CHOP assessing RE options

Great article about Children's Hospital of Philadelphia in this week's PBJ.

"The Children’s Hospital of Philadelphia has begun an extensive review of its real estate needs in Philadelphia and the suburbs that could mean constructing new buildings and expanding its regional footprint.

It will consider buying properties, constructing anew, relocating or finding space to add to existing locations. Its decisions could significantly affect Philadelphia and the King of Prussia area where it currently maintains outpatient medical facilities. It is not considering relocating its main hospital.

In Philadelphia, CHOP is seeking 400,000 square feet of office space and possibly up to 500,000. The space would accommodate its corporate administrative functions and clinical research department. Those operations are currently in 226,000 square feet at 3535 Market St. in University City and 174,000 in the Wanamaker building in the Central Business District.

The hospital has also asked real estate developers to offer proposals to construct a 400,000-square-foot office building at the former John F. Kennedy Center on Schuylkill Avenue in Philadelphia. Two months ago, CHOP bought the 700,000-square-foot facility, which is basically “deteriorating shell space” and would potentially be razed to make room for a modern building, said John McDonough, vice president of facilities at CHOP.

In the King of Prussia area, CHOP is looking for 100,000 to 125,000 square feet of space with room to expand.

“It’s important we have the ability to grow,” McDonough said. “No matter what we start with, it would be important to have a site where we could grow.”

The hospital currently occupies a total of 70,000 square feet between two buildings in King of Prussia for its specialty-care operations. The two buildings — one on Mall Boulevard and the other on Pulaski Drive — are limited in their ability to expand. CHOP has outgrown them.

Ideally, the hospital would like to stay in the King of Prussia area because of highway access. However, it will consider sites farther out.

One option would be to develop new facilities on the former 126-acre Valley Forge Golf Course along North Gulph Road where Realen Properties had envisioned a mega-mixed-use residential, retail and entertainment development called the Village at Valley Forge. CHOP could kick off the development, which has been stalled because of the recession and changes in the retail industry. That property would also give it plenty of extra ground for future growth.

CHOP has plenty of options downtown.

“Like any large back-office user that draws from the Greater Philadelphia region, there’s a desire for access to public transit, there’s a desire from some for closer proximity to its main campus,” Garvey said. “That’s not a ‘must have’ but a ‘nice to have.’ At the end of the day, the goal is to get a good solution that’s economically responsible and meets their needs.”

The hospital’s main campus is at 34th Street and Civic Center Boulevard in University City. There it has a 430-bed inpatient facility as well as a 70-bed intensive care unit for newborns and infants, cardiac care and radiology. It outgrew its space at 3535 Market about five years ago and leased space at the Wanamaker building at 100 Penn Square East.

During the past decade, CHOP has invested or committed to spend about $2 billion on building projects in West Philadelphia to provide more treatment space for patient care and more laboratory space for researchers. Projects have included modernizing the pediatric hospital’s facade, constructing the new patient care building and, most recently, opening the $500 million Colket Translation Research Building at the former Civic Center property in October.

Dr. Steven M. Altschuler, CHOP’s president and CEO, said in previous interviews the expansion efforts are a response to the hospital caring for more patients from outside the region, and outside the country, who come to CHOP with complex medical conditions.

Additionally, Altschuler said, the hospital needed more room for its researchers. In 2002, for example, CHOP spent $50 million to add 10 floors to the Leonard and Madlyn Abramson Pediatric Research Center. In less than five years that space was fully occupied. The Colket building, which will be completed in June, will start out at 11 floors, but have the capability to go to 23.

CHOP’s expansion activities have not been limited to West Philadelphia. Its network of pediatric and adolescent care practice sites, formerly known as Kids First centers, has grown to 28 locations. It also has established specialty-care centers that include outpatient surgery in Exton, Chalfont and Voorhees, N.J., and a pediatric imaging center in King of Prussia.

Aside from its growth and continued expectations to grow, its leases downtown and in King of Prussia come due between 2012-13, prompting CHOP to initiate an assessment of its real estate needs.

While renewing in space where it currently occupies, relocating, buying a building if one was suitable, or constructing 400,000 square feet on the JFK site are all in the mix, CHOP could also be an anchor tenant for Brandywine Realty Trust’s Cira South or other Cira buildings, setting in motion the construction of more office buildings in and around 30th Street Station.

“We haven’t ruled anything out yet,” McDonough added that “all options” will be explored. Depending on its growth, CHOP could need more than 500,000 square feet for its administrative and clinical research departments in just five years.

It’s too early to peg how much CHOP will spend since the evaluation isn’t complete and no decisions have been made. The hospital is prepared to make a massive financial commitment to ensure it meets its growth needs. It expects to narrow its options and have a better idea of what it will do by about June.