(Editor’s note: This post was updated at noon on Mon., Nov. 18.
Due to editor error, the original version listed an incorrect location for the Courier-Journal building.
Also, several sources have sent Insider Louisville copies of the latest Louisville Arena Authority Form 990, which was filed in September. Due to reporter area, MBB stated the form was not publicly available.
Finally, the plan to go to an abbreviated Monday Business Briefing format got shot down by emails from multiple readers, all unanimous in recommending IL keep the long-form approach. Thanks for the input.)
Welcome to the November 18 Monday Business Briefing.
This is your private business intelligence briefing, with Insider Louisville staff and contributors vetting tips collected during the past few days, hours and minutes before we post at 7 a.m.
As we prepare for our Insider’s Meetup this afternoon at Vincenzo’s with Oohology digital marketing entrepreneur Mark Palmer, we’ll have multiple topics for discussion including all the downtown projects.
Tag this the “where do we start?” edition of Monday Business Briefing.
We could start with the KFC Yum! Center bond downgrade mess. We could start with the GLI financial mess.
But at MBB, we’re prone to being bullish about Louisville and the region as a whole. So let’s start with …..
• a development so under-the-radar we made sources nervous just calling and texting them about it.
But on Thursday, One Southern Indiana officials are going to have what we’re hearing will be an announcement of multiple new tenants at a new industrial park adjacent to River Ridge Commerce Center outside Jeffersonville.
We worked all our One SI sources past and present, and a fair number confirmed the coming announcement. But we got too many names of companies we never heard of, and no double-confirmations. So we’re waiting ….
Sources say the smart money is on America Place developer Jim Karp announcing multiple tenants at the $30 million complex, which will have 700,000 square feet of Class A industrial space when it’s completed next year or in 2015. Our sources say one of three planned buildings is nearly complete. (In Louisville, Karp and the Bleiden family own the Kaden Tower, Holiday Manor Shopping Center and other holdings including RXCrossroads.)
A major tenant at America Place would accelerate momentum to industrial parks in Southern Indiana. As one of our sources put it, “The public doesn’t understand how that (East End) bridge is going to shift the center of business gravity in the region.”
Amazon just invested $150 million to build a 1 million-square-foot fulfillment center at River Ridge, which opened last February. That said, Shepherdsville still has direct access to the UPS WorldPort air-freight hub at Standiford Field, and access to UPS is what this is all about.
• Speaking of balance of power, the Louisville Arena Authority members have asserted in monthly meetings for two years that finances are “glowing” as they scrambled in private to figure out not to default on the $248 million KFC Yum! Center.
And each year, the big New York debt rating agencies shatter the public illusion with regular downgrades of the debt.
The situation got so through-the-looking glass distorted that Arena Authority member Alice Houston chastised Chairman Larry Hayes for allowing then-Courier-Journal reporter Marcus Green to post the annoyingly accurate June headline, “Arena Authority financials show reliance on city money.” Which of course they do, for $10 million per year for the annual debt payments, which currently total $22 million, but will begin rising sharply in 2018 to a peak of $37 million in 2029.
As every media outlet in town reported Friday, Moody’s Investors Services downgraded the arena debt for the second time in 18 months citing the instability of arena finances, including the tax increment financing district that was supposed to contribute the bulk of the debt service revenue.
The Moody’s downgrade deeper into a non-investment grade, or “junk,” rating is worrying.
There are so many variables we’ll have a complete post on where the arena finances stand. One bizarre aspect is the Louisville Metro Council voting to cut down the tax increment financing district around the arena to two square miles from six square miles. Of course, the Metro Council can’t actually do that. The Kentucky Cabinet for Economic Development, which can, never did.
We got this Friday afternoon from Bradley Thomas at the econ-dev cabinet:
We have been in touch with the Arena Authority about the changes but are not yet sure when the amendment will be on the agenda for KEDFA.
Another major issue is the $1.4 million the Kentucky State Fair Board billed the arena authority back in May, an obligation to cover lost business at the Kentucky Fair and Exposition Center, a debt arena board members assure us doesn’t exist.
But we checked with State Sen. Chris McDaniel, a State Fair Board member, who confirmed it does. Its existence is important, because had the arena authority actually paid it this year, they would have had to dip into the arena reserve. Which, from the rating agencies’ point of view, is a red flag no-no.
On Dec. 1, Standard & Poor will release their rating of the debt. We’ve been told by several sources that Standard & Poor analysts received financial documents submitted by third parties.
• News also broke Friday about Greater Louisville Inc. losing about $1 million for 2012 out of a total budget of about $8 million. The news came five days after a GLI powwow that included new GLI CEO Craig Richard and Debbie Scoppechio, Creative Alliance chairwoman/CEO and GLI board chairwoman, last Monday at Vincenzo’s. This didn’t come from a source. The solemn group walked through our Insiders Meetup to their table. We resisted the temptation for an ambush interview, but an insider told us later, “Things didn’t go well.” We don’t know what that means, but insiders tell us it has been a while since top GLI executives have been out fundraising.
