SPECIAL REPORT — UPMC: FORGING A GIANT FOOTPRINT

UPMC East End expansion leads to controversy



When UPMC paid $10 million in 2006 for the old Ford Motor Co. building on Baum Boulevard in Bloomfield, jaws dropped at what some considered an exorbitant price, even for a local landmark.

The sale "sort of stopped purchasing for a while because a lot of people thought they could get rich, too," Pittsburgh Councilman Bill Peduto said. "They thought that if they held out, UPMC would knock with a check with a couple of extra zeroes."

People did indeed get rich following the sale of the 1915 building that once served as a Ford assembly plant and showroom, but not by holding out as a way to take advantage of the $10 billion health care giant.

They simply owned the right property at the right time when UPMC, with its deep pockets, made a strategic decision to establish a larger East End footprint.

In a three-year buying spree, UPMC doled out big paydays -- $1.7 million here, $4.75 million there, $2.8 million to a third party -- while it snapped up parcel after parcel.

PG graphic: UPMC properties in the East End
(Click image for larger version)

By the time it was done, UPMC controlled a sizable swath of the Baum Boulevard-Centre Avenue corridor that was once home to the city's car dealerships.

Some see UPMC's spreading sphere of influence in the neighborhood as positive for job creation and growth. Others view UPMC with skepticism and distrust, believing that the needs of an urban community are being made subordinate to an institution's.

UPMC's current master plan for development around its Shadyside campus features a 1,000-car garage, an outpatient building on Baum and a major research facility in the former Ford building.

Despite an opposition petition signed by more than 200 local residents, the plan sailed unanimously through the city's planning commission in June. It is now before City Council. A coalition of community groups has challenged the plan's zoning changes in court.

"What they're proposing," Cypress Street resident Doug Graham, 53, said of UPMC, "is a neighborhood for patients and medical staff. It has nothing to do with the residents."

A start in spurts

By 2009, UPMC had spent more than the budget of some Allegheny County municipalities on its East End expansion. Its East End holdings now include UPMC Shadyside, Hillman Cancer Center, several ancillary medical buildings and a fair amount of vacant land.

UPMC's early phase of property acquisition took place in spurts between 1985 and 1999. In April 1999, the hospital system picked up three key parcels -- two on Baum and one on Centre Avenue -- from Richard J. Hoffman, a Greensburg real estate developer, for what he said was $3.4 million. The land would eventually become the site for Hillman, which opened in 2002.

Only seven months earlier, Mr. Hoffman had bought the same batch of properties from H. Gary Berlin for $450,000.

One of the factors that pushed up the purchase price was the need for UPMC to incorporate the estimated future income of a Burger King on Baum and the fee Mr. Hoffman had to pay to close the eatery, according to Mr. Hoffman.

"In essence, they paid $3.4 million for a little over an acre. If the restaurant would not have been there then obviously the price would have been a lot less," Mr. Hoffman said.

The hospital system binged again from 2006 to 2009.

First came the acquisition for $1.3 million of the Baum Boulevard land where a Boston Market sits. That was followed by pricey deals for the Ford Motor Co. building and properties sold by Ward Olander, Kratsa Properties, McKean Auto Group, Don Allen automotive group owner Richard Voelker, and Philip Coblitz, owner of Lifetime Automotive Center.

By far the costliest purchase was the $10 million for the Ford Motor Co. property at 5000 Baum Blvd., a 240,000-square-foot building bought from the late Murray Reidbord in March 2006.

"That was way over market value, I thought," said Mr. Olander, owner of Real Estate Enterprises, which has been engaged in commercial development in the East End since the 1950s .

Mr. Reidbord picked up the property in 1969 for $487,500. His daughter, Amy Reidbord Spear, remembers her father wasn't interested in selling the building because it was generating enough cash in rent.

"So he put an exorbitantly high asking price on it and UPMC said, 'We'll take it,' " Ms. Spear said.

Said Jeffrey Ackerman, executive vice president of the Pittsburgh office of CBRE, a commercial real estate firm: "There was very little supply and it was the only site that would have been right next to the Hillman Cancer Center. Because the options of where they would locate were so limited, that drove up the price."

Worried neighbors

Some residents were mystified about what UPMC was going to do with its burgeoning East End real estate portfolio, said Lenore Williams, chairwoman of the Baum Centre Initiative, a community group that forced the issue of a master plan she said was past due.

"You can't buy up property without saying what you're going to do with it," she said. "You're taking it out of the tax base."

UPMC disagrees with Ms. Williams' characterization of when it was obligated to amend its last master development plan, which it says dates to the late 1980s.

But hospital system spokesman Paul Wood notes that the current plan for its Shadyside campus must be approved by May and is well under way.

Throughout the public process, UPMC insists, it has been willing to work with the community. Executives point out that UPMC has responded to concerns by reducing the size of the garage, eliminating plans to demolish the Ford Motor Co. building, spending millions to renovate its facade and hosting community meetings.

UPMC also greened up areas, got rid of a planned garage exit on a residential street that drew criticism and lopped off one story on plans for a new building.

"I think we listened. I think we reacted. And I think we made some changes," Sean Logan, vice president of UPMC community relations, said at a May meeting.

Still, many residents fear that UPMC's expansion will spawn traffic problems and stress the infrastructure of Bloomfield, Shadyside and Friendship. They also do not like zoning changes endorsed by the city's planning commission that they say would give UPMC free rein to build bigger and taller.

"You've got the 800-pound gorilla out there which does not like to be told what to do, when to do it or where to do it. They assume that because they're big and powerful they can run over everybody," said lawyer Kenneth Stiles, a founder of the Friendship Preservation Group, who has tangled with UPMC in court over various zoning issues.

A handful of small businesses remain in the midst of UPMC's land, including Alley Way Auto Body on Woodworth Street and Cafe Sam, a Baum Boulevard restaurant next door to which UPMC plans to open an outpatient clinic.

The owners of both businesses declined interview requests.

What of the taxes?

Today, years after its expenditures, the hospital system has little progress to show in some sections of Baum Boulevard.

The largest empty plot is an ugly eight-acre pit next to the East Busway beneath Gross. Cypress and Woodworth streets that one resident likens to "what's left of the Earth after a nuclear apocalypse."

Once the planned site of the failed $115 million multi-use Luna Square development led by Kratsa Properties of Harmar, it is now destined to be a 1,000-vehicle garage. Luna Square developers once projected the complex would bring in $964,000 in property taxes; as a UPMC parking garage for employees, it would likely be off the tax rolls.

Something so mundane has generated intense controversy, with some applauding UPMC for finally creating large-scale centralized parking for its employees while others lamenting the loss of potential land for taxable development.

Mr. Peduto believes that looking at the Luna site in terms of being taxable is too narrow. Instead, one must think of the bigger picture in terms of UPMC being part of a beneficial eds-and-meds economy that sparks citywide development.

"It's not the loss of the immediate piece of property" to the tax rolls, Mr. Peduto said. "It's not giving away the tax base. It's not giving away the land. It's understanding the critical role for the city and the region while minimizing the negative impacts of the growth."


Jonathan D. Silver: jsilver@post-gazette.com or 412-263-1962. First Published September 25, 2012 4:00 AM


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