Febr
uary 15, 2022
HONO
RABLE MAYOR AND CITY COUNCIL
City of Long Beach
California
RECO
MMENDATION:
Aut
horize the City Manager, or designee, to execute the First Amendment to Amended and Restated Lease No. 35432, and necessary documents , with MWN Community Hospital, LLC (Tenant), for modifications to various provisions of such Lease; and, Adop
t a Resolution finding that the Community Hospital and surrounding campus remains necessary for the City of Long Beach use as a general healthcare campus with related community-serving uses and authorizing the recordation of amended covenants so restricting use of the Subject Property. (District 3)
DISCUSSION
On October 19, 2019, the City Council authorized Amended and Restated Lease No. 35432 (Lease) with MWN Community Hospital, LLC (Tenant) , for the operation of an acute care hospital and other health care services on City of Long Beach (City) owned property located at 1720 Termino Avenue, 1760 Termino Avenue, and 4111 E. Wilton Street (Subject Property) (Exhibit A to the Resolution). The use restriction is memorialized as a Deed Restriction recorded on the Subject Property. As part of the use restriction to operate the Subject Property as an acute care hospital, the Lease also requires the Tenant to pursue seismic-strengthening and building-code related improvements mandated by the State of California Assembly Bill 2190 (AB 2190).
Over the past two years, the Tenant worked with the City, State, and community organizations to reopen the hospital and secure approval for seismic construction plans prior to the January 1, 2022 deadline for groundbreaking as established by State law. Unfortunately, over this time, seismic construction costs increased by 50 percent over initial estimates and demand for acute care services failed to reach levels to sustain acute care hospital operations. On January 14, 2022, the California Department of Public Health (CDPH) confirmed in writing that the Tenant had surrendered its General Acute Care Hospital License effective December 31, 2021.
Notification of Termination
Under Section 28 of the Lease, the Tenant has the right to terminate the Lease if there is no longer economic justification for the Tenant to operate the Subject Property. On September 27, 2021, the Tenant issued a notification of termination to the City indicating economic adversity and requesting to (a) modify the current deed restriction to remove the requirement that the Economic Development Department
411 West Ocean Boulevard, 10th Floor Long Beach, CA 90802 (562) 570-6099
R-12
HONORABLE MAYOR AND CITY COUNCIL
February 15, 2022
Subject Property be used for a general acute care hospital, and (b) amend the Lease to allow for the Tenant and the City to negotiate a transition plan for the facility to continue to serve Long Beach residents as a general healthcare campus.
As described in Section 3 of the Lease, the Tenant “shall use the Premises for (i) subject to the issuance of the Office of Statewide Hospital Planning Department ( OSHPD) approvals, an acute care hospital with emergency care (only such portion of the Premises that are licensed by CDPH as a general acute care hospital … and other health care services as determined by Tenant or as may be required pursuant to Tenant’s licensure as an acute care hospital, and (ii) medical office buildings.” Given that the Tenant ceased efforts to comply with State seismic construction requirements, the City acknowledges that general acute care services are no longer permitted by OSHPD or licensed by CDPH, effective January 1, 2022, and that the current deed restriction which requires the property to be used for a general acute care hospital must be amended. Additionally, given the ongoing need for community health services, the City Manager was authorized by the City Council to negotiate a transition agreement and/or an amendment to the Lease with the Tenant to provide non- acute health care services at the Subject Property that benefit the community including:
• Behavioral Health
• Recuperative Care
• Social Services
• Education
• Government Offices
• Housing (Healthcare Students)
• Specialized Services
City Council authorization is requested to amend the Lease and the current deed restriction requiring acute care services to allow the Tenant to provide health- related services as described above, effective January 1, 2022. City Council authorization is also requested to amend the Lease as necessary to accommodate ongoing negotiations between the City and the Tenant for potential sale of the Subject Property pursuant to the Lease, including without limitation the extension of certain noticing provisions and deadlines applicable to (i) preparation and review by the City of Net Hospital Capital Costs, and (ii) preparation and review of appraisals establishing the fair market value of the Subject Property. Any proposed agreement for the sale of the Subject Property to the Tenant or another party will be presented to the City Council and the public for final review and approval.
This matter was reviewed by Principal Deputy City Attorney Richard F. Anthony on January 27, 2022 and by Finance Director Kevin Riper on February 3, 2022.
