McCownGordon Construction

Healthcare Panelists: Disruptors include tech, politics and consumer-centric market

Several disruptive trends could provide headwinds to the typically stable healthcare development market over the next two years, including insurance industry uncertainty, shifting political power, ongoing consumer demand for mobile connectivity, and a move to patient-centric drivers in service delivery.

Panelists offered insight into those trends and more at MetroWire Media’s 2018 Healthcare Summit on June 26 at Blue Hills Country Club. Moderated by Dan LacyMcCownGordon Construction vice president of operations, here’s a snapshot of comments:

“The landscape for healthcare in general is the most dynamic it has ever been in KC. If you look from Holmes Road along I-435 to Metcalf Avenue, you’ve had 450,000 square feet of new construction occur. So that corridor and that visibility takes on a rank-and-file in commercial real estate that we have never seen before-- to the delight of investors, to the delight of institutional owners and to the delight of real estate developers.” -Suzanne Dimmel, Senior Vice President, Cushman & Wakefield

“Getting patient care close to home is obviously a big factor, and you also have the search for getting market share, so bringing patients back to the 'mothership' hospitals-- whether it’s tertiary care or regional hospitals-- you see providers really trying to gather that market share.”    -Mitch Hoefer, Founding Principal, Hoefer Wysocki

“We are building critical care clinics that are non-traditional in a sense because they are owned by the insurance companies themselves. They are eliminating the middle man to keep costs down, and we are seeing this all over the country.” -Kevin Rogers, CEO, United Excel

“I think you will see growth in outpatient recovery and sending people home with medical equipment that is connected back to the ‘mothership,’ so patients don’t have to recover for the entire time in the hospital. That could actually reduce the numbers of beds.” -Rick Embers, Principal, Pulse Design Group

“We are looking at flexibility in how we design wireless networks because everyone wants to get on the network with their iPad or phone while sitting there and waiting, but that has to be separate and secured different than the patient network. There’s a huge push there as well as a push to get equipment connected from wireless spaces.” -Jeremy Bechtold, Vice President- Facilities, Construction & Real Estate, Saint Luke’s Health System

“When you’re talking about qualifications and procurement from a design-build standpoint, the process gets a lot more streamlined. The goal of design-build is that we’re all looking for better outcomes, so the goal is to provide that in collaborative manner with teams so they can get engaged with the users.” -Matt Miller, Project Executive, Turner Construction

“Tight construction timelines and speed-to-market pressure means contractors need to custom order product with plenty of lead time… as far as disrupters (to the industry), I think it’s going to be the consumer experience of health care, the demand for convenience and the demand for value.” -Meghan Dudek, Principal, Benson Method

Check out the Event Slideshow

Behind the Deal: ‘Speed to market’ tipped Terracon build-to-suit

Timing played a key role in Terracon’s decision to build its new $21 million corporate headquarters in Olathe rather than relocate to existing office space in the region. With 10 to 15 percent annual growth, the engineering consulting firm needed space to fit new employees that it expects to hire to accommodate burgeoning business.

John Coe of Copaken Brooks worked as Terracon’s corporate real estate advisor and says the company had a need for speed.

“We started in June of last year and did an exhaustive search of opportunities throughout the metro,” Coe said. “‘Speed to market’ would be one way to describe it.”

Terracon plans to be in its new 65,000-square foot, two-story headquarters in the first quarter of 2018, but getting to the deal's finish line took some rapid legwork on the part of the multiple parties.

The company began evaluating headquarters options in July 2016, looking at 11 existing buildings and 18 build-to-suit options in Kansas and four existing buildings and two build-to-suit options in Missouri.

By December, Terracon narrowed down its list to three existing properties-- two in Kansas and one in Missouri-- but ultimately determined its preference was to stay in Olathe, its headquarters home for more than decade. With no available existing buildings to accommodate the company’s growth, moving forward with a build-to-suit emerged as the preferred course of action.

“It was a long shot that a build-to-suit option would come through because timing was tight,” Coe said. “But VanTrust stepped up and proved they could work within that time frame.”

VanTrust Real Estate and Terracon wasted no time in requesting project incentives from the City of Olathe, which approved a 10-year, 65 percent property tax abatement, as well as industrial revenue bonds that allow for a sales tax exemption on construction-related materials.

Terracon won’t have to move far; its new headquarters will be in Corporate Ridge Office Park near Kansas Highway 10 and Ridgeview Road, just around the corner from its existing office at 18001 W. 106th.

“This investment represents the passionate commitment of our employee-owners to progress our growth," Terracon President Swaminathan Srinivasan said in a release. "Inspired by new surroundings, we will focus our future on serving clients in new, innovative ways and seeking out opportunities to make positive impacts on the communities where we live and work.”

The project’s development team includes property owner VanTrust, which will lead the design-build team, as well as McCownGordon Construction, general contractor.

Terracon provides environmental, facilities, geotechnical and materials services from more than 140 offices serving all 50 states.

Five minutes with Ramin Cherafat, McCownGordon’s “on deck” CEO

Starting in 2018, Ramin Cherafat will take over as CEO of McCownGordon Construction. Pat McCown and Brett Gordon founded the Kansas City-based construction company in 1999, and after nearly two decades the company has grown to one of the region’s most prolific players, with projected 2017 revenue of $525 million. Cherafat started his career at McCownGordon 17 years ago when he joined the company as a project manager. MetroWireMedia caught up with Cherafat at the construction company’s downtown Kansas City office to find out more about where he plans to take the company and how he plans to get there.

MWM: What is your strategic vision for McCownGordon?

