OGI sells its Hillsboro campus
OHSU - The sale prepares the science and engineering school for a move to Portland's South Waterfront area
Tuesday, January 09, 2007
A Maryland-based private equity firm has bought the OGI School of Science and Engineering's Hillsboro campus from Oregon Health & Science University for $44.4 million, the university said Monday.
But it remains unclear exactly when the school will move into a planned new campus in Portland's emerging South Waterfront area.
A unit of Wakefield Capital, LLC, a Chevy Chase, Md.-based private equity firm that invests in health care-related real estate, bought the 44-acre, 15-building campus. It will lease the buildings back to OGI, which is part of OHSU, for seven years, with two three-year extension options.
While OGI's lease technically enables it to stay put for as long as 13 years, the school has long had surplus space and has begun to market about 100,000 square feet of space for sublease to high-tech and biotech companies in the Sunset Corridor. The school has vacated the Bronson Creek Building, opening up 85,000 square feet of Class A office space. The other 15,000 square feet is mainly lab space.
Ed Thompson, dean of the OGI School of Science & Engineering, said the sale achieves the school's goal of setting itself up for a move to the South Waterfront area in Portland, and generates cash for an endowment and ongoing operations.
"Those were the two key goals we had," Thompson said.
OGI plans to invest $24 million of the proceeds in its endowment, Thompson said. The balance of the money will help pay for leasing the campus and helping fund new professors, he said. While the school does not plan to grow its faculty as vacancies are filled, he said new professors often need startup money for research.
OGI will lease the entire 286,652 square feet of space from the new owner for $3.5 million a year, with annual rent increases, OHSU spokesman Jonathan Modie said.
The school is now faced with the obligation to sublease its surplus space to help satisfy the new lease payments. But agreeing to the lease helped fetch a high price for the campus in a frothy environment for commercial real estate.
Having the university, with its investment-grade credit rating, lease the entire campus helped attract interest from about 10 serious potential buyers, said Gary Griff, a broker with Cushman & Wakefield, which represented both the buyer and the seller.
"You're looking at both the creditworthiness of the tenant and the underlying real estate, as opposed to just the underlying real estate," Griff said.
The OGI property includes about 12 acres of developable land among the 40-acre campus, Griff said.
"The capital markets and many institutional buyers are looking for this type of opportunity," Griff said. "You have a credit tenant and some upside in the future for new development."
Wakefield Capital, a joint venture of NorthStar Realty Finance Corp. and Chain Bridge Capital, is not related to Cushman & Wakefield.
OGI's Thompson said the school already is in talks with a pharmaceutical company and an OHSU spinoff as potential tenants.
Northwest Technology Ventures, a venture capital firm specializing in early stage startups, recently became OGI's first tenant in the Bronson Creek Building. Managing Director Gordon Hoffman said the firm was looking to escape from Portland and Multnomah County business taxes and locate close to high-tech firms.
"I'm glad OGI's opening up the campus," Hoffman said. "There are a lot of facilities there, and it's a very collegial environment. A good place for startups."
OGI has located its school of biomedical engineering in the Center for Health & Healing, OHSU's first building in the South Waterfront. The bulk of OGI is expected to relocate with the pharmacy, nursing and other schools in 19 acres known as the Schnitzer Campus, between the Ross Island Bridge and the Marquam Bridge.
OGI hopes to move to the Schnitzer campus in five to seven years, Thompson said.
OHSU is still trying to figure out what it wants to build on the campus, which could have at least 2 million square feet of development under current zoning, said Mark Williams, OHSU's South Waterfront project director.
"We expect to see a student-centered campus that will represent a truly collaborative learning process that is interdisciplinary and integrated with the environment and the community," Williams said.
Dylan Rivera: 503-221-8532, firstname.lastname@example.org