Deal for Hospital Perils 1st Lady’s Drug Program

A controversial drug-rehabilitation high school bearing First Lady Nancy Reagan’s name may not take over a bankrupt Lake View Terrace hospital because another group already has offered to buy the property.

“There is a signed agreement from a group that has told us that they intend to use it as a hospital,” said attorney Richard L. Seidenwurm of San Diego, who represents the investors who have first claim on profits from the sale of the Lake View Medical Center site.

Gilbert Robinson, the court-appointed trustee for the property, said the hospital group’s offer will be filed with the U.S. District Court’s bankruptcy division as early as today. Neither Seidenwurm nor Robinson would disclose the name of the interested hospital group.

The news pleased many Lake View Terrace residents, some of whom vehemently objected to a takeover of the property by Phoenix House, which is proposing the Nancy Reagan Center.

“Well, that would be great. . . . That would be marvelous news,” Phyllis Hines, president of the Lake View Terrace Improvement Assn., said of the possibility that the hospital group will buy the property. “We’ve said right along what we really want is a hospital back.”

Residents’ Fears

During an April 27 community meeting, the residents said the Reagan center might attract drug trafficking and increase crime.

Despite the hospital group’s offer, Phoenix House will submit a bid on the Lake View property later this week, said Larraine Mohr, a vice president of the organization. Phoenix House is the nation’s largest nonprofit, drug-services agency.

“We’ve just been hearing all sorts of things. We really don’t know what the status of this other offer is,” she said. “All we’ve been told by our attorneys is that we should get our offer in.”

Robinson and Seidenwurm would not rule out consideration of other, higher bids. But they said those bids cannot be officially reviewed until the hospital group’s offer goes to bankruptcy court sometime next month. Even then, the hospital group, as first bidder, would have an edge in the quest to buy the property, Robinson said.

“An opening offer always has a better position than a new offer, which is untried, undiscussed and unnegotiated,” he said.

Robinson said he was surprised by a mid-April public announcement that Phoenix House planned to turn the Lake View Medical Center site into the Nancy Reagan Center. He said that no one from the drug-rehabilitation organization had contacted him about buying the medical center site before that announcement.

“I don’t know who would make proposals for something when they don’t own it,” Robinson said.

Word of Phoenix House’s interest in the hospital leaked out sooner than intended, Mohr said, making it appear that the organization was sure it would be able to obtain the property. However, Mrs. Reagan first mentioned wanting to start a drug-free high school in Los Angeles in a February speech about her post-White House plans. Then, entertainer-producer Merv Griffin announced April 19 that the bankrupt San Fernando Valley hospital would be the site of such a high school, the Nancy Reagan Center.

Phoenix House has not yet raised hard cash for the center, which is one of the reasons the organization did not immediately make an offer to buy the Lake View property, Mohr said.

The organization is counting on getting $5 million from a fund-raiser held May 2 by Griffin, Mohr said. Griffin’s spokesman, Warren Cowan, said he did not know when checks from Griffin’s wealthy breakfast guests would begin to arrive at Phoenix House’s Los Angeles headquarters.

But, Cowan said, “Merv set out to try to raise $5 million for them. . . . Merv seems to feel they’ll reach that.”

That money would be used to secure a loan for the property and to pay for improvements, Mohr said. Phoenix House would try to pay off the loan during the next few years with donations from public and private foundations, Mohr said.

The organization is prepared to spend about $7.5 million for the site, Mohr said, and at least another $2 million to turn the medical center buildings into a school.

Seidenwurm said the bid by the hospital group is less than the estimated $11 million owed to his clients, who bought the construction bonds that financed reconstruction of the medical center’s main building after the 1971 Sylmar earthquake.

The Los Angeles County tax assessor has set the value of the buildings and land at nearly $15 million.

Phoenix House administrators see the Lake View Medical Center as ideal, Mohr said. But the organization has several other Los Angeles County locations in mind in case it is unable to buy the property, she said. Mohr would not disclose the locations of the backup sites, saying “not after the reaction we got on this one” from several angry Lake View Terrace residents.

“Certainly this site is most suitable. We really think it’s terrific for our purposes,” she said. “But if we do not acquire this property, that doesn’t mean the project is dead.”