NORFOLK, Va., – Fort Norfolk Plaza seemed like a long shot. Despite that fact that no new commercial medical office buildings (MOBs) had been built in the downtown Norfolk medical district in nearly four decades, efforts to develop a new MOB near the Eastern Virginia Medical Center campus appeared dead as recently as last year.
But that was before Indianapolis-based Lauth® stepped in as a joint venture partner. With its healthcare real estate development expertise and capital capabilities, Lauth was not only able to drive the project forward, the firm successfully secured financing despite the worst credit market conditions in years. Financing for the $70 million, nine-story, 195,890 square foot Fort Norfolk Plaza closed Nov. 26th.
Wasting no time, Lauth has already started construction of the MOB and its connected 904-space parking deck. The project is being built on a 2.8-acre in-fill site across Brambleton Avenue from the city’s extensive medical district.
“Fort Norfolk Plaza will do more than simply satisfy pent-up demand for modern medical office space,” explains Tag Birge, Lauth’s Senior Vice President, Healthcare. “It will realize the vision of our physician partner, Dr. Keith H. Newby Sr., and will bolster the city’s efforts to revitalize the Fort Norfolk area.”
The Fort Norfolk Plaza project, which was announced nearly three years ago, had been delayed by a slowing economy and other factors. But that began to change last year when Lauth was brought in as a joint venture partner with Dr. Newby, a local cardiologist.
“Lauth has the financial wherewithal and the development experience I needed,” Dr. Newby says, “and I really like the group. They want to do a good project.” He envisions a sophisticated facility that will be a cut above typical MOBs in terms of technology and amenities, and which will be a model for other medical office developments. Dr. Newby says he also considers the project to be a tribute to his late father, who passed away at the age of 41 when he was only seven years old. His father was the first African-American board-certified internist in the area and the first African-American on the Norfolk Planning Commission.
Working closely with Dr. Newby and city officials, the Lauth team was able to qualify the project for the federal New Markets Tax Credit (NMTC) Program, which is used by communities to attract equity investors to public-interest projects. Lauth rounded out the financing for the public-private partnership by securing debt financing through Bank of America and SunTrust.
To qualify for financing, Lauth needed to pre-lease at least 55 percent of the space, according to Andrew Lawler, Lauth’s Vice President, Healthcare – Eastern Region.
“The area is significantly underserved for medical office space, relative to the number of beds at the nearby hospital as well as the number of physicians who practice in the area,” Mr. Lawler says. “So we’re really filling a need.” The medical campus includes 555-bed Sentara Norfolk General Hospital, 720-student Eastern Virginia Medical School and 161-bed Children’s Hospital of The King’s Daughters.
Signed tenants include Sentara Medical Group with about 65,000 square feet, Dr. Newby’s Cardiology & Arrythmia Consultants with about 22,000 square feet, and some smaller medical practices. A restaurant has also leased part of the building’s first-floor retail space. Mr. Lawler says there is “very strong interest” from other potential tenants and Lauth is in discussions with enough additional prospects to fill the building by the time of its scheduled completion in April 2010.
The MOB project will also be a catalyst for further redevelopment of the Fort Norfolk area, a former industrial district and a federal Empowerment Zone on the banks of the Elizabeth River, predicts Rod Woolard, Director of Development for the City of Norfolk and Executive Director of the city’s Economic Development Agency. City officials backed the project with City grants, related infrastructure improvements and other support.
Mr. Woolard credits Dr. Newby’s vision and tenacity for getting the Fort Norfolk Plaza development process started. But where most other developers might have given up, he says Dr. Newby recognized the need to bring in “a world-class development partner to join him in realizing his vision, and he found that in Lauth.”
Once Lauth was on board, the company’s project team demonstrated a “very, very impressive” level of professionalism and personal commitment, Mr. Woolard says. “There was no such thing as an 8-to-5 or a 9-to-5 kind of day with these guys.”
Developing a project on the scale of Fort Norfolk Plaza would require extensive healthcare development expertise and financial strength even in the best of times, he adds. The fact that Lauth was able to move ahead with the project during this extremely difficult economic period is even more remarkable.
“Lauth has been a good partner,” Dr. Newby agrees. “I couldn’t have asked for a better partner to have for this transaction.”
“The funding of the Fort Norfolk Plaza MOB in these extremely challenging times is a testament to the strength of the Lauth development platform and the excellent partnership we formed with the City of Norfolk and the leading physicians in the area,” Mr. Birge concludes. “We look forward to the completion of this exciting project in 2010.”
About Lauth®
Modern Healthcare recently ranked Lauth as the 8th largest developer of healthcare facilities nationally. Lauth currently has over 3.5 million square feet in nearly 50 healthcare projects under development or completed within the last 5 years.
Since 1977, Lauth has been building facilities for clients to lease or own throughout the United States. Lauth’s years of solid experience, coupled with completed projects worth billions, make it one of the nation’s leading development and construction firms. Lauth delivers many types of commercial facilities including office, industrial, healthcare and retail from eight offices nationwide. Additional Lauth information is available at www.lauth.net.