St. Luke’s closes deal on former Morrison Knudsen HQ

File photo.
The Washington Group Plaza campus near downtown Boise. File photo.

A joint venture including St. Luke’s Health System and a number of investors closed March 8 on the $86.5 million purchase of the four-building Washington Group Plaza complex originally built by Morrison Knudsen Corp,  a corporate giant that was acquired and relocated in 2007.

The 622,000-square-foot acquisition at Broadway and Front Street substantially expands St. Luke’s 1.1 million-square-foot campus on the east end of Boise’s downtown.

St. Luke’s has been angling to acquire the former MK/Washington Group property for a couple of years and has leased one of the structures, the six-story, 125,568-square-foot Plaza I building, since June 2015.

The largest hospital group in Idaho plans to occupy 120,000 additional square feet in portions of the Plaza II, Central Plaza and Plaza IV buildings by the end of the October, said Mary Cronin, St. Luke’s  senior director of operations.

Over the next six years, as existing tenants – particularly the state of Idaho – move out, St. Luke’s will occupy the entire complex where Broadway, Myrtle Street, Front Street and Park Boulevard all converge, she said.

St. Luke’s historic downtown St. Luke’s Regional Medical Center campus is just three blocks away with plans for a 700,000-square-foot expansion. St. Luke’s departments in buildings that are slated for demolition at the regional center will relocate to Washington Group Plaza, which will eventually be renamed.

The St. Luke’s billing team, administrative team support for outpatient services and scheduling & registration will be the first tenants moving into the newly acquired space. St. Luke’s human resources and Center for Learning and Development moved into Plaza I in July 2016.

St. Luke’s has a lease-to-own deal

St. Luke’s has a 49.5 percent ownership share in Broadway Park Holdings, the limited liability corporation that bought the former Morrison Knudsen corporate headquarters from City Office REIT, Inc., a Vancouver, B.C., real estate investment trust that acquired the property in April 2014 from Second City Capital Partners, also of Vancouver.

“Since that time, we have implemented substantial operational improvements and cost savings, increased the square footage of the buildings by 23,000 square feet through re-measurement,” said Greg Tylee, chief operating officer and president of City Office in a news release.

City Office owned Washington Group Plaza through its wholly-owned SCCP Boise LP subsidiary, which it acquired from Second City.

St. Luke’s will be the master leaseholder of the property, leasing from Broadway Park Holdings, which will pay off the $86.5 million mortgage, likely over 30 years with refinancing expected after five and or 10 years, said David Wali, managing member of Broadway Park Holdings.

Wali is executive vice president at Gardner Company, developer of several high-profile Treasure Valley office and medical facilities. He is the principal investor of the 50.5 percent ownership share at Broadway Park Holdings, along with a small number of other investors. Wali has had several similar co-ownership arrangements with St. Luke’s.

Cronin said Washington Group Plaza now has about 100,000 square feet vacant with tenant improvements underway for St. Luke’s.

The state of Idaho leases 159,535 square feet for three agencies, with leases expiring in the next three years. The Idaho State Tax Commission, occupying 111,381 square feet, will depart in October to the former Hewlett-Packard campus, which the state acquired Dec. 21 for $110 million.

Idaho Fish & Game’s lease on 28,022 square feet runs to December 2019 and the Idaho Department of Finance’s lease on 20,132 square feet ends in July 2021, said Linda Miller, the statewide leasing manager at the Idaho Department of Administration.

City Office reported it anticipated a $45 million net gain on the sale.

The Ada County Assessor assessed the four-building complex at $82.1 million in 2017, but only $43.98 million in 2016 and $39.87 million in 2015.

“The value is in the eye of the beholder and sometimes not in the eye of the assessor,” Wali said. “If you take the $86.5 million and divide it by the square footage, I can’t build it for that.”

That division comes to $139 per square foot. Cronin said St. Luke’s calculated the cost of building such a campus, and came up with construction costs of $250 per square foot.

