Major building projects delayed by financial conditions

Several building projects in what industry experts have called the strongest sectors of the local construction economy - health care and education - are being put on hold for a variety of economic reasons, ranging from increased cost to decreased capital.

"It's the (developers) that have money invested in the stock market that have taken the hit locally," said DeWitt & Associates Inc. President Jerry Hackleman, who noted that most of the company's health care clients have taken the wait-and-see approach until at least the beginning of 2009. "Many of them had money invested in the stock market and other investment tools, and with everything that has happened in the last couple of months, they've drawn back and looked again at what they're proposing."

One of DeWitt's clients is St. John's Health System, which is in the midst of its $600 million, 10-year building plan. While no projects have been canceled, hospital officials say the time frame has been pushed back on some of the work due to the economy.

"We're not immune to the economic downturn," said St. John's spokeswoman Cora Scott, though she did not say which components of the plan have been delayed. "We're fortunate that we're a strong operation financially, but we're being very cautious because of these economic times."

Elsewhere in Missouri, Texas County Memorial Hospital in Houston also has been affected.

In October, the hospital's board of trustees approved an $18 million renovation to its existing facilities, pending appropriate financing. The project originally was planned to begin earlier this year, but the weakening bond market made it impossible to obtain adequate funding for the project, according to Steve Rutherford, project architect with HMN Architects in Springfield.

"The bids came in in great shape based on their budget, but when they went to the bond market, it was the day the markets went south," he said. "We're still in a situation where we're waiting for that bond market to thaw out so we can get appropriate financing for the project based on their debt capacity."

Rutherford said contractor JE Dunn Construction Co. expects construction to take 16 months once work gets under way.

In the education industry, higher construction costs are also the culprit at Drury University, where work on the new O'Reilly Family Event Center has been pushed back.

When the $12 million arena was announced in 2007, the university also announced a $6 million gift from the namesake O'Reillys, with the remaining money to be raised through donations and other fundraising efforts. Construction was slated to begin in spring and be complete by 2009.

But Edsel Matthews, Drury's vice president for athletics and special projects, said the university is now awaiting finalized construction documents, which will then be taken to several contractors to get a final construction cost.

"There's no question that prices were going up faster than we could raise money for a while, especially in late summer," Matthews said, adding that the new timeline puts a groundbreaking date in March or April.

Hackleman is not surprised that construction costs delayed the Drury project; he said many projects were thrown into limbo this summer, when petroleum and diesel prices caused costs of construction materials to skyrocket.

He added, however, that prices of many materials - particularly steel - have started to fall due to decreased oil prices and lower demand.

"That's offsetting some of the hits people are taking other places," he said, adding that economic uncertainty remains the biggest barrier to commercial projects. "We were talking to an out-of-state client the other day who was thinking about building a building in our area, and he said ... before they had to put 20 or 25 percent down, (and) now they have to put 30 percent down. People have to look at things a little differently, especially if they need to borrow significant amounts."

Drury's Matthews said that while the school has raised roughly 80 percent of the money it needs for the project, the economy has made gathering the necessary funds for O'Reilly Family Event Center tough.

"It's our first time trying to raise this much money, so I don't know how much (of an) effect it has been," Matthews said, "but there's no question that it hasn't helped any."

[[In-content Ad]]