Capital Project Gold Rush: What Can We Learn From a Foundation's Giving Spree?

The explosion in regional philanthropy brings to mind visions of a hardscrabble entrepreneur somewhere in “flyover” country who amasses a small fortune—typically in some bland old-economy industry—and then becomes a major benefactor of local causes.

While this stereotype contains a lot of truth, it’s often simplistic and patronizing. Nowadays, most regional wealth is inextricably linked to the global economy, with increasingly profound philanthropic implications.

Consider the rapid evolution of the Overland Park, Kansas-based Sunderland Foundation. The foundation was established in 1945 by Lester T. Sunderland, who served as president of the Ash Grove Cement Company for 33 years. The foundation, which mainly focuses on funding construction projects, awarded the majority of grants in four broadly defined areas across the 2017 grant cycle: Higher Education ($10 million), Human Services and Arts and Culture ($7 million each), and Health Care and Hospitals ($2.9 million).

It’s pretty standard stuff, as far as regional family foundations go.

Then, last September, Ash Grove entered into a merger agreement with CRH plc, under which it would acquire Ash Grove in a transaction valuing the company at $3.5 billion. The deal read like a case study straight out of Global Economics 101: The Dublin, Ireland-based CRH plc was Ash Grove’s largest customer.

The Sunderland Foundation promptly opened the philanthropic floodgates. In January, it made a $75 million donation to build a new tower for the Children’s Mercy Research Institute in Kansas City. Local outlets took notice. The Kansas City Business Journal noted that the Ash Grove sale could mean “a huge influx of assets to the family foundation—which could mean more big charitable projects.”

On June 15th, the FTC approved the deal. Three months later, another whopper from the Sunderland Foundation: a $66 million donation earmarked for an inpatient care unit at the University of Kansas (KU) Health System. The system’s president and CEO Bob Page said Sunderland’s gift is “something you can't even grasp, because 20 years ago, we were just trying to stay open. Now, we're on the national and international map, and this will propel us into the future.”

So to summarize: The foundation awarded roughly $26.9 million in grants across its 2017 lifecycle. In the year since the announcement of its sale, it awarded $141 million to two recipients, both of which are embarking on ambitious construction projects.

The takeaways? One, funders may be regional in name, but their sources of wealth and their ambitions are far more expansive. Two, Midwest-based higher ed, human services, arts and culture, and healthcare organizations need to get acquainted with the Sunderland Foundation.

And three, as we’ll soon see, healthcare organizations looking to build new facilities are well positioned to benefit from this surging brand of philanthropy that in many ways is regional in name only.

Building Boom

Donors have been funding hospitals since the dawn of modern philanthropy, and that impulse is as strong as ever among philanthropists. Only now, as often noted, there's more money than ever sloshing around, especially in regions off the beaten path.

Throw in an aging baby boomer demographic, the growing demand for specialized care, and the community benefits of a construction project—new jobs, more businesses for surrounding establishments, etc.—and the prognosis is encouraging for regional universities with medical institutions that combine research and patient care. Donor-friendly major capital projects are often part of the mix.

Examples in 2018 alone include the Anschutz Foundation’s $120 million gift to the University of Colorado Anschutz Medical Campus, Bob and Corrine Frick’s $18 million gift to the Ohio State University Wexner Medical Center, Herbert A. Meisler’s $5 million gift to the University of South Alabama for the expansion of the school’s trauma center, Richard and Susan Rogel’s $150 million commitment to the University of Michigan Comprehensive Cancer Center, and Lester and Sue Smith’s $50 million gift to Texas Children’s Hospital to support Legacy Tower, the hospital’s new home for heart, intensive care and surgery.

Lost in this capital project gold rush, however, is the inconvenient fact that these efforts are, by definition, risky undertakings. Projects often go over budget. They blow past their targeted completion date. Planners underestimate ongoing maintenance expenses or, given the red-hot economy, overestimate the availability of qualified labor.

