City setting stage for VCU Health to demolish Public Safety Building

PublicSafetyBldg1

The 3-acre Public Safety Building property at 500 N. 10th St. (BizSense file photos)

As scrutiny of VCU Health’s aborted redevelopment of the old Public Safety Building continues, the City of Richmond is clearing the way for demolition of the downtown property on the health system’s dime.

City Council on Monday introduced legislation to allow the health system to access the city-owned property to begin the demolition, a process VCU Health had committed to as part of its agreement to back out of the $325 million development that was planned for the site at 500 N. 10th St.

The pending ordinance would authorize execution of a license agreement between the two parties that was part of the project’s wind-down in February, when the city took back ownership of the property it had previously sold for the project.

The scope of work in the license agreement includes remediation of contaminated and hazardous materials such as asbestos abatement, demolition and removal of the 69-year-old building, and placement of protective fencing. DPR Construction is VCU Health’s contractor for the work, which would effectively prep the site for future development.

The work would complete prior asbestos abatement and other site preparations that had gotten underway before the health system decided to back out of the project through a defeasance process that voided its lease for the new building and included a onetime exit payment of $73 million.

Public Safety old rendering

A rendering of the project that was planned to replace the Public Safety Building. (BizSense file)

In addition to that payment, VCU Health agreed to go through with the demolition, at an estimated cost of $5 million. It also committed to continue paying the project’s annual guaranteed obligation payments to the city, or payments in lieu of taxes, which were worked into the deal to cover the minimum real estate tax revenue that the project was anticipated to generate for the city over 25 years.

Those payments – one of which is due this month – have so far totaled nearly $2 million. Those, along with the demolition cost and defeasance payment, brings the total known project-exit cost for VCU Health to $80 million.

The health system has said it decided to exit the project in light of challenges arising over the course of the pandemic and the financial obligations that came with the project, which put VCU Health on the hook to pay more than a half billion dollars in rent over its 25-year lease.

The ordinance is expected to be reviewed in committee this week before coming back to the council for approval. The license agreement requires that all of the site work be completed by Dec. 31, 2023, or nine months from the council’s approval.

A separate construction schedule that was circulated during the wind-down process indicated the work was supposed to get underway in March, with fencing to be installed and abatement started in May. Demolition was to start in August and last 75 days, with all work to be completed by the end of this year.

PublicSafetyBldg2

The Public Safety Building site at Leigh and 10th streets, a block away from City Hall.

The site prep could set the stage for a new development that VCU, the university, is now pursuing for the site: a planned $415 million Dentistry Center, to replace the School of Dentistry’s Lyons Dental Building and Dental Building 1 on the nearby MCV Campus.

VCU’s Board of Visitors is seeking state funding approval for the project, which could potentially also involve a new research building to replace the aging Sanger Hall a block away.

Meanwhile, the Board of Visitors and the VCU Health System Authority Board of Directors are awaiting the results of an internal review of the original deal that has been underway for months and is scheduled for completion this summer.

Initiated in September by Michael Rao, president of both VCU and VCU Health, the review is being conducted by national law firm Saul Ewing and led by a committee consisting of members of both boards.

A closed session for the two boards to consult with legal counsel is scheduled today (Wednesday). It isn’t known whether the session involves discussion of the downtown project review.

PublicSafetyBldg1

The 3-acre Public Safety Building property at 500 N. 10th St. (BizSense file photos)

As scrutiny of VCU Health’s aborted redevelopment of the old Public Safety Building continues, the City of Richmond is clearing the way for demolition of the downtown property on the health system’s dime.

City Council on Monday introduced legislation to allow the health system to access the city-owned property to begin the demolition, a process VCU Health had committed to as part of its agreement to back out of the $325 million development that was planned for the site at 500 N. 10th St.

The pending ordinance would authorize execution of a license agreement between the two parties that was part of the project’s wind-down in February, when the city took back ownership of the property it had previously sold for the project.

The scope of work in the license agreement includes remediation of contaminated and hazardous materials such as asbestos abatement, demolition and removal of the 69-year-old building, and placement of protective fencing. DPR Construction is VCU Health’s contractor for the work, which would effectively prep the site for future development.

The work would complete prior asbestos abatement and other site preparations that had gotten underway before the health system decided to back out of the project through a defeasance process that voided its lease for the new building and included a onetime exit payment of $73 million.

Public Safety old rendering

A rendering of the project that was planned to replace the Public Safety Building. (BizSense file)

In addition to that payment, VCU Health agreed to go through with the demolition, at an estimated cost of $5 million. It also committed to continue paying the project’s annual guaranteed obligation payments to the city, or payments in lieu of taxes, which were worked into the deal to cover the minimum real estate tax revenue that the project was anticipated to generate for the city over 25 years.

Those payments – one of which is due this month – have so far totaled nearly $2 million. Those, along with the demolition cost and defeasance payment, brings the total known project-exit cost for VCU Health to $80 million.

The health system has said it decided to exit the project in light of challenges arising over the course of the pandemic and the financial obligations that came with the project, which put VCU Health on the hook to pay more than a half billion dollars in rent over its 25-year lease.

The ordinance is expected to be reviewed in committee this week before coming back to the council for approval. The license agreement requires that all of the site work be completed by Dec. 31, 2023, or nine months from the council’s approval.

A separate construction schedule that was circulated during the wind-down process indicated the work was supposed to get underway in March, with fencing to be installed and abatement started in May. Demolition was to start in August and last 75 days, with all work to be completed by the end of this year.

PublicSafetyBldg2

The Public Safety Building site at Leigh and 10th streets, a block away from City Hall.

The site prep could set the stage for a new development that VCU, the university, is now pursuing for the site: a planned $415 million Dentistry Center, to replace the School of Dentistry’s Lyons Dental Building and Dental Building 1 on the nearby MCV Campus.

VCU’s Board of Visitors is seeking state funding approval for the project, which could potentially also involve a new research building to replace the aging Sanger Hall a block away.

Meanwhile, the Board of Visitors and the VCU Health System Authority Board of Directors are awaiting the results of an internal review of the original deal that has been underway for months and is scheduled for completion this summer.

Initiated in September by Michael Rao, president of both VCU and VCU Health, the review is being conducted by national law firm Saul Ewing and led by a committee consisting of members of both boards.

A closed session for the two boards to consult with legal counsel is scheduled today (Wednesday). It isn’t known whether the session involves discussion of the downtown project review.

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Jim Jones
Jim Jones
1 year ago

The city is putting the screws to VCU, even after all the progress VCU has made to clean up the city. Without the medical and academic campuses there would be extraordinarily little reason to even go to the city.

Michelle Reynolds
Michelle Reynolds
1 year ago
Reply to  Jim Jones

VCU puts the screws to Richmond all the time.

Michael Morgan-Dodson
Michael Morgan-Dodson
1 year ago
Reply to  Jim Jones

I truly believe that the City Administration (and Council) is being hard with the contract enforcement on this project otherwise they would look even more foolish as they push the Diamond District and new downtown RFP. Given the two on-going projects and the City POOR history of project management, they are acting like they are good stewards of city funds and manager of their agreements. I mean if they can’t get the funds/enforce the deal on a one for one building redevelopment, one can easily argue that they aren’t going to be capable to handle the two larger projects.

Victoria Woodhull
Victoria Woodhull
1 year ago
Reply to  Jim Jones

I think the CITY is in the driver’s seat here. MVC VCU needs this new Dentistry school expansion. Like where else is MCV going to go……?