worth, as was determined by the process," Graber said.
While the sale price was not in dispute during the hearing, there were questions raised by Bucki and others concerning how the proceeds would be distributed.
"It is reasonable to expect that all the creditors will be paid, even if there are carve-out considerations," Bucki said.
Proceeds will be used to pay creditors.
Sheehan's board of directors, in late March, announced plans to close the hospital, saying its financial state "was not sustainable for the long-term future."
Dr. Jerome Yates, a longtime Sheehan board member, spectated Thursday's hearing from a back row seat.
"I've watched this go through a lot of machinations over the years," he said. "It's kind of sad, because it (the hospital) is needed when you look at access to care. It's sad to see it go that way."
Sheehan closed in June, putting 150 people out of work. The hospital's roots in Buffalo date back to 1888.
The shut-down was followed Aug. 24 by a Chapter 11 filing under the U.S. Bankruptcy Code, with Sheehan citing liabilities of $5.45 million and assets of $6.3 million.
The property, which is listed in the bankruptcy filing as having a $3 million book value, is listed as one of the hospital's primary assets along with $3.3 million in furnishings and equipment.
The hospital also has $3.17 million in outstanding accounts receivables, according to the filing, prepared by Graber.
But, hindering the hospital are the liabilities, including $485,099 in a secured claim by General Electric Capital Corp., $845,727 in four separate claims by the Internal Revenue Service and $126,654 to National Grid.
New York state is also owed $1.914 million in Medicaid overpayments made to the hospital; while unsecured creditors include $93,531 owed the state Department of Labor for unemployment insurance.