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Metro Nashville To Acquire Former Hickory Hollow Mall: Vanderbilt University Medical Center To Negotiate Lease Of 600,000+ Square Feet

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Mayor John Cooper and Councilwoman Joy Styles just announced the city’s plans to acquire the Global Mall at the Crossings, formerly known as Hickory Hollow Mall, along with a new vision for the cornerstone property in Southeast Nashville.

Metro has signed a Letter of Intent with Vanderbilt University Medical Center (VUMC) to negotiate a long-term lease of at least 600,000 square feet for health care related services, similar to VUMC’s repurposing of retail space at One Hundred Oaks.

This announcement concludes a decade of uncertainty at the site and begins its long-awaited community-driven revival. The purchase is the latest in a series of recent investments in Southeast Nashville, including a new police precinct and a new city park off Tusculum Road. It is anticipated that if successfully negotiated, the long-term ground lease with VUMC will materially offset Metro’s purchase price.

Once the largest retail space in the state of Tennessee, the mall site will again serve as a community hub following a decade of underuse. In addition to the potential VUMC presence, the property may include space dedicated to community needs expressed through surveys and public meetings. These expressed community needs could include a facility for the arts, after-school youth programming, childcare, Metro offices and services, and entrepreneur and small business development opportunities. Health care, arts and youth programming would add to a broader site that already includes Nashville State Community College, the Ford Ice Center, the Southeast Community Center, and the Nashville Public Library’s Southeast Branch.

“This is incredible news for our area. After so many years of the mall sitting vacant, we are finally able to move forward with its new future for the community. I am grateful that Vanderbilt has recognized Antioch as a critical investment for community health care. I am also elated that with the purchase of the mall, we can now have a permanent arts space, an Antioch Performing Arts Center, to bring arts to Antioch,” Councilwoman Joy Styles said.

“We are investing in one of our fastest-growing neighborhoods, and it will pay major dividends for our city and Southeast Nashville in particular,” Mayor Cooper said. “World-class health care is just the start of what this site can do for the community. I look forward to seeing residents shape how we can best serve them with this site through community benefits like additional greenspace, dedicated space for the arts, and resources for entrepreneurs.”

Mayor Cooper and Councilwoman Styles will file legislation with the Metro Council allowing Metro Nashville to purchase the two separate properties for a combined $44 million. The first property is the former mall building itself, consisting of 650,000 square feet of rentable space. The other is an office building on the East side of the former mall building consisting of 160,000 square feet of rentable space. Metro Nashville will acquire the former mall site for $24 million and the office building for $20 million.

The decision to purchase and repurpose the former mall property follows extensive grassroots community engagement, including surveying more than 500 Antioch residents. Mayor John Cooper and Councilwoman Styles have worked closely with sustainable real estate developer Clay Haynes to assess opportunities to activate the property for area residents.

The Vanderbilt University Medical Center partnership represents the first phase of the project, focusing on increasing access to health care services and jobs. The second phase of the project will be guided by an extensive community planning process, to build on the 500 community responses already received. The Joe C. Davis Foundation has also agreed to help Metro Nashville activate the property and make it a true community asset.

 

Source: Nashville.gov

Office, Retail Owners Look To Fill Vacancy With Healthcare: It Often Doesn’t Work

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Children’s National Hospital is one of several D.C.-area health systems looking to expand its footprint into more neighborhoods across the region, and it is taking advantage of record office vacancy to find new locations.

“Children’s National used this strategy to lease two floors at the Wonder Bread Factory office building, a Douglas Development-owned property in Shaw that became vacant after WeWork and other tenants moved out,” said Children’s Executive Vice President and Chief Strategy Officer Michelle McGuire at Bisnow’s Mid-Atlantic Healthcare Summit in D.C.

Douglas Development principal Norman Jemal confirmed to Bisnow that Children’s National leased the first two floors of the building, which total around 50K SF and were previously occupied by a nonprofit.

McGuire said the deal is part of Children’s National’s efforts to expand from its main D.C. campus into neighborhoods across the region to give more people convenient access to healthcare.

