Welcome to the August 19 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 7:30 a.m.
There’s so much to cover, we looked back over the last six months and realized the health care world has slipped off our radar a bit.
Wonder what ever happened with that hugely controversial merger that involved Denver-based Catholic Health Initiatives, Jewish Hospital & St. Mary HealthCare and University of Louisville Hospital/University Medical Center?
• The big story this week is that KentuckyOne Health, as have so many health care companies before it, appears to be in the process of being brought low by business in Kentucky. KentuckyOne Health lost $135 million during the fiscal year just ended June 30. Executives at KentuckyOne’s parent CHI fired the KentuckyOne CFO last week after only seven months on the job. Makes sense doesn’t it? Lose $135 million, mostly based on decisions coming from the corporate office in Denver, then fire the guy who’s counting the beans. The rumor going around is that losses are accelerating, not declining. July losses might be more than $20 million alone, according to insiders.
We went through CHI’s 45-plus page quarterly disclosure, which you can see here, but found no mention of KentuckyOne losses broken out. (Warning: It’s a .pdf file.) What we did find: 2012/2013 is a time of shrinking margins for the non-profit, the third-largest faith-based health care system in the United States. But the earnings report notes that CHI is making a number of huge commitments, including the acquisition of St. Luke’s Health System in Texas effective June 1.
As part of the deal, CHI will contribute $1 billion in cash and debt over seven years to a foundation focused on improving health care in the area. CHI did not assume responsibility for St. Luke’s debt as it did in Louisville with Jewish Hospital.
In Kentucky, CHI agreed to a joint operating agreement with Jewish Hospital & St. Mary’s HealthCare and University Medical Center in which CHI is committed to injecting $173 million over five years, as well as loaning UMC $40 million to pay down debt.
Net revenue rose 10 percent to $8.3 billion for the nine months ended March 31 from $7.6 billion for the same period last year.
Most data and ratios are similar between 2012 and 2013 including days of cash on hand and ratio of debt to capitalization. (See the chart above.) But the operating margin decreased to .5 percent for the year ended March 31 compared to 3.6 percent from the same period last year.
Here’s the bottom line: CHI absorbed Jewish and University Hospital in an extremely controversial merger knowing both were bleeding money due to all sorts of problems ranging from indigent care to an over-reliance on coronary procedures. It was a do-or-die deal for both Jewish Hospital and for U of L. Are CHI executives turning things around? We can’t say. We spoke briefly with CHI spokespeople, including Barbara Mackovic, who promised a response.
• Back in April, we looked at all the properties downtown near KFC Yum! Center that remain dead or underutilized two years after the opening the downtown arena. One of the largest and most strategic is the complex of buildings between Second and First streets and Liberty three blocks directly south of the arena that used to be the Coyote’s/City Block entertainment district, which got crushed by Fourth Street Live. Finally, there seems to be some movement. This week, Kennie Combs and Patricia Combs bought the 12,000-square-foot building on the east side of the complex at Second and Jefferson from the Fischer Family. The Combses, who own the adjoining property at First and Liberty, which is a Bader’s gas station/convenience mart, paid $1.4 million for the .4 acre property, according to Jefferson County Property Valuation Administrator records.
Just what the couple intends to do with the property is unclear. Painters at the site last week said there are no immediate plans for the property, adding they’d been hired to make it less of an eyesore. Russell Spencer at Walter Wagner Jr. Co. Realtors made the sale.
• The sale of at least a section of that dead block brings us indirectly to another strategic downtown parcel. 21C Museum Hotels partners, including Steve Wilson and Laura Lee Brown, are not exactly spring chickens, but appear to be in the prime of their business careers, opening 21c units in Cincinnati and Bentonville, Ark. Now, they have another wave of museum hotels opening including Lexington, Ky., and more on the drawing board including Kansas City, Mo. and Raleigh, N.C. In fact, 21c is advertising at this very moment for a Lexington director of sales:
You are driven. You have a sense of style and service in an upscale environment. You are self-reliant and confident. As a hotel sales leader you know how to make rain. You are accustomed to being recognized as the best at what you do. You are a thinker and a doer. You attract talent and build talented teams. You are creative and market savvy.
