Welcome to The Closing Bell. This is your last stop for biz scoops and big news before the weekend — a roundup of stories that can’t wait till Monday.
Community development organizations show ‘keen interest’ in west Louisville YMCA
YMCA of Greater Louisville CEO Steve Tarver was careful not to exaggerate the current status of funding for the planned West Broadway YMCA, but he is optimistic.
“They are not committed, but there are a couple of (Community Development Financial Institutions) that have indicated a fairly keen interest in our project,” Tarver told Insider Louisville. “We are getting a little traction on it.”
IL previously reported the YMCA was forced to look outside of Kentucky for New Market Tax Credits to fund the new $26 million multi-use center, located at 18th and West Broadway, after no organization in the state received a cut of the $3.5 billion federal tax credits this year. The tax credits are used to invest in developments in under-served areas such as Louisville’s West End.
If a deal is inked with the financial institutions, the YMCA could receive the tax credits in two parts — half this year and half when the federal government doles out the credits in 2016 — “which actually fits our construction plans very well in terms of how the money will get spent,” Tarver said. “We are excited about that.”
Tarver didn’t know when a possible deal could be made but said that organizations with tax credits like to allocate them before the end of the calendar year. If the YMCA doesn’t receive any tax credits this year, it will try again in 2016, he added.
However, if they come through, Tarver expects construction to start within 12 to 16 weeks of securing the funding. Right now, the YMCA is getting its ducks in a row in terms of building design and approvals, so that when the time comes it just needs to bid out the work.
On Sept. 21, the project is headed before Louisville-Jefferson County Metro Government’s Board of Zoning Adjustment to ask for a variance and a waiver.
Meanwhile, Tarver is regularly talking to members of the YMCA’s board of directors and Metro Government, as well as speaking to community members about the project and where it stands. “We have tried to be pretty aggressive on that point,” he said. “We are working to keep those communication lines open.” — Caitlin Bowling
New private equity firm to focus on local food, manufacturing, health care
Louisville is about to get a new private equity firm dedicated to investing in local businesses. The firm, called Weller Equity, is headed up by Ken Berryman, a former director at the Capitala Group, and Dale Boden, president of B F Capital Inc., another Louisville-based investment firm.
Berryman broke the news to members of Louisville’s business community via a July 21 email that a source shared with Insider. In the email, Berryman said he’s leaving the Capitala Group after eight years, and his new private equity firm — Weller Equity — will focus on majority and minority equity investments in Kentucky and the Mid-South region.
On Aug. 31, the site Mergers & Acquisitions added more details. Specifically, Weller will focus on area manufacturing, health care, and food and beverage industries, with companies that have from $5 million to $50 million in revenues, i.e. small-to-mid-sized firms.
A Louisville business insider, who requested anonymity, said Weller will fill a void in the local business investment community, but added the real struggle is getting fledgling firms to the $5 million threshold. Still, the insider said it’s exciting to see a fund focus on investing in businesses that are clear areas of strength for Louisville. “There’s a lot of exciting manufacturing businesses in the region that people don’t know about,” the source said. “And there are also a lot of health care assets in the region. I think it’s a good thing.”
IL attempted to contact Berryman multiple times, so far without success. In an email to IL, Boden said he’s not quite ready to discuss Weller. “We’re still moving through the notification process for ‘friends of the firm,’” he wrote. “Once that is completed, I’d be happy to discuss in detail what we are up to.” –David Serchuk
Analysts: KFC could knock Chick-fil-A off its throne
Can a $5 menu offering help KFC Corp. reassert its dominance as the premiere fast-food chicken chain in the United States? Analysts at Citi Research think so.
The analysts wrote in a note about KFC that the company’s $5 Fill Up promotion — an entree, side, biscuit, cookie and soft drink all for $5 — is helping KFC boost its U.S. sales, Business Insider reported.
That boost will only be amplified by the recent addition of the $20 Family Fill Up, Citi Research analysts said.
“We believe the positive sales momentum is likely to continue,” the note reads. “Of note, $5 Fill Ups continue to resonate very well and lower gas prices remain a tailwind.”
