Hospitals Active in Real Estate

Professional sports leagues have winning teams and those that hope to contend someday. Teams such as the Yankees and Mets have the opportunity to acquire real estate and build new stadiums, while the perpetual underdogs have limited resources with which to purchase new sites and update facilities.As land prices remain high and the value of Manhattan real estate continues to break records, both the winners and contenders of New York City’s health care sector are extremely active players in the real estate market.The winners — including New York Presbyterian Hospital/Weil Cornell Medical Center, NYU Medical Center, and Memorial Sloan-Kettering Cancer Center — are expanding their facilities at a rapid pace. The contenders, meanwhile, are seeking to sell off lucrative real estate assets to cover spiraling debt and stay afloat. The majority of the new development is planned for the area around York and First avenues, the home of New York Presbyterian Hospital/Weil Cornell Medical Center, NYU Medical Center, and Memorial Sloan-Kettering Cancer Center.Within the next six weeks, a 13-story, 330,000-square-foot ambulatory care and medical education building will open at 1305 York Ave. at 70th Street. The building will serve as the focus for patient care and education for the Weil Cornell Medical College. The medical college has also announced plans to construct a $650 million, 350,000-square-foot biomedical research building on 69th Street and York Avenue. In addition, construction is scheduled to begin this year on a 19-story mixed-use tower on the block front on First Avenue between 71st and 72nd streets that will house employees and medical offices.Last month, NewYork-Presbyterian Hospital/Weill Cornell Medical Center received community board approval for an expansion of its hospital facilities. The expansion includes the construction of a four-story building to be used primarily for clinical and diagnostic procedures on a site that previously served as the entrance to the emergency room. Another floor for hospital beds will be added to the Greenberg Pavilion. Last July, NYU Medical Center announced it is planning a $160 million project to add new features and enhance the existing infrastructure of Tisch Hospital. One of the major components of the plan will be to create a new ambulatory heart center, scheduled to open by January 2008. Other components of NYU Medical Center’s plan, which will span a period of three years, include building a new ambulatory surgery center on 38th Street and First Avenue that will include surgical suites for ambulatory procedures, and an expansion of the emergency department.NYU Medical Center has announced a $200 million investment in children’s mental health, including plans to build a 120,000-square-foot home for the NYU Child Study Center. The project will result in the largest child and adolescent psychiatric treatment, research, and training facility in the world. (It should be noted that I am an associate trustee on the board of the NYU Medical Center.) Memorial Sloan-Kettering Cancer Center has been a very active real estate developer on the Upper East Side. Last September, the 23-story Mortimer B. Zuckerman Research Center opened. One of the tallest laboratory buildings in the world, the 693,000-square-foot research complex cost an estimated $503 million. A second phase of construction that will create a connecting seven-story structure is under way. The first building is 558,000 square feet and the second phase is 135,000 square feet. Construction has begun at the site of the former Beekman movie theater at Second Avenue and 66th Street. Memorial Sloan-Kettering is building a high-rise facility for breast cancer treatment and imaging that will occupy the entire block front on Second Avenue between 67th and 68th streets.On the Upper West Side, construction is under way on a five-story, 140,000-square-foot addition to the Milstein Hospital of the NewYork-Presbyterian Hospital. The Vivian and Seymour Milstein Family Heart Center was made possible by a $50 million gift from the Vivian and Seymour Milstein Family Foundation, the largest single gift in the hospital’s history. A number of smaller health care institutions are capitalizing on the sale of its parking facilities. As I reported last month, New York College of Podiatric Medicine in April will be closing on the sale of its parking lot at 1800 Park Ave. between 124th and 125th streets, where a joint venture of Vornado Realty Trust, MacFarlane Partners, and Integrated Holdings is planning to construct a 550,000-square-foot mixed-use office building that will include retail and underground parking. According to industry sources, the developers are paying about $60 million to the college and the former leaseholder of the parking lot. Later this year, North General Hospital is expected to sell its parking lot adjacent to the hospital on 120 and 121st streets between Park and Madison avenues. A number of developers are interested in purchasing the site to build a mixed-use building that would include below-grade parking, community facility space, and a residential rental or condominium component.In October, construction began at a former one-acre parking lot belonging to New York Downtown Hospital. Forest City Ratner acquired the site in December 2003 for $84 million, and plans to transform the property into one of the tallest buildings in Lower Manhattan. The 75-story, Frank Gehry-designed Beekman Tower, at 8 Spruce St. between William