CoStar Feature Spotlights Trends, New Projects and Construction Entering (Or Leaving) the Commercial Real Estate Development Pipeline
This week, we report on a case that illustrates why health-care real estate isn’t a surefire vaccination against the dysfunctional economy.
Penn State Medical Center pulled the plug for now on its planned children’s hospital in
Hershey, PA. Other MOB projects are still flying off the shelves, however -- especially if the builder is named
Lillibridge. Also,
Sweetwater Construction taps into the animal hospital market with two new facilities in New Jersey;
Harrison Street Real Estate Capital and
Campus Crest Communities join forces to launch a $220 million joint venture to develop 10
student housing communities, and
Cushman & Wakefield Sonnenblick Goldman secures financing for a Midtown Manhattan hotel.
In The Pipeline is a column by Senior News Editor Randyl Drummer on significant land sales, transactions and trends affecting office, industrial, flex, multifamily, mixed-use, hotel and public works developers. Send us news leads about your new project -- and sign up to be added to our distribution list to receive future In the Pipeline columns for free by e-mail. Read last week’s column.
PA Med Center Delays $235M Children's Hospital
Medical-office projects are flying off the shelf, but big projects are still susceptible to the credit crunch flu. In one such case, Penn State Milton S. Hershey Medical Center has decided to delay construction of its new Penn State Hershey Children’s Hospital.
In a letter distributed to staff last week, Medical Center Chief Executive Officer Harold L. Paz, said the action was taken in response to concerns over the global financial crisis, which he said "substantially compromises" the medical center’s ability to secure bond financing for the $235 million project.
"Unfortunately, the current state of the financial markets makes it impossible to secure the millions of dollars in bond funding necessary to move forward with construction at this time," said Paz, who also serves as Penn State’s senior vice president for health affairs and dean of Penn State College of Medicine. "We are not alone. Nationwide, many other hospitals and universities have had to make the difficult decision to delay major construction projects due to the challenging economy. Unfortunately, we cannot predict when the financial markets will stabilize or bond funding will become available."
Groundbreaking was set to occur next month pending approval of the medical center’s board of directors and Penn State’s board of trustees. The medical center has postponed the scheduled presentation of architectural designs and financing plans to both boards, a necessary step to moving forward with construction.
Fundraising efforts and site work related to the children’s hospital will continue and the medical center remains committed to the project, however. The medical center has already secured more than $58 million in private philanthropic donations to date toward a goal of $65 million.
Hospital officials said the decision to delay the children’s hospital does not affect several other critical expansion projects already under way. For example, the new Penn State Hershey Cancer Institute is more than 70% complete and scheduled to open in late spring. The facility will provide much-needed research space and clinical facilities for radiation oncology, chemotherapy and other vital cancer services.
The med center has nearly completed a second-floor expansion of the post-anesthesia care unit, which will provide 39 new beds. Early next year, a renovation project to add up to six operating rooms also will begin, bringing the total number to 29. Renovations continue on the first and second floors of the hospital’s south addition.
Lillibridge Develops MOBs in Texas, NJ
Chicago-based Lillibridge has been an especially prolific developer of medical office buildings. The firm is building two MOBs to serve hospitals in Waco, Texas. The firm also partnered with Meridian Health to develop The Meridian Health Village, a three-story, 150,000-square-foot medical facility at Cooks Bridge Road and Bennett's Mills Road, in Ocean County, NJ.
Lillibridge is working with Seavest Inc. to develop the two buildings that will serve Hillcrest Community Hospital and Hillcrest Women’s & Children’s Hospital, which are being rebuilt on 50 acres in Waco. The MOBs and the replacement hospitals will be located two miles from Hillcrest’s current campus. The developers broke ground for the two medical office buildings in mid-October, with completion scheduled for next summer.
The 59,000-square-foot, two-story Hillcrest Women’s & Children’s Medical Office Building will house related physician practices and services. The new three-story, 107,000-square-foot Hillcrest Community Medical Office Building will connect to the adjacent community hospital with a second-story skybridge designed to allow physicians and patients easy access from the hospital to an imaging center and an ambulatory surgery center.
Lillibridge is building the Meridian Health Village using a unique ‘Y’-shape and will have three key service areas within the building, including an internal medical/family practice area, a women’s and children’s health area and a section for medical and surgical specialists. The building will also host a surgery center, imaging center, urgent care center, rehabilitation, phlebotomy laboratory and patient education area. Construction is scheduled to begin in the spring with delivery set for summer 2010.
