KruegerAnchor_2_351As metropolitan areas continue to grow in population and attract more college-educated workers, older hospitals and other anchor institutions will continue to relocate to bigger and better facilities in order to accommodate technological upgrades and changing urban environments.  When this happens, owners will be tasked with the decision of boarding up, demolishing, or redesigning the facility for a new purpose or a quick sale. The final verdict could determine not only the financial value of the buildings, but also the market value of properties in the surrounding community.

Last month, an Urban Land Institute advisory services panel offered recommendations for such a site in Buffalo, New York. The panel’s sponsor, Kaleida Health, hired the panel of land use experts to help them decide how best to reposition the soon-to-be-vacant Millard Fillmore Gates Circle Hospital. Due to the hospital’s continual expansion of its neurovascular and cardiac programs, Kaleida Health agreed that it was best to relocate its services to the Buffalo Niagara Medical Campus. The move, scheduled to be completed by early next year, will leave the ten-acre (4-ha) site unoccupied for the first time since 1911.

The panel spent a week evaluating the site and interviewed more than 200 local stakeholders about their concerns over redevelopment, regenerative infill, transportation, historic preservation, and retaining the community’s residential character. In addition, the Buffalo News reported that the site has grown to be a “massive architectural barrier” that has degraded and undermined the area’s image.

According to panelist Steven Spillman, principal at the Mission Viejo, California–based Pacifica Companies, a comprehensive development strategy was needed to ensure that the hospital site was redeveloped effectively. “Creating a comprehensive approach from a viable master plan will add value to the remainder of the properties along with the community reaping additional benefits,” he said.

The panel presented Kaleida Health with three options: 1) close down and board up the facility; 2) blow up and totally clear the site; or 3) redevelop the site, reusing substantial portions of the exiting hospital building complex and identifying potential uses to backfill the newly renovated space. The panel agreed that the third option was the best one, as it provided the most long-term benefits to all stakeholders and clearly defined Kaleida’s costs. It was argued that reuse of the existing facility would enhance the surrounding market and property values since this option created a defined framework for activities and would build certainty rather than skepticism about the area’s future.

To accomplish this, Business First reported the panel’s suggestion that the property should be pared down to 660,000 square feet (61,380 sq m) from 800,000 square feet (74,400 sq m) and anchored by  a mixture of market-rate condominiums and apartments, medical offices, retail and restaurant space, and a boutique hotel. To accomplish this, the ten-story main hospital building would need to be reduced to five stories while the parking ramp would need to be expanded by an additional 150 spaces.

KruegerAnchor_1_300However, to ensure that these goals were met, the panel strongly advised transferring the site’s title to a nonprofit development management entity.

“Transfer of ownership would provide the best option for the greater health of the community,” said panelist Mike Maxwell, managing partner at Maxwell + Partners, LLC, in Miami, Florida.  “Even though, initially, it may be painful financially, the paybacks can be enormous.”

Transfer of ownership was suggested since it would permit Kaleida to exit the site without further involvement in its redevelopment, allowing them to focus solely on relocating the medical campus and operating the new facility. In addition, it would allow Kaleida to benefit financially when the redevelopment assets are monetized in the future.

The panel will issue a final report within 90 days, which will then be considered by a steering committee. The committee, composed of members from the hospital’s board of directors, will then determine which recommendations will be implemented to help repurpose this site so that it continues to be an anchor for economic growth.

ULI advisory services panels

provide strategic advice to sponsors on land use and real estate development issues. Panels link developers, public agencies, and other sponsors to the knowledge and experience of ULI and its membership.