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Record Mayo Clinic DMC investment seen as other private development drops
Record Mayo Clinic DMC investment seen as other private development drops

Yahoo

time27-03-2025

  • Business
  • Yahoo

Record Mayo Clinic DMC investment seen as other private development drops

Mar. 26—ROCHESTER — Overall private investment related to the Destination Medical Center initiative bounced back in 2024, but non-Mayo Clinic development continued to decline in the DMC district for the sixth year. DMC Corp. Board Chairwoman Pamela Wheelock said she expects Mayo Clinic's investment in its planned $5 billion "Bold. Forward. Unbound. In Rochester" expansion will spur other development in the wake of economic headwinds caused by the COVID-19 pandemic and higher interest rates. "Once you actually start to see this massive, multi-billion dollar physical space start to emerge, that in and of itself (will) compel people to think about this community and the opportunities," she said of the six-year expansion project. "The savvy developer or business owner will get in before you can start to see some of that get out of the ground," she added. With work already started, Mayo Clinic is reporting its DMC-related investment in 2024 rose nearly 32%, from $134 million spent in 2023 to $176 spent last year. The expansion effort began with utility and infrastructure work, as well as the expansion of the Prospect Utility Plant on the north end of Mayo Clinic's downtown campus. "We are really ramping up with a lot of the work we have in process right now," said Doug Holtan, Mayo Clinic's chairman of the Department of Facilities and Support Services. The 2024 Mayo Clinic spending was the organization's largest reported DMC-related investment since 2013, when tracking of work related to the initiative began. Holtan also said 2024 investments included work related to the re-opening of Herman House for mental health services, added work on the Anna-Maria and Stephan Kellen Building dedicated to research and continued work on Mayo Clinic's proton beam therapy expansion project, which is slated to start seeing patients in mid-2027. It was part of an overall increase in private investment from $146.2 million spent in 2023 to $185.5 million spent this year, but non-Mayo Clinic investment dropped by 26%, from $12.5 million in 2023 to slightly less than $9.3 million in 2024. The combined private investment is part of the annual DMC report to the Minnesota Department of Employment and Economic Development, which was approved Wednesday afternoon by the state's DMC Corp. executive committee, ahead of the document's April 1 deadline. The annual report is a requirement for receiving up to $30 million in state funds each year of the 20-year DMC initiative, which can be used for public projects in the DMC district. While the Mayo Clinic investment included in the DEED report can include any development and upgrades throughout the city, the related investments by other developers and business owners must be within the district boundaries. Since 2015, $1.88 billion in the private DMC investment has been reported, with $548 million outside Mayo Clinic. Work has ranged from restaurant upgrades to the creation of new hotels and apartment buildings, but DMC Economic Development Agency Executive Director Patrick Seeb said the decline following a $135 million peak in 2018 isn't surprising. He said development cycles that see spikes similar to the 2018 investment, followed by $131 million in 2019, often see an "absorption phase," when developers will determine what is needed and whether a particular market is saturated. Citing 14 developers in discussions with local officials to build apartments, hotels and life-science facilities in the DMC district, he said he anticipates future investment will increase. "I think we have every reason to believe when markets stabilize, when interest rates stabilize, there is a lot of pent up demand and eyes are on Rochester," he said. The private spending reported in 2024 points to some anticipated development, with $836,000 of the $9.3 million spent used to clear sites for future development. It included $606,000 tied to demolition of the former Kmart building and $180,000 to demolish homes and other buildings on the block bounded by Sixth and Fifth avenues and Third and Second streets in northwest Rochester. Other non-Mayo Clinic development was focused on business and housing expansion in and surrounding the downtown core. The largest 2024 project reported was $1.9 million spent on renovations leading to the June opening of Ruth's Chris Steak House in the Kahler Grand Hotel, 20 Second Ave. SW. In a close second was $1.8 million reportedly invested in remodeling Residence @ Discovery Square, 511 Third Ave SW, to add 20 first-floor apartments. While development declined in the DMC district, Rochester Deputy City Administrator Cindy Steinhauser said the city has seen its two highest years of citywide commercial investment in 2023 and 2024. "I think that is a direct result of the kind of change that is happening and the work in the DMC district," she said. As growth is seen outside the district, Seeb also predicted private investment in the upcoming years will eclipse reports seen in the first 10 years of the DMC initiative, largely fueled by Mayo Clinic's expansion. He presented a graph that pointed to the potential for more than $400 million being spent this year, with annual increase leading to a nearly $1 billion investment in 2029. While the numbers aren't definite, he said they are estimates based on plans and discussions currently underway. While more growth is expected in the next five years, Steinhauser said the 2024 report to DEED offers a positive reflection on the DMC initiative as economic winds shift. "It's been a good year and a healthy year, in spite of some of the private-sector challenges out there in relation to interest rates and other issues," she said. The continued release in state funds is also tied to reported city support for the initiative, and the Rochester City Council recently confirmed the city contributed nearly $5.8 million in support last year. It brings the total city contribution to $73 million of its expected $128 million 20-year contribution, as the initiative hits the halfway point.

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