02/27/09: “A Shot in the Arm,” Virginia Business

A Shot in the Arm


Two new acute-care hospitals could offer the Fredericksburg area some immunity to the ills of an ailing economy.

North of Fredericksburg, the 100-bed Stafford Hospital Center opened last month in Stafford County. South of town, the 126-bed Spotsylvania Regional Center is under construction in Spotsylvania County, with anticipated opening in spring 2010.

Combined with the existing 412-bed Mary Washington Hospital in Fredericksburg, the region will have three hospitals along a roughly 20-mile stretch of Interstate 95, an indication of the increasing prominence of health care in the local economy.

Laurens Sartoris, president of the Virginia Hospital and Healthcare Association, says the state’s decision to allow two new hospitals in the region underscores how much the area has changed in the generation since the current Mary Washington facility was built. “It’s just a testament to the growth in that area,” he says.

For years, a flurry of housing and retail activity, fueled by Fredericksburg’s proximity to Washington, has placed the region among the fastest growing in the nation. Although the housing market is down (foreclosures and sharply discounted “short” sales rose nearly 600 percent last year) and retail is sluggish, the regional economy still has several stable pillars to lean on, including the hospitals, the area’s two colleges, a growing tourism industry and a number of military connections. None of those are entirely recession-proof, but together they provide some insulation against the worst economic chills.

Hospitals to employ 750 workers

The new hospitals are leading the way, each creating its own micro-economy. Stafford Hospital Center will have 350 employees, while Spotsylvania Regional Center will have 400.

Medical offices, restaurants and hotels are planned to support staff and visitors at the new facilities. For example, the $175 million Spotsylvania project includes plans for one or two medical office buildings for physicians joining the hospital’s staff.  The region has a lot to offer health-care professionals who want to relocate, says Mark Foust, an HCA spokesman. “Whenever you have a brand-new hospital with advanced technology, that’s a big drawing card,” he says.

The hospital is a draw for developers, too. The Fredericksburg-based Silver Cos. is creating Cosner East, a mixed-use project adjacent to the Spotsylvania medical campus. It will include medical office buildings, a grocery store, pharmacies and restaurants. “The dynamic of that project is interesting because there is so much retail there already,” says Jon Riley, Silver’s project manager, explaining that Cosner’s Corner, with 1.2 million square feet of retail, is just on the other side of I-95.

The Virginia Department of Transportation has approved a permit for a bridge over the interstate, connecting Cosner’s Corner to the 1.5 million-square-foot Cosner East and the hospital. (Silver also is the developer of the enormous Celebrate Virginia project — a 2,400-acre area that includes the Central Park shopping center, hotels, a golf course, active adult residences, a corporate campus and the site of the planned Kalahari Resort indoor water park.)

The Spotsylvania hospital will be easily accessible from the Lee Hill campus of Germanna Community College, a potential source for nurses. In February, HCA donated $50,000 to the college to fund nursing faculty salaries.

University developing property

Another development in the area is being spearheaded by an unusual source — the University of Mary Washington Foundation. The foundation purchased a 21‑acre shopping center across Route 1 from the main college campus in Fredericksburg, adjacent to Mary Washington Hospital. The property will be redeveloped as Eagle Village, a mixed-use project featuring premium student apartments, retail, a transportation center, office space and a 500-car parking garage.

“It’s an entrepreneurial and aggressive project for a foundation, especially a fairly small foundation,” says Jeff Rountree, the foundation’s CEO and president of Eagle Property Holding LLC, the real estate development company formed to handle the project. The $115 million project’s first phase has begun with construction of an apartment complex and the pedestrian bridge over Route 1. That phase is expected to be completed in summer 2010. The foundation made its first foray into real estate development in 2001 when it purchased a 350-unit apartment complex near the campus for $15 million.

“As a private foundation with a good endowment, we have access to the capital market that much of the public doesn’t have. We made this purchase at about the worst time in the credit market,” Rountree says. But hard times also mean labor is plentiful. Contractors are aggressively bidding for the work. “This project may be helping to keep some businesses in business. If the economy bounces back around the time that we come online, [next summer for the first phase] our timing might look brilliant in the end,” he says.

