(Editor’s note: This post was updated at 11:30 a.m. on Mon., Jan. 14. Louisville Magazine reported in its November 2012 issue that Lynn’s Paradise Cafe had 2011 gross revenue of $4 million.)
Welcome to the January 14 top secret, always confidential Monday Business Briefing.
These are biz tips Insider Louisville staff and contributors have collected during the past few days, a few of which are NOT double-verified as with our daily reporting.
But as always, we’ve made multiple calls on these tips, which come from sources who are not merely insiders, but who have direct knowledge of the deals.
So much news and so little time this week.
Not all of it good, frankly.
We’ll start with the good news, or at least what we think is good news.
• At long last, it appears the area on Brownsboro Road at Mockingbird Gardens will finally be redeveloped. Construction crews were busy doing something last week that involved a lot of impressive looking equipment, we’re not sure what. So we stopped and asked them what’s shaking. Our big tip of the week: One of Louisville’s best known operators will build a restaurant on a parcel just west of the forlorn and forsaken Azalea restaurant building. We double-confirmed this with the operator, but for the moment, we’ve promised to keep the identity confidential. If we mentioned the name, your response would be, “Get out!” So, we’re confident this is something that will actually happen. A rotting building where area-appropriate businesses should be has been a sore point for area residents such as WHAS Radio personality Terry Meiners. Still, it isn’t clear what will happen to that structure. Business First beat us to the scoop that the former Doll’s Market will become a 25,000-square-foot Sutherland’s hardware store. Sort of a puzzling choice considering we don’t think of the surrounding neighborhoods as DIY strongholds. The only do-it-yourself home repair tool people in Mockingbird Valley and Glenview tend to own is an iPhone with contractors on speed dial. More as we’re updated on the restaurant.
• Okay, here’s what you really came for. It was a shocker when Lynn’s Paradise Cafe closed after what seemed at first like a minor dustup over Lynn Winter’s new tip bank policy. (We wonder if the union organizers see the closing, which put about 85 people out of work, as a Phyrric victory, or a total victory?) Since Saturday afternoon, we’ve gotten multiple texts from insiders – people with serious capital and track records – asking us for Winter’s contact information, inquiries we passed on through the proper channels. (Since the 1990s, Winter has split her time between Louisville and California.) On Sunday, the calls were still coming in and at least one security person was standing guard outside the restaurant in the downpour. LPC would be something of a prize just because business has never slowed for 22 years, especially for the weekend breakfast crowd. Open breakfast, lunch and dinner seven days per week, we estimate Lynn’s has typical annual sales somewhere north of $600 per square foot, or more than $1 million gross revenue per year. (We were way off! In a November profile of Winter, Louisville Magazine reported the restaurant had 2011 gross revenue of $4 million, with 7,000 customers each week!) Jefferson County Property Valuation Administrator lists the assessed value of the building and half-acre lot as $683,270, which was the most recent transaction amount. Lynn Winter Rental is listed as the owner. Everyone – and we mean everyone – was talking about the closing, wondering if it’s permanent. Here’s what’s interesting. People who’d worked at LPC were not at all shocked at the turn of events. The consensus was, they couldn’t believe it had taken this long for years of madness to culminate in a closing. More as we’re cleared by legal counsel to say more ….
• The second most talked about story this weekend was the end of the River Fields suits after the group spent more than 30 years trying to stop the East End bridge. Which in our book may be an even bigger story than Lynn’s Paradise Cafe closing, though the local media has devoted far more time and effort to the latter. The conversations we had centered around something insiders term “the investment grade tolling study,” or the “time of day traffic study.” The latest we could find was one from 2007 done by Wilber Smith and Associates. Such a study is crucial because it documents traffic volumes on the Kennedy Bridge as a way of estimating the traffic volume on the new bridges. And traffic x tolls = a rough guess at how much revenue the bridges will generate toward servicing the debt we’re all taking on to build them. And it’s a lot of debt:
From Louisville-Southern Indiana Bridges Project website:
To support the financing and construction of the Downtown Crossing, Kentucky will provide $50 million per year for six years beginning with state fiscal year 2013 (subject to General Assembly appropriations), as well as the proceeds of an estimated $236 million of previously authorized GARVEE bonds, for a total of $536 million in addition to already expended funds of $220.4 million (including $69 million of a previously issued $100 million GARVEE bond issuance) and previously committed funds of $31 million. To support the East End Crossing procurement, Indiana has committed $54 million per year for eight years, commencing in state fiscal year 2013, for a total of $432 million, in addition to already expended funds of $73 million. Indiana will provide additional funds required to supplement its share of toll revenues in the event tolls are insufficient to cover its obligations under its planned concession agreement.
