We know too well the old cliché, “a win-win situation.”
We’re going to tweak that a bit and tag Nucleus’s big announcement today as a “sort of win-mostly lose” situation for Louisville.
At the big ribbon-cutting ceremony this morning, University of Louisville officials announced the high-end senior-living company Atria will be the main tenant for the new $20 million Nucleus building at Market and Floyd streets.
Atria Senior Living currently is headquartered four blocks away in the Brown & Williamson Tower at Fourth and Liberty streets. So the good news is, Atria’s 250 employees will be able to walk to their new offices next year instead of having to cross state lines.
At the announcement, Atria Chairman and CEO John Moore noted his company’s biggest markets in their private-pay senior living niche are on the coasts, with Moore referencing New York City, Cape Cod and California.
Atria, Moore said, is a national company operating in 28 states, a company that could be headquartered anywhere.
Atria is at least staying in Louisville. Which for us is the story, not the opening of yet another U of L spec office building.
Or they could have left downtown for the East End, TIF-blessed complex where U of L/NTS’s next spec office building, 700 N. Hurstbourne, is scheduled to go online next year.
The Atria move will have a big impact on the city, but not the way Nucleus President and CEO Vickie Yates Brown and U of L President James Ramsey described this morning.
When Atria leaves Fourth and Liberty, they’ll leave 72,000 square feet of space – floor 19 through floor 23 – of the Brown & Williamson Tower, which already is about 30 percent vacant.
Of Class-A office towers in the downtown business district, Brown & Williamson Tower is second only to its twin, Meidinger Tower, when it comes to empty floors, with Meidinger 60 percent vacant.
Atria’s move to Nucleus will, of course, move 250 jobs from a building where the city receives income tax revenue – 2.2 percent for residents, 1.45 for non-residents – to a TIF district building where the city will receive bupkis.
That’s writing off a lot of revenue, because, as Moore noted, Atria has had a 25 percent increase in HQ employees since 2006, but a 60 percent increase in payroll. Salaries for headquarters jobs at Atria are comparable to Humana and other larger companies, averaging about $120,000 per year, according to various recruitment websites.
Times 2.2 percent or 1.45 percent. Times 250.
By my calculation, Atria’s move to Nucleus translates to about $600,000 annually deducted from the city tax base. (Not counting state and city tax incentives to move, if that turns out to be the case.)
Maybe I’ve been misinformed about this all these years, but I thought Nucleus was built to attract new cutting-edge tech businesses in bio-medical and science to Louisville, which has too few STEM jobs – science, technology, engineering and mathematics.
I was flabbergasted to learn yesterday that Nucleus, part of U of L’s non-profit foundation, is only meant to suck tenants out of the buildings developed by for-profit companies and into a spec building owned by our non-profit, state-owned university.
Not to sound like a conservative, but that sure seems like a scheme to redistribute wealth to the state from the private sector.
In this, Atria is not the bad guy. They’re doing what IL’s investor group would do … grab a bargain lease rate in a nicer, newer building at the taxpayer’s expense.
Also, Atria is a business Louisville can’t afford to lose, an employer that gets high ratings on every site I checked, even (oddly) from ex-employees with grudges.
That said, Atria isn’t at all what U of L officials promised when they announced Nucleus all those years ago. The city and U of L had tried to build a research center for decades but could never make it happen, largely because Louisville isn’t Boston or Cupertino.
So, Brown should get credit for getting the building off of the ground. But U of L has struggled to fill it. We got countless calls early in the year from sources frustrated with what they described as a bait-and-switch.
Our city gov source said U of L execs told city government officials that Nucleus was going to bring bio-med research companies to Louisville, not Hoover existing businesses from the central business district: “That’s not what Nucleus was supposed to be.” To remind us of the original mission, one econ-dev official sent us a copy of the 2010 U of L President’s Report which quoted Gov. Steve Beshear: “Nucleus epitomizes what we’re trying to do in Kentucky in terms of attracting and incubating biotech and life science discoveries and companies.”
As great as Atria is, it is neither a biotech nor a life sciences company. It’s a Louisville-based piece of Vencor, spun off in 1998 just before Vencor collapsed. A company that runs old-folks homes for rich people.
Yet, when Ramsey announced Atria as the tenant, he said, “This is exactly what we envisioned a downtown research park could do – drive innovation at U of L and economic development in our community.”
Our insiders have always said Nucleus officials simply never figured out how to attract growing bio-science and tech businesses from other states. Instead, they decided to go with efficiency and focus on taking tenants – any tenants – from downtown buildings.
Stites & Harbison law firm briefly considered moving 300 attorneys out of the Aegon Center at Fourth and Market to Nucleus.
University of Louisville Physicians’ administrative office is moving to Nucleus from the Landmark Building at 300 Market St. downtown.
Today, Atria takes the sixth, seventh and eighth floors, and Nucleus is 97 percent leased out.
What if an actual bio-medical research company came along? What are lost opportunity costs if a legitimate economic-development coup goes to another city with an actual research park such as Charlotte or Phoenix.
On that theme, tax incremental financing districts such as Nucleus has are supposed to give developers incentives to build in areas of the city where there is no activity. Instead, Atria to Nucleus further empties out a struggling business tower in an area of downtown that hardly needs to lose foot traffic.
I consulted with a number of city sources, developers and commercial real estate executives – people whose judgment I respect – and to a person, everyone expressed (to paraphrase) essentially the same sentiments. “You know, this will be a big story later. But today, let U of L have their moment.” And I sort of agree.
The Nucleus building is a beautiful building, and it will invigorate the blocks around it. But it’s also a building that’s not at all what U of L officials said it would be.
U of L wants IL to tell you this is a great day for Louisville. But the unvarnished truth is, it’s just another day.
Just another day of U of L senior leadership serving cow pies and telling everyone they’re gold.