NORFOLK — A large redevelopment project that proposed turning the former Bon Secours DePaul Hospital into almost 500 luxury apartments won’t happen, according to a representative of the developer.
Developer Frank “Buddy” Gadams’ Marathon Group was in talks last year and preparing to redevelop the former 15-acre medical center site.
However, like many projects across the country, increased interest rates and continued construction supply chain snarls presented an insurmountable challenge, according to Raffaele Allen, Marathon’s chief operating officer.
“Unfortunately, we had to step away from the project,” Allen said. “And it was disheartening cause we were all very excited about it and obviously put in a lot of work and hours working with the city and the neighborhoods and the civic leagues.”
He said the construction costs ended up about 40% higher than previously anticipated and interest rates have doubled since the project’s inception.
“If the rates were where they were before, we probably could’ve found a way to pencil this out, but even then it’s still hard,” Allen said.
Marathon isn’t the only development group that’s had a proposed multi-family project hit a snag recently.
“Starts for new multifamily rental and condominium construction have dropped precipitously in 2023 from historically high levels in 2022,” said a Fannie Mae August report, citing Dodge Data & Analytics Supply Track construction pipeline data.
In addition to interest rates making the financing of new construction more expensive, the report said oversupply in the multi-family development market and a reduction in bank lending for construction could also be contributing to the slowdown.
The Bon Secours DePaul Medical Center complex was under contract between the Marathon Group and Bon Secours for an undisclosed amount in summer 2022. The complex is still owned by Bon Secours, according to a company spokesperson. The six parcel site between Granby Street and Newport Avenue on Kinglsey Lane was last valued at over $3.6 million this year, according to city documents.
The health system is “committed” to sell it to a buyer who will use it for “the highest and best use for the community and for the neighborhood,” according to emailed statements from a Bon Secours spokesperson.
The hospital, which opened in 1944, closed in 2021 after patient numbers dwindled. During the height of the pandemic, only 20 to 30 patients were seen daily, the health system previously said.
The site was the relocation of the first public hospital in Norfolk — The Hospital of St. Vincent De Paul which was established in 1856, according to city documents.
Earlier this year, the city approved a rezoning request for the proposed Marathon project following a split decision from the Planning Commission. Some residents voiced concern that not enough of the units would be affordable housing.
The redevelopment was slated to include 164 studio apartments, 170 one-bedroom apartments, 112 two-bedroom units with just over 40 three-bedroom apartments, nine townhouse apartments and a garage, according to documents presented to the City Council. Only eight units — less than 2% — were slated as affordable. Amenities like a courtyard and fitness center were also included in the plans.
Ian Munro, 757-447-4097, ian.munro@virginiamedia.com, @iamIanMunro
