The Making of a Med-Tropolis

Memorial Hermann Building More Than $1 Billion in New Projects

Memorial Hermann is utilizing a variety of financing mechanisms to build dozens of new structures --including the largest commercial project currently under way in Houston--at the same time.

By Rob Patterson

Houston's Memorial Hermann Healthcare System, the largest not-for-profit health-care provider in the state, is actively building to meet the coming needs of its community.

Memorial Hermann currently has more than $1 billion in new construction and rehabilitation jobs in various stages and more than a dozen major capital projects under way at various locations in and around Houston. "We are preparing for what we believe to be a tremendous expansion in demand for health-care services," said Marshall Heins, vice president of construction, real estate and support services for Memorial Hermann. "We have a project of major scope in progress at every single one of the nine campuses that we own and operate."

The projects include the nearly $200 million Memorial Hermann Medical Plaza in the Texas Medical Center built by Houston-based D.E. Harvey Builders and an $85 million expansion and renovation of its Southeast Hospital performed by Manhattan Construction Co. The Houston office of Manhattan is also handling a $90 million flood-proofing project at the Medical Center for Memorial Hermann.

Memorial Hermann is constructing two new hospital campuses to replace existing facilities in Katy-a $98 million job representing a partnership between the Southwest district office of Greeley, Colo.-based Hensel Phelps and SpawMaxwell Co. of Houston-and Sugar Land-an $80 million project recently awarded to W.S. Bellows Construction Corp. of Houston. Both will triple capacity at their locations.

The hospital has partnered with Trammell Crow Healthcare Services to develop, construct, own and operate professional office buildings at the Katy and Sugarland locations and a $65 million heart and vascular institute on its Southwest campus. The project is scheduled for completion in summer 2006.

Tellepsen Builders LP of Houston is finishing out three floors of a building it constructed at the main Memorial Hermann campus, another heart institute with a $40 million price tag. And the health care giant is developing three additional professional office buildings to the tune of about $60 million at various Houston sites. The buildings will also house Memorial Hermann ambulatory care centers costing $25 million to $35 million in addition to the building cost.

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Financing tools bring projects online

To facilitate such extensive construction, Memorial Hermann is utilizing a variety of financing mechanisms. "It's a new era, I believe, for not-for-profit systems to go out and seek for-profit partners to help us develop so we can devote our capital to our core business, which is providing health care to the community," Heins said.

The Medical Plaza building, Houston's largest commercial construction project currently under way and the biggest office building in the Texas Medical Center, is being developed in partnership with Mischer Healthcare Services. "We own a little more than 45 percent," Heins said. "We contributed the land and a couple million dollars in capital, then Mischer went out through a private placement offering and raised the additional equity."

The 31-story structure will boast 500,000 sq. ft. of clinical, office and commercial space and a 1-million-sq.-ft. parking garage with 2,400 spaces, which will provide a significant income stream. The hospital's ambulatory care clinic will occupy two floors and cost $45 million of the total project tab. Medical office space will occupy the floors above, and retail and restaurant space will be on the lobby and concourse levels. Parking will occupy two underground levels and nine floors above ground.

Memorial Hermann will utilize another unique financing tool for its five professional office buildings, offering tenants the opportunity to invest in the projects. "It's an effort to help them have some return on their investment to help offset occupancy costs and hopefully have a good return once the building has appreciated," Heins said.

The buildings will all be based on a prototypical design with 125,000 to 135,000 sq. ft. of space. Doctors will also be offered investments in the buildings and the surgery centers, which the hospital and United Surgical Partners of Dallas are constructing in a partnership.

All told, Memorial Hermann currently has 412 construction projects on the books valued at $1 million or more.

New plaza takes shape

Work began on the Medical Plaza in October with a soldier-pile-retention system on the nearly 3-acre site. Drilled piers up to 110 ft. deep will support the reinforced concrete structure, the tallest in the Medical Center.

"Everything about it is tough," Kelly Hall, senior project manager for D.E. Harvey, said about building on the constricted site. In order to pour 85,000 cu. yds. of concrete with 10,000 tons of reinforcing steel, deliveries have to be strategically scheduled through some of the most heavily trafficked streets in Houston.

The structure will be clad with an aluminum-framed, unitized curtain-wall system of about 4,000 panels.

Although recent jumps in the price of steel price haven't affected the project, getting concrete aggregate from the Hill Country has. "The railroads did some reorganization and decided that gravel was not at the top of their priority list," Hall said. "So there's a huge premium because we will have to truck it in here."

Three tower cranes will lift 4,000 tons of cooling equipment for the mechanical system on level 12. In order to install a 60-ft. lantern feature atop the building, the crew must hang steel on a slant cantilevered out 500 ft. in the air, Hall said.

An existing skybridge will connect the building to Memorial Hermann Hospital and Children's Hospital as well as the University of Texas Medical School at Houston. "We have to build a new abutment on the project site to support the skybridge, resupport it and then tear down the existing abutment-and keep it in operation," Hall said.

D.E. Harvey is performing the job at a $155 million building cost on a construction-manager-at-risk contract. The structure is slated to top out in April 2006 and be completed the following November.

Existing facilities expand

The expansion and renovation of the Memorial Hermann Southeast Hospital that began in November 2003 is equally daunting. Four structural steel sections totaling 170,000 sq. ft. are being added by Manhattan on all sides of the original 250,000-sq.-ft., reinforced-concrete structure as hospital operations continue.

"We had to poke steel through existing roofs where there were patients," said Manhattan project manager Ron Garrett. "We were hanging steel adjacent to women giving birth. On a job like this you can't do enough planning, investigation and research."

After initial work to add parking and rehabilitate bridges crossing a drainage canal, a new central plant was built as a separate 13,500-sq.-ft. structure that relocates all essential mechanical services and medical gas supply well above flood level.

Routing new conduits through a pre-existing tunnel required rigorous care. "We're bringing in huge new piping and it's very tight," Garrett said. "It's quite a challenge to get in there and make the tie-ins, and do it so we don't disrupt and hurt anything."

Three levels totaling 27,000 sq. ft. have been added to the east side of the hospital to expand its intensive care unit and labor and nursery facilities. On the building's northwest side, 115,000 sq. ft. have been constructed on four levels, partly atop the existing hospital and partly as a new wing built above grade. It will include a new emergency room, diagnostic and testing areas, expanded surgery and nursery facilities and a mechanical penthouse.

A 13,800-sq.-ft. shell level is currently being added atop the third floor of a patient tower on the southeast side of the hospital for future expansion. Completion is set for the end of this month. Manhattan will continue remodeling spaces within the existing hospital through November.