The local Veterans Administration clinic could be forced to pay close to four times its rent next year if its several-year-old plan to move out of its current facility at Springhill Avenue and Catherine Street is not completed by the end of the year.
The clinic currently leases about 45,000 square feet of space on two different floors at the University of South Alabama facility in Midtown where, according to USA spokesman Michael Haskins, the U.S. Department of Veterans Affairs pays $57,655 per month.
Haskins said USA discussed the clinic’s lease with realtors in August 2013, where it was agreed to extend the lease through December of this year. But USA also decided to increase the rent to $83,000 per month after Oct. 1. After Jan. 1, the rent will increase to $222,000, representing an inflation of more than 285 percent in one year. Under its own original plan, the VA would have moved out before either of those increases are realized.
VA spokeswoman Glenda Powell wrote in an email message Tuesday the agency is working on a lease extension beyond Dec. 31, 2015, the terms of which haven’t been finalized.
In addition to the veterans’ clinic, USA’s Springhill Avenue facility houses half of the continuing education program, pediatric clinics and clinical offices, Steve Simmons, USA vice president for finance and administration said.
He added that VA officials told the university of plans to move the veterans’ clinic to a West Mobile location as many as seven years ago, which led USA to consider and ultimately finalize a plan to move the remaining Springhill Avenue campus tenants to a new facility less than a mile away near the Children’s and Women’s Hospital. The new building is currently under construction and is scheduled to be completed early next year, Simmons said.
Meanwhile, the Springhill Avenue facility is losing money and with the current tenants will continue to do so to the tune of about $2 million a year, Simmons said. In order to defray some of the costs if the VA decides to stay there past Jan. 1, the university has advised the VA the increase in rent will constitute a “holdover fee,” starting next year.
“We’re supportive of the veterans, but we’re trying to make sure USA doesn’t lose money on the deal,” Simmons said. “We’ve met with the VA several times. We had to move forward with plans and that’s what we’ve done.”
There are alternatives, however, including one being pushed by local commercial real estate broker John Toomey III.
Toomey, of Stirling Properties, has proposed the VA use the old Infirmary West hospital on Knollwood Drive at Grelot Road. Toomey, who represents the property, called the hospital “move-in ready.” He said it has been closed for about five years.
“It was renovated several years ago,” Toomey said. “It’s unbelievable.”
Toomey gave a copy of the proposal to Lagniappe. The proposal would allow the VA to lease 100,000 square feet of space in one of the hospital’s two towers for 20 years at just over $1.6 million a year. The first year would be free.
By comparison, that’s about $1 million less than the VA would pay to stay on Springhill Avenue, when the holdover fee is assessed. On Knollwood Drive, the VA would get 100,000 square feet for the price of 65,000 square feet, Toomey said.
Toomey added the Knollwood hospital is blocks away from property the VA is considering to build a new facility, one planned for years but never funded. If the money came through for a new facility, Toomey said it would take about three years to construct.
“This deal is not going to happen because they don’t want it to happen,” Toomey said of the VA. “So, there’s no need for the veterans to wait for three years, there’s no need for taxpayers to pay five percent penalty for the next three years, which is absurd. There’s a hospital that’s move-in ready.
“Sites they’re looking at are blocks from this location, so it’s in the same part of town,” he added. “It’s a concrete brick building. It’s solid.”
Toomey’s proposal isn’t being considered, he said, because of federal laws that require a competing bid for the project. Powell wrote the VA initially looked at sites with existing buildings, like the Knollwood hospital, but said a “build-to-suit” option was procured because “there was not adequate competition among existing sites.”
Proposals for a new outpatient clinic were received in September of last year, Powell wrote, and a lease award should be announced this summer.
“The site and the developer will be selected concurrently at lease award,” she wrote.
Once a site is chosen, Powell wrote, the VA will begin a 26-month design and construction schedule. Activation of the new clinic would also take “several” months. Powell wrote a new clinic could be up and running in about three years.
The proposed 85,000-square-foot facility would offer primary care, mental health, audiology and speech pathology, radiology, surgical specialty clinics, women’s health, an eye clinic, pharmacy and lab, Powell wrote.
Seth Morrow, communications director for U.S. Rep. Bradley Byrne, noted the same “federal contracting requirements” as the reason the VA is remaining tight-lipped about the facility.
“We have been trying to get some information from the VA on this all week, but aren’t really getting anywhere,” he wrote in an email. “We are aware that the VA did not consider any existing facilities, but they aren’t giving us any information in terms of the deadline or penalties.”
Additionally, Toomey said he was told by VA personnel that security wasn’t adequate at the Knollwood location. Toomey said he offered to build a fence or a wall around it, but they still couldn’t reach an agreement. In meetings, he was also told the VA facility plans to use “swing space,” or a temporary working environment, until a new facility is built.
Infirmary Health President and CEO Mark Nix also wrote in an email that he supported the use of the Knollwood facility by the VA.
“We are very interested in working with the VA to bring this facility back to life,” Nix wrote. “We believe this is the most efficient and cost-effective alternative for the relocation of the VA facility in Mobile.”
Infirmary Health Systems, which leased the Knollwood hospital from USA under a 99-year agreement beginning in 2007, closed its operations there in 2013 citing health care reform and a poor economy. Subsequently, it purchased the property for $5 million.
Toomey said he’s done his part to spread the word to the VA about the facility. The proposal has even been pitched to VA Secretary Robert McDonald and both of Alabama’s senators.
“Everybody in America has seen this proposal, except for you and the citizens of Mobile,” Toomey said. “All I’m suggesting is that the VA should consider the Infirmary hospital because it’s move-in ready (and) it’s not being used. Taxpayers would be well-served and there’s no need for delays.”