Friday, April 15, 2011

Downtown Express article on our work opposing the sale of St. Vincent's Medical Center Greenwich Village campus to the Rudin family

BY Albert Amateau

U.S. Bankruptcy Judge Cecilia Morris approved the sale of St. Vincent’s Hospital’s Greenwich Village campus last week in a deal allowing Rudin Management to develop luxury residential condos and North Shore-Long Island Jewish Health System to operate a comprehensive care center with a 24-hour emergency department.

The ruling came in a packed courtroom on Thurs., April 7, almost one year after New York City’s last Catholic hospital filed for bankruptcy and ended its 161 years of serving the neighborhood.

In a joint statement, Michael Dowling, North Shore-L.I.J. chief executive officer, and Bill Rudin, chairman of Rudin Management, said they were “especially pleased that the judge confirmed what we’ve been hearing from residents, business owners and community leaders—the historic agreement reached last month by St. Vincent’s, North Shore-L.I.J. and the Rudin family is a great deal for the community and would ensure an innovative return of comprehensive healthcare to the neighborhood.”

Dowling and Rudin added, “We look forward to securing the necessary approvals from city and state officials and working closely with the community, so that we can restore high-quality healthcare on the West Side by 2013.”

Judge Morris delivered her decision after the two-and-a-half-hour hearing on Thursday morning.

“I realize how sad it was to close St. Vincent’s,” she said. “It has been hanging over our heads for a year,” she added, noting that she has heard pleas for alternatives intended to save the full-service, acute-care hospital. But she ruled there was no likelihood that alternatives would be found to improve on the Rudin-North Shore-L.I.J. proposal.

“The court must not blindly follow the most vocal interest group but must find the likelihood of a proposal that would lead to the plan for the liquidation of the Chapter 11,” she said, referring to the type of bankruptcy sought by St. Vincent’s trustees.

She overruled a recently filed objection by James Shenwick, an attorney representing former City Councilmember Alan Gerson and others; Gerson’s group had sought a 45-day adjournment in hopes of nailing down a better proposal than Rudin’s $260 million for St. Vincent’s creditors and North Shore-L.I.J.’s $100 million (plus another $10 million from Rudin) to convert the former hospital’s O’Toole Building into a 24/7 emergency medical department and ambulatory surgery center.

“For my clients, this is a matter of life and death,” said Shenwick at one point last Wednesday, drawing applause from the public and prompting Morris to warn that she would clear the courtroom if there were further demonstrations.

Shenwick told the court that Jim Partreich, a principal in the Pinetree Group, a real estate brokerage firm, has been talking to potential investors. The attorney added that the National Football League’s Retired Players Association wanted to be a partner in a hospital that could serve its members. But Shenwick did not specify who the other investors were. Neither did he mention the name of any “major academic medical center,” despite assurances by the alternative plan’s supporters that one or more were interested.

Gerson, who was at the April 7 hearing but did not testify, submitted an affidavit saying that unnamed medical centers and developers had told him they did not submit proposals because they believed the Rudin proposal was a “done deal” and that pursuing their interest would antagonize parties, “which could inflict economic retribution.”

The former councilmember’s affidavit concluded with Gerson saying, “I believe there is a reasonable probability that, if given an extension, I and fellow objectors could work with the community, government officials and potential medical centers and development participants to come up with a plan which will both provide both a greater payment to creditors and better meet community needs.”

But Morris rejected the argument and also overruled another proposal for a 45-day adjournment sought by Arthur Schwartz, attorney for the tenants’ association of the Robert Fulton Houses, a New York City Housing Authority development in Chelsea.

Schwartz is associated with the Gerson group in seeking an alternative to the Rudin proposal, but he did not join in the Gerson group’s objection because he was representing his Fulton tenants clients in a separate objection.

