Rochester, Minnesota's Mayo Clinic adding 11 floors to Gonda building, 7 of which will be a hotel
By Jeff Kiger | Post-Bulletin, Rochester, Minn. | September 18, 2018 1:00am
Sept. 18--Rochester's skyline is going to reach new heights.
Mayo Clinic is working with a Singapore development firm to add a seven-story hotel plus four clinical treatment floors on top of its Gonda Building in downtown Rochester.
Once completed, the project will make the now 21-floor Gonda Building into Rochester's tallest skyscraper with the hotel on top.
The proposed addition will add about 185 feet to the building to bring it to 490 feet tall with 32 stories. Broadway Plaza, at 342 feet, is the tallest for now.
"This is a strategic collaboration between the Pontiac Land Group and Mayo Clinic. It really addresses two important patient needs," said Mayo Clinic's Executive Dean of Practice Dr. C. Michel Harper Jr.
"One need is additional clinical space. We just get busier and busier ... And the other need we'll meet is hospitality, which is also a need expressed for a number of years by our patients visiting Rochester."
Early estimates are for construction to start in late 2019 or early 2020 with the goal of having the hotel and medical floors ready for use by the end of 2022.
Mayo Clinic's collaborator in the project, the Pontiac Land Group, is a firm known for its luxury properties worth an estimated $5.5 billion. It's led by the Kwee family. The Singapore hotel that hosted President Donald Trump's summit meeting with North Korean leader Kim Jong Un in June is another one of the properties owned by Pontiac Land Group.
"Our relationship with Mayo Clinic started about 12 years ago, when members of the family were patients. They experienced Rochester throughout the seasons and came to understand the peculiarities of this market," said Pontiac Land chief operating officer Philip Kwee. "We could not think of a better partner to explore this intersection between health care and hospitality."
This will be Pontiac Land Group's second project in the United States. It is also developing an 82-story residential condominium complex in New York City, adjacent to The Museum of Modern Art. Cost of the smallest one-bedroom units start at $3 million.
Lisa Clarke, the executive director of the Destination Medical Center initiative's Economic Development Agency, said her group started talking to Pontiac Land Group about two years ago. She says that no public assistance, such as tax-increment financing, will be requested to support the project.
Mayo Clinic officials say taking the unprecedented step of allowing a luxury developer to build a hotel on top of a medical complex means that it can build the needed medical floors much sooner than the clinic could have managed on its own.
Harper estimated Mayo Clinic would not have been able to add the floors to the Gonda Building for a decade and "it would probably cost us four or five times as much."
While the clinic is seeing strong financial revenue as well as booming donations, collaborating with a private developer like this allows Mayo Clinic to closely control its finances as it continues to grow.
"It's really critical that we maintain the strength of our balance sheet. Therefore that's the reason for debt financing as opposed as trying to finance these out of cash flow from operations," said Mayo Clinic's Chief Administrative Officer and Vice President Jeff Bolton.
Mayo Clinic expects to invest $190 million to build the four additional medical floors, much of which will serve as an expansion to the Mayo Clinic Cancer Center and Outpatient Procedure Center.
Those floors will generate more local jobs in the spirit of DMC, Bolton added.
The new hotel will add to the city's current tally of about 5,300 rooms for visitors, though other hotels under construction will open before it is completed.
Details about the hotel, like its brand and what its rates will be, have not yet been finalized. However, looking at Pontiac Land's other hotels that include Four Seasons, it is expected that the hotel will be luxury property.
While some consultants have said that Rochester needed a high-end hotel, developers like Javon Bea and the Bloom International Realty have said that their research did not show that the city could support a new high-end luxury hotel.
Bolton said this hotel project is about looking to the future.
"A lot of developers are concerned with the risk of the market. In many ways, we have to make a market in Rochester that doesn't entirely exist today. We feel, given the growth of the Destination practice, that now is the time to do that," he said.
Is there any concern that other developers, like Rochester's Titan Development & Investments that is building a 264-room Hilton hotel downtown, might be see this project as Mayo Clinic giving a competitor a head start?
"We have had discussions with them (other hotel developers). Mayo's objective is to grow the pie, not change some slices of the pie. Mayo's success will benefit all of the providers of these services in the community," Bolton said.
The new hotel will offer additional health-related services as well as close proximity to medical care. The latter is very important to visitors to the Med City, according the interim executive director of Rochester's convention bureau.
"The number one concern for visitors calling is finding the hotel closest to where their appointments (at Mayo Clinic) are scheduled," said Mary Gastner, of Experience Rochester.
This project is described as just the start of an ongoing collaboration between Mayo Clinic and the Pontiac Land Group. Leaders of both organizations didn't say what any future projects might look like, though they confirmed there might be others in Rochester as well as in other U.S. and international locations.