The Business Insider story also noted that KFC’s same-store sales in the United States were up 7 percent during the first quarter of 2015 and up 3 percent during the second quarter after taking a dip in the first two quarters of last year.
The sales growth could once again make it America’s top fast-food chicken chain, a title that was stolen by Chick-fil-A last year.
On a side note, KFC sister company Taco Bell Corp. may try to manufacture its own chicken boost. The company is testing taco shells made out of fried chicken at at least one store in California. — Caitlin Bowling
IL’s local stock focus
1) CafePress (ticker: PRSS): Though the markets have been on a wild ride, insiders at Louisville printing firm CafePress continue to invest big time in the company’s stock. CEO Fred Durham made multiple purchases of the firm’s stock from Aug. 26-28; his total stock purchases came to just over 15,600 shares. These were purchased at prices ranging from $4.45 to $4.48. His total shares stand at over 2.1 million.
Also, activist investor Lloyd I. Miller purchased 10,000 shares, bringing his total to just under 2.75 million, making him PRSS’s largest shareholder. (Miller’s holdings are both in his name, and through entities he controls and/or owns.) Miller purchased his shares at $4.25 per share on Aug. 31.
CafePress has suffered slightly in comparison to recent gyrations in the larger markets. Over the past five trading days, PRSS is down just over 2 percent, while general markets are close to flat. Over the past six months, however, PRSS has outperformed the markets, up 37.6 percent, while the S&P 500 is down 6.7 percent.
2) Porter Bancorp (ticker: PBIB): Though PBIB is a regional bank, with limited international exposure, its stock has taken a pounding amidst the recent financial market volatility. PBIS is down 8.9 percent over the past five trading days, well in excess of the general markets.
At the same time, Porter Director Bradford T. Ray bought 10,000 shares on Aug. 20, at $1.60 per share, valued at $15,950. So he’s not scared. –David Serchuk
EnterpriseCorp’s Hot Dozen moves to Play
Is it just us or does it seem like we’ve got a glut of business awards in this city? (We’ll take that back if, you know, we’re named to EnterpriseCorp’s Hot Dozen. We are a thriving startup, after all.)
The Hot Dozen Showcase honors “12 of the region’s most promising and innovative early stage companies.” It will be held at Play on Monday, Sept. 28, from 5:30 p.m. to 7 p.m. Ten bucks gets you admission and some appetizers. Rub elbows with similarly entrepreneurially-minded people and investors. Register here for the event, a production of EnterpriseCorp, the division of Greater Louisville Inc. focused on startups and fast-growth companies. — Melissa Chipman
A little quiet on the investment front…
At this week’s Venture Connector’s luncheon, EnterpriseCorp’s Lisa Bajorinas made her usual announcement about what companies received investments in the past month. Turns out August was a little… lackluster. That being said, it was also a month during which lots of rich people take their money on fancy vacations.
However, the Vogt award winners each saw $20,000 investments in non-dilutive funds. Those winners were: Hue Innovations, Inscope Medical Solutions, Stinger Equipment, Sunstrand, and TriBlue Engineering Corp.
Epic Sammich Co. becoming a chain, albeit a small one
Louisville-based sandwich shop Epic Sammich Co. is planning to open a second location in Richmond, Ky., near Eastern Kentucky University’s campus.
Eric Morris, who co-owns the concept with Dustin Staggers, was in Richmond this week working on the space at 236 W. Main St. An open date isn’t set, but he hopes to have it running around Sept. 12.
Staggers, who also is known locally for his other two restaurants Roux and America. The Diner., previously mentioned that he’d like to open multiple locations if Epic Sammich took off. He added at the time that the simple concept would be easy to replicate.
Now a short two and a half months after opening the first Epic Sammich at 2009 Highland Ave., the pair are on their way to creating a chain. Morris said they’re also looking in Lexington and Bowling Green.; however, the opportunity near EKU presented itself first.
The space was essentially turnkey, with chairs, tables and kitchen equipment already there.
“That is our goal,” Morris said. “We just had to make it our own aesthetically.”