As a result, anecdotal evidence suggests that in certain quarters—like the performing arts and museum world—the bloom is coming off the capital project rose. Clearly, though, health-focused higher ed donors think differently. Let’s take a closer look to see why this is the case.

Benefits Outweigh Risks

Health causes have always drawn big donor support, but in a philanthropic climate increasingly focused on impact, this is even more the case. It’s easier to make a strong argument for building a new cancer ward than a new wing for European art (nothing personal, Rembrandt).

“We primarily make contributions to nonprofit construction projects where people in distress can find hope and healing,” Sunderland Foundation secretary and treasurer Charlie Sunderland said upon announcing its KU gift. “We feel very comfortable in making this grant, which will be used well to help a lot of people and improve the quality of lives for years to come.”

Charlie Sunderland served on KU’s Hospital Authority Board for many years and chairs the Quality and Safety Committee. He is also the chairman and former CEO of Ash Grove, and was named among the Kansas City Business Journal's Power 100 in 2014 and 2015.

Also consider the idea of demand. Approximately 10,000 baby boomers are reaching retirement age every day. Many will live long lives thanks to advances in modern medicine. And unlike museum visitors, all of them, at some point, will likely pass through their regional healthcare system.

Sunderland’s website acknowledged as much, subtly foreshadowing its hospital-focused giving spree by calling healthcare and hospitals “a growing area of need in many of the communities the foundation serves.”

Growing demand also brings with it the need for greater specialization and differentiation. The Frick’s gift to Ohio State University, for example, establishes the nation’s first center dedicated to treating those with heart failure and arrhythmia. When funders back state-of-the-art facilities to provide critical and specialized care off the beaten path, they are simply emulating their brethren in larger U.S. cities, albeit on a smaller scale. One reason that top metro areas have the most advanced medical centers is because philanthropists have been bankrolling such places for a long time. Now, other parts of the country are catching up—thanks to today’s regional mega-givers. The most dramatic example of this is Penny and Phil Knight’s $500 million gift to Oregon Health & Science University.

A Focus on Brick and Mortar Projects

Since its inception, the Sunderland Foundation has focused on supporting construction, renovation, and restoration projects in the Kansas City region and markets traditionally served by Ash Grove Cement, including Missouri, Kansas, Nebraska and other Midwestern and Western states. According to its website:

Our focus on funding bricks and mortar projects—including planning, design, construction, renovation, repairs and restoration—reflects our unique heritage and provides a necessary source of funding for established nonprofits that need new or improved facilities.

It’s an important mission, given that many foundations expressly don’t fund capital projects.

Sunderland’s $75 million to Children’s Mercy Kansas City will kickstart the construction of the future home of the Children’s Research Institute and accelerate the recruitment of top researchers from around the globe. The institute will eventually house nearly six times more space for pediatric research than currently exists and grow its research enterprise tenfold. It will help “establish Kansas City as a premier, global research hub,” according to Kent Sunderland

The Kansas City-based Hall Family Foundation also chipped in $75 million for the project.

“It means the world to our family to join the Hall family in supporting research at Children’s Mercy and helping to establish Kansas City as a premier, global research hub,” said Kent Sunderland, president of the Sunderland Foundation and vice chairman of Ash Grove Cement.

Meanwhile, the Sunderland gift to the University of Kansas Health System will allow its Blood and Marrow Transplant Program and Division of Hematologic Malignancies and Cellular Therapy (HMCT) to “come together for patient care and research.” The new space will “create a “holistic care experience particularly important in immunotherapy treatments” that can require significant inpatient time.

“This new dedicated space will allow us to treat more than 2,500 patients over the next 10 years in an environment that ultimately will bring our full interdisciplinary team onto the same campus, improving the patient experience and outcomes,” said Joseph McGuirk, DO, division director, HMCT.

The Sunderland gift is the largest ever received by the system and completes a $100 million fundraising campaign for the new unit, which Sunderland helped seed with a $2 million gift.