The question, of course, in all this is, if Wilson and Brown are deeply involved in 21c, who’s overseeing the redevelopment of Whiskey Row? Because if Whiskey Row and other downtown properties such as the former Coyotes don’t get redeveloped, the tax increment financing district that is supposed to pay for KFC Yum! Center will never meet projections.
• Sources tell us the Nucleus Innovation Park at Market building will open this month or in September. At least one major event is planned there. But we keep hearing comparisons between the Louisville vision and what cities such as Charlotte and Raleigh, N.C. are accomplishing. In Raleigh, Basel, Switzerland-based tech giant Bayer has committed to $400 million worth of research centers at Research Triangle Park. Is this where we’re ultimately headed in Louisville?
• We get a lot of emails with this theme: “I like the Monday Business Briefing, but can’t you break up the bad news … downtown office vacancies and Yum arena – with a little levity? You should call it the ‘Debbie Downer Report.’ ”
By popular demand, we’re going to give you a fun scoop to break up the serious scoops. The Prospect Area Chamber of Commerce is putting together a huge new fundraiser, “Dancing with the Prospect Stars.” Seriously. Maker’s Mark’s Bill Samuels, Diana Polsgrove from Eventualities and State Sen. Ernie Harris will be the judges. The event is going to be at The Falls of Goshen events space, and there will be only 200 tickets, or so we hear. All the attorneys who live in Prospect are competing, our source said, and get to pick their charities. “They’ve all been taking dance lessons for three months, and they all think they’re going to win!” our source said.
• We missed this, but the Shoppes at Plainview at 801 S. Hurstbourne Parkway sold at the Jefferson Circuit Court foreclosure auctions last Tuesday:
PTF GCCFC 2005-GG5 HURSTBORNE
DEF SHOPPES AT PLAINVIEW, LLC, A COUNT
purchaser: GCCFC 2005-GG5 HURSTBORNE ADDRESS 801 SOUTH HURSTBOURNE
According to our sources who were there, the shopping center generated spirited bidding, but the lender prevailed. We never heard of GCCFC 2005-GG5 HURSTBORNE either, but it appears to be a Kentucky subsidiary of New York City-based CT Corporation System. Our sources tell us the only tenant remaining in the shopping center is a Barnes & Noble bookstore.
• We love the business behind entertainment. We haven’t been able to get with Triangle Talent’s talent in person, yet. But we had an email conversation about this quiet company that’s been in the concert business for decades:
This weekend we have shows in Evansville, Missouri state fair, multiple shows at the Iowa State Fair and two shows each night at the Kentucky State Fair. And then off to nearly 30 shows at New York State Fair. It is our busy time. We are one of the largest producers of outdoor concerts in the country doing shows from Florida to Texas to Oklahoma to Wisconsin to New York.
Wow! More later.
Actual MBB business briefs:
• If you’re interested in real estate, and who isn’t these days, don’t miss our overview from PRG Investments’ inaugural “Diversity in Real Estate Series” later this morning. The informal real estate summit brought together top developers and investors at The Green Building last Thursday. A panel and audience members discussed at length market conditions and the overall outlook. It was the first in what is planned as a series sponsored by Merrill Lynch and BridgeTrust Title.
• The building at 720 E. Market St. in NuLu looks like it’s being gutted. We hear this could be a big deal. Snooping ….
• Robson Forensic, a Lancaster, Pa.-based firm, is looking for Louisville office space. Robson handles every sort of forensics research and expert witness testimony from engineering to investigation for attorneys and the insurance industry. Are they here for a case, or is this a big move? Most of the Robson offices are in the East and Midwest.
• Top Gannett Co. Inc. editors from across the United States were here last week, according to our Courier-Journal sources. They were attending a meeting about “the Butterfly Project,” which is a plan by Gannett executives at the company’s HQ in McLean, Va. to replace Associated Press and other outside content providers with content from USA Today.