VCU Health paid $72.9M to back out of development

VCU Health paid nearly $73 million to back out of a $325 million development deal earlier this year, according to Dr. Marlon Levy,  CEO of the health system and Virginia Commonwealth University’s interim senior vice president for health sciences.

The project, known as the Clay Street Project, included plans for a medical office tower and multiuse project in downtown Richmond at the site of Richmond city government’s former Public Safety Building at 10th and Clay streets.

In a statement, Levy said that the original plans were developed before the COVID-19 pandemic. In early 2021, the city approved the $3.5 million sale of the 3-acre property to Capital City Partners LLC and was referred to at the time by Mayor Levar Stoney as a “critical first step in reviving downtown.”

However, by late 2021, “construction and other challenges made it simply impossible to build the original project,” Levy said in a statement. “Moving forward today would cause dire long-term financial repercussions,” Levy added. “With that in mind, VCU Health was forced to make a difficult, but also prudent, decision to exit the original project.”

VCU Health was required to make the one-time payment to end its obligations on the site, and it was paid for using operating funds representing less than 2.5% of the organization’s annual operating budget. It also means “avoiding far greater financial obligations and problems in the future,” Levy said.

VCU is working with the state and city governments on new plans, which Levy said are “envisioned as a signature development for VCU and Richmond, with potentially a new facility for VCU’s School of Dentistry as the centerpiece.”