By Mar-Vic Cagurangan
Guam Regional Medical City is facing a multimillion-dollar lawsuit filed by a local developer accusing the hospital of reneging on its rent obligations and breaching the lease agreement.
CW Holdings LLC, owned by Guam attorney Cesar Cabot, is seeking $34 million in damages on top of the $4.47 million in unpaid rent and related expenses.
GRMC, which is operated by = Guam Healthcare Development Inc., occupies the entire second and third floors of the Medical Arts Center, a CW Holdings-owned building adjacent to the hospital.
The Medical Arts Center, a $25 million three-story building, was built on a 50,000-sq.ft. property owned by Cabot to complement the facility needs of GRMC. It was designed to house doctors' offices, hospice care, senior care facilities, a hemodialysis center, a pharmacy, diagnostic and therapeutic service clinic.
According to the lawsuit filed Aug. 30 at the Superior Court of Guam, CW Holdings and GRMC entered into a 30-year lease agreement on June 10, 2021.
After completing the necessary documents from government agencies, CW Holdings said it turned over the keys to GRMC on Feb. 1, 2022. GRMC occupied the leased premises on March 16, 2022 and made partial payments of base rent and pre-paid rent in the amount of $1.8 million
“Additionally, an annual escalation of rent by an amount equal to 2.5 percent of the base rent per year, to be effectively increased on each subsequent anniversary of the rent commencement date,” the lawsuit said. “Although defendant has already partially paid $1.2 million toward base rent, it has failed to pay all the base rent amounts that have accrued as required under the lease.”
Besides rent payment, the lawsuit said GRMC was bound by the lease contract to reimburse CW Holdings for all expenses it has incurred for utility connections, related operational and administrative costs, real property taxes, as well repairs and maintenance.
The costs of power and water connections were supposed to have been paid within 30 days after the utility hookups, the lawsuit said.
“Such outstanding amounts for reimbursement of operating expenses are still due. The amount has accrued to $52,954,” CW Holdings said.
The lease contract also covered the construction of a sky bridge that would link up GMRC to the Medical Arts Center.
But after the completion of maps, surveys, planning, architectural and engineering designs, GRMC “unilaterally canceled” the sky bridge project and asked CW Holdings to “cease further work.”
Since GRMC agreed under the contract to reimburse CW Holdings for all expenses related to the now-aborted sky bridge, the landlord billed the hospital accordingly, amounting to $73,500, which has since been due.
The lawsuit also alleged that GRMC “has not kept in force the insurance required for the leased premises.”
The lease agreement provides that CW Holdings “shall be entitled to recover from the tenant, as damages for loss of bargain” in the amount reflecting the “present value at the time of termination” of the lease that would otherwise have expired after 30 years.
As of Aug. 1, the present value of future rent was calculated at $34.43 million in addition to the current outstanding lease rent and charges totaling $4.7 million, the lawsuit said.
CW Holdings said the notice of default was first transmitted to Alan Funtanilla, then CEO of GRMC, and Teodorico D. Constantino, senior vice president and treasurer, on July 23.
Funtanilla resigned from GRMC on July 18 for unexplained reasons. GRMC later announced the appointment of Dr. Alexander Wielaard as the hospital's interim chief executive officer.
CW Holdings said a second notice was transmitted on Aug. 4, while an eviction notice was also served to the hospital board chairman Jose Xavier Gonzales.
“GRMC is providing no comment regarding this matter,” said Kimberly Grace Teves, communications director at GRMC.
GRMC is a subsidiary of the Manila-headquartered The Medical City, which was acquired this year by the Luxembourg-based investment firm, CVC Capital Partners Asia V.