Welcome to the July 29 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 more and more frequently, minutes before we post at 7:30 a.m.
This is “the world is changing beneath our feet” edition of Monday Business Briefing, with analysis of world and national trends that are beginning to shape Louisville. (Mark Twain was wrong. Or at least data challenged. Rather than 10 years behind the times, Louisville suddenly is at least keeping up with change, not moldering on the sidelines.)
• For the first time since maybe the 1930s, American urban centers are growing faster than suburbs. From 2010 to July 2011, city centers grew faster than ‘burbs in 27 of the nation’s 51 largest metropolitan areas between, according to U.S. Census data, data cited this week by about a dozen national media outlets. During the previous decade, only five metropolitan areas saw downtowns growing faster than the suburbs, according to author Bruce Katz on NPR’s “Fresh Air” show this week with host Terry Gross.
As of 2013, the majority of Americans – about 65 percent – live in the 50 largest cities. So, what’s this have to do with Louisville?
The Courier-Journal published an interesting opinion post this week by Steve Trager, president and CEO of Republic Bank & Trust Co., talking about why he moved downtown from Eastern Jefferson County. In the post, Trager, who oversees the largest Louisville-based bank ranked by assets, talks about the role KFC Yum! Center made in his decision. He contends getting suburbanites downtown to U of L games allows them to see how all the urban myths – high crime, no parking – are just myths is a game changer.
From Trager’s post:
Since our purchase more than three years ago, which was precipitated by the arena, we have transitioned from part-time downtown residents to full-time and witnessed a remarkable transformation of activity.
With every passing day we see more people, particularly lifelong suburbanites, gravitating downtown, resulting in a vibrant seven-day-a-week center city. What was once a ghost town after hours has come to life. It’s even more interesting that many of our friends and acquaintances after spending time at the arena and witnessing our style of living have either purchased condos downtown or are currently in the market to do so.
We’d argue the catalyst for the downtown Renaissance was NuLu, since KFC Yum! Center is still dark at least 33 percent of the time. Further, we wonder if this just isn’t about the end of suburbia, as Katz argues. Katz, vice president of the Brookings Institution, has written a book with Brookings Fellow Jennifer Bradley, “The Metropolitan Revolution: How Cities and Metros Are Fixing Our Broken Politics and Fragile Economy,” in which they argue city leaders, not national policy or 20th Century economic-development models, determine which cities are winners, and which are losers.
Their assertion is, city leadership needs to spend time on more organic job creation via their city’s competitive advantages as opposed to stealing other cities’ corporations through bad tax incentive deals.
From the Fresh Air interview:
“Over the last 25 years, cities and metropolitan areas got caught up in the national growth model, which, frankly, is mostly focused on making the United States a consumer economy, a consumption economy. In many cities and metropolitan areas, economic development was what I could call ‘Starbucks and Stadia and Stealing Businesses.’ That, in many places, [has] made cities and metropolitan areas more quality places to live.
“But in the post-recession environment, given that the recession was a wake-up call, what I see cities and metropolitan areas doing now is beginning to focus on the fundamentals. What do you make? What services do you provide? What do you trade, to either other parts of the United States or other parts of the world? And who do you trade with? And do you have the skilled workers and collaboration between universities and companies and entrepreneurs and labor unions so that you can really compete and prosper, but also build on your distinctive assets and advantages?”
This already is the policy of Ted Smith, the Fischer Administration’s econ-dev Czar. That said, Louisville is attracting insufficient out-of-town capital for projects on the scale of Nashville. Whatever the case, the urban resurgence could change everything across America, from realigning real estate values to realigning the county power structure.
• Speaking of emerging urban areas, could Clifton overtake NuLu as the city’s hottest hot spot? Or has Clifton, home to the Silver Dollar Saloon, Comfy Cow, Volare, Varanese and a bunch of boutiques, already overtaken NuLu? If it hasn’t, this could be a transformative moment. The River City Tire property at 2235 Frankfort Ave. is on the market for $1.3 million. (PRG Investments is the broker, but it’s not on their website.) We first heard about this when PRG brokered the Comfy Cow building sale to the Pagano family in a lease-back deal. Why is this a big deal? Because the lynchpin property is a half-acre in the most strategic part of Clifton, with 250 feet of frontage on Frankfort. Comfy Cow is to the west, Bourbon’s Bistro on the east side. Across from it is Basa restaurant and Clifton’s Pizza. Imagine a multi-use, multi-floor project replacing the tire store, with retail, a restaurant and cool apartments.
Another strategic spot, the 1920s-era former gas station at the corner of Frankfort and Franck avenues, apparently is off the market. The property belongs to Todd Blue’s Cobalt Ventures, but the sale sign is gone.
• Our phones started ringing off the hooks (metaphorically) Friday after Business First posted the news: University of Louisville Physicians Group admin offices are moving about four blocks to Nucleus Innovation Park from the Landmark Building. Which, per our mission, we reported last March. (Advanced Cancer Therapeutics is moving five blocks to Nucleus from the Republic Building at 429 W. Muhammad Ali Blvd., a building owned by Blue Venterra.)
Revisiting the Nucleus issue touched a raw nerve, apparently, with a surprising number of Insiders. Business First describes U of L Physicians as “a large private practice.” Which it is. But all the docs are professors and/or researchers at U of L’s medical school and hospital. So a significant portion of their revenue/salaries comes from the public sector.
“Isn’t Nucleus supposed to bring new research and health-science innovators as part of a huge downtown research park?” they said. As one insider marveled, “This has to be the most ambitious effort ever to rig the downtown real estate market … so, now I get to compete against a taxpayer funded, tax exempt non-profit ….”
