HAGÅTÑA (The Guam Daily Post) — The Guam Regional Medical City has answered the multimillion dollar lawsuit brought on by developer C.W. Holdings LLC, and has raised claims of its own, alleging in part that the developer failed to complete work on time for the Medical Arts Center that the private hospital had agreed to lease.
C.W. Holdings LLC sued GRMC in late August for allegedly failing to pay more than $4.4 million in rent and other fees for the Medical Arts Center. The property is directly adjacent to GRMC and is meant to house clinics, a pharmacy and a number of other outpatient and wellness services.
According to Guam Daily Post files, the facility was reportedly handed to GRMC in February 2022, with the agreement that the hospital would pay $1.3 million annually to rent the second and third floors of the building.
The developer alleges that, although GRMC has already paid $1.8 million toward rental payments, the hospital has yet to pay a security deposit, additional rental charges, and various other costs stipulated in its lease agreement for the Medical Arts Center.
After serving two default notices to the hospital this year, the developer moved to terminate the lease agreement, and has turned to the Superior Court of Guam, seeking payment for money GRMC allegedly owes, as well as $34.4 million in damages for the estimated rent that the hospital would have otherwise paid during its 30-year lease agreement with C.W. Holdings.
Through counterclaims filed in late September, GRMC states that not only is it entitled to the return of the $1.8 million, it is owed other amounts by C.W. Holdings. The hospital contends that it did not have to pay rent due to several issues with the development of the Medical Arts Center project.
C.W. Holdings has not had a project manager for years, and the construction of the center since the COVID-19 pandemic was intermittent, irregular and disorganized, according to GRMC.
“Among other things, the MAC Building project has suffered setbacks from poor project execution, planning and design, lack of construction management, lack of funding and the COVID pandemic. There are numerous construction deficiencies which were not remedied and continue to exist,” GRMC stated.
According to the hospital’s filings, the developer failed to achieve completion of the premises and the facility for the Medical Arts Center project within dates required under the lease agreement, which were cited as June 30, 2022 and Dec. 31, 2022 respectively.
C.W. Holdings reportedly provided a certificate of occupancy in January 2022, but this was for the shell of the building only. GRMC stated that the certificate indicated several agencies had not yet inspected the building, and alleged that C.W. Holdings failed to arrange those inspections as required by the lease. The hospital further stated that the certificate provided was incomplete and did not meet requirements of the lease.
GRMC also stated that in order to achieve “final completion” of the premises, the premises needed to be free and clear of all mechanic’s liens and the right to file such liens. But that couldn’t be done by June 30, 2022, because of a mechanic’s lien that wasn’t released until October 2022, according to GRMC.
Hospital representatives inspected the Medical Arts Center building after Typhoon Mawar and found substantial damage because a number of windows on the second and third floors hadn’t been sealed, and the floors were flooded, GRMC stated. The fire suppression system pump room with a water storage facility was flooded and “infiltrated” by mold, “creating an environmental hazard,” GRMC stated in court filings.
The hospital noted the lease requires base rent paid “from and after the latter to occur” as of Feb. 1, 2022, or upon the first day of the first month once there was an established premises completion date.
“(C.W. Holdings) failed to achieve premises completion and facility completion as required under the lease, therefore (GRMC) was not required to pay rent under the lease,” the hospital stated in its counterclaims.
The hospital added that an amendment was made to condition the payment of the security deposit and prepaid rent to within five days of a financial closing date for a successful bond offering by the hospital. That didn’t happen, so GRMC is not obligated to make any payments under the lease, the hospital stated.
GRMC alleges that C.W. Holdings committed a breach of contract by failing to achieve completion requirements under the lease, among other things.
“The state of the construction of the (Medical Arts Center) building is such that the building is in no condition for a tenant to occupy or take possession, which is a material breach of the lease by (C.W. Holdings),” the hospital stated.
A scheduling conference for the case is set for Nov. 14.
The Guam Regional Medical City as seen Tuesday, Oct. 3, 2023, in Dededo.
