As
reported in the St. Louis Business Journal, June 6, 2008 -
Key
employees at HBE Corp. will soon be adding a new title to their
resumes: co-owner.
Fred Kummer is spinning off the main portion of HBE's business - the
design and construction of healthcare facilities - into a new company
and launching an employee stock ownership plan. Kummer and his family
currently are the sole owners of HBE Corp., a company that Kummer
founded in 1960 and built to be one of the largest private companies in
the region.
Kummer and his wife, June, are making a $100 million capital investment
to launch the new company, to be known as HBE Design-Build. Over the
next four years, key personnel at the company will have the opportunity
to buy into the firm.
"In four years, I would expect the employees to have a very substantial
ownership stake," Kummer said, although he does not anticipate the
company being 100 percent employee-owned.
The changes are being made to provide a method for management
succession at the company, where Kummer, who is 79, is chairman,
president and chief executive. "It's just spinning this off so it will
be a sustaining enterprise for years to come."
Current managers at HBE include Chief Operating Officer Lonnie Lange,
Chief Information Officer Scott Berlinger, Vice President of Operations
Richard Lalonde and Vice President of Development Gary Maier. Kummer is
still in the process of assembling and naming additional members of his
management team for the new company. He said an operating board of
directors also will be formed to "take over a lot of the functions of
guiding this company."
One hundred to 125 employees may participate in the shareholder plan,
Kummer said. HBE has more than 400 employees companywide, including
architects, engineers and construction experts.
In addition to the shareholder plan, HBE also is launching a
profit-sharing plan for all HBE Design-Build employees, a first for the
company. Employees participating in the shareholder plan will be able
to re-invest their profit-sharing earnings back into the company to
finance their ownership stake, Kummer said.
"The earnings of the
company as it goes on will be the source of the funds that buy the
stock for the employees," Kummer said.
The formation of the new entity will be effective July 1. Following the
spinoff, the remaining HBE Corp. will consist of the Kummer family
holdings such as the Adam's Rib Ranch, a 1,600-acre resort community,
and the Adam's Mountain Country Club, both in Eagle County, Colorado.
Kummer said HBE Corp. likely will be renamed Kummer Enterprises.
Health growth - The healthcare design-build business is the main
operating unit of the current HBE Corp. The company previously operated
the Adam's Mark hotel chain, which consisted of more than 20 properties
across the country. Kummer gradually sold off all the hotel properties
over the past decade, including selling a package of eight hotels to
Morgan Stanley and Pyramid Advisors LLC of Boston for $236 million in
December 2003.
In February, the deal closed to sell the final five Adam's Mark Hotels,
including the downtown St. Louis location. San Francisco-based Chartres
Lodging Group LLC, formerly known as Oxford Lodging Management, paid
$71 million for the 910-room downtown hotel, which has been rebranded
as the Hyatt Regency St. Louis Riverfront.
In addition to operating the hotels, HBE also formerly operated a
construction unit that built financial facilities. The company exited
that market in 2007 to focus solely on design-build in the healthcare
industry.
HBE has been able to capitalize on the health growth within this
industry niche. The company, which has estimated revenue of $410
million, currently has more than $1 billion in backlog business,
according to Kummer. The company recently landed its largest contract
ever - building a $195.5 million, 621,000-square-foot replacement
hospital in Wallkill, N.Y. HBE broke ground on the project in April,
with completion expected in January 2010.
Nationwide, healthcare construction spending has been booming.
According to a report compiled by Green Bay, Wis.-based consulting firm
Wipfli, healthcare construction spending topped $40.2 billion in 2006,
a 43 percent jump since 2002.
Philip Warner, a research consultant with Raleigh, N.C.-based FMI,
expects the healthcare construction market to continue to grow by an
average of 8 percent nationwide over the next five years. He forecasts
that $49.1 billion of healthcare construction projects will be under
way by 2009.
The growth is prompted in part by the increasing demand for healthcare
services as the baby boomer generation ages and by the number of aging
hospitals that are in need of renovation, replacement or expansion,
Warner said.
"We work with construction firms across the country that have a large
component of healthcare related work, and most, if not all of them, are
doing well," Warner said. "As things (in the economy) slow down, in a
lot of areas, people can readily move into somebody else's market, but
in healthcare, because it's so complex, it doesn't happen so easily."
HBE's current portfolio includes 23 medical facilities under
construction and a record number of proposals in the pipeline,
according to Mark Ames, vice president of advertising and marketing at
the firm.
Building Business - Large HBE design-build projects currently under
way:
Orange Regional Medical Center in Wallkill, N.Y.-$195 million
Communtiy Memorial Hospital in Ventura, Calif. - $180 million
Four hospitals for McLaren Health System based in Flint, Mich. - $120
million
San Antonio Community Hospital in Upland, Calif. - $110 million
Enloe Medical Center in Chico, Calif. - $100 million
Goleta Valley Cottage Hospital in Santa Barbara, Calif. - $80 million
Montgomery General Hospital in Olney, Md. - $30 million
Southeast Georgia Health System in St. Marys, Ga. - $25 million - BY
ANGELA MUELLER
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