Top owners

South central owners weigh pros, cons before deciding to build

By Candy McCampbell

An owner's decision to build is driven by a simple need for more space to produce goods or offer services. And in the process they perform market surveys, check out the competition and line up financing.

"It's pure economics," said Mike Holland, executive vice president for the American Council for Construction Education in San Antonio, Texas. "What drives them is a need for more capacity, either more manufacturing capacity or for services."

Adding capacity may mean expanding or replacing a structure that is "falling down or out of date," he said.

Some of the largest south central owners, rated by investment in construction, are currently in the food and health care industries. They follow a pattern common among most owners.

Rick Wade, senior vice president of the American Hospital Association in Washington, D. C., said a hospital's decision to build is often driven by "the age and condition of the facilities they have now." Other contributing factors include a lack of space at an existing site or relocation caused by geographic changes in a community.

advertisement

And while interest rates can help or hinder a project, hospitals also consider the unpredictability of funding in future years, since government policy and insurance rates are subject to change, he said.

Hospital building costs are rising to $14.95 billion for non-government-owned facilities in 2003, according to the U.S. Department of Commerce.

The poultry industry, a $38 billion force, has reached maturity in this country and its annual growth rate has slowed from about 5 percent to the 3 to 3.5 percent range, said Bill Roenigk, vice president of the National Poultry Council in Washington, D.C.

"The pencil has to be a little sharper" as owners consider a project these days, he said.

The industry is vertically integrated, so the corporate owner pays for structures ranging from the hatchery to the processing plant, with the exception of the poultry houses owned by the farmers who raise the birds.

So they have to consider the export market, the state of cattle and pork competition, the cost of corn and soybeans and government policy that might change it, he said.

And they must look at general economic conditions and the possibility that a downturn could send sales downward.

"Companies take a long-term view when looking at building or expanding," since the structures will be in use for 25 to 35 years, he said.

Following are profiles of some of the largest owners in the south central region, as well as an examination of the factors that have motivated them to build.

St. Vincent's Hospital, Birmingham, Ala. The not-for-profit St. Vincent's Hospital has a $53 million, 200,000-sq.-ft. South Tower under way and is expected to start construction early this year on a $30 million,160,000-sq.ft. Musculoskeletal Institute, with testing facilities, rehabilitation services, operating rooms and doctors' offices.

Those follow the One Nineteen Health and Wellness facility, a $25.8 million, 154,645-sq.-ft. suburban operation that opened last year, and the $40 million, 120,000-sq.-ft. North Tower that is already full.

The hospital also recently announced a merger with Eastern Health System that will give it additional hospitals in Huffman, Oneonta and Pell City, all in the eastern part of the state.

Nan Priest, St. Vincent's vice president of planning and marketing, said the hospital looks at demand for services, integration of new technology and consumer demand for patient-centered care when it considers a new project.

"Changing technology, consumer needs and utilization patterns - such as the move from inpatient services to more outpatient services - make it necessary for progressive healthcare organizations to invest in their facilities," Priest said.

Even the Musculoskeletal Institute plans are not yet firm because hospital officials are still trying to decide how many floors to build.

Brasfield & Gorrie LLC, a Birmingham-based general contractor, has been involved in several of the hospital's projects, including the North and South towers and One Nineteen facility.

The firm is like a member of the family, Priest said.

"Their collaborative approach and deep understanding of our health ministry have yielded exceptional results and wonderful working relationships," she added.

The hospital also picked Earl Swensson Associates of Nashville as architect for the One Nineteen and North and South tower buildings.

Tyson Foods, Springdale, Ark. One of the world's largest chicken, beef and pork processors and marketers looks carefully at several factors before waving the checkered flag for another building.

In fact, an examination of its long-range plan and another hard look at costs on a project already under way made Tyson executives decide to go ahead last year on a four-story, 174,000-sq.-ft. office tower at its headquarters complex in Springdale, Ark.

The office building is an addition to the Discovery Center, a multi-task structure that will house research, development and training offices. The two total 285,000 sq. ft. and represent an investment of $85 million to $95 million.

