Judge OKs Hospital’s Sale to Drug Abuse Group : Lake View Terrace: The bankruptcy court ruling allows Phoenix House to buy the closed facility at a reduced price of $3.2 million.

Saying “I think I’m having a little deja vu, “ a federal bankruptcy judge Thursday approved the sale of Lake View Medical Center for $3.2 million to a group that wants to establish an adolescent drug rehabilitation center there, to the annoyance of neighbors.

Phoenix House, the largest private nonprofit drug abuse agency in the nation, first tried to buy the 15-acre Lake View Terrace property in 1989, with the intention of creating the Nancy Reagan Center. But the group withdrew from the deal after intense community opposition apparently caused the former First Lady to pull out, taking her financial backers with her.

The purchase price approved by Judge Kathleen Thompson Lax on Thursday was less than half the amount agreed to three years ago. The sale will not become final until later this summer because a few details still must be worked out.

Lawyers for Phoenix House and for the hospital’s court-appointed trustee attributed the sharp drop in the hospital’s sales price to the recession and the fact that this deal carries no contingency clauses, while the last one had several, including approval of a city permit.

“This time, you’re buying a sack of potatoes, and once you get that sack, it’s yours,” said attorney Robert L. Ordin, who represented Phoenix House at the hearing.

The medical center filed for bankruptcy in 1984 and closed its doors in 1986. Since then, it has housed some classes and, most recently, it has been used as a movie location for hospital scenes, including the mental institution in “Terminator II.” It has sustained some vandalism, including a fire during the recent riots.

An attempt by City Councilman Ernani Bernardi to make a counter bid on the property failed earlier this week when the council voted against his proposal, citing an earlier survey that found city departments were not interested in using the facility.

Phoenix House plans to establish a 150-bed residential treatment center on the site. Steven Taylor, a Phoenix House vice president, said he expects to submit an application for a necessary city conditional use permit before the end of next week. Phoenix House was granted such a permit in 1989 but had appealed its strict conditions, which included high fences and a guard gate.

Two Lake View Terrace residents groups responded differently to Thursday’s sale. Eileen Barry of the Lake View Terrace Improvement Assn. said her group would adamantly oppose issuance of a city permit on the grounds that the center could bring more crime and drugs to the residential area.

“The majority of the people who live next to the hospital are against it,” Barry said. “We’re going to fight it.”

However, Lewis Snow of the Lake View Terrace Home Owners Assn. said his group would wait to see the permit application before responding. Snow was the only local resident who attended Thursday’s hearing.

It was he who announced plans to picket Reagan’s Bel-Air mansion in the spring of 1989, just days before she withdrew her support.

“There are some dynamics that are not involved this time,” Snow said, explaining his more cautious approach three years later. “Mrs. Reagan is not involved and it is smaller, for instance.”

In 1989, Phoenix House planned to house 60 adults at the site in addition to the 150 adolescents. It also planned to establish a research institute there, where Reagan was expected to have an office. Although Phoenix House President Mitchell S. Rosenthal has said he would not rule out future expansions, those would require additional City Council review.

Two aspects of the sale that still must be dealt with involve a claim by the federal government regarding a grant issued to the former hospital and an insurance claim resulting from the fire.

During Thursday’s hearing, attorneys for all parties agreed that those two problems had been worked out, but the agreements must still be written and signed.

A grant of about $350,000 from the National Institute of Mental Health was used to pay for construction of part of the hospital. In a compromise, $192,500 of the sale proceeds will be paid to the government by the hospital trustee, said the trustee’s attorney, David Gould.

The fire in a pharmacy building on the site, thought to have been caused by a Molotov cocktail, is expected to result in a $400,000 insurance settlement, according to Taylor. Insurance proceeds will be split by Phoenix House and the trustee.