and Nassau streets, is expected to be completed in 2009.Investors’ frenzy to buy residential rental apartments has led to a windfall for many health care institutions. In July 2004, Mount Sinai Medical Center sold the 16-story, 120,000-square-foot residential rental tower at 1200 Fifth Ave. — designed by Emery Roth in 1928 — for about $61 million. The New York Sun has learned that Mount Sinai has retained an investment banker to market a building it owns on East 106th Street between Madison and Fifth avenues.In November, Beth Israel Medical Center sold the 166-unit, 137,000-square-foot rental apartment building at 290 Third Ave., known as the Eletraka, which served as housing for hospital staff. According to public records, the property was sold for $92.5 million.Another residential tower, at 315 E. 15th St., which serves as housing for hospital staff of New York Downtown Hospital, is expected to be sold early this year. Cash-strapped St. Vincent Catholic Medical Center, one of four city hospitals in Chapter 11, is expected to sell buildings associated with its campus on 12th Street and Seventh Avenue.The president of Newmark Knight Frank, James Kuhn, said selling off property belonging to a health care institution can present unique challenges.“Great cities need great institutions, universities, and especially great health care facilities,” Mr. Kuhn said. “Maintaining the balance between the growth of these institutions and respecting the sensitivities of the community is an art form, reserved for the most creative artists with the subtlest of touch with the brush.”Industry leaders expect that most of the four hospitals that filed for bankruptcy protection under Chapter 11 in 2005 in 2006 will monetize their valuable real estate. The institutions include the largest Catholic hospital system in New York State, St. Vincent’s Catholic Medical Center, as well as the Brooklyn Hospital Center in the Fort Green, Victory Memorial Hospital in Bay Ridge, and Parkway Hospital in Forest Hills.St. Vincent’s Catholic Medical Center has closed a number of its affiliates and sold valuable real estate. In August 2005, it closed St. Mary’s Hospital in Brooklyn and sold the site later in the year to the Backer Group for $21.2 million. In 2004, it sold the former St. Joseph’s Hospital in Flushing to a joint venture of Sean Lavin for $10 million. In 2003, St. Claire’s Hospital became affiliated with the St. Vincent’s health care system. It has been renamed St. Vincent’s Midtown, with its headquarters at 415 W. 51st St. in Hell’s Kitchen. The Sun has learned that a number of the facilities on the campus will be marketed for sale.In July 2004, the Beth Israel Medical Center, a member of the Continuum Health Partners, sold the 14-story Beth Israel Hospital Singer Division building and two adjacent apartment buildings for $185 million. The purchaser, Skyline Developers, an affiliate of Garden Homes, is transforming the site into a luxury 110-unit condominium tower.Hunter College announced plans to sell off the school’s 3.5-acre Kips Bay nursing campus near 25th Street and FDR Drive and to build a 16-story building for science and health professions programs at 67th Street and Second Avenue. The governor and the state Legislature have already approved a $78 million allocation for Hunter’s new science building. Early this year, Hunter plans to issue a request for expressions of interest in the 25th Street site.As reported in the Sun in November, perhaps one of the biggest real estate development opportunities is located at the site of Cabrini Medical Center, which occupies nearly a full block between Second and Third avenues and 19th and 20th streets, two blocks from Gramercy Park. Hospital officials reportedly have estimated that the site might fetch as much as $130 million for condominium development. This value would dimish significantly if a new developer is unable to begin constructing the foundations of the building due to the planned changes in 421-a tax abatements.Over the past year and a half, the hospital has sold two properties in the surrounding community. In addition to the hospital facilities, the medical center is the owner of a few residential apartment buildings on Third Avenue. The Manhattan Eye, Ear and Throat Hospital is another institution that may sell a large portion of its present campus, most likely the building at 210 E. 64th St. In 2000, Lenox Hill Hospital became the sponsor of Manhattan Eye, Ear and Throat. Since then, Lenox Hill has invested approximately $40 million into its subsidiary.As noted in the final report of the commission of health care facilities in the 21st century, known as the Berger Commission, the hospital has a license for 150 beds but only about 30 of them are in service. Lenox Hill’s plan for Manhattan Eye, Ear and Throat now includes the preservation of its outpatient service, the closure of all its inpatient bed, and the sale of part of its real estate holdings.In the past few years, New York’s health care champions and contenders have been active in real estate development. Look for other hospitals and medical centers to sell parking lots and underserved facilities and fetch record prices for real estate in 2007.Mr. Stoler, a contributing editor of The New York Sun, is a television broadcaster and senior principal at a real estate investment fund. He can be reached at mstoler@newyorkrealestatetv.com.

Hospitals Active in Real Estate

Hospitals Active in Real Estate

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