VCU, VCU Health hear briefing from independent law firm about Clay St. project
June 14, 2023
(VCU Enterprise Marketing and Communications)
UPDATE: This news release was updated June 16, 2023 to reflect new information from the VCU / VCU Health Board of Directors.
At the June VCU Health System Board of Directors meeting, a motion was voted and approved to require VCU Health System senior management to adopt and implement processes for all significant financial transactions that require Board approval, to include establishment of management project teams, use of third-party advisors, and disclosure to the Board of significant legal, financial, business and reputational risks, underlying assumptions, and financial projections related to proposed transactions; and further require VCU Health System senior management to provide a report on the processes.
A joint Virginia Commonwealth University and VCU Health taskforce of board members met this week with members from both boards to receive a briefing from the independent law firm hired to review the Clay Street development project.
The planned project became infeasible due to a combination of macroeconomic factors felt across the entire real estate sector. Factors included historic levels of commercial office vacancy rates, inflation, supply chain constraints and interest rate increases.
The VCU Health board made the most fiscally prudent decision to exit the project and incur a one-time defeasance payment of $72.9 million. In addition, the VCU Health board and VCU board engaged a third-party, the Saul Ewing law firm, to evaluate its processes and identify important opportunities for improved governance and decision making based on best practices.
This one-time payment to exit the project was funded by VCU Health reserve funds. Neither university funds nor state revenues were used to make the payment, which allowed VCU Health to avoid far greater financial obligations and problems in the future.
The task force voted to release Saul Ewing’s written presentation to the public. Michael Rao, Ph.D., president of VCU and chair of the VCU Health Board of Directors, and H. Benson Dendy III, rector of the VCU Board of Visitors, issued the following joint statement:
“While well intentioned, the original project at Clay Street became impossible to build due to site conditions and macroeconomic and pandemic-related headwinds. Given the project’s dire financial future, the correct, though difficult, decision to end it was made.
Saul Ewing, a respected, independent law firm, was hired to look back at how Clay Street was developed and to make future-focused recommendations to improve internal processes and controls. Today, Saul Ewing shared its findings with the joint VCU-VCU Health taskforce.
In keeping with our commitment to transparency, we are sharing the written presentation Saul Ewing provided to the taskforce. This report, and the good discussion board members had during the meeting, will result in actionable improvements for the health system as VCU Health continues its mission to preserve and restore health for all people in Virginia and beyond through innovation in service, research and education.”
