On 23 July 1905, the Paris edition of the New York Herald carried a report headed: "German Company Plans to Make Madeira an up-to-date Resort".

In return for a promise to build a sanatorium and hospitals and treat 40 tuberculosis patients a year free, the Madeira Aktiengesellschaft, headed by Prince Friedrich Karl Hohenlohe-Öhringen, was in an arrangement with the Portuguese government, that in turn for building these facilities it will take over all business concerns on Madeira.

When plans for some of the hospitals were exposed as being designs for hotels and holiday camps, the Madeirans realized that they were being colonized through the back door and promptly withdrew the concession.

The site was left abandoned until 1930 when the Madeirans continued to build the Hospital dos Marmeleiros.

Locals say that the reason that the hospital construction was abandoned by the Germans was not just because of their colonization plans being discovered.