Rountree says it’s not entirely a coincidence that much of the development in the Fredericksburg area is being led by health-care and educational institutions. “We see ourselves as being the economic engine of a place in a very critical time.” The foundation supports the university through the real estate investments, but the community benefits, too, from retail and service businesses, Rountree says. “The university had a specific need for premium university housing,” so the first phase includes the apartment-style housing with 624 beds. But the mixed-use project aligns with the city’s JumpStart redevelopment and urban revitalization plan. Rountree says the foundation plans to make some announcements about anchor businesses soon for Eagle Village.

Wegmans store planned

Just a few miles away, the Celebrate Virginia project will get a boost when a 150,000-square-foot Wegmans grocery store opens in June. The privately held grocery chain based in Rochester, N.Y., expands at a conservative pace of two or three stores per year. The Fredericksburg store is the fifth in Virginia since the company entered the state in 2004; a sixth is under construction in Leesburg. The company has opened an employment office and is taking applications for the 550 to 600 full- and part-time employees it needs.

“We spend a lot of time designing each store and hiring and training staff,” says Jo Natale, director of media relations at Wegmans. “We look for sites that bring together a lot of important elements: densely populated area with a regional draw, a place that is accessible and large enough to accommodate our stores and parking — minimally 15 to 20 acres. Natale says, “We’re pleased with the performance in all our Virginia stores. We do our homework before we commit, and we’re very hopeful for the Fredericksburg store.”

Meanwhile another grocery chain, North Carolina-based Harris Teeter, announced in January that it plans to build a distribution center in King George County, on the eastern part of the region. The $101 million facility would bring about 300 jobs to the area. Harris Teeter operates stores in eight mid-Atlantic states.

But not all area development projects are progressing as planned. The credit crunch may delay Kalahari Resorts’ plans for its $250 million indoor water park and hotel. Company President Todd Nelson told reporters late last year that finding financing had proved to be a challenge. Nonetheless, he says, the Wisconsin-based company remains committed to the project. Kalahari has filed a development plan with the city but says it may miss its original December 2010 opening date. Kalahari now operates two resorts, in Ohio and Wisconsin, which each attract about 1 million visitors a year. A 2007 study by Strategic Advisory Group anticipates the Fredericksburg resort will have an economic impact of about $122.7 million on the region.

Diversification of the economy has been an important goal for the Fredericksburg area, which has been heavily reliant on retail for jobs and tax revenue. When retail sales drop, “with nothing but consumer spending to drive the economy,” recovery in retail-dominated regions is slower, says Stephen Fuller, director of the Center for Regional Analysis at George Mason University.

Nonetheless, the good news for outlying suburbs like the Fredericksburg area is that Northern Virginia’s job market is expected to grow this year. Fuller predicts a net increase of about 12,000 jobs in 2009, mostly connected to government spending. He also thinks that, led by the business and professional services industries, Northern Virginia job growth will continue to rise, adding 126,000 positions by 2013. The economic effects will ripple out. It’ll be 2010 “before the Fredericksburg region feels warm again. The chill will release its grip slowly … 2010 will be a slow year, and 2011 will be a good year,” Fuller says.

Until then, the new hospitals offer the best prescription.

Stafford Hospital Center

Location: A 72-acre campus at the corner of state Route 630 (Courthouse Road) and U.S.  1 north of Fredericksburg in Stafford County.
Size: 100 beds
Employees: 350
Opening: Feb. 27
Ownership: The hospital is owned by Fredericksburg-based MediCorp Health System, a nonprofit network of 28 health-care and wellness facilities. MediCorp is the parent company of Mary Washington Hospital.

Spotsylvania Regional Medical Center

Location: A 73-acre site southeast of the intersection of Interstate 95 and U.S. 17, south of Fredericksburg near Massaponax.
Size: 126 beds
Employees: 400
Opening: May or June 2010
Ownership: The facility will be the 13th hospital in Virginia owned by HCA Inc. The publicly traded company based in Nashville, Tenn., has 170 hospitals.

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Published: February 27, 2009

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