Fort Norfolk Plaza medical complex gets its funding

NORFOLK

The developer of the Fort Norfolk Plaza medical office project has signed an investment agreement with an Indianapolis-based group that specializes in health care.

Dr. Keith Newby said Tuesday that construction will start in early summer.

Newby's new partner is Lauth Property Group. It signed a joint-venture agreement with him to develop Fort Norfolk Plaza across Brambleton Avenue from the medical complex that includes Sentara Norfolk General Hospital and Eastern Virginia Medical School. The project, which has been subsidized by the city, calls for a nine-story medical office building, a jazz club/restaurant, retail shops and a parking garage.

Lauth will be providing "all the capital," said Newby, who has been in negotiations with the group for over two months. "We're still figuring out what that will be."

The project, estimated to cost $66 million, also could be partly financed by the sale of federal empowerment-zone bonds.

While some details still need to be worked out, the project is a done deal, said Andrew Lawler, Lauth's vice president for health care.

"We're all over this," he said. "We're excited."

According to its Web site and news accounts, Lauth is the 13th-largest real estate developer in the United States and the eighth-largest developer of health-care projects. Its projects include Bon Secours Health Center at Virginia Beach.

"They do medical office buildings all the time," said Newby, a local cardiologist. "They wanted to get this going, and they wanted to get it done fast."

So does Newby.

Like other developers in the region, Newby has had difficulties getting financing in the current investment-shy economy. Earlier this year, an equity investor pulled out, forcing Newby to stop the preliminary construction that had begun on the 2-acre site.

When plans for the project were announced two years ago, they included a medical office building, condominiums, a hotel, restaurant, retail shops and a parking deck. Seeing a glut of new housing in the downtown area, Newby abandoned the condo plans early on. In March, an extended-stay Hyatt Summerfield Suites was dropped.

That left a core project of a medical office building plus a restaurant and some retail. Construction is scheduled to start by July, with the building opening to tenants between 14 and 16 months later, Newby said.

The city has helped the project financially. It bought the land from the state for $2.5 million and plans to convey it to the developer when financing is finalized.

Last year, the City Council approved a tax incentive package worth about $11.4 million, but that amount will be scaled back to reflect the loss of the hotel, said Roderick Woolard, Norfolk's economic development director.

"I'm very, very happy that Dr. Newby has secured such a strong and experienced partner to join him in his project," said Woolard, adding that Lauth has "not just the expertise but also the resources to make it a reality."

Lauth was attracted by the city's support and the project's location near the medical complex, Lawler said. It's also the first large medical office building built in Norfolk in decades and is significantly pre-leased, he said.

About 60 percent of the medical office building's space is already under firm leases, Newby said. The largest tenant is Sentara Medical Group. And, he said, he has letters of intent for an additional 25 percent of the space.

Nancy Young, (757) 446-2947, nancy.young@pilotonline.com