Builders Capital Eyes Data Center at Distressed Hospital

The lender that seized the former MetroSouth Medical Center in Blue Island after its previous owner’s big debt default has a new remedy for the distressed property: a data center.

Builders Capital, led by CEO Robert Trent and based in Puyallup, Washington, is floating plans to convert the sprawling south suburban Chicago hospital site into a computing warehouse, the Tribune reported. But the firm’s high-tech pivot is already facing headwinds, as Village of Blue Island officials are skeptical of the proposal and raising questions about the property’s future.

The strategy shift comes months after a messy foreclosure lawsuit over the property first reported by The Real Deal. Builders Capital took control of the property earlier this year after its previous owner, Lockwood Development Partners, defaulted on a $44 million loan from Builders.

Lockwood originally had grand ambitions to redevelop the shuttered hospital into housing geared toward seniors and military veterans. Delray Beach, Florida-based Lockwood bought the former hospital site for $20 million in 2020. The proposal also promised to fill the void left by the hospital’s closure with a new grocer, medical offices and a 23-room hotel for visiting families.

Instead, the Blue Island project flatlined, along with several other properties in Lockwood’s real estate portfolio. At the time Builders Capital’s foreclosure lawsuit for the MetroSouth property was filed in January, it was one of at least seven simultaneous alleged defaults totaling $178 million in troubled debt owed by Lockwood, marking a portfolio-wide collapse for the firm led by Charles Everhardt and Edward Dovner.

Everhardt said earlier this year Lockwood had lender approval to move forward with a sale of the properties to resolve the financial issues, but it’s unclear where that deal stands now. Builders Capital confirmed to Blue Island officials it now controls the MetroSouth property, the newspaper reported.

After moving into the driver’s seat, Builders is looking to capitalize on Chicagoland’s booming data center market. Repurposing a massive, power-equipped hospital campus could theoretically be a savvy play. Developers across the metro area are scrambling to find sites with existing heavy power infrastructure to meet relentless real estate demand from cloud providers and AI firms.

But getting the village on board could be a tough sell. Blue Island officials and residents raised eyebrows at the data center pitch, questioning whether a server farm aligns with their vision for the community and what tangible economic or employment benefits it would actually deliver compared to a mixed-use or commercial project.

— Sam Lounsberry