Just after that meeting, we found out about one more exit from GLI. Kelly Armstrong left earlier this month for a new job after two years as economic development director, Lifelong Wellness & Aging Care. The question is, will Armstrong be replaced? By our count, GLI’s once formidable economic-development office is down to three people, maybe two. At least seven top executives have left since October, including Tracee Troutt, Chief Administrative Officer, Carmen Hickerson, Vice President Corporate Communications and Public Affairs; Mark Kline, Chief Financial Officer; and Kathy Zandona, Vice President Education.
• Things are tough all over in the health care sector. This week, Norton Healthcare executives sent letters notifying their nursing staff the late-night pay differential is going away. Our sources quoted the letter as saying it’s necessary to cut late-shift pay “in order to prevent layoffs.” Norton execs are blaming it on Obamacare. But our sources say it’s part of a transition to an Accountable Care Organization, including a new electronic records system that will improve efficiencies.
We checked Norton’s Q3 financials, which state that for the first nine months of 2013, electronic record system implementation cost Norton $27.1 million on top of $36.3 million spent in 2012.
The Norton system generated $28 million in net income for the nine months ending September 30. Of that, 86 percent, or $24 million, came from earnings on investments. The operating margin is only $4 million, extraordinarily thin for a system that reported $1.25 billion in revenue.
• We’ve tried to talk to the people creating the new GraleHouse bed-and-breakfast for more than six months, but they’ve never returned our calls/emails. It’s the same couple — Lori Beck and Tyler Trotter — who own the Louisville Beer Store in NuLu and operate the Holy Grale at 1034 Bardstown Rd. in the Highlands.
In fact, the GraleHouse backs up to the rear Holy Grale beer garden, forming a “you never have to go home” drink and sleep complex for beer lovers.
So, we read with some consternation in New York magazine all the details about what sounds like a very cool project.
From the New York mag story:
This is Drink up the décor at GraleHaus (1034 Bardstown Rd., 502-459-9939; from $125), opening in December behind the courtyard of beloved beer bar (and repurposed church) Holy Grale. Occupying the upper floors of a century-old home, Louisville’s first design-focused bed and breakfast features three rooms furnished with a mix of new and old items, many from the eclectic shop SCOUT, and two rooms come with claw-foot tubs from the British bath company Victoria + Albert. A handpicked selection of beers will be available for in-room purchase, while the first floor will house a public café, overseen by Holy Grale’s much-lauded chef.
• Insiders are telling us Humana has closed its Innovation Center after three years. Many of Louisville’s digital entrepreneurs passed through there, working on contract.
The 10th floor center was created to accelerate Human’s move into digital technology as it features offerings the company has created to help its members understand how to live healthy lifestyles. They included creating video games to encourage insurees to get more physically active, and an Apple iPhone application that tracks the number of steps users walk in a day.
• Former Courier-Journal circulation director Mike Huot’s suit against CJ parent, McLean, Va.-based Gannett Company Inc., is scheduled to go to trial tomorrow, Nov. 19. Huot was laid off in 2011 amid Gannett’s multiple draw-downs and restructurings. His contention is, he was let go because of his age at the time, 61, and $300,000 salary (with bonuses), replaced with a guy 11 years younger, and less well-paid.
Our legal insiders say this won’t go to trial. (We tried to confirm Friday that it has been settled, but couldn’t get access to the documents, which were in Jefferson Circuit Court Judge Fred Cowan’s office.)
Here’s why it won’t go to trial — Gannett would be required to put into evidence a lot of sensitive and proprietary internal documents. Gannett Blog, run by former CJ business reporter Jim Hopkins, has done a yeoman’s job in staying on top of this suit.
From Hopkins’ in-depth reporting:
(Hout) found a witness who says his dismissal followed deliberations dating back several years about jettisoning “the old guard.” The witness, Jerry Haywood, a former Gannett finance executive, attributed that phrase to Randi Austin, now a regional human resources executive in the U.S. community newspaper division, according to Huot’s court filing.
“There were discussions as early as 2006 regarding the termination of members of the ‘old guard’ and specifically Mike Huot,” the filing says, citing an affidavit signed by Haywood. “Randi Austin stated that Gannett intended to ‘get rid of the old guard’ and that she believed Gannett would terminate Mike Huot’s employment.”
Huge layoffs across Gannett started in 2006. There are very few 50-year-olds left at Sixth and Broadway as the company cut staff to offset declining print advertising sales. Company-wide, Gannett employment plunged to under 31,000 people last year from more than 50,000 in 2006.
We can guarantee you won’t see this story on A1 of the CJ.
Actual Monday Business Briefing briefs:
• We’re hearing about plans for a $2 million mountain bike complex as part of the Parklands of Floyds Fork.
• Locust Grove officials are notifying their neighbors about their “vision” and “next big push,” which we interpret as a possible expansion. The historic home, which dates back to about 1814, includes 55 acres, the last and largest parcels of undeveloped land in the very expensive Blankenbaker Lane area between Brownsboro Road and River Road.
• Jaust Consulting Partners, the San Jose-based IT, consumer relationship manager and biz intel company, is expanding its Louisville presence.
• There are some weeks we’re sitting on more secrets than we’re reporting. Sometimes we get scooped. Most of the time we don’t. Just so you know, MBB staffers are working the streets, major future posts include details about a Louisville-grown company’s new HQ in Old Louisville, a potentially Urban Outfitter-exciting project coming to Bardstown Road and a new complex with a restaurant incubator, Louisville’s first.