If 170 East End Avenue is any indication, an old hospital can become great new real estate.
Two-and-a-half years ago, Skyline Developers bought Beth Israel Hospital North for $185 million and tore it down to erect high-end condominiums. The new 20-story building cost the developer $350 million, but the project went well enough that Skyline president Orin Wilf is taking one of the 94 units and moving his family in. Wilf said the building is 60 percent sold at prices between $1.5 million and $15 million, long before the summer move-in date arrives.
Beth Israel may have company in the transition from emergency rooms to living rooms.
New York’s hospitals have long been struggling financially. In November, a report released by the Commission on Health Care Facilities in the 21st Century, established by the state to overhaul the health care system, recommended the restructuring of nearly 50 health care facilities and the closure of nine others in the state, in addition to the elimination of 3,000 nursing home beds.
Seventy New York hospitals and more than 63 nursing homes have closed since 1983, according to the report, commonly called the Berger report, after the chairman of the commission, Stephen Berger. Real estate investors are waiting eagerly on the sidelines to see which parcels of land will become available.
Closures could affect a number of Manhattan hospitals, including St. Vincent’s Midtown Hospital in Midtown West and Cabrini Medical Center near Gramercy Park. A downsizing of the Upper East Side’s Eye, Ear and Throat Hospital is also possible.
With the New York State Assembly not looking likely to reject the recommendations of the report by the end of 2006, they were set to become law at the start of 2007, though it could take years of legal wrangling before any of the sites become available. Some hospitals have filed for bankruptcy or are considering doing so to ward off closure.
Hospitals under the umbrella of Saint Vincent’s Catholic Medical Center have already declared bankruptcy. Some have already closed, including Saint Mary’s Hospital Complex in Crown Heights. St. Vincent’s is mulling the future of its other facilities, particularly its West Village site on Seventh Avenue and 12th Street.
Chadwick Castle, director of sales for Massey Knakal, was working in mid-December to close the $21.2 million sale of Saint Mary’s. The property, which occupies an entire city block, hit the market in May 2005. A Brooklyn developer bought the property and plans to transform it into a residential development project, Castle said.
Because it was built as recently as the 1970s with Sheetrock, the building can be reconfigured, Castle said. “You have an existing building that you can work with,” he said.
Not all buildings are that easy to convert.
“I think some of them are appropriate for development, but few are good as is because of the way they were constructed,” said Michael Berne, leader of the senior housing and health care group at Cushman & Wakefield. “It would cost more to renovate for any purpose than to just tear it down and use the property for other development.”
Hospitals are a challenge because the principles that guide their layouts are the inverse of successful residential properties — big, open corridors, small rooms and wide elevators. For a place where people actually want to live, that’s not ideal.
David Schechtman, the director of the turnaround group at Eastern Consolidated, concurred, saying, “There’s an incredible cost to convert a medical use to a non-medical use. It complicates it significantly, and the buyer has to bear the cost.”
Schechtman said he was working on deals with three hospitals named in the Berger report, one each in Manhattan, Brooklyn and Queens, but declined to name them. The Manhattan project would maintain part of the complex as a hospital and sell off another building.
“I’d say very few [Berger report facilities] will sell completely,” Schechtman said. “None of the hospitals have made any absolute decisions as to what to do with their real estate.” First they have to decide whether they want to keep any part of their operation up and running and, if so, how much.
While many of the state’s hospitals have financial woes, not every hospital is heading for closure.
Cushman & Wakefield’s Berne said he is negotiating a substantial development deal with a New York City hospital.
A nondisclosure agreement prevented Berne from naming the hospital, but he said it was not one recommended for closure or restructuring in the commission’s report. The project would include adding residential quarters and clinic operations to the hospital’s property, and would require the purchase of more land.
Land was a big part of the appeal at 170 East End Avenue, where the lot overlooks the East River, Gracie Mansion and Carl Schurz Park, between 87th and 88th streets. “The site was fantastic,” said developer Wilf. “Basically when I went to go look at the hospital, I said to myself, this view is unbelievable.”
Why not just keep the shell of the hospital and gut the interior?
“I don’t know of anyone that would’ve wanted to live in a hospital,” Wilf said. “Would you live in a condo-conversion where people died?”