Penn Health makes big land grab in Radnor

The University of Pennsylvania Health System is making a major move into the western suburbs and is buying an 18.2-acre site off King of Prussia Road in Radnor, Pa., for an estimated $35 million.

The seller, BioMed Realty Trust, has owned the property since 2004 and has worked vigorously for the last decade on trying to get the property approved for more than 400,000 square feet of new space in a project called Radnor Park.

The development faced opposition from Radnor planners and neighbors who worried the development would exacerbate traffic congestion and lacked parking, among other issues. After receiving their feedback, BioMed continued to rework the development to make it more acceptable to Randor's planners but no plan was ever finalized.

Brandywine Realty Trust, which owns the majority of office space in Radnor, also came out against the BioMed plan. At public meetings, Brandywine’s attorney insisted the project was too dense and would lead to traffic problems. However, many in the real estate community felt the company’s opposition was an attempt to protect its monopoly in that office submarket.

Equus Capital Partners made a recent run at buying the property at 145 King of Prussia Road, but a deal never happened and Penn Health swooped in to buy it.

Penn Health already has a presence nearby at 250 King of Prussia Road. However, this purchase gives it ample room to construct a highly-visible and accessible campus.

"This is not a new strategy but the evolution of a very successful one," said Kevin Mahoney, senior vice president and chief administrative officer for the health system.

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It devised a strategy years ago to have a bigger presence throughout the region. It went into Radnor 20 years ago and eventually bought 250 King of Prussia Road, a 170,000-square-foot structure where it has remained. Patients come from all over the region — as far as Lancaster County, South Jersey and Delaware — to the facility because of its access to the Blue Route and other major highways, Mahoney said.

The other dynamic at work is that the system generates more money through out-patient visits rather than overnight procedures conducted inside a hospital, thanks to an advance in medicine and technology.

That trend also drove a need for an expanded outpatient facility along the Main Line, but finding the right location proved challenging. Go too far west and Penn Health would bump up against its Southern Chester County facility or the one it recently opened in Valley Forge. Go too far east and it would be too close to its main campus in University City. It also considered renovating its existing building but decided that wasn't ideal.

Since Penn Health has an existing relationship with BioMed, exploring an acquisition of its Radnor property made sense.

"The BioMed site works for us," Mahoney said.

The plan is for Penn Health to construct a gateway building on the property. How big hasn't been determined.

No timeframe has been set for when Penn Health would like to begin constructing a facility. "We're a healthcare provider and not a real estate investment trust so if it takes a little longer than that is fine," he said.

Mahoney stressed he plans to work with the township on concerns, such as traffic, that it had with previous proposals for the property. He noted that many visits to medical facilities are during off-peak hours and that should alleviate some potential traffic.

The acquisition also potentially changes the dynamics of the health care industry in the suburbs since it would give Penn Health a significant presence in Main Line Health’s territory. Main Line Health has hospitals in Paoli, Pa., Bryn Mawr, Pa., and in Wynnewood, Pa., and has its corporate offices about a mile away at 240 Radnor-Chester Road in Radnor.

Penn Health has been aggressively expanding its facilities as it competes with other medical centers in a region rich with options, and it aims to solidify its position as a top medical care provider. The health system is one of Philadelphia’s largest employers and is a huge economic engine for the region. In fact, the health system and medical school together form a $4.3 billion enterprise.

The property currently consists of five buildings with 374,387-square-feet of lab, office and warehouse space. The buildings were constructed between 1952 and 1982, and renovated in 2004. BioMed, a San Diego real estate investment trust, intended to raze the structures to make way for the new office buildings.

Source: Philadelphia Business Journal