Welcome to the July 13 Monday Business Briefing, your private business intelligence digest from Insider Louisville.
The surface parking lot is a common and long-acknowledged hindrance in the effort to transform downtown Louisville from a commuter-based 9-to-5 into a place with nightlife, living amenities, and a resident population. Some 30 percent of buildable land downtown is either surface or structural parking, according to a recent analysis by the Louisville Downtown Partnership, which measures and advocates for the growth of the urban core.
As a result, there are big gaps in the streetscape that interrupt the pedestrian experience, revealing a lack of structural density that can be disquieting. And because many surface parking lots are moneymakers for those who own them, their value is higher than any common lot, making reuse more remote.
In the coming months, the partnership will begin trying to persuade owners of certain lots to sell to or partner with developers who want to build. One of the key ways they will do it is to offer air rights. That way, a developer could build above a parking lot and not interrupt the parking revenue, which in some lots downtown can be hundreds of thousands of dollars per year.
“What we’re really starting to do is strategically look at lots where the location is key, but also lots where the ownership is key,” said LDP executive director Rebecca Matheny. “Then try to get some sense from the owners to see if they’re open to considering development and working to try to identity potential development partners in the private sector.”
Large swathes of asphalt parking lots are common in downtowns throughout the Midwest, as are efforts to build on them. In Indianapolis, Columbus and Minneapolis, to name a few, surface parking once dominated key parts of the urban core, but private and public entities have worked to increase density there by finding ways to remove them.
Surface parking is valuable in downtown Louisville because it is still necessary, though, which speaks to other deficiencies. Developer Bill Weyland, who has done extensive adaptive reuse projects downtown, such as the Henry Clay and Louisville Slugger, said addressing the parking lot problem — while good — won’t suddenly create density downtown.
“Until you can move a lot of people into downtown without their cars, until you can move groceries into downtown so people who live downtown can have that, you’ve got to have a place where people can park their cars,” he said.
Weyland said without a better mass transit system in and around the urban core, along with stronger economic growth, private entities with enough capital to build the kinds of buildings that would make financial sense with the air-rights strategy won’t be looking here. He said Louisville lacks the absorption rates downtown right now for such development to happen naturally.
The parking lot strategy is part of a broader LDP effort to concentrate growth in a handful of downtown neighborhoods: West Main and Market, Fourth Street, East Main and Market, the Medical Center, and NuLu. The idea is that density in certain districts will eventually create enough incentive for developers to bridge the streetscape gaps.
But the group isn’t an economic development agency, of course. And as Weyland pointed out, the past few decades of major downtown development have been geographically diffuse: the West Main initiative, Cordish and Fourth Street Live, Slugger Field, the KFC Yum! Center.
“We jump all over the place. That’s not a strategy — that’s reaction,” he said, adding that it will take a long time to fill the gaps between those destination points.
SEC hits Vero Capital Management with multimillion-dollar fraud penalties
Six months after charging an investment firm founded in Louisville with fraud, the Securities and Exchange Commission imposed sanctions and multimillion-dollar financial penalties on its principals in an order released last week.
According to the SEC, Vero Capital Management’s president, Robert Geiger, general counsel George Barbaresi, and chief financial officer Steven Downey of Prospect diverted $2.8 million from investor-backed funds they had established to float a failing business venture, while telling investors they were winding down those funds. They also used $7 million from those investor funds to secretly purchase debt from a subsidiary of Vero, the SEC found.
As a result, according to an order released July 8, the SEC is forcing Vero to deregister as an investment adviser, fining each of the principals $300,000, and imposing a disgorgement of nearly $3.1 million on the three and Vero. In addition, Downey is barred from appearing before the SEC as an accountant for three years, after which time he must petition for reinstatement.
The order, to which Vero and its principals agreed, is not an admission of guilt.
“This non-scienter (meaning to lack intent) based settlement was largely driven by a desire not to spend investor and other monies fighting the SEC for what would have amounted to years and, as hundreds of companies large and small, public and private, have done in similar situations, to forgo litigation in favor of focusing on the business of the business,” said attorney Greg Morvillo, who is representing the firm and the principals.
According to the SEC’s original complaint, the three men had started a side business, Gresham Partners, designed to help big financial firms navigate stricter post-recession valuation methods. In five years of existence, however, that company only reported $525,000 in revenue. As it was failing, the SEC said, the three men made bridge loans from their firm’s investor funds without informing those investors. The commission also accused Downey of misleading U.S. Bank — the funds’ administrator — for an email he sent to move $800,000 from the funds to Gresham.