“The health system also leased 140K SF in the former Discovery Communications headquarters in Silver Spring, and it is opening facilities in Friendship Heights, Columbia Heights, Anacostia, Takoma Park and Prince George’s County,” McGuire said. “We’ve been thinking about needing to be in communities to address gaps in care and access to care and access to specialty care, so that drives the need to have a broader footprint.”

For some health systems, the coronavirus pandemic highlighted the importance of having locations in the community. Howard University College of Medicine Associate Dean for Strategy Outreach and Innovation Michael Crawford said he saw the most successful Covid testing and vaccination sites were ones within neighborhoods, rather than at large healthcare campuses.

“Folks are craving that intimacy between their providers and that’s helping inform how we look at an ambulatory strategy,” Crawford said. “Is that co-location? Yes, co-location is an attractive proposition when you think about how you can array services to meet the needs of the customer. Is that looking at commercial spaces? Yes, you have to take that into consideration.”

Johns Hopkins University & Health Systems Vice President of Economic Development Alicia Wilson said her organization is also looking at commercial spaces as a way to be closer to patients.

“We’re thinking about our growth and thinking about our utilization of leased spaces within commercial buildings, and how we have our patient care be closer to our patients and repurposing our facilities at traditional hospital centers for those things that must be done at the hospital site,” Wilson said.

The prospect of leasing to health systems is especially attractive to office and retail owners that experienced rising vacancy during the pandemic. Cushman & Wakefield Managing Director Matthew Sullivan said medical users have increasingly heard from these owners looking to lease space to them.

“A lot of asset classes, office and retail in particular, have had a tough go the last 18 months,” Sullivan said. “The ownership of those asset classes calls the healthcare crowd all the time and says, ‘Can we get medtail, put medical into retail?’ or, ‘Hey, I’ve a got commodity [Class-]B office, and 20% is a couple physicians, can we convert it?'”

While the landlords are expressing more interest, Sullivan said it is often difficult to convert office and retail space into medical use. He said the cost can be so high that the landlord would need to land a large user with a long-term commitment. He cited one example of this, MedStar Health’s 112K SF lease with Beacon Capital at D.C.’s Lafayette Centre in 2015, but he said those deals are few and far between.

“Overall, it’s unlikely those are successful without dramatic changes,” Sullivan said. “All the infrastructure things have to be created, and that becomes really expensive. On the surface it sounds easy: ‘Let’s get medical folks and stick them here, and there’s good parking in this shopping mall.’ But medical is not going to take down a 200K SF old Macy’s. There are a few cases across the country, but overall it’s more challenging.”

“Landlords that try to put medical users in the same building as traditional office tenants often find the two are difficult to mix,” Anchor Health Properties Vice President of Investments Elliott Sellers said. “We made the conversion bet selectively across the country, but you need to go into it assuming that your commercial tenants are likely going to leave,” Sellers said. “Those two uses don’t really coexist all that well when you have a law firm in one floor and you have sick patients sitting in the lobby. In all four of those cases, we’ve had almost all of our commercial tenants leave.”

Sellers said office landlords are better off bringing in medical real estate experts and trying to market the full building to healthcare users, but he said the conversion projects aren’t easy to execute.

“You layer in the complexities of design and mechanical systems and layout, and I think there’s probably more losers than winners when it comes to conversion, not just in D.C., but broadly,” Sellers said.

Douglas Development, which leased the first two floors of its Wonder Bread Factory building to Children’s National, is planning to fill the top two floors of the building with coworking office users.  The landlord is rolling out its new in-house coworking concept, The Mark, on the former WeWork floors of that building and two other D.C. buildings WeWork vacated in October, the Washington Business Journal reported. Jemal confirmed the plans to Bisnow and said he thinks Children’s National and the coworking space will fit well together in the building.

“We were able to secure Children’s Hospital, which is a great tenant, it fits in great for the neighborhood, and it serves the community,” Jemal said. “The days of everybody wearing a suit and tie in an office building are the days of yesteryear. Everybody needs to see a doctor at some point — that’s just the reality of life — and where better for it to be than in the community?”

Health systems are also looking to locate within mixed-use developments that have apartments, retail and other uses. Whitman-Walker just broke ground on its new healthcare facility on the St. Elizabeths East campus in Congress Heights. Whitman-Walker CEO Don Blanchon, speaking at the event, said his team has focused on how to integrate the facility with the rest of the development to make it a space that feels like part of the community.

