Mayo Clinic is holding off on construction of a luxury hotel and additional clinical space on top of its iconic Gonda Building due to the COVID-19 pandemic.
Mayo has been planning to add 11 stories to the downtown building at the heart of its Rochester, Minn., headquarters. The project was first announced in 2018 as a partnership with the Singapore-based real estate developer Pontiac Land Group.
Mayo said in a statement Tuesday the project is paused indefinitely and that the health system will continue to seek partners to expand the Gonda Building or other viable alternatives.
“Mayo Clinic remains fully committed to developing and implementing plans that support the facility needs of patients for years to come, including facility expansion opportunities with Pontiac Land Group and other developers,” the health system said.
The Gonda Building houses doctors’ offices and examination rooms, as well as some testing areas. It’s connected via skyway and subway to Mayo’s Methodist Hospital.
Mayo initially planned to spend $190 million to add four floors to the building that would become 200,000 square feet of clinical space. The health system planned to enter a joint venture with Pontiac for ownership of the seven-story hotel.
Preliminary plans called for construction to begin by the end of 2019 or early 2020, with completion by the end of 2022.
Mayo has been aggressively cutting costs during the pandemic, including salary reductions from consulting, executive and administrative staff, suspending retirement plan contributions and temporary workforce reductions. The system posted a strong, 4.8% operating margin in the quarter ended June 30, generating $154 million in operating income on $3.2 billion in revenue in the quarter. While lower than its 9% margin in the prior-year period, that’s still much higher than many of its not-for-profit peers.