Schwartz told the April 7 hearing that he was disturbed both by the lack of details in the North Shore-L.I.J. proposal and by the lack of a formal bidding process for the sale negotiated by Rudin and North Shore-L.I.J. with St. Vincent’s creditors. He called for the adjournment in order to “make sure there is an arm’s-length transaction” that would allow other bidders to offer more money than Rudin and provide a full-service, acute-care hospital for the community.

Morris, however, said that negotiated, private sales of debtors’ assets are not unusual in bankruptcy cases if they are the result of sound business judgment. She also said that although the New York State Constitution requires the state to provide healthcare for low-income residents of Fulton Houses, it does not mean that a facility has to be on the shuttered St. Vincent’s campus.

Yetta Kurland, attorney for the Coalition for a New Village Hospital, also called for an adjournment, saying that the proposed North Shore-L.I.J. free-standing emergency department did not meet the neighborhood’s healthcare requirements. Kurland also faulted the privately negotiated aspect of the deal. But her pleas did not move the judge to grant a delay in the case.

Morris dismissed all moves to delay the sale. She said that Schwartz’s State Supreme Court lawsuit demanding that the state build a full-service hospital as a successor to St. Vincent’s “could take years.” She also said she doubted that Gerson’s group could raise a financially credible challenge to the Rudin-North Shore-L.I.J. proposal.

Kenneth Eckstein, attorney for St. Vincent’s, opposed any delay, saying, “Every month we don’t close costs, the estate is assessed $1.2 million in interest and carrying charges.” Stephen Bodder, attorney for St. Vincent’s unsecured creditors, said the proposed deal had the unanimous approval of creditors.

In approving the sale, Morris cited the fact that Rudin’s offer included a $22 million cash down payment. In addition, Morris said, the fact that Rudin’s offer was not contingent on city zoning or state Department of Heath approvals was an important reason for her decision. She noted that the current deal was a successor to Rudin’s 2007 contract to buy St. Vincent’s east campus. That deal, which included Rudin’s right to buy the property for 15 years, was canceled with the hospital’s bankruptcy filing last year.

As of last week, there were 18 medical tenants in the O’Toole Building, at 12th St. and Seventh Ave., on a month-to-month basis. Eight have agreed to leave by July 31, and the rest will meet with St. Vincent’s on May 19 in an effort to resolve their issues, according to a court-approved agreement.

Copyright 2011 Community Media LLC. All rights reserved.

Monday, April 11, 2011

NYT: Avoiding Refinancing Costs After Divorce

DIVORCED homeowners wrangling with the task of removing a former spouse’s name from the mortgage after buying out his or her equity stake in the marital house may think that refinancing is the only choice.

There is another, little-known option that can avoid refinancing and its costs, which generally run 3 to 6 percent of the outstanding loan principal, according to LendingTree. You simply ask your lender to remove the former spouse’s name, leaving the loan note in your name only.

The problem is that not all lenders or mortgage servicers offer this option, known as release of liability. The lenders and servicers that do will most likely run a separate credit check on you — requiring, for example, that you meet minimum credit scores (typically from Fannie Mae, the giant government buyer of loans), and ensuring that you are current with the monthly mortgage payments. They may also require that any investors in the loan, after it is sold off, agree to the deal.

And if you are “under water,” and owe more on the mortgage than the home is currently worth, this process is not an option.

“This is a common and often messy business,” said Jack Guttentag, a mortgage expert and emeritus finance professor at the Wharton School of Business at the University of Pennsylvania. “Lenders seldom have a reason to take a co-borrower’s name off the note.”

But, he added, if a homeowner can prove that he or she can afford the payments and meet the required credit criteria — typically those of the investor in the loan — then release of liability may work.

Neil B. Garfinkel, a real estate and banking lawyer at Abrams Garfinkel Margolis Bergson in New York, says the lender “will require the borrower to prove that the borrower is able to support the monthly payments without the co-borrower spouse,” typically through monthly bank statements, annual tax returns and investment statements.