"After analyzing the projected cost of the Discovery Center, we determined it makes economic sense to build the additional space now rather than later," said John Tyson, Tyson Foods chairman and chief executive officer.

"Our company's long-range plan calls for the development of additional office space to bring more of our corporate staff" to the Springdale headquarters as well as provide room for growth, he added.

Crossland Construction Co. Inc., of Columbus, Kan., is general contractor for the project. The office building is scheduled for completion this fall and the Discovery Center in early 2007.

The Discovery Center will include a 63,000-sq.-ft. kitchen building, with test kitchens, retail and food service preparation kitchens and a futuristic kitchen.

It will also include a 48,000-sq.-ft. pilot plant for product development, new market-ready ideas, package design and shelf-life studies.

Tyson, which is publicly traded, said the cost of the buildings will be included in its capital expenditures budgets for "the next several years."

Sanderson Farms, Laurel, Miss. The completion of $96 million in plants in Georgia last year enabled Sanderson Farms to invest $24 million in Collins, Miss., to expand a hatchery, build a new feed mill and retrofit a processing plant.

"We had the opportunity at our operations in Mississippi to bring it to full capacity," said Pic Billingsley, director of development for the chicken producer/processor company.

The Collins operation had been processing both smaller and larger birds, but the August opening of the Moultrie, Ga., processing plant enabled the company to devote Collins to big birds.

Sanderson also built a new feed mill and a hatchery in nearby Adel, Ga.

The company gave the go-ahead to the Georgia operations because "it was an opportunity to get closer to our East Coast customers, to be able to serve them better," Billingsley said.

"The Collins (project) was an opportunity for us to upgrade and fully utilize our assets over there," he said.

For the Collins job, Sanderson brought in Todd & Sargent of Ames, Iowa, a contractor/engineer that does specialty work such as feed mills.

During one week in December, it was performing a continuous, 24-hour-a-day pour on the plant's 135-ft. feed mill towers, Billingsley said.

"We maintain a loyal list of contractors" that also includes Fountain Construction of Jackson, Miss., SpawGlass Construction of Houston, and Jones Construction of Tifton, Ga.

Sanderson executives looked at other possible opportunities as the Georgia work was nearing completion.

"Our balance sheet dictates what growth we do," Billingsley said, calling it a "conservative balance sheet."

Sanderson is a publicly-traded company and does not discuss future plans for its operations in Mississippi, Texas, Louisiana and Georgia.

"It's important to us that we manage our assets and can get to our assets quickly," Billingsley said. "That is why you see our base of operations where they are.

"It allows us to be close… to our operations."

St. Jude Children's Research Hospital, Memphis, Tenn. Radiological services - and a need for more - was behind the renowned hospital's decision to start the $114 million, 300,000-sq.-ft. Integrated Patient Care and Research Building in Memphis.

"The driving force for this expansion was the Radiological Services Department," said John Curran, director of design and construction.

Patient volume was so heavy that technicians "were doing MRI's until 10 p.m.," he said.

Things will change in March 2007 when the IPCRB opens as a new home for the Department of Radiological Sciences. It also will house radiation oncology, diagnostic imaging, in-patient beds, outpatient facilities and two floors of research laboratories, he said.

St. Jude does a lot of outpatient treatment.

"This building increases inpatient beds, solves the radiological services dilemma and gets more research labs for growth," Curran said.

When deciding what the next building will be, St. Jude officials try to determine "which department has been in the worst shape," Curran said.

Four years ago, the pathology department underwent a renovation that should serve for another 15 years.

The IPCRB answers a need for research labs for the next seven to 10 years, he said.

St. Jude is on a 66-acre campus that is bordered by Interstate 40 and three major city streets. Officials want to keep it an inter-connected campus and not move beyond its current boundaries, Curran said.

For that reason, any future buildings will be vertical rather than horizontal.

And while Curran would not say what might come next, he said the master plan calls for the IPCRB to have a second tower. Skanska Inc., the construction manager, has already built the foundation for the second tower, he said.

St. Jude, which accepts patients without regard for their ability to pay, depends on donors for 70 percent of its annual budget, Curran said.