“At St. Elizabeths, we’re going to do a bunch of workaround healthcare, there’s going to be a bunch of services there,” Blanchon said. “The real issue is: What’s going to bring the community in? How do we think about that space, what do we do for activation on the ground floor? What do we do for engagement? What do we do on the outside of the space? In dealing with our partner Redbrick, there’s been a lot more thought about this sense of community ownership and activation. Ten years ago, we just didn’t spend as much time on that.”

 

Source: Bisnow

UT Southwestern’s Move Is A Trend Breathing New Life Into Big, Empty Department Stores

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Turning abandoned mall space such as the closed Sears store in the RedBird development in Dallas into medical offices and clinics is a new use for tired shopping centers that has already found success in other cities.

RedBird owner Peter Brodsky just announced that UT Southwestern and Parkland Hospital are taking over vacant retail space at the former Red Bird Mall. UT Southwestern will open offices in a 150,000-square-foot Sears store that closed earlier this year. About 43,000 square feet of a Dillard’s store that closed in 2008 is already being retrofitted for Parkland.

Dallas developer Frank Mihalopoulos, who has been working with Brodsky since 2015 on the RedBird project, has already successfully adding university-affiliated medical offices to aging malls in Nashville; York, Pa.; and Atlanta.

 “Selling the RedBird development to local health care companies became a priority as community needs and wishes matched up with trends in the mall redevelopment business,” Brodsky said.

“Health care companies want to reach underserved populations and are trying to find ways to serve more people with the least amount of cost,” Mihalopoulos said. “Repurposing mall space can keep costs down. The University of Pittsburgh Medical Center, for example, has opened occupational therapy clinics and back offices in 22,000 square feet of the West Manchester Mall in York, Pennsylvania It’s lowered their overall cost of occupancy, and then the university medical center is able to rent its space that can fetch higher rents to others.”

In Atlanta, Emory Healthcare agreed in October to lease 224,000 square feet of a former Sears store at Northlake Mall to house offices for 1,600 administrative staff. That also adds daytime traffic to the mall, which is anchored by J.C. Penney and Macy’s. Northlake and the mall in Pennsylvania are owned by ATR Corinth, a partnership of Mihalopoulos and Dallas real estate investor Tony Ruggeri formed 15 years ago to redevelop ailing malls.

“Mall locations have a lot of what medical clinics and offices need,” Mihalopoulos said. “There’s parking, good real estate with good exposure to freeway locations. Old department stores have high ceilings that office tenants are looking for these days and those new office workers can shop and eat without leaving the property.”

ATR Corinth’s first big success was in Nashville, where Vanderbilt University Medical Center put administrative offices and medical clinics in One Hundred Oaks Mall.

“That project began in 2008, and within five years of the redevelopment, the stores in the center had experienced sales increases of as much as 100%,” Mihalopoulos said.

While they were considering the RedBird development, UT Southwestern officials visited that project. They also visited the Jackson Medical Mall in Mississippi, which was converted from a shopping mall in 1996 after it lost customers and stores to a newer mall in Jackson.

At that point, Red Bird Mall was also well into its decline. The former mall at the intersection of Highway 67 and Interstate 20 in Dallas was one of the early shopping center casualties. Several Dallas mayors and out-of-town owners tried to fix the center as the mall continued to lose traffic. There are 800 vacant anchor spots at the 1,300 malls and outlet centers in the U.S., according to an updated mall report from Green Street. In addition to health care uses, malls have been turned into call centers and even Amazon warehouses. When Brodsky first purchased the mall, Sears and Macy’s were still open.

“But it became apparent that anchor stores would have to be filled with other sorts of activities to draw people to the property,” Brodsky said. “The shopping center still has about 60 tenants, from Burlington Coat Factory to small mom-and-pop businesses that are doing well. A Foot Locker is under construction in a new green space being built on the Camp Wisdom side where Starbucks opened last year. I’m new to the real estate industry and I give Frank a lot of credit for his track record of converting malls into highly productive office space.”

 

Source: Dallas News