Not to keep beating this dead horse, but U of L officials seem to define “disruptive technology” as the ability to use state tax schemes to deprive the private sector of legitimate business opportunities, which isn’t going unnoticed at City Hall.
From our March MBB post:
What those officials told us, and we didn’t know, is that University of Louisville Physicians Group administrative office is moving to Nucleus from the Landmark Building at 300 Market St. downtown. 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.” How did that effort go so wrong? That’s a future post.
That future post will look at the structure of the Nucleus Tax Increment Funding District deal. As a source close to the deal pointed out, TIFs are posited on the idea that as the area around a project such as Nucleus or KFC Yum! Center starts to flourish, dedicated increased state income taxes, sales taxes or real estate taxes from the TIF district will pay for the project. Which we get with KFC Yum! Center, a community asset. But why, exactly, said our sources, is the private sector supposed to pay for a building that taxpayers already are financing? A building against which commercial real estate developers have to compete? So far, all Nucleus is doing is taking rents from private commercial real estate developers and transferring them to U of L.
• Big shakeups across Louisville’s media landscape, especially at the Gannett Co. Inc. properties …. We’ll have a post this week about the local changes, which come down to lots of people leaving the Courier-Journal, but hardly anyone being replaced. When Executive Editor Bennie Ivory retired this week, he was one of three executive editors to leave Gannett properties with no advanced internal notification, our sources say. The problem is, print is fading, but digital revenue isn’t increasing sufficiently to support the legacy operations. Gracia Matore, CEO of the McLean, Va.-based parent company made public some stunning information at a recent conference call for investment analysts. Six months ago, Martore said it was Gannett’s goal to have 250,000 to 300,000 digital-only newspaper subscribers across Gannett’s 82 U.S. newspapers by the end of 2013. But during the conference call, Martore said the net number of digital-only increased by just 4,000, to 50,000.
• In some actionable news for our real estate moguls and contractors, sources are telling us Zirmed is expanding. Our source says the company, a health-data/billing software company, is adding 85 people, mostly due to a new training center. The total workforce will be about 385.
• Word on the street is that a new building is planned for Ninth and Main streets. We’ve heard different versions of what it will be … but it will be something that will take advantage of all the tourism attractions, existing and planned ….
• Construction is about to start at the Seelbach Hilton Hotel. That work will expand Otto’s restaurant, opening it to the lobby of the historic hotel at Fourth and Muhammad Ali. One of the issues still to be resolved is what to do with the Starbucks, which has street-level entrances.
• The Hertz family may not sell the Starks Building after all. Our sources tell us the 14-story historic office tower across from the Seelbach, and directly on Fourth Street Live, has gotten multiple offers. But there may be a Plan B, which could see the building add apartments on the upper floors … a plan that was floated, then abandoned, back during The Recession when office tenants were difficult to come by. The reason the residential plan remains viable is the construction of the building, which has waterlines in every vertical column, making converting office space to apartments relatively inexpensive compared to newer skyscrapers.
• What’s up with PBI Bank? Last week, shares of the troubled Louisville-based bank began to shoot up. PBI, which trades on the NASDAQ exchange, had seen its stock drop to a 52-week low of about 82 cents per share last month. On Friday, shares closed at $1.52, a 92-percent increase! The rise started after Business First reported John Taylor, late of American Founders Bank, would replace Maria Bouvette as CEO and president. Bouvette, a PBI co-founder with Chester Porter, who also has left, is retiring at a youthful 55 years old.
From the story, in which Taylor, 52, is clearly excited Bouvette is gone, as are shareholders, apparently:
PBI Bank president and CEO John T. Taylor said he’s honored and excited about being named CEO of Porter Bancorp Inc. (NASDAQ: PBIB), the bank’s holding company.
“I continue to be excited about the opportunity to be in a leadership position,” Taylor said in an interview.
We’re assuming investors are thinking like sports fans: New coach, new possibilities for some big wins. But Taylor is no Coach K. He comes with baggage from his time with American Founders Bank, based in Lexington, Ky. Taylor was brought in to clean up one of the state’s biggest banking scandals, with former Democratic officials including former Gov. Brereton Jones using American Founders as their own private piggy bank for their thoroughbred racing hobbies. American Founders still has much higher than normal non-performing asset to total asset ratio, but certainly isn’t bleeding like PBI. PBI still has a number of outstanding shareholder suits, and it just received a $7 million judgement after losing a fraud case … its second.
• Louisville is getting a Monkee’s boutique. The Wilmington, N.C.-based chain is going into a former PNC Bank branch on Lexington Road in the Chenoweth Plaza strip center just east of the Bauer Property. Monkee’s has 22 franchise operations in at least six eastern/southeastern states including North Carolina, Tennessee, South Carolina, Virgina and Ohio. The PNC Bank branch has been sitting unoccupied for at least two years, maybe more. Monkee’s carries shoes, clothing and accessories from Tory Burch, Diane von Furstenburg and Kate Spade, among other brands, according to its website.
• We got a tip on the IL 24-hour tip line that a new pizza place is coming to Goss Avenue in Germantown.
Germantown – Schnitzelburg
NEW Business Coming soon: Someone bought the VFW on Goss Avenue and plan to open up a New York Style Pizza place. Congrats on closing on the property and welcome to the neighborhood. They have some work renovating and hope to be open as soon as they can. Goss Avenue is growing into a hot spot of small business, fun and food.
We can’t reveal the details quite yet, but trust us … these guys won’t be sorry. Great things are about to happen on Goss Avenue.