NC wants to sell old Rex Hospital site

The state wants to sell nearly 16 acres in the heart of one of Raleigh’s most historic and upscale inside-the-Beltline neighborhoods.

The 15.84-acre site at the corner of Wade Avenue and St. Mary’s Street was home to Rex Hospital for more than 40 years before it moved to West Raleigh. Now it houses the North Carolina Division of Employment Security, which oversees unemployment insurance and benefits.

On Dec. 9, the state issued a request for proposals from developers interested in buying the site at 700 Wade Ave., which could be converted into a mix of offices and residential units. Proposals are due March 3, and a developer could be selected April 7.

The state hasn’t listed a price, but the property’s location will likely lead to big offers. It’s near Cameron Village and downtown, and is on the edge of the Hayes Barton neighborhood, which has been home to some of the city’s most prominent families.

“It’s a once-in-a-lifetime opportunity for a developer to find,” said Moss Withers, a commercial real estate broker with Carolantic Realty who attended a pre-bid meeting this month. “It’s within the Beltline, and the demographics and accessibility around it are phenomenal.”

Jones Lang LaSalle, a global commercial real estate services firm, will help state officials evaluate proposals from developers and finalize an agreement.

To be approved, a proposal must meet the goals of the Wade-Oberlin area plan and the city’s 2030 Comprehensive Plan. In the Wade-Oberlin plan, the site is designated as Wade Avenue’s only place for new retail. As part of the comprehensive plan, the city rezoned the site to allow up to five stories of mixed-use development.

The tree-lined property includes a 300,000-square-foot office building, which used to be the hospital, and a roughly 12,000-square-foot maintenance building.

The Division of Employment Security will remain on the site through Nov. 9, 2018, and will have the option of staying up to an additional year. The state will not pay rent during that time, and the developer will be on the hook for all operating costs.

The developer would also be responsible for environmental clean-up at the site if it chooses to tear down the buildings.

Terracon, a Kansas-based engineering firm hired by the state, submitted a site assessment in April identifying some environmental concerns.

A gasoline tank from an underground storage tank removed in 2003 polluted the soil and groundwater, but the contamination was too close to the buildings to remove safely while keeping the structures intact.

The contamination isn’t dangerous for the buildings’ current occupants, but site remediation would be required if a developer demolishes the buildings. It’s unclear how much that would cost, but the developer would be responsible for it.

Withers said it would likely cost between $25 million and $30 million to fix the environmental issues and operate the site while the state office remains.

“If it was vacant and ready to be developed, I’d estimate that it could get between $2 (million) and $3 million per acre,” he said.

History of Rex

The history of Rex Hospital reflects Raleigh’s growth.

John Rex, a successful tanner who died in 1839, left money and land in his will to establish a hospital for the “sick and afflicted poor.”

Decades of legal procedures followed, and in 1893 a board of trustees bought a site on South Street downtown that contained the former home of Gov. Charles Manly. The following year, the hospital opened its doors, more than 50 years after Rex died.

As Raleigh continued to grow, the need for additional space became clear. The hospital relocated to a different site several blocks east on South Street while trustees worked to acquire the site at Wade Avenue and St. Mary’s Street.

Construction began in 1935, and the hospital, set atop a hill, remained there for 43 years before moving to Lake Boone Trail in West Raleigh in 1980.

The following year, the state bought the property at Wade and St. Mary’s for $2.45 million.

Size and location

Raleigh City Council member Russ Stephenson said many neighbors are aware the site would eventually be redeveloped, but they might not have known it would happen so soon.

“The two biggest questions are the traffic and the transition,” Stephenson said.

William Allen III, chairman of the Hillsborough Citizens Advisory Council, said the resident-led group was not aware of the state’s plan to sell. But he said he thinks the site will attract lots of interest.

If developers want to rezone the site – if they want to build taller than five stories, for instance – the group might gather to discuss it.

“It wouldn’t surprise me if it was rezoned,” Allen said.

The site’s size and location are its strongest selling points, said Jeremy Becker, a vice president of JLL’s Public Institutions group.

“There aren’t that many prime development sites left that close to downtown Raleigh,” he said.

This story was originally published December 19, 2016 at 5:25 PM with the headline "NC wants to sell old Rex Hospital site."