Investor interest expected for Cabrini assets

Last Thursday, Gramercy Park’s Cabrini Medical Center filed for Chapter 11 bankruptcy protection, leaving a valuable asset for the taking.

The medical center closed its doors March 17, 2008 and the following day, the 338-bed hospital handed over its 60 hospice beds to Saint Vincent Catholic Medical Centers. Cabrini was one of the five hospitals in New York City slated for closure in 2006 by the Berger Commission on Health Care Facilities. After the hospital shuttered a year ago, the facility provided ancillary health services like inpatient medical/surgical, psychiatric and rehabilitation services, and was a state-designated AIDS center.

Over the past two years, Cabrini was in negotiations with Saint Vincent’s to buy two of its buildings, Crain’s reported. The most important asset of the bankrupt medical center is its 18-story hospice located at 227 East 19th Street between Second and Third avenues. Sun Life Assurance Company of Canada holds a $35.1 million first mortgage on the building.

The building is located less than two blocks for the NYU Langone Medical Center and the Hospital for Joint Diseases and a few blocks from the Beth Israel Medical Center located on First Avenue at 16th Street. Due to the strategic location of Cabrini Medical Center, industry leaders expect the most interested bidder would be NYU, which has announced expansion of its Tisch Hospital, Rusk Institute of Rehabilitation Medicine and planned children’s hospital. Nevertheless, industry leaders would not be surprised if there were other health care bidders for the property including New York Presbyterian, The University Hospital of Columbia and Cornell St. Vincent Catholic Medical Center and Mount Sinai Medical Center.

The property might also fetch bids from real estate investors who may be interested in converting the property into student and faculty housing or a residential rental building or condominium. In February 2008, New York Downtown Hospital sold its 12-story mixed-use residential rental building located less than two blocks from Cabrini, at 318 East 15th Street, to Arun Bhatia Development, for $56 million. According to sources, Bhatia, who has developed a number of dormitory facilities in Manhattan, plans to convert the property into a dormitory. Even in the midst of the credit crisis industry leaders expect the property to sell for a price of $35 to $40 million.

Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” and “Building New York” on CUNY TV and on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is a director at Madison Realty Capital as well as an adjunct professor at NYU Real Estate Institute, and a former contributing editor and columnist for the New York Sun.