Cherafat: Our vision is to continue to focus on growth and opportunity for our associates, not only in the markets we currently serve but also additional markets in the future, so we will be looking at both vertical market expansion and geographic expansion.

McCownGordon has a long history and commitment to civic involvement in the communities we serve, and that won’t change. Moving forward we’ve got an incredible leadership team that will continue that commitment, and in many respects our community engagement can increase with the broader level of leadership within the firm. 

Additionally, we will continue to focus on growing market share in our current markets as well as regional growth and expansion. With more than a half billion in revenue this year and a backlog of close to $750 million, we have built a foundation that will enable us to grown more diversely.

MWM: When did McCownGordon begin talking about a succession plan?

Cherafat: The process started about 5-7 years ago. We started to invest heavily in the next generation of leaders.  We invested in training, development and leadership planning. We worked with executive coaches to deepen our bench to best position the company for growth. The highest profile outcome of that process was our transition to being an ESOP (Employee Stock Ownership Plan) in 2015. McCownGordon is now 100 percent employee owned, and we are very proud of that. About that same time we started focusing on the succession plan for McCownGordon’s next CEO and developing our leadership team. 

Our leadership team now is comprised of several people, and a majority of the team has been here well over 10 years. We have an incredibly strong and deep bench in terms of leadership, and we have organized the company the way we think will help sustain it for generations into the future.

MWM: Where do you see the company going both short-term and long-term?

Cherafat: McCownGordon is on an incredible trajectory; we all recognize that. We’ve been blessed with a very entrepreneurial culture, and we don’t want to see that erode as we grow. Keeping our culture strong, entrepreneurial and progressive is paramount to our future success. We have the right team in place to make sure we continue on that path.

In the short term, we want to continue to grow our market share in the greater Kansas City metro area, as well as the areas that our Manhattan, Kan. office serves. We also plan to add regional offices. We opened our first regional office about three years ago, and it’s doing very well, so growing the company regionally is definitely a goal. If I had to share a long-term vision, it would be to position McCownGordon for a national expansion.

MWM: Where do you see company fitting into the construction market?

Cherafat: I see us as leaders in the markets we serve and as a firm that is focused on trusting partnerships, being easy to work with and one that sincerely cares about doing the right thing.

We are very diverse. We have five major markets, including education, corporate office, health care, civic/philanthropic and science/technology.

We are working on some really amazing projects right now: A $200 million expansion for Garmin’s world headquarters; a $300 million public/private partnership for the University of Kansas; a $40 million logistics and distribution facility in Lenexa; and Cerner’s headquarters in Kansas City. We also have active projects in South Dakota and Oklahoma. And our Veloxity division, which focuses on Kansas City-area projects under $5 million, has annual revenue of close to $50 million. Veloxity helps us serve our ongoing repeat clients and helps us build relationships with new ones.

MWM: How did the Great Recession change the construction industry, and is the industry prepared to handle another downturn?

Cherafat: When the Great Recession hit, we saw that we had a choice: Either buckle up, tighten the purse strings and wish for the best -- or you can invest and prepare to emerge from it stronger because you know it is going to end and you want to be ready when it does.  We chose the latter option and invested heavily in our team during the recession.

We initiated our strategic plan at the beginning of the recession, and we set some lofty goals that we were able to achieve.  A year and a half into the recession, we quadrupled our training and development budget. We reinvested into our people and our team and we told ourselves, “Okay, we are going invest in our team and stick to our values and then, when the market turns around, that will catapult us forward.” And in many ways, that’s what has happened.

MWM: How is your leadership style different from your predecessors? What are you building on, and what might be a bit different?

Cherafat: I like to look into the future and work with the team on where we want the company to go, always thinking about where we need to be going. My biggest strength to the company is to work with the team on formulating a vision for the future and then work to drive and implement that vision to reality. I enjoy working with teams and empowering the next generation of leadership to help the company grow.

I am a big consensus builder. I like to have everyone around the table - perhaps to a fault. I want to make sure everybody has bought into what we are trying to do. Sometimes that takes quite a bit of persuasion, but I’m okay with that as long as we have consensus.

We have talked as a team about how leadership styles change as a company changes. Styles may change but values can’t, and that’s extremely important to our leadership team.

Being an entrepreneurial start-up company and being an entrepreneurial mature company are two different things and they require different types of leadership. The more we grow, the focus of leadership has to be more on empowering others. Being able to recognize the changing demands on leadership is why it has worked so well for McCownGordon over the last 17 years. We recognize that all of us bring different skill sets to the table. As we work to take this company to the next level, we are evaluating the skill sets of everyone at the table and making sure we have a balanced team.

MWM: What do you see ahead for McCownGordon?

Cherafat: One of our major goals moving forward is that we continue to live by the same set of values that we have always lived by since our inception. We have learned that people will hire and work with the people they trust, like and that are easy to work with. At our level of competition, it’s about working as a team with clients, designers, subcontractors and project partners. It’s relationship-based, trust-based and all about delivering value through the process.

What I tell the next generation of leaders in our company is while that our job is building structures, our business is building personal relationships. The construction part of the business is not the hardest part. The hardest part-- yet most rewarding-- is building strong and trusting relationships.

MWM: What do you see ahead for the construction industry in general?

Cherafat: The construction industry will continue to face issues with labor and management shortages. The best companies will have invested heavily into their people and team to ensure associate engagement.  In today’s market, it’s the company’s responsibility to ensure the best workplace environment and opportunities for their team. We will continue to focus on this moving forward to allow us to continue to attract and retain the best and the brightest in our industry.