21c Museum Hotels shows Louisville some love with agency contracts: When we heard recently that 21c Museum Hotels had signed local creative agency OOHology for search engine marketing and optimization, we dropped the parties a line to ask about the strategy. We found it interesting that an increasingly national brand would be going with a local firm — even for a relatively small piece of its marketing-dollar pie. Turns out at 21c, that’s kind of the thing. The company has been working with Louisville-based branding firm Mindsalt since 2008, on projects from its new hotels in other markets to the branding of the affiliated Garage Bar on East Market Street. “They’ve been instrumental in helping us go from a single hotel to a growing brand,” said Monica Guarnaschelli, 21c’s director of brand marketing. Other locals on the roster include Jet A Studio (web development), “The Potter’s Field” documentarian Edward Heavrin (video production), and Lexington-based Glint Studios (photography). 21c also taps local markets where it’s locating, such as for the launch of its Durham, N.C., hotel restaurant. But even that business has since moved to Mindsalt. “The local talent is phenomenal,” Guarnaschelli said.
Source: High interest in KentuckyOne’s Fourth Street property: In a totally expected development, a source tells IL that KentuckyOne Health has given multiple tours of its office complex at 535-539 S. Fourth St. for interested buyers since putting it on the market a week ago today. According to the listing from CBRE, the bundle — which also includes 321 S. Fourth St. — has 288,000 square feet of office space and a 310-space parking garage, which is on the corner of Fourth and Chestnut. The offices are prime real estate between Chestnut and Guthrie streets along the Fourth Street commercial corridor, and CBRE is marketing the buildings for office, apartment, hotel or mixed-use developments. Interest in the area has been extremely high of late, after the opening of the new Embassy Suites and the planned $80 million redevelopment of the Starks Building. In a statement to IL, KentuckyOne spokeswoman Barbara Mackovic said the sale process — as well as the transitioning of 560 employees to other KentuckyOne offices downtown — would “take place over the coming months. We’re excited to be part of the continued growth of this great city.”
Humana updated CEO’s compensation day before Aetna announcement: Hat tip to WDRB reporter Chris Otts for alerting the Twitterverse to an amended compensation agreement for Humana CEO Bruce Broussard filed with the Securities and Exchange Commission the day before the announcement of its $37 billion sale to Aetna. The changes ensure Broussard’s time-based stock options and equity awards, as well as his performance-based stock options, become vested immediately should Humana be purchased and Broussard not continue with the new company. As IL first reported June 1, Broussard is set to receive a $16.9 million golden parachute if a sale goes through and he does not stay on with the buyer. His is part of $66 million in compensation for the top six Humana officials (all of whom are men) should the company get acquired and they not retain their employment.
Embassy Suites Downtown gets national nod: The swanky new 304-room hotel at the former Stewart Dry Goods/Hilliard Lyons Center on Fourth Street and Muhammad Ali Boulevard will receive the “Deal of the Year” award from the National Association of Black Hotel Owners, Operators and Developers at a ceremony in Miami later this week. The hotel, developed by Florida-based Eric Bachelor, a Kentucky native, and the Al J. Schneider Co., opened in April. It is among more than a handful of higher-end hotels recently opened or under development downtown, including the Omni Louisville, the Starks Building, and Aloft Hotel on West Main Street.
Ultra Pop proprietor wants to get his hands on a life-size KFC Cosplay Colonel: Paul LePree has been infatuated with life-size KFC Colonels for some time now. The owner of Ultra Pop, the eclectic comic book store/toy shop/art gallery on Barret Avenue, has always admired the life-size statues that are found throughout Japan, and he’s been jonesing for one for his store. Now, the Colonels are a little closer to home, making a debut last weekend at the San Diego Comic Con in various cosplay outfits (werewolf, unicorn centaur, alien, etc.). So LePree has created a Facebook page — “Bring the Cosplay Colonel Home” — to help gather supporters. “When I saw this current promotion for San Diego Comic Con, I thought this is a great excuse for me to try and get one of these statues to display in the shop when they return to Louisville,” he told IL. “My hope is if I get enough support through the page and through local media, I might actually be able to pull this off!” KFC hasn’t revealed its plans for the life-size Colonels, but it’s only fitting at least one should reside here in Louisville, where parent company Yum! Brands is headquartered. LePree said he’ll contact KFC in hopes they’ll be on board with the Cosplay Colonel homecoming bandwagon. KFC also launched a Colonel Sanders comic book at the SD Comic Con. Who knew the Kentuckian was so trendy? —Sara Havens
Welcome to Cleveland, Schulte: Louisville-based hotel management company Schulte Hospitality Group is continuing its expansion in Ohio with a key downtown hotel acquisition in the North Coast, the Plain-Dealer reported last week. In partnership with Connecticut-based Starwood Capital Group, Schulte purchased the Hilton Garden Inn in downtown Cleveland for $16.6 million. Schulte will manage the hotel, which had been under bank control since 2011, when it fell into foreclosure. As the P-D points out, the time is right for the buy: The 2016 Republican National Convention will be a boon to the downtown hotel market there. The northern Ohio pickup is part of an emerging growth trend for Schulte, which earlier this year acquired hotels in Dublin, Ohio and the Columbus suburb of Worthington. Schulte, whose officials don’t do interviews, IL was recently told, owns and operates hotels in 17 states.