Lakeview Health System buys land for possible new hospital campus in Stillwater

With the August opening of the new St. Croix bridge and its direct connection into western Wisconsin, the Hwy. 36 corridor through Stillwater became a more attractive location for businesses and developers.

Count among them Stillwater-based Lakeview Health System, which has staked a high-profile claim along one of the last undeveloped stretches of Hwy. 36 in the city — a spot that could potentially turn into a new campus anchored by a 300,000-square-foot Lakeview Memorial Hospital.

The system, a HealthPartners subsidiary, operates the current 1961-built hospital elsewhere in the city as well as the Stillwater Medical Group of clinics. Last month, Lakeview Health System closed on the purchase of two adjacent properties in the northeast quadrant of the busy intersection at Hwy. 36 and Manning Avenue, an area that real estate observers call the "Gateway Site" because it is an entry point to Stillwater from the west.

According to state records, the nonprofit health provider's foundation arm paid $15.7 million to an entity controlled by east metro developer Dennis Trooien for a 46-acre parcel facing the intersection, and a further $4.6 million to the Bergmann family, who for generations held an adjacent 21-acre parcel which they operated as a greenhouse and nursery business.

With the strategic properties now under control, Lakeview has engaged Edina-based Frauenshuh Commercial Real Estate and BWBR Architects to develop a master plan envisioning a possible build-out of the land into a signature healthcare campus that will include rolling topography and walking trails.

A preliminary concept plan shown to city officials and neighbors this fall depicts a new hospital of up to 97 staffed beds; two "pad sites" capable of accommodating up to 120,000 square feet of medical office space; a combination senior housing/health and wellness building holding up to 150 residential units; and a commercial/retail component that could include up to 150,000 square feet of additional development.

The early-stage plans show common-area connections among the various components. Green space, trails and dedicated pedestrian rights of way, offer "a balance of natural area green space elements," the plan indicates.

Lakeview Chief Executive Ted Wegleitner cautioned that, despite the land purchases and the introduction of the campus master plan, no official decisions have yet been made to replace the current 68-bed hospital, located at 927 Churchill St. W.

"It's really a perfect location in terms of what we call 'strengthening our future,' and we knew that if we waited much longer this property wouldn't be there in case we needed it, especially with the opening of the river crossing," he said. "But we still have to determine if actually building a hospital there would be feasible.

"Over the next couple of years we're going to be doing a determined, deliberate feasibility analysis," he said. "Will the property work for a campus? Can we work with the city and county on the roadways which would have to be built? These are the kinds of questions that will have to be answered before we go to our board with requests to build any new buildings."

But there's little doubt, Wegleitner added, that with the new bridge, the easily accessible Hwy. 36 location has the potential to integrate HealthPartners' western Wisconsin market more solidly into Lakeview's Stillwater home base. The provider currently has smaller hospitals in Amery, Wis., New Richmond, Wis., and Hudson, Wis.

"There's a lot of room for residential development on the Wisconsin side, and we definitely think it's going to grow," he said. "We're already feeling some capacity pressure on our current hospital due to the growth of the east metro market."

One factor favoring a new campus is the landlocked nature of the current hospital. Hemmed in by residential neighborhoods, the original building has been renovated three times over the years and has reached the limits what is possible in that location.

But even if no new campus is ever built, Wegleitner said, the hospital has made a smart land investment in what is likely to be a booming transit corridor in the future.

Don Jacobson is a freelance writer based in St. Paul. He is the former editor of the Minneapolis-St. Paul Real Estate Journal.