Northwestern University buying Rehab Institute building - Rehabilitation Institute of Chicago

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Published on August 13, 2015

Source: Crain's Chicago Business

Northwestern University buying Rehab Institute building

Northwestern University is buying the building housing the Rehabilitation Institute of Chicago, which has two years to go before debuting a new facility two blocks away.

Evanston-based Northwestern, which owns the land the Rehab Institute is built on, said terms of the deal are still being finalized. The university is in the process of planning how it would use the hospital, but it likely would be for office space and other academic purposes, spokesman Alan Cubbage said.

The marriage makes sense, said Michael Newman, president of Chicago-based Golub, a real estate investment and development firm. Streeterville is the city's “urban medical district,” he said, a nod to not only the Rehab Institute but also nearby Northwestern Memorial Hospital and Ann & Robert H. Lurie Children's Hospital. Both are big patient feeders to the Rehab Institute.

Northwestern's Feinberg School of Medicine, whose students can learn the ropes of physical medicine and rehabilitation at the Rehab Institute, is around the block from the hospital.

With several residential and commercial buildings going up, such as the new Loews Chicago Hotel, “there's limited availability of land and buildings in the area,” Newman said.

A Rehab Institute spokeswoman declined to comment.

The Rehab Institute, commonly known as RIC, is a prominent hospital with a global reach specializing in rehabilitating patients with some of the most severe ailments and injuries, from strokes and amputations to spinal cord trauma. It's consistently ranked the top hospital for rehabilitation by U.S. News & World Report.


The deal with Northwestern comes as the Rehab Institute is building an estimated $550 million new hospital at 630 N. McClurg Court. The facility is about half completed, CEO Dr. Joanne Smith said in an interview last week.

With 18 stories and about 387,500 square feet, the current hospital has outgrown its space. Its 182 patient beds typically are full, and many fit two patients per room, a challenge for infection control and patient satisfaction, Smith said. The hospital's racetrack-like configuration (a rectangular shape with narrow corridors) is inefficient and forces many functions to be squeezed into spaces that aren't adequate for services today, like bigger wheelchairs, the hospital told state regulators in a 2012 application requesting permission to build the new facility.

“We literally have no place to grow,” said Smith, adding that the hospital has more than 100 patients a year on a waiting list.

The new hospital, to be called the Ability Institute of RIC, will be much bigger. It will span 1.2 million square feet, with 27 stories and room to add more space. Its 242 patient rooms will be private. The facility, which has a heavy research focus, will embed researchers among patients and physicians to help spark medical breakthroughs.

While the hospital missed earlier fundraising targets, it's up to $200 million of its $300 million goal, Smith said. Mae Hong, a Chicago-based vice president at Rockefeller Philanthropy Advisors, said donors have bounced back since the recession. The Rehab Institute's branding power, niche and high-profile board should help it solicit contributions, she said.

“If they were any other institution, I think I might say that's going to be a bit of a stretch,” Hong said.


If Northwestern didn't embark on a deal, the Rehab Institute would have been a hard sell, experts say. The hospital's lease for the site is up in 2069, according to its 2012 state application. Northwestern “declared a need” for the land under the hospital and would not only let the lease expire without renewing it, but it may want to use the site before the lease was terminated, the application said.

A new buyer would have only 54 years on the Rehab Institute's existing lease. It sounds lengthy, but it's a risky bet for a new buyer that might plunk down millions of dollars to repurpose the 41-year-old hospital building, then lose it to the university when the lease expires, experts said.

“It's not economically viable,” said Howard Ecker, president and CEO of Howard Ecker & Co., which represents commercial tenants and has offices in four cities, including in Chicago.

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