The Goldman Sachs of the world can’t even begin to craft the bond prospectus without revenue estimates. The reason our sources are concerned is because Louisville was sold a bill of goods on the KFC Yum! Center, with a buttercups-and-sunshine forecast back in 2004 of how much the arena and the taxing district would generate toward paying down $525 million in principal and interest over 30 years. A bill of goods that could – best case scenario – cost the city $10 million per year for 40 years, or could end up – worst case scenario– resulting in default.
• New York City-based CID Entertainment has the deal again this year to offer Forecastle Festival travel packages, according to our sources. Last year, the Forecastle travel package deals that included rooms at the Galt House sold out. The two-night and three-night packages started at $1,200 and went up to about $2,000 for two nights and VIP access and executive suites. Look for the same this year if Forecastle brings big names. The question we have is, how physically big can Forecastle become until organizers have to find a new downtown space? And where would it go?
• Our Beam sources say the Chicago-based spirits giant won’t move into its Fourth Street Live space until May. That leaves a number of employees crammed into a small office in a Shepherdsville office park. Meanwhile, we’ve been given four different places in the Fourth Street entertainment complex as Beam’s final destination including space over the Gordon Biersch microbrewery, and the former Mosaic space, with Mosaic replacing Angel’s Rock Bar. Others hint heavily that Beam could end up in all the vacant space in the Kaufman-Strauss building. Our question continues to be, “What is Cordish getting in incentives to bring Beam to Fourth Street Live?” Which we think is a fair question.
• Congress recently passed a bill that eliminates limits on the size of government contracts woman owned businesses can win. Under old rules, the Women Owned Small Business Federal Contract Program required that 5 percent of all government contracts must be set aside for businesses owned by women. However, the program limited the size of the contracts to $6.5 million in manufacturing and construction, $4 million for everything else. Our first thought is, that sure flew under the radar – our radar, anyway. Our second thought was, “What an insulting pat on the head that had been. Okay, little lady, we’re giving you some access, just not so much that will hurt your pretty little head. We gave you the vote, what more do you keep expecting of us?”
• File this one under “news you’re not going to get in Business First.” Gus Goldsmith just sold his Fairfax, Va. pawnshop to The Cash Store for $8 million. That may be the highest price ever paid for a pawn shop, according to a news release from BoxCar PR. The Cash Store is owned by Arlington, Texas-based First Cash Financial Services, Inc. This is a bigger deal than you think because First Cash Financial is a publicly traded company on the NASDAQ exchange. Which means they probably have the cash, or at least the equity shares, to actually consummate the deal. The release states that in the late 1990s, Gus sold his family’s Dan’s Pawn Shop for $5 million. After reading endless corporate news releases, we find Gus’s release to be entertaining in the Muhammad Ali, “I’m the smartest, I’m the prettiest” school of self promotion.
From the release:
Hard to argue with that. Gus operates in several states including Kentucky, Maryland and Virginia, so it’s difficult to know the extent of the Goldsmith empire. Gus himself estimates he has $100 million in assets and unlike his clients, abhors debt. Here’s a factoid that tells you everything about Gus. Bob Gunnell, who owns Boxcar PR, was into Goldsmith for a $22,771 loan on an automobile the last time we looked. Goldsmith typically makes high-interest, high-risk loans to borrowers with credit histories that make them ineligible for conventional sernior secured bank loans. Gus also is sitting on one of the choicest pieces of downtown real estate in his Action Loan HQ at Second and Market streets, one block from KFC Yum! Center.
• Late Friday, as about 20 stories were materializing, we got a copy of a legal document that could lead to the feds intervening to stop Kentucky’s Medicaid Managed Care Meltdown. Appalachian Regional Healthcare, the Lexington-base hospital system, is asking federal courts for permission to add the federal Centers for Medicare and Medicaid Services, or CMS, to their suit against Coventry Health Care and the state of Kentucky. ARH’s latest tactic is to claim CMS should never have allowed the Beshear Administration to implement its 2011 switch to Medicaid Managed Care organizations from a fees for services system.
From the ARH complaint:
CMS, which is the agency charged with administering the federal Medicaid laws, failed to follow a number of statutory directives when it approved Kentucky’s Managed Care Waiver. Instead of ensuring, for example, that MCOs provided adequate access to services or that the Cabinet’s capitated rates were actuarially sound, CMS simply took the Cabinet at its word and rubber-stamped Kentucky’s Waiver application.
ARH attorneys are arguing Beshear Administration’s managed care system was broken from the giddy-up, and that CMS officials should have noticed. The result has been a year of crises for Medicaid beneficiaries and providers in a system that’s “heading toward eventual collapse,” according to the complaint. More on this later this week.
• Media sources in Europe are reporting the $6.8 billion UPS attempt to acquire Amsterdam-based TNT Express is dead. Regulators argued the deal would create a freight-hauling mononpoly. Scott Davis, UPS chairman and CEO, told Reuters the combined companies would created a model “transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world, while supporting growth in Europe in particular.” And it might have led to the expansion of UPS operations in Louisville.