St. Luke’s has departments in 12 to 20 leased buildings around the Treasure Valley, and is considering moving those into the plaza in the next two to five years. The only buildings Cronin would identify are the former Kmart and the Shoreline Center, both at Americana Boulevard and Shoreline Drive, both under contract for sale for a potential downtown stadium and mixed-use complex.

State seeks up to 600,000 square feet of Ada County office space

The Idaho Tax Commission lease at Washington Group Plaza expires in June 2017. Photo by Teya Vitu.
The Idaho Tax Commission lease at Washington Group Plaza expires in June 2017. Photo by Teya Vitu.

If you have 110,000 to 600,000 square feet of vacant office space in Ada County to lease or sell, or even a desire to build, the state of Idaho is looking for you.

The state Department of Administration issued a request for proposals Oct. 21 for at least 110,000 square feet of office space as a new home for the Idaho State Tax Commission, whose lease at Washington Group Plaza expires in June 2017. The RFP elaborates that as many as 600,000 square feet of new or existing office space are desired.

The deadline for proposals is Dec. 15.

“I’ve been talking to brokers who say I’ll get 40 responses, which I find amazing,” said Linda Miller, the statewide leasing manager at the Idaho Department of Administration.  “We are trying to negotiate a short-term extension.”

Miller wants to relocate the tax commission before August 2018.

Bill Beck wonders how successful the state will be in lining up so much office space.

“There are 24 million square feet of office space (across the Treasure Valley) with about 10 percent vacancy,” said Beck, founding principal of Tenant Realty Advisors, a Boise commercial real estate firm that exclusively represents tenants. “That’s about 2.2 to 2.3 million square feet. If they take 600,000 square feet, that would take 25 percent of the vacancies away.

“Right now,” Beck continued, “if you are looking for 50,000 to 80,000 square feet of space, there might be between four and six. There’s not that many options. If you want 150,000 square feet, there’s one option. If you want 200,000 to 300,000 square feet, to the best of my knowledge, there are none.”

St. Luke’s Health System is evaluating whether to buy 556,000-square-foot Washington Group Plaza with four large structures at the eastern edge of downtown Boise.

Whether the sale goes through or not, the state must relocate the tax commission, Idaho Department of Fish and Game and Idaho Department of Finance as their leases expire at the Washington Group Plaza, the former corporate headquarters for Morrison Knudsen Corp., Miller said.

The tax commission will be the first to go. The Department of Finance lease on 21,132 square feet expires in July 2021, and the Fish and Game lease on 28,022 square feet expires in June 2019. Miller said those leases would remain valid even if Washington Group Plaza changes ownership.

The State of Idaho leases 38 properties in Boise. Image courtesy of Idaho Department of Administration.
The State of Idaho leases 38 properties in Boise. Image courtesy of Idaho Department of Administration.

Moving the three agencies inspired Miller to find ways to consolidate 38 different state-leased locations in Boise to fewer than 10 leased locations with the requested range of 110,000 to 600,000 square feet. The state leases 704,000 square feet in Boise for $11 million a year, a dollar figure that has doubled since 1996, Miller said.

“(The consolidation) could be anywhere in Ada County, including Meridian or Eagle,” she said. “This is the biggest RFP I have ever done and I’ve been here for 17 years. It’s forward thinking. It’s looking at containing our costs.”

She is focusing on moving agencies that don’t need to be in downtown Boise and with leases that expire in the next five years. These are agencies not located in the 15 buildings that comprise the 1 million-plus square feet of the Capitol Mall.

Miller is considering leasing or purchasing office space. She’s also considering using existing buildings or building new buildings, even a new campus, if an interested developer steps forward.

“I would prefer buying,” she said. “We will be looking at leasing with an option to buy or a phased purchase program. We’re looking for some creative concepts.”

Miller estimates new construction would cost between $100 and $200 per square foot for a projected total cost of $60 million to $120 million that would require legislative approval. She said build-out could be in phases over a number of years.

Because it has an “annual appropriations cancellation clause,” Beck said, the Legislature can cancel leases if, for instance, the state doesn’t have enough money. Whatever their length, the leases are therefore regarded as year-to-year.