Sweetwater Broadens Its Scope to Include Veterinary Hospitals
Cranbury, NJ-based Sweetwater Construction Corp., which has built a practice based on expertise in healthcare development, is expanding into animal hospitals.
Sweetwater, which has built 11 surgery centers over the past five years, was recently awarded contracts for construction management services for two large veterinary hospitals. The first is the $3.5 million, 10,500-square-foot Winslow Animal Hospital at 640 Sicklerville Road in Sicklerville, NJ, a section of the Camden County community of Winslow Township. The hospital, which is expected to open in September 2009, will be the largest non-specialty animal hospital in Camden, Gloucester, Burlington and Atlantic counties, said the owner, Dr. Philippe Coudrai. Work on the new facility is expected to begin in December.
The second is a $9 million, 33,000-square-foot veterinary specialty and emergency trauma center in the Mercer County community of Robbinsville, NJ. The center will replace the existing 5,200-square-foot Veterinary Surgical and Diagnostic Specialists facility in Millstone Township. Work is due to begin in the spring of 2009 on the hospital at 315 Robbinsville-Allentown Road. The facility is scheduled to open in May 2010.
The expansion of Winslow Animal Hospital is necessary due to the huge population growth in the area in southern Camden County, about 20 minutes outside of Philadelphia. The new facility will eventually employ eight full-time veterinarians and have about 4,500 active clients.
The new specialty hospital in Robbinsville is at the forefront of a nationwide trend to provide more sophisticated medical care to pets, said Brie Messier, hospital administrator for veterinary surgical and diagnostic specialists.
The architect for both facilities was Jeffrey L. Grogan of Conshohocken, PA, who specializes in veterinary facilities.
CushWake Arranges $55M Loan for New Midtown Manhattan Hotel
Cushman & Wakefield Sonnenblick Goldman said despite the current difficulty in landing financing, it has arranged a $55 million construction loan for a new upscale hotel rising at the corner of Lexington Avenue and 48th Street.
"While the finance market is quite challenging, there are creative ways to capitalize hospitality transactions," said Mark Gordon, executive vice president, principal and head of the U.S. Hotel Group at Cushman & Wakefield Sonnenblick Goldman. "This will be the first new hotel to be built in the Midtown submarket in many years, which underscores the viability of the New York hospitality market, as virtually every other major U.S. city has had multiple full-service hotels constructed during this period."
Opening in 2010, the 25-story luxury suite hotel will include 116 guest suites, a library lounge, wine bar and café, an executive boardroom, and a fitness center with in-room spa services. Features include European kitchenettes and in-room state of the art technology for the longer stay business or leisure traveler. Hersha Hospitality Management, L.P., a leading hotel operator with over 9,546 hotel rooms in major metropolitan markets will manage the property upon its completion.
The development will also include approximately 3,800 square feet of prime corner retail space on Lexington Avenue - located on the lower- and first-floor levels of the hotel - and is expected to be leased to a high-end retailer.
Harrison, Campus Crest Form $220M Joint Venture
By Laurie Forbes
Harrison Street Real Estate Capital, a Chicago-headquartered private equity firm, and Campus Crest Communities, a Charlotte, NC-based student housing property developer and manager, created a $220 million joint venture to develop 10 student housing communities near college campuses around the country.
Campus Crest said it wanted to meet the growing demand for student housing by expanding its development pipeline, while Harrison Street wanted to increase its reach into recession resistant assets like student housing. Harrison will use its six-month-old, $430 million equity fund, Harrison Street Real Estate Partners II, to finance the venture.
The 10 developments, each branded as The Grove, will average 218,000 square feet of space and typically feature 504 fully furnished bedrooms with private baths, walk-in closets and a washer and dryer. The properties will include a swimming pool, a 24-hour gym, a fire pit, tanning booths and clubhouse.
The partnership targeted universities with a growing enrollment and high demand for student housing. They include Austin Peay State University in Clarksville, TN, University of Central Arkansas in Conway, AR, Sam Houston State University in Huntsville, TX, University of Kansas in Lawrence, KS, University of Idaho in Moscow, ID, University of Nevada, Reno in Reno, NV, Angelo State University in San Angelo, TX, Texas State University in San Marcos, TX, Georgia Southern University in Statesboro, GA, and California State University, Stanislaus in Turlock, CA.