Having the name removed protects the credit of both parties, actually. If the former spouse failed to pay other debts, a lien could be placed on the home, and if you were delinquent on the mortgage payments, your former spouse’s credit could be hurt.

Most divorce settlements stipulate one of two outcomes for marital property. Either the house must be sold, or the person wanting to keep the property must buy out the other’s share, usually within months of the date of the settlement, and get the other party’s name off the mortgage — either through refinancing or a release of liability — typically within a year.

Under the second option, the former spouse signs a quit-claim deed at the divorce settlement, relinquishing his or her claim to the property. But while that action takes the former spouse off the house’s title and leaves it in one name only, it does nothing to remove his or her name from the actual mortgage.

Lenders or servicers typically charge $300 to $1,000 to execute a release of liability and require the property owner to pay an additional, nonrefundable application fee, typically $250 to $500. The process can take from 30 to 90 days, mortgage experts say.

One mortgage servicer, PHH Mortgage of Mount Laurel, N.J., requires that a homeowner with a loan sold to Fannie Mae have a minimum FICO credit score of 620 and a debt-to-income ratio of 50 percent or below (the ratio measures the amount of gross monthly income that goes to paying off all debts).

Still, a lender or servicer “generally has no obligation to release one of the borrowers,” Mr. Garfinkel said.

But Mr. Guttentag says homeowners may have one point of leverage. He suggested that qualified borrowers not accorded the release they seek tell their servicer or lender that unless a release of liability can be executed, the borrower will refinance the mortgage — at another lender.

“In such cases,” he said, “the servicer might agree to do it.”

Copyright 2011 The New York Times Company. All rights reserved.

Thursday, April 07, 2011

NYT: Learn How to Collect From Slow Payers


SMALL-BUSINESS owners know it is cash flow or die. While the recession officially ended in June 2009, many companies are still reeling. Credit can be hard to come by, and profits have not completely bounced back. On top of that, many customers are taking longer than ever to pay their bills.

Exhibit A is Cisco Systems, one of the largest technology companies in the world, which announced last year that it would wait a full 60 days to pay its small-business suppliers — mostly because it had found that that was what other big companies were doing.

So how does a small business get paid in a tough economy without hiring a collections agency or alienating its clients? Better yet, how does it avoid ending up with a stack of unpaid invoices in the first place?

Judging from the experiences of the small-business owners interviewed for this guide, it is part art and part science.

DO YOUR DUE DILIGENCE It used to be that credit reports were expensive and only for big companies with large budgets. Not anymore.

Ron Phelps, commercial credit manager at Boulevard Tire Center, a tire distributor with 26 locations in Florida, pays $99 a month for Pulse, a service offered through Cortera, , an online business credit reporting system, that keeps tabs on his clients. Last December, Cortera’s monitoring system noted that there was a large federal tax lien on one of Mr. Phelps’s clients, a small trucking company. He cut off the company’s credit line.

“That very same day,” he said, “we decided just to make them a cash customer, because we were concerned about their ability to pay.”

Cortera also offers a free service that collects and analyzes payment histories on more than 20 million businesses. Think of it as Yelp for business credit — instead of reviewing restaurants and stores, its community gives feedback on how promptly a company pays.

“We are helping small businesses tell the world that this person is a deadbeat,” said Alex Cote, vice president for marketing for Cortera. (There are other services, including Dun & Bradstreet, that will assess the financial strength of a company.)

SET YOUR TERMS (WITH A SMILE) Diane Nicosia manages and coordinates major construction and design projects through her company, D. E. Nicosia & Associates, which is based in New Rochelle, N.Y. “I’m in charge of the budget and have to make sure vendors, architects and engineers get paid,” Ms. Nicosia said. “What I’ve learned is that you have to negotiate these days.”