Morris said he hopes to spend less than $10,000 on the build-out.
The Richmond store will be different from the Louisville site. It will seat about 60 people, offer delivery and have a full liquor license. There also is a lounge area in the back where Morris hopes students will hang out to watch sporting events on TV and play arcade games.
Two Louisville friends, including chef Chip Hartley, will run the Richmond location, which will help Morris and Staggers figure out best practices for running the concept on a broader scale, Morris said. “It is definitely a learning experience being our first restaurant in Louisville.” — Caitlin Bowling
Lawsuit: Private equity fees/investment performance partly to blame for KY pension crisis
Jefferson County teachers may not have known this, but the beleaguered Kentucky Teachers’ Retirement System put money into all sorts of exotic private equity investments on their behalf. The issue with these so-called “alternative investments” — according to class-action plaintiffs Randolph Wieck, Betsey Bell and Jane Norman, acting on behalf of themselves and all other Kentucky teachers who are members of the KTRS — is that these investments were not permitted by Kentucky law, lacked disclosure, and performed poorly.
These allegations came to light in the class-action suit Randolph Wieck v. Board of Trustees of the KTRS. Private equity firms the Carlyle Group, Blackstone Group, KKR & Co., Rockwood Capital, and Highbridge-J.P. Morgan are also defendants. The suit was filed Aug. 24 in the U.S. District Court for the Western District of Kentucky. Lead plaintiff Wieck is a teacher in Jefferson County.
The suit shows the speed with which the KTRS ramped up its private equity investments. In 2007, the KTRS had no alternative investment managers listed in its Annual Financial Report. By 2013, it listed 31 alternative managers. “Alternative managers have been criticized … for underperformance, excessive fees, excessive risks, and a lack of transparency,” the suit said.
The plaintiffs also claim KTRS failed in its fiduciary duty by selecting investments and investment managers that were not allowed; KTRS specifically invested in high-risk alternative investments not appropriate for fiduciaries under Kentucky law. In 2014, KTRS admitted to paying $9.2 million to alternative investment managers in secret no-bid contracts. The suit also points out that several private equity firms aligned with KTRS have hired lobbyists in Frankfort, including KKR, J.P. Morgan, and Blackstone.
Another problem with these alternative investments/private equity is a lack of transparency. “KTRS has refused to provide the contracts of even a few of these high-risk investments in answer to an October 2014 open records request by (the lead plaintiff),” the suit said. The investments with these private equity firms are not only too secret for Kentucky teachers to see, the suit claims, but also KTRS trustees, the state auditor, and the Kentucky Legislative Contract review committee.
Even as the KTRS has struggled to fund itself, it recently has spent hundreds of millions on private equity partnerships. Over the last eight months, it has started eight of these new partnerships, according to the suit, with KTRS private equity commitments totaling over $595 million, despite a pending suit claiming KTRS private equity purchases are illegal. On March 15, KTRS committed $180 million to the Carlyle Group, Blackstone Group, and Rockwood Capital. On Dec. 14, 2014, it committed $235 million to limited partnerships of Audax Group, KKR, Riverstone Holdings, and Oaktree.
McDonald’s rolls out all-day breakfast in Greater Louisville starting Oct. 6
Who knew 10:30 a.m. at McDonald’s was so emotional? But when the breakfast menu gets commandeered by the lunch menu, some people around the country actually break down in tears — or so the higher-ups at the Golden Arches believe. Because no man should have to wait until morning to enjoy an Egg McMuffin, McDonald’s is rolling out all-day breakfast beginning Oct. 6.
According to the press release, all-day breakfast has been the No. 1 request from customers, and more than 120,000 McTweets have been recorded in the past year.
“We’re excited to offer all-day breakfast to our customers, as we know they’ve been asking for it,” said Frank Ward, president of the Kentuckiana McDonald’s Co-op. “We appreciate and value customer feedback, and we’re looking forward to offering them the ability to enjoy breakfast at McDonald’s anytime.”
Now you can have your McHotcake and eat it, too — all day long. —Sara Havens