SPECIAL REPORT — UPMC: FORGING A GIANT FOOTPRINT

UPMC leaves a trail of big real estate prices



Few people were as happy as James Roberto when UPMC bought Mercy Hospital in 2008.

The longtime Uptown resident had dueled with Mercy Hospital officials for 30 years -- and his parents a decade before that -- as they tried everything possible to get him to sell his "little white house," as it was commonly called.

"They offered me nickels on the dollar," said Mr. Roberto, 88, an electrician, brick layer and project manager during his 40 years in construction. "But I didn't spend eight years in the Navy (part of it during World War II) so they could come and take my house for nothing."

It was a neatly kept, white brick home, with a smaller guest house in back. Most important, it was located strategically across Marion Street from Mercy Hospital. It stood smack in the middle of the block that Mercy had for years targeted to possibly build a second hospital tower, parking garage or something else; it was never clear to residents exactly what the Sisters of Mercy, who owned the hospital, intended for the block.

By 2007, Mr. Roberto's home was the only lot between Edna Street, Van Braam Street, Marion Street and the Boulevard of the Allies that Mercy did not own. And Mercy needed only to buy four more lots to own the adjacent block between Locust Street and Edna.

PG graphic: UPMC properties in Uptown
(Click image for larger version)

How UPMC managed to buy up those last five lots is a telling example of the difference in purchasing tactics between UPMC and its predecessor hospitals, as is the way UPMC has dealt with the neighborhood since it bought Mercy.

Founded in 1847, Mercy Hospital was the city's first hospital. Its century-plus presence in Uptown on the Bluff were a big part of the Catholic enclave that included Catholic-run Duquesne University and a neighborhood made up primarily of Catholic residents.

When Mercy began buying land in the 1960s, it capitalized on those ties, said Louis Nocine, whose grandparents moved to the neighborhood in the 1940s.

"A lot of properties up there were given to Mercy. Families would basically give it to them because it was the Catholic hospital. They'd sell it for less than it was worth or even just give it to them," said Mr. Nocine, 46, a real estate title examiner who grew up near Mercy.

Parcel by parcel, Mercy bought the small homes and rowhouses that covered the neighborhood as they came up for sale, paying $10,000 to $30,000 for each. By the mid-1980s, it had bought up much of the adjacent two blocks.

But by then, it had exhausted all the good will it had with neighbors, who were now either refusing to sell or demanding more money than the land was worth. As a reaction, Mercy created three straw companies to do the buying for it anonymously: Curran Development, Brighton Woods and Coolock Enterprises.

Coolock and Brighton Woods bought a few pieces, but it was Curran that became Mercy's main stalking horse, buying up more than two dozen parcels at market rate, paying $25,000 to $45,000 for the small homes, telling sellers it was just a development company.

Mercy's use of Curran to hide its expansion was one of the reasons neighborhood activists created Uptown Community Action Group in 1990, said John Chapman, a co-founder whose family has lived in Uptown for more than a century.

Though he and others discovered Curran's ties to Mercy and tried to inform the neighborhood, "I don't think most people knew; they never put two and two together."

Most of these purchasing tactics occurred under the leadership of Sister Joanne Marie Andiorio, Mercy's CEO from 1972 to 1998.

"Sister Andiorio was my mortal enemy," Mr. Roberto said with a laugh. "She tried everything with me to get me to sell."

The former CEO did not return several phone messages seeking comment.

Under her leadership, Mr. Roberto said, Mercy tried everything to get him to sell from financial enticement (offers up to $225,000), to intimidation (calling the police after at least one confrontation) to annoyance (moving the hospital's oxygen tanks near Mr. Roberto's home and letting the hospital's emergency helicopters fly over his home).

None of those tactics worked with Mr. Roberto, and none of the financial offers worked on Mr. Nocine, or Rosella and Barry Bill, or Michael and Patricia Ward or Michael Roberto (no relation to James), who all owned homes or lots on the two blocks across Marion Street from the hospital.

But in 2007, a few months after Mercy announced it was being bought by UPMC, the tactics changed overnight, Mr. Nocine and Mr. Roberto said.

"UPMC came in with this fancy figure and wanted to give me $400,000," Mr. Roberto said.

UPMC spokesman Paul Wood would not answer specific questions about land deals at Mercy.

After just a few months of haggling, "UPMC turned around and gave me the right price right away," Mr. Roberto said.

The right price in his case for his 2,489-square-foot lot was $573,847 -- more than double the best price Mercy had ever made.

