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Yesterday's grim asylums are becoming tomorrow's grand apartments

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DANVERS, Mass. -- Perched on a hill and surrounded by forests and hay fields sits an imposing brick structure that one visitor called "the scariest building in North America." It's the former Danvers State Hospital, the setting of a 2001 horror movie and a painful reminder of the brutalities of institutionalized mental-health care.

Now, Danvers State is shedding its past. AvalonBay Communities Inc. (NYSE: AVB), a leading U.S. real estate developer, plans to build 497 high-end apartments and condos on the 75-acre property, located just north of Boston. The company is building an additional 387 rental units and a nine-hole golf course at another former mental hospital in another Boston suburb.

Around the United States and in Canada, state hospitals that have sat largely empty since mental-health care was deinstitutionalized in the 1980s have become a developer's dream in a hot housing market: huge tracts of land located in or around large cities, such as New York, Vancouver and Columbia, S.C.

It's another example of surplus government property being converted to commercial use. But these projects are complicated because of what the state hospitals represent to the mental-health community and in popular culture.

Officials in South Carolina are planning the redevelopment of a 178-acre state-hospital campus in the heart of Columbia, the state capital. They want to save one brick building with the word "Asylum" chiseled in the facade. The building, according to some locals, was designed to block out moonlight, which was thought to exacerbate some mental conditions. "It's potentially the greatest development opportunity Columbia has ever seen," said Columbia's mayor, Bob Coble.

Outside Vancouver, British Columbia, 1,100 condos are being built on the site of another former asylum. In rural Dover, N.Y., a developer has bought the 850-acre Harlem Valley Psychiatric Center, a sprawling property located about 80 miles north of New York City. And in Detroit, the marketing firm Sperry Van Ness will auction 414 acres of a former psychiatric hospital campus on Aug. 30; the property sits directly across from a Home Depot (NYSE: HD), and near shopping centers and restaurants.

Early on, William McLaughlin, a senior vice president for development at AvalonBay, who grew up near Danvers, wondered whether the hospital's past would make potential renters and condo buyers wary.

"If you grew up in Danvers and you remember it as the spooky place on the hill, it might not be the right place to live," said McLaughlin. "But I think there is a mix of folks that are going to want to live in a very cool place."

AvalonBay is convinced Danvers State will become a "showcase" for attractive and respectful reuse.

The company plans to convert about a fourth of the massive, Gothic hospital building into loft apartments with towering ceilings and exposed brick. New apartment buildings will surround the original hospital and condos will line the edge of the property. At the bottom of the hill, AvalonBay will likely build offices. All the other buildings will be razed.

There will be a pool, a fitness center and a field for pickup soccer and football games. Average rents for two-bedroom units will range from $1,750 to $2,000 a month. Condos will be marketed for $300,000 to $400,000.

It's a far cry from how the hospital appeared one morning last week: The windows and doors were boarded up, roofs sagged and the pathways were overgrown with weeds. It was deeply quiet save for the rustle of wild turkeys wandering the grounds.

Danvers was the setting for the horror movie "Session 9," about a worker who goes insane while removing asbestos from the hospital. "It's the scariest building in North America," actor David Caruso, who starred in the movie, told AboutFilm.com. "It was always scary, and you could really feel the pain of the people that were at Danvers," Caruso said.

A group of former patients and advocates for the mentally ill want AvalonBay to construct a museum on the site to chronicle the hospital's difficult history. "I want the public to know how cruel some of the treatment was," said Judith Robbins, who was first an employee and later a patient at Danvers.

Her father was also a patient at Danvers after World War II. She remembers that he twice broke his collarbone during his stay there. The hospital explained that he was hurt playing baseball. "I don't think so," Robbins said.

Danvers State -- like many state hospitals -- was founded in the 19th century on the idea that the mentally ill could be helped by moving out of cities and into more bucolic settings of farm fields and Victorian gardens.

With its Gothic architecture and sweeping vistas, Danvers State was particularly grand. Over time, conditions deteriorated. Patients, often misdiagnosed and misunderstood, might be "people who were homeless or a little odd or children who were incorrigible," said Richard Trask, the town archivist.

In the 20th century, patients were being treated with lobotomies, electric shock and water immersion. By mid-century, patients were sleeping in corridors because of over-crowding.

Hundreds of patients were buried in two cemeteries on the hospital grounds in graves marked with stone cylinders and numbers. After the hospital closed in 1992, a group of former patients and advocates used medical records to identify the graves and put up headstones. But many records had disappeared.

"If we don't tell this story, we are going to repeat it," said Pat Deegan, who helped restore the cemeteries and wants a museum on the site.

AvalonBay says a museum is impractical. Instead, the company proposes building an outdoor memorial with a series of plaques explaining the history.

AvalonBay is buying the Danvers hospital from the state for about $20 million. Of that, $4.2 million is going to pay for housing for the mentally ill elsewhere in the state and $2 million to the town of Danvers for local schools, historic preservation projects and affordable housing around town.

Some units will be set aside as affordable housing, and 2 percent of the total development -- about 10 apartments -- will be reserved for people with mental illness. The company must also maintain access to the cemeteries.

Local preservationists wanted AvalonBay to save more of the hospital building, which opened in 1878 and is on the National Register of Historic Places. The company doesn't think there is enough demand to renovate all that space.

Town Manager Wayne Marquis praised the developer for saving the one main building while also maintaining open space. "It's striking a balance of all interests," he said.

Robbins left Danvers State as a patient in the early 1990s. She would like to move back to the hill to live in the new development. She likes the idea of having a pool and the promise of a nice view. "It's going to be beautiful and new," Robbins said.

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