Would you rather not sink a ton of your hospital's money into real estate? Would you like somebody else to handle all the details of your construction project from beginning to end?
Help is already here. There's a new breed of construction company that will handle everything from financing to design to construction and leasing.
While MODERN HEALTHCARE's annual Design & Construction Survey hasn't tracked such firms, reports from industry sources say these companies are growing in number and revenues. MODERN HEALTHCARE plans to launch a survey in the near future to monitor this new segment of the industry.
Among the new services being offered is off-balance-sheet financing for construction projects. In these arrangements, a development company provides financing for the project, and hospitals are free to use available cash for operating purposes or equipment acquisition.
One of the companies in this new field is Terry S. Ward & Associates, Houston.
"Many hospital/healthcare organizations are turning to off-balance-sheet financing to remove real estate liabilities from their balance sheets; in essence, cleaning up their balance sheets," says Terry S. Ward, founder and president of the company. Taking this route reduces the real estate portion of a hospital's financial statement to lease payments for that year.
Two kinds of players are involved in this game: developers and program managers. A developer, sometimes called an "investment builder," will construct the facility, own the property and lease the facility to the client. The developers provide construction financing to the client.
The program manager, a veteran in this industry, sometimes known as an owner's representative, will manage the development process for a fee. The client retains ownership of the facility when the construction is completed.
Presbyterian Medical Plaza, a 70,000-square-foot medical center in Charlotte, N.C., is one example in which Cousins/Richmond, an Atlanta-based real estate investment trust, was hired to handle the funding, design and construction, leasing and real estate management.
The first phase, to be completed in June, will consist of a radiology center, a laboratory, a primary-care clinic and a multispecialty clinic that combined will use 73% of available space. The remaining space will be leased to independent physicians. The project is estimated to cost $7 million to $8 million, but the arrangement spares the hospital the need to spend that money on construction.
According to David J. Rubenstein, senior vice president of Cousins/Richmond, the hospital can concentrate on what it does best-healthcare delivery-while the developer concentrates on real estate worries.
As of last year, Cousins/Richmond completed two medical facility projects and will break ground on three more this year.
In addition to these specialized development companies, expect to see architectural and design/build firms taking a swing at this increasingly popular service. Marshall Erdman, for example, a design/build firm based in Madison, Wis., has teamed up with Ziegler Securities, which has been providing healthcare construction capital for nearly 70 years.
No specific information was available on projects under way.
"We currently have a few projects in progress, but it takes a bit longer for completion because of the money," says Dennis Lynch, director of planning at Marshall Erdman. "This is definitely going to be a (major part) of our business in years to come."