"They had to work with me. But they had the money. To them, that was a nickel in the slot machine," he said.

Mr. Nocine had torn the home down on his 2,880 square foot-property along Locust Street in 2000 and turned it into a 12-space parking lot.

"So, instead of selling it to (UPMC) as a home lot, I got to argue its worth to me as a business," he said.

He had made the same argument to Mercy before, but never got the same offer he got this time: $468,391.

"I don't think they were eager to pay top dollar, but they were eager to pick up those last three parcels and worried about competition from" a private parking lot near UPMC Mercy, he said.

The other three holdouts got equally stunning sums: the Wards got $192,521 for 1,183 square feet; the Bills got $225,000 for 1,217 square feet, and Michael Roberto got $576,000 for 2,880 square feet.

"I ended up setting the price for the last three parcels that sold," Mr. Nocine said he believes. "Those last three houses that were standing, they sort of rode my coattails and they got lucky."

UPMC tore down all the homes.

It also bought the only parcel Mercy didn't own across Locust Street from the hospital -- a 5-story medical office building owned by Bonnie and Jerome DiGiacobbe ---- for $2.2 million -- and tore it down in 2011.

A year earlier, in 2007, as Mercy was awaiting formal approval of UPMC's takeover, it had three rowhouses torn down along Van Braam Street that Mercy had owned since at least 1996.

John Hancock, a home contractor who owned the rowhouse on the end of that row, said it was a shame to see the three homes next to his go, leaving his surrounded by vacant land on three sides.

"They might have been in better shape than mine," said Mr. Hancock, who was about to start fixing up the home he bought in 2006. "All they needed was a little care and they could have been rented out."

All the teardowns follow a pattern UPMC long has followed with real estate: If it is not going to use the buildings it takes them down and reduces their taxes if they're going to stay on the tax rolls.

The small homes it took down produced just a couple thousand dollars a year in combined taxes. But UPMC paid $37,468 in property taxes (to the city, school district and county) on the DiGiacobbes' building and land in 2011 - a figure that will drop considerably now that its assessed value has dropped from $1.3 million to just $312,000 after the building was torn down.

As part of its acquisition of Mercy, it also picked up Mercy's own medical office building next door to the one the DiGiacobbes owned.

But, according to UPMC Mercy's 25-year plan that it filed with the city earlier this year, it eventually plans on tearing down that older Mercy office building, too, and building a four-story office building on the block, leaving much of the block for green space.

That aspect of the plan was the least upsetting to residents and businesses in the neighborhood.

They had hoped UPMC would allow for some neighborhood-friendly changes to its property-- such as retail or restaurants along UPMC Mercy's Locust Street property -- the kind of ideas that a local group, Uptown Partners, had put forth in their plan for the neighborhood in 2009.

Instead, UPMC's plans for its vacant blocks on the other side of Marion Street include a multi-story parking facility, a power plant and eventually an additional 12-story tower.

"Instead of them just building a parking lot, maybe (UPMC should build) a restaurant or coffee shop for the college students. I don't see them doing anything that really helps the neighborhood that much," said Tony Williams, whose family owns dozens of properties in Uptown and has gotten its own criticism for creating too many surface parking lots. "What you want ideally is [to] live, work and play in an area."

"When they said they were going to build a parking lot overlooking the river, I thought, 'What a waste. That should be a hotel,'" he said.

But Jeanne McNutt, Uptown Partner's executive director, said the group is happy with UPMC's master plan for the neighborhood. Uptown Partners, a community planning group that counts UPMC as a major funder, approved the revised plan in May, after UPMC made several changes, she said. Those changes included moving the parking garage from UPMC Mercy's 25-year plan to its 10-year plan, and adding more landscaping and greening of the neighborhood, she said.

"This has been a long process, a good process, the right process," she said. "They've made numerous changes to the plan. They were very responsive to the community."

Mr. Chapman, for one, doesn't agree. He said he left the neighborhood group he founded in 2006 because Mercy Hospital and Duquesne University were gaining too much influence over it, and now with UPMC funding Uptown Partners "it's more of the same."

City Councilman R. Daniel Lavelle, who has represented the Uptown neighborhood since 2010, said he hopes UPMC is done acquiring land in the neighborhood because "they're big enough already."

"In this present day we need to be cautious about UPMC expansion and their ability to snap up property because I do believe Uptown is becoming a more vibrant neighborhood there," he said. "They should work with the community."


Sean D. Hamill: shamill@post-gazette.com or 412-263-2579 First Published September 25, 2012 4:00 AM


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