The joint venture broke ground on three of the developments and five will start shortly with a completion target date of the 2009-10 school year. Two other projects will break ground the fourth quarter of next year and deliver by the 2010-11 academic year.
Campus Crest operates 18 communities with another 10 projects starting construction this year. It has a development pipeline of more than 50 projects in 12 states, and has developed more than $100 million of student housing since 2005. Harrison Street invests in real estate at or near universities and hospitals where tenant demand is high. Two of its funds have purchased or is in the process of developing more than 130 properties worth more than $1.8 billion in 27 states.
In The Pipeline is a column by Senior News Editor Randyl Drummer on significant land sales, transactions and trends affecting office, industrial, flex, multifamily, mixed-use, hotel and public works developers. Send us news leads about your new project -- and sign up to be added to our distribution list to receive future In the Pipeline columns for free by e-mail. Read last week’s column.
More New Development and Land Sales
All Roads, LLC has purchased 31,886 square feet of land and 8,426 square feet of office warehouse buildings at 714 Franklin Lane, in Orlando, FL for $1.03 million. All Roads purchased the property from Mid-Florida Pools, Inc. Greg Morrison of Morrison Commercial Real Estate the buyer and Carlton Vandiver and Trevor Hall of Colliers Arnold represented the seller.
Barker Vista Land Holdings Ltd. purchased a 7.26-acre land parcel at 16435 Interstate 10 in Houston from Zanelli Family Partnership Ltd. The actual sales price was undisclosed but the asking price was listed at $6.95 million, or approximately $957,300 per acre. The parcel is in the Southwest Beltway 8 submarket. Currently the land is in a pre-developmental stage for the construction of an office building. David Cook, Marshall Davidson, Graham Horton and Jeff Peden of Cushman & Wakefield represented the seller. Robert Anthony of LandStar Realty Advisors represented the buyer. (By LaDeva Harris)
Brembo North America, a world leader in design and development of high performance braking equipment, signed a 12-year lease and will be the sole tenant of a new 45,000-square-foot, built-to-suit industrial building at 47765 Halyard Drive in Plymouth, MI. Designed and built by DeMattia Group, the building will stand as the company’s headquarters. It will include at least one drive-in bay and have separate areas for offices, labs and research and development. Brembo is consolidating three office and technical locations into the single building. The project is scheduled to deliver next summer. Brembo's arrival in Michigan is "expected to produce 724 indirect Michigan jobs in addition to the 325 created by the company," according to the Michigan Economic Development Corp. David Greene of First Commercial Realty represented Brembo North America. Gary Glotzhober of Colliers was the listing broker. (By Dina Naff)
Meadows & Ohly LLC acquired 2.98 acres in Jonesboro, GA, from Southern Regional Medical Center for $7.83 million, or approximately $2.63 million per acre. The new owner/developer will build a 50,000-square-foot medical-office building on the Spivey Station campus of Regional Health Systems. The new facility will have a 25,000-square-foot Southlake Ambulatory Surgery Center and other medical offices. Two of the floors will also be linked to the existing Physicians Center. There were no brokers reported for the transaction. (By Finerve Holder)
VinCo Properties and Abrams Properties secured a $10 million loan to finance the construction of a 55-unit multifamily community in Foxboro, MA. The loan consists of $7.62 million for construction and a $2.4 million historic tax credit bridge loan, which will fund the acquisition and development costs of the property. The Chestnut Green Apartments is part of the historic mixed-use redevelopment of the former State Hospital campus. The property will consist of office, retail, residential and recreational uses. The completion date is scheduled for next year and the property will include one- and two-bedroom apartments, a fitness center, community room, walking trails, on-site storage and recreational fields. Director Janet Krolman of HFF's Boston office arranged the loan through Wells Fargo Middle Market Real Estate. (By Lauren March)
Wayzata Bay Redevelopment Co. acquired the Wayzata Bay Shopping Center from The Foursome Clothing & Shoes for $24 million, or about $185 per square foot. The property at 901-931 East Lake Street in Wayzata, MN, is a 130,000-square-foot neighborhood center constructed in 1967 in the Ridgedale Retail submarket. The property is scheduled to be demolished in the spring in order to construct a mixed-use property. Wayne Kratzer of Coldwell Banker Commercial Griffin Cos. represented the buyer. (By Andrew Sears)
More CoStar News Columns
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