St. Luke’s looks to buy Washington Group Plaza

File photo.
File photo.

St. Luke’s Health System is under contract to purchase all the buildings at Washington Group Plaza, which originally was built by Morrison Knudsen Corp., one of Boise’s legacy corporate giants.

St. Luke’s in June 2015 entered into a lease with an option to buy the Plaza I building, but since then Washington Group Plaza owner Second City Capital Partners of Vancouver, B.C., approached St. Luke’s to purchase all the buildings, St.

Anita Kissée
Anita Kissée

Luke’s spokeswoman Anita Kissée said.

Washington Group Plaza is comprised of the six-story, 125,568-square-foot Plaza I built in 1970; the four-story, 115,600-square-foot Plaza II built in 1975; and, added in 1982, the two-story, 138,633-square-foot Central Plaza and the seven-story, 220,045-square-foot Plaza IV, according to Ada County Assessor records.

They are located where Broadway, Myrtle Street, Front Street and Park Boulevard all converge.

“Whether St. Luke’s will proceed to purchase has not been determined,” Kissée said. “The timeline is still subject to evaluation.  We are conducting due diligence and evaluating the property.”

St. Luke’s has leased space in the Plaza II building since 2013 and started moving into the Plaza I building in July 2016 after the departure of  the Boise office of Los Angeles-based AECOM, an architecture, design, engineering, and construction firm.

“About 370 St. Luke’s employees are currently working or in the course of relocating to space in Plaza I and Plaza II under leases that are already in place,” Kissée said.

This includes employees in clinical training, clinical research, human resources, information technology, and operations improvement. Plaza 1 will house St. Luke’s Center for Learning and Development, an education hub and training site for St. Luke’s employees and other clinical providers.

St. Luke’s leases URS building at Park and Broadway

Washington Group Plaza in Boise. Photo by Pete Grady.
Washington Group Plaza in Boise. File photo.

St. Luke’s Health System has leased, with an option to purchase, the former headquarters building of Morrison Knudsen and most recently the Boise office of Los Angeles-based AECOM, an architecture, design, engineering, and construction firm.

St. Luke’s signed a lease June 18 for an undisclosed amount for the 147,657-square-foot Plaza I building at 720 Park Blvd., where Myrtle, Broadway and Park converge in at the east edge of downtown Boise.

The building is one of four in what is still commonly called the Washington Group Plaza, the complex’s tenant from 1996 to 2007. The building St. Luke’s will occupy was the first one built in 1970, according to the Ada County Assessor’s records.

The building will consolidate about 330 St. Luke’s employees from varied locations across the Treasure Valley in the areas of support staff, accounting and finance, supply and human resources. It will also house the hospital’s Center for Learning and Development for staff, said Tim Marsano, St. Luke’s director of public relations.

Tim Marsano
Tim Marsano

St. Luke’s has about 3,150 employees in downtown Boise. St. Luke’s previously leased 18,733 square feet in the Plaza II building about a year and a half ago and recently added  8,858 square feet in Plaza II, said Al Marino, the Thornton Oliver Keller Commercial Real Estate broker handling these transactions.

Plaza I is currently occupied by AECOM employees. AECOM acquired engineering and construction firm URS in October 2014 but the URS sign remained in place until April.

“We anticipate they will leave the building in December,” Marsano said. “There will be six months construction. We hope to be in there in July.”

Plaza I is three blocks from the main St. Luke’s campus.

“We need additional space,” Marsano said. “This seems to be the logical place to expand for support staff.”

Morrison Knudsen, once a major employer in Boise, built Plaza I in 1970, followed by Plaza II in 1975 and Plaza IV and Central Plaza in 1992.

Morrison Knudsen was acquired by Washington Group International in 1996, and it was acquired by URS in 2007. URS itself was acquired by AECOM in October 2014.

The continuous lineage from Morrison Knudsen at Plaza I ends with St. Luke’s arrival.

The Canadian company Second City Capital Partners of Vancouver, B.C. has owned Washington Group Plaza since June 2013.