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Potential buyer would tear down University District hospital building for student housing

The PeaceHealth University District hospital building as seen from the east in Oct., 2023. PeaceHealth closed it's emergency department in Eugene in Dec. 2023. The building complex is now on the market.
Rachael McDonald
/
KLCC
The PeaceHealth University District hospital building as seen from the east in October 2023. PeaceHealth closed its emergency department in Eugene in December 2023. The building complex is now on the market.

The former Peacehealth University District Hospital may become another apartment building near the U of O Campus.

That’s according to reporting by Eugene Weekly 'Bricks $ Mortar' columnist Christian Wihtol. He spoke with KLCC’s Rachael McDonald.

Rachael McDonald: Peacehealth closed its University District hospital in December of 2023 and put the building on the market this spring.

What have you found out about a potential buyer?

Christian Wihtol: Well, first of all, the package of University District properties that PeaceHealth put on the market, it's big and it's complicated. It covers 12 acres. There's the old hospital building. There's vacant land. There are several big medical office type buildings. There are 3 parking garages.

Landmark, which is a housing developer that's based in Georgia, says it's interested in part of that and it wants to build a big student housing complex on a piece that comprises the footprint of the old hospital and some adjacent vacant land.

Now, Landmark specializes in market rate student housing and in market rate multi-family housing around the country, they've got lots and lots of projects in many states all over the country. It's a large, privately held company.

And my guess is that Landmark is not interested in the Office of Medical buildings or in the parking garages, although it hasn't spelled that out specifically to me.

McDonald: As you mentioned in your column, there are already a lot of student apartments and more being built near the University of Oregon. What's your sense of demand for this kind of housing in Eugene?

Wihtol: This is a very tricky issue with a lot of variables. It's very fluid. So, we've seen this astonishing wave of construction in the past 10 years. There have been, by my count, at least 8 really big high rise or mid-rise complexes built in the Franklin and East 13th areas plus many, many smaller complexes and all of these were built by a bunch of national, regional, and local developers.

And it's really transformed the look and the feel of that whole segment of Eugene. So is this gonna keep on going? That's just hard to know. So as context to this, UO enrollment grew really rapidly from 2000 to 2013, and a lot of this development has been in response to that rapid enrollment growth. And it's continued even though since 2013 UO enrollment has fluctuated, it's risen, it's fallen, it's risen again, it's trended somewhat upward.

And the demand for this kind of what's called purpose built student housing has continued to be strong until just last year when suddenly there was a big spike in the UO area of rental housing vacancies, especially in these large purpose built complexes.

That’s according to a survey that’s done every year by Viewpoint Appraisals. That's a property appraisal firm here in Eugene. And Viewpoint Appraisals figured that the vacancy increases were due to these big new projects coming online in the past couple of years.

Now, whether this is temporary, whether this is permanent, who can tell? And it is a very fluid situation because UO students live in non-purpose built housing, single family homes, duplexes, regular run-of-the-mill apartments, and many of these are shifted over to the purpose built large complexes. So, that's opened up these older properties to non-student renters or to buyers and conversely you have non-student renters who do rent in some of the large purpose built student complexes. So it's kind of a situation with a lot of moving parts. The more housing supply there is, the more renters will benefit from shopping around. And on the flip side, the developers will likely be asking themselves whether the Eugene student housing market is reaching saturation point.

McDonald: Have you found any other bidders for the Peace Health property?

Wihtol: The only public records that exist that I found show just the Landmark interest in the PeaceHealth property of the hospital building and the empty land. So, it's not clear whether anyone else is interested in those same pieces. It's not clear whether the hospital and Landmark have some kind of agreement already, a sales agreement. With the hospital building though, it's likely that is headed for demolition. It can't really be repurposed in any way. There aren't many hospital systems that are looking to buy old hospitals and kind of bring them back to life.

And the configuration of that hospital building is such that it really can't be reused for many things, so as far as the office and medical buildings and the parking garages, PeaceHealth won't say whether anyone else has any kind of a firm deal to buy those. Typically, a buyer would want those to keep those intact and manage them as income generating properties, but demand for office space in Eugene Springfield is somewhat slack.

And also, many of the medical practices have migrated to Northeast Eugene into the gateway area to be close to PeaceHealth Riverbend (in Springfield). So, we'll see if anybody steps forward to who's interested in those medical office buildings. As far as the parking garages, they're only valuable if they can generate income from parking fees. And Landmark says its tenants would use the parking garages. So there are many moving parts to this.

McDonald: We spoke not long ago about a new high rise apartment building that's planned for the northeast corner of 13th and Alder by the UFO campus. When will we see, I guess, basically, demolition of what's there and then construction going up?

Wihtol: Yeah, so that's a project by CRG, they're based in Chicago, another big national company that is interested in Eugene's student housing market.

They've told me they plan to start construction by the end of the year. They've submitted permits to do demolition. Those permits are still being processed by the city of Eugene. And it's again just speaking to the complexity and the many moving parts of the whole situation with the student housing market, there's another contemplated, high-rise student building kitty corner from the CRG project. No applications have been filed for that yet, no building permit applications, but it has been talked about, and there's another site on Franklin, the old 66 Motel, that's now closed. That's been tentatively discussed for student housing, so developers are still interested in the Eugene market, but all of them are probably very antsy because no one wants to build or own a housing complex that has a high vacancy rate.

McDonald: Well, lots of big changes are coming to the University of Oregon neighborhood in Eugene. Thanks so much for talking with me, Christian.

Wihtol: Thanks for inviting me, Rachael, I enjoy being here.

Christian Wihtol writes the 'Bricks $ Mortar' column for the Eugene Weekly.

Rachael McDonald is KLCC’s host for All Things Considered on weekday afternoons. She also is the editor of the KLCC Extra, the daily digital newspaper. Rachael has a BA in English from the University of Oregon. She started out in public radio as a newsroom volunteer at KLCC in 2000.
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