HONORABLE MAYOR AND CITY COUNCIL
February 15, 2022
TIMING CONSIDERATIONS
City Council action is requested on February 15, 2022, to allow all parties to execute documents in a timely manner.
FISCAL IMPACT
The recommended action by City Council to modify the deed restriction for the Subject Property is a requirement of the existing Lease between the City and Tenant. There is no additional fiscal impact as a result of this recommendation and the recommendation does not change any of the financial terms described in the existing Lease. As described in the existing Lease approved by the City Council, City c osts associated with the administration of appraisals and the reconciliation of net hospital capital cost reimbursements are expected not to exceed $150,000. Any recommendation associated with an amended agreement between the City and Tenant that impact the financial obligations of the City would require City Council approval .
This recommendation has no staffing impact beyond the normal budgeted scope of duties and is consistent with existing City Council priorities. There is no local job impact associated with this recommendation.
SUGGESTED ACTION:
Approve recommendation.
Respectfully submitted,
JOHN KEISLER
DIRECTOR OF ECONOMIC DEVELOPMENT
ATTACHMENT - RESOLUTION APPROVED:
THOMAS B. MODICA
CITY MANAGER
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OFFICE OF THE CITY ATTORNEY
CHARLES PARKIN, City Attorney
411 West Ocean Boulevard, 9th Floor
Long Beach, CA 90802
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE OF
CITY OF LONG BEACH, FINDING AND DETERMINING THAT
THE CITY-OWNED PARCELS LOCATED AT 1720 TERMINO
AVENUE, 1760 TERMINO AVENUE AND 4111 E. WILTON
STREET ARE NECESSARY FOR AGENCY’S CONTINUED
USE FOR PURPOSES OF GOVERNMENT CODE SECTION
54221(c)(1)
WHEREAS, City and MWN Community Hospital LLC (“Tenant”) are parties to that certain Amended and Restated Lease (Contract No. 3543 2) (“Lease”) pursuant to which Tenant leases from City that certain real property (“ Subject Property”) commonly known as Community Hospital and as more particularly described in Exhibit “A” attached hereto; and
WHEREAS, the Subject Property has been operat ed as a hospital and medical campus for several decades; and
WHEREAS, in accordance with the terms of the Lease, the Tenant has recently given notice to City of Tenant’s determination that the Subject Property cannot be economically operated as an acute-care hospital; and
WHEREAS, as a result of such notice, the Subject Property shall be sold to Tenant or a third-party in accordance with procedures provided for in the Lease, provided that in either event the Subject Property shall be restricted primarily to the provision of health care services to the surrounding community and related and supporting uses; and WHEREAS, ensuring the continued provision of such health care -related services is a legitimate government interest;
NOW, THEREFORE, the City Council of the City of Long Beach resolves as follows:
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OFFICE OF THE CITY ATTORNEY
CHARLES PARKIN, City Attorney
411 West Ocean Boulevard, 9th Floor
Long Beach, CA 90802
Section 1. The City Council has determined the Subject Property, despite the proposed transfer to Tenant or a third-party, is necessary for City’s continued use.
Section 2. In furtherance thereof, the Subject Property shall be subject to covenants and restrictions recorded in the Official Records of Los Angeles County which require that all future owners of the Subject Property use the Subject Property primarily for a community-serving health care campus with ancillary and supporting uses.
Section 3. This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting this resolution.
I hereby certify that the foregoing resolution was adopted by the City Council of the City of Long Beach at its meeting of _______________________________, 2022 by the following vote:
Ayes: Councilmembers:
Noes: Councilmembers:
Absent: Councilmembers:
Recusal(s): Councilmembers:
City Clerk
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OFFICE OF THE CITY ATTORNEY
CHARLES PARKIN, City Attorney
411 West Ocean Boulevard, 9th Floor
Long Beach, CA 90802
EXHIBIT “A”
APN:7253-016-901
APN:7253-017-900
APN:
7253-016-900
APN:
7253-016-902
WILTON ST
E PACIFIC COAST HWY
TERM
INO
AVE
OUTER
TRAFFIC CIR
E ESTHER ST
LOS ALAMITOS CIR
LOS
COYOTES
DIA
COMMUNITY WAY
TERMINO AVE
E PACIFIC COAST HWY
WILTON ST
5 3
7 2
8 9
1 46
100 0 100 20050
Feet
AttachmentSubject Property:
1720, 1760 Termino Ave
& 4111 Wilton St
Council District : 4