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MINNETONKA, MN-Medica officials say the group health organization recently canceled construction of a new headquarters complex in Hopkins estimated at $77 million. The cancellation is related to the recent breakup of Medica and Allina Hospitals, and subsequent cost-cutting of corporate overhead expenses, according to Larry Bussey, director of Medica’s communications.

The breakup came shortly after a lengthy audit of the company by Minnesota AttorneyGeneral Michael Hatch, who suggested a breakup. The company says it had already been looking at splitting up the two concerns prior to Hatch’s suggestion.

The company had signed a purchase agreement with Supervalu Inc., the food wholesaler and retailer based in Eden Prairie, MN, to buy a 31-acre site for a 320,000-sf, five-story office building, Bussey says. The deal had also included demolishing a 624,000-sf distribution center that Supervalu no longer uses, he adds.

Medica had planned on being the lead developer with Minneapolis-based Kraus-Anderson Inc. acting as the construction contractor and Minneapolis-based RSPArchitects providing architectural services. Medica had secured $16.3 million in tax increment financing for the project.

“Medica is exploring all it’s real estate options in the southwest suburbs to find the best options for its employees and members,” Bussey says.

Allina Hospital & Clinics will continue to occupy the Brenwood III building, several suites in Gateway South and operate their human resource service center from 10900 Red Circle Dr., all of which are in Minnetonka.

Together, the companies have cut back about $4 million in costs, and Allina plans to lay off 100 to 150 employees. Earlier, Medica had expected to grow its employee base of 900 workers by about two-thirds over the next decade.

Medica will continue to occupy the Gateway North building in Minnetonka as its headquarters building. Its lease there expires in May 2004, according to Bussey.

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