Eastside Hospital up for sale

Group Health Cooperative is putting its 28-acre Redmond hospital campus up for sale today, paving the way for a housing, retail and office complex that could spur a revitalization of the city's Overlake neighborhood.

The co-op is moving its operations to two other Eastside locations this year. Group Health has been shifting its focus over the past several years to outpatient care, and its 30-year-old Eastside Hospital doesn't fit the new business model, co-op officials said.

Plans to leave the Redmond campus were announced about five years ago, and since then, Group Health and Redmond officials have developed a new plan for the property.

The leafy campus, assessed at $78 million, will probably be the site of more than 1,000 apartments or condos and significant office and retail space, in buildings as tall as 125 feet, or 12 stories — part of zoning changes approved by the City Council in December.

Incentives are also in place for the construction of a 2 ½-acre park and a hotel and conference center that could be a key meeting place for Microsoft, said Jayme Jonas, a city associate planner.

Over the next two decades, the city wants to revamp a 200-acre section of the Overlake neighborhood currently occupied not only by Group Health but also by strip malls and aging one- and two-story buildings. The new zoning would allow most buildings to be up to eight stories, with the hospital campus even taller.

"Catalyst for change"

The Group Health property is large and centrally located and could be redeveloped in the next few years.

"It really takes something big to get things going," Jonas said. "So we see it as a catalyst for change in the neighborhood."

The campus is adjacent to Microsoft, which is quickly expanding into office space across the Eastside and Seattle. The company announced last fall that it is leasing space in a South Lake Union building co-owned by Group Health, which has its headquarters there.

Group Health's Redmond campus might make more sense for Microsoft as leased rather than purchased space, Jonas said. Because of the zoning changes, any new owner will have to develop not just offices, but housing and retail and possibly a park and hotel, none of which are Microsoft specialties.

Microsoft spokesman Lou Gellos said the company is always looking for space, but he declined to comment on the Group Health property.

Group Health will take bids on the campus over the next few months and expects to get interest from some firms out of state and possibly from other countries, said Bill Biggs, executive director of administrative services. A deal could be completed by the end of the year.

3-phase move

Group Health is planning to move off the campus in three phases.

• By May 1, the hospital's inpatients will be moved to Overlake Hospital Medical Center in Bellevue, where they will be cared for as part of a partnership between Overlake and Group Health.

• On July 1, outpatients and a behavioral-health clinic will be moved to a new Group Health building next to Overlake Hospital Medical Center.

• In October, the co-op's primary-care center will move to a new building in Redmond.

The move of inpatients to Overlake this spring will mean 363 Group Health employees — nearly half of them nurses — will be laid off. The other laid-off employees include pharmacists, technicians, janitors and clerks.

Overlake is adding positions because of the new patients and a South Tower that opened last fall. The hospital has made offers to 50 Group Health employees slated for layoff, 35 of them nurses.

Ashley Bach: 206-464-2567 or abach@seattletimes.com