Cost of VCU Health ghost tower climbs to nearly $80 million
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The cost of VCU Health's decision to bail on a major downtown development project keeps rising.
What's happening: The university's hospital system is on the hook for nearly $80 million after backing out as the lead tenant of a private development deal to replace the city's old public safety building downtown, per Richmond BizSense.
Why it matters: It's an eye-popping sum to pay for an office tower that's no longer being built as a result of VCU's decision.
Catch up fast: Richmond BizSense first reported in early May that the health system was contractually obligated to pay developers $73 million in penalties to exit the deal.
- BizSense later reported that the university's contract also required it to demolish the decrepit public safety building at an estimated cost of $5 million.
- Plus: On Monday, the outlet reported that the school is making a payment to the city totaling more than $1.3 million. The check is part of an agreement intended to guarantee minimum tax payments to the city regardless of the pace of the project — payments which could continue until the property is developed.
What they're saying: The health system has maintained that exiting the project, which was planned pre-pandemic, saved the institution money in the long run.
- "By late 2021 construction and other challenges made it simply impossible to build the original project," the health system said in a statement last month. "Moving forward today would cause dire long-term financial repercussions."
👀 The latest: On Tuesday, the Times-Dispatch reported the health system's leadership initially attempted to hide the expense from VCU's Board of Visitors.
- The situation has VCU's board reconsidering the university's current governance structure, under which the hospital system is governed by its own board of directors, the Times-Dispatch reports, citing two unnamed sources familiar with the matter.
The big picture: VCU is still pursuing the property, but under a completely different development that would be helmed by the school instead of a private developer.
- The school's new plan for the property replaces the formerly proposed 20-story office tower with a new building to house the university's dental school.
- The university is in the process of requesting funding for the project from the General Assembly.
Of note: At an estimated $415 million, the new project is even more expensive than the old one, which was pegged at $325 million, per BizSense.