On a recent project involving 45,000 square feet of office space in a Midtown Manhattan office tower, a construction company said it would back out of the deal after it found that it would take 90 days to get paid by Ms. Nicosia’s client, a Fortune 100 financial services and manufacturing firm. Ms. Nicosia met with her client’s senior management and found that the payment timetable was not set in stone; there was room to broker a schedule that could keep the construction company from walking.

“Most people don’t think to challenge the payment schedule,” she said, “but we have to step up as small-business owners and say, ‘This is my living.’ ”

What Ms. Nicosia learned through this negotiation process, which she said was very amicable, was that there are often options: “All they have to do is push a little button that says pay in 10, 30 or 60 days, and that gets your invoice in a queue, so I got my vendor paid faster by working with the right people in the company.”

GET THE PAPERWORK RIGHT Is your invoice perfect? Did you fill out all the forms (even the ones you may not know about)? Companies do not need much of an excuse, if any, to delay your invoice. So make sure not one piece of information is missing.

Do you know whether the invoice needs a purchase order number? Not having this number can leave invoices lingering in accounts-payable purgatory, and it is unlikely that accounts payable will call to tell you.

Is your invoice formatted correctly? Some companies accept invoices only in the form of a PDF. If you are a new vendor, did you fill out a new vendor form? Many companies require these forms to process a first-time payment (but do not always make that known).

KNOW WHEN TO LOSE A CLIENT If customers do fall behind, when do you decide to cut them off? And what do you do if it is a customer you think you cannot afford to lose?

At Boulevard Tire, delinquent accounts are placed in one of two buckets — 30 days overdue and 60 days overdue.

“We look at those lists long and hard and ask ourselves,” Mr. Phelps said, “is this someone I want to immediately put on credit hold? Or is there something salvageable here? Are they a first-time offender?”

There are, he said, no hard and fast rules. “It’s all about the dynamics,” he said. “For example, if we have a customer who is in dire straits, and they appear to be making an effort to pay, we might continue working with them.”

Still, the economics may ultimately dictate the decision. As Mr. Phelps pointed out, if your company has a 10 percent profit margin and you lose $10,000 on an account, that is an additional $100,000 in revenue that your company has to find.

DON’T RELY ON THE POST OFFICE To avoid having someone in the accounting department tell you that “the check is in the mail,” push for direct deposit or electronic transfer. That way, you can get paid exactly on the 45th or 60th day. There are also services available from banks that will allow checks to be faxed and scanned, with the money deposited into your account the same day.

Consider accepting credit cards or PayPal. Yes, there is a fee, depending on which card or service you use, but the cash comes almost instantly.

“Some credit card companies pay their merchants on the following day,” said George A. Cloutier, founder of American Management Services, a financial turnaround firm. “And in a climate where cash is so tight, that’s often worth the fee.”

LET THEM KNOW IT’S IMPORTANT Rachel Lawrence oversees invoicing and bill collection at Bright Power, an energy efficiency company based in Manhattan. She was trying to collect from a property management firm that was 30 days late on a $25,000 invoice.

“They kept giving me this excuse that they had changed accounting systems, which I think can be a delay tactic,” she said. “It got to the point where I really had to make it clear that I wanted payment, so I offered to physically pick up the check.”

Ms. Lawrence gave the property management company dates and times she would be available to make the 30-minute trip to its office in Midtown Manhattan. The firm agreed to have the check ready. “When you say this is important enough to me that I will go out of my way,” she said, “I think people respond.”

OFFER A DISCOUNT Mr. Phelps said he does not like to reward clients for not paying, but that in certain cases extending a discount on the condition that the debt be paid immediately in cash or a cashier’s check can make the money appear.

“We’d rather have something than nothing and save ourselves the time and effort of going to court,” he said, “but we probably wouldn’t enter into a credit relationship with that company in the future.”

And do not be afraid to give a 10 percent discount, said Mr. Cloutier: “For 1 or 2 percent, it’s probably not worth it to the person who owes the money, particularly if they are short on cash.”

Copyright 2011 The New York Times Company. All rights reserved.