A settlement between Steward Healthcare and its landlord moved forward last week despite the concerns of Orlando Health, the presumptive buyer of Sebastian River Medical Center and two Brevard Hospitals, with the Orlando nonprofit saying it lacks vital details about the sale, including exactly which properties it is purchasing.
Just in Indian River County, Steward’s landlord, Medical Properties Trust, owns 61 different properties including and surrounding the Sebastian hospital, including some vacant land, plus a separate office building in Vero Beach.
Erin Brady of the Hogan Lovells law firm in New York, Orlando Health’s attorney in the bankruptcy court negotiations, pointed out to Judge Christopher Lopez that the settlement agreement now allows landlord MPT to transfer the real property to Steward. Then Steward would sell the properties, free and clear of liens and liabilities, to Orlando Health.
But since the real estate negotiations have yet to begin, and Orlando Health is not even sure which properties it is supposed to be purchasing, Brady wanted clarification that, no matter who the seller is, any agreement must be consensual.
“We don’t have a purchase and sale agreement with any party at this point, that’s a condition of closing, so whoever is going to deal with Orlando Health needs to do that and we all need to come to an agreement. I think that everybody understands that point,” she said. “If there is no agreement, then we can’t close and that’s not what we want or any other party wants.”
Orlando Health offered some language to add to the settlement order which would clarify things, but Brady said, “Nobody was willing to negotiate language with us, which frankly is a little bit disappointing.
“MPT has come to court before and said we won’t agree, we can’t be forced to do a non-consensual agreement. We’re just saying the same thing. We shouldn’t be forced to do a non-consensual agreement. I hope that that’s not what the parties are trying to do, but they rejected our language on this point,” she said.
Her statements to the bankruptcy court judge reveal the general unease, or even a lack of trust in Steward and MPT, with regard to the $460 million deal. Orlando Health has bid $439.4 million in cash for the three hospitals and the associated property, of which Steward will net $395 million.
Lopez advised Brady to come back to court and he would referee should any issues arise. “I’d be the one who signs both orders and I understand your argument,” he said.
A closing on the Sebastian River Hospital business or “going concern” is tentatively set for Oct. 23 or sooner, and Orlando Health must close on the purchase of the real property prior to or at the same time the parties close on the business of operating the hospital.
Lopez said the the parties had come a long way “as compared to where this case was early on.”
The bankruptcy settlement he approved last week gives Steward’s five South Florida hospitals plus a dozen or so hospitals in other states to MPT to satisfy roughly $1.5 billion in claims MPT was asserting against Steward for back rent and rejecting unexpired leases.
Had the settlement not gone forward, Steward would have had to continue trying to sell the hospitals with no remaining operating cash left to keep them open. As part of the deal, MPT gave Steward $9.1 million to pay employees for time worked in September, plus $5 million for other expenses. Interim operators took over running the hospitals given to MPT on Sept. 11.
