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Whittaker Memorial Hospital Case Study

A developer who plans to make affordable apartments inside the vacant Whittaker Memorial Hospital is preparing to apply for tax credits that would be key in making the project a reality.

If Whittaker Development II LLC gets those low-income housing credits from the state, the Newport News Redevelopment and Housing Authority would likely grant the project housing vouchers and $709,000 in HOME funds — money the U.S. Department of Housing and Urban Development gives to localities for rehab projects, among other things, according to Karen Wilds, director of the housing authority. The project also would need a sound financing package, Wilds said.

Property owners can apply for these federal income tax credits through the Virginia Housing Development Authority. The credits are supposed to encourage the development of affordable rental housing, according to VHDA's website.

Whittaker Development II purchased the hospital in October 2016 for $600,000, according to city property records. The proposed plan is to convert it into 62 one- and two-bedroom affordable apartments.

A combination of tax credits and help from the city's housing authority would provide strong financial support of a rehab that has been teased by others in the past but has previously flopped. The large 74-year-old building, which is on the National Register of Historic Places, has been vacant since about 2002.

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Developer Gerald "Junior" Burr did not say what the plan would be if they don't get the credits, except that "we just have to continue working." He also did not say how much the rehab would cost, but last fall, the cost was estimated at about $13 million.

Burr, a Richmond-area developer who has a stake in Whittaker Development II, said Thursday that architects are completing 85 percent of the design, which they need to do before VHDA considers them for tax credits. They are also working with the state's Department of Historic Resources to make sure they're following guidelines.

Burr said the group has scored itself based on VHDA guidelines, and they "feel pretty comfortable" in getting the tax credits they need.

"Several walk-throughs have taken place — I mean, several walk-throughs," Burr said. "It just takes a lot of thought and coordination."

Last year, Burr applied for a more competitive set of tax credits for the hospital project and scored last in both pools that his application was placed in. That application requested $500,000 in credits. He had a different business partner at the time who backed out of the project.

This time, the group will apply tax credits that are not as competitive, Burr said.

"I will say, it's not unusual for people to come in and apply and reconfigure and rework," said JD Bondurant, director of low-income housing tax credit programs at VHDA. "You may see that a deal is tweaked or refined next year."

Historic buildings are tough to rehab because certain elements must be protected under state historic preservation guidelines, Wilds said. And the original plans for Whittaker involved some costly renovations, Bondurant said.

Built in 1943, Whittaker Memorial Hospital was the first hospital in Newport News where black residents could be treated beyond a clinic inside a jail, according to a nomination form that later certified the building as a national historic place. It was also built and designed by black doctors and architects, the document stated.

The hospital closed in 1985, and the Salvation Army used it for a few years before it was condemned. Previous failed plans for the building included creating an alcohol abuse rehab facility, another apartment complex and, most recently, a veterans center.

The building's structure and concrete exterior also make it tough to rehab, Wilds said. Hospital rooms are hard to convert into individual apartment units, and there is more plumbing than a residential building would need, she said. There are also certain quirks, such as an incinerator that was used to burn medical waste.

Burr said he has experience in historic rehabs through his firm, Canterbury Enterprises, which Wilds said will help.

"It's not like they were buying an apartment complex that needed upgrading," Wilds said. "They're having to knock out walls that you typically don't have to do with just your traditional housing rehab. They have to reuse a building that was designed for something totally different."

Amin can be reached by phone at 757-247-4890.

CASE 2 COMMUNITY GENERAL HOSPITAL INTRODUCTION In the case of Community General Hospital, Dr. Noland Wright was appointed the latest manager of the hospital. The recently retired physician, Dr. Wright, possessed little training in business management. Community General Hospital, formerly known as the Whittaker Memorial Hospital, is a community-run hospital that serves the city of Newport News, Virginia. The hospital suffered a falling census, and a deteriorating reputation. In order to manage its losses and bad debts, Whittaker Memorial Hospital received funding from the city of New Port, but continued to decline in financial health. In 1983, as the hospital faced a $402,000 budget deficit, its suppliers started demanding cash payments for purchases. Whittaker Memorial Hospital moved to restructure itself by changing its name to Community General Hospital. The hospital opened a new facility and moved to a new location. Community General Hospital received a $15 million bond issue and $1.5 million in community pledges to continue to operate. The financing measures did little to enable the hospital to wisely grow out of its fiscal difficulties. As the hospital’s debt exceeded $20 million, Community General Hospital filed for bankruptcy after a failed attempt to sell the bank. In 1993, the hospital was granted its bankruptcy petition. In order to resolve the hospital’s fiscal issues, administrators were hired, but there tenures were short-lived, and the hospital was once again running a large fund deficit. The previous board of directors had mismanaged the image of the hospital, and allowed that to diminish its operational and financial ability. METHODOLOGY