Welcome to the June 24 edition of the top-secret, always confidential Monday Business Briefing.
This is your private business intelligence briefing, with Insider Louisville staff and contributors vetting tips collected during the past few days and hours.
A few of which are NOT double-verified as with our daily reporting.
This is the news about businesses and trends you’ll be reading about in the coming days in the conventional media.
We get accused of starting MBB with too-serious items, the more arcane and technical, the better. Medicaid and bank non-accrual loan ratios. Not today. Today we’re starting with a tease for a possible story down the line.
• Last Tuesday night at EnterpriseCORP’s Signature Event, a tall, slender young man on crutches entered Bomhard Theatre quietly after the lights went down. He joined an all-star entrepreneur crowd while Executive Director Tendai Charasika was opening the Louisville startup community’s biggest event. But a guy this famous gets noticed, and pretty soon everyone around the IL entourage was whispering, “Is that Kevin Ware?” The University of Louisville guard was indeed at the event and is apparently interested in technology, specifically wireless applications. Our sources tell us Ware’s adviser traded cards with Tendai. We have our Mark Coomes trying to get the rest of the story. It would be cool if this turned out to be the convergence of sports and tech in this crazy town ….
• Okay, it’s back to the serious business beat. Contrary to the Beshear Administration’s cheery evaluation of Kentucky’s Medicaid Meltdown (“Two thumbs up!”), our insiders agree the wheels are falling off. St. Louis-based Centene Corp. has stated in SEC filings it stands to lose more than $200 million in Kentucky and remains leaving determined to pay the penalty for giving up its Medicaid Managed Care contract early. That penalty would be 10 percent of annual revenue, or $45 million, if Centene leaves before July, 2014.
How bad was it?
This is from the most recent Centene conference call with equity analysts:
After a few months of operation, it became clear that our financial performance was much different than our projection based upon the data provided by the Commonwealth during the bid process. Our analysis concluded that inaccurate and incomplete data led to actuary unsound rates for our health brand. Unlike our experience in other states, efforts to resolve these issues with the regulatory agencies have been unsuccessful. Having exhausted all other paths to resolution, we pursued our only option short of unfairly impacting our shareholders. We’ve filed a lawsuit against the Commonwealth to recover losses associated with the data errors and to recover damages for other actions taken by the Commonwealth that we believe are inconsistent with the contract.
If Centene, which does business here as Kentucky Spirit, leaves, the state will have to transfer its MCO members to Tampa-based WellCare Health Plans or Coventry Cares, based in Bethesda, Md. If that’s the case, it will cost Kentucky about $220 million to move those 140,000 members because Kentucky will have to give WellCare and Coventry a higher reimbursement rate than they were giving low-bidder Centene. And this would be money on top of about $150 million the state had to throw in when it adjusted up reimbursements for Coventry and WellCare last February. Back when Gov. Steve Beshear was running against Sen. David Williams, the Beshear Administration came up with this plan, claiming it would save $430 million. Figuring in the adjusted rates and potential costs related to Centene leaving, we calculate that “savings” is down to $60 million. Now, the ringer in all this is Passport Health Plan. Apparently, Beshear’s Plan B is for Passport to expand out of its current Louisville-centered region and scoop up Centene’s members. It’s starting to become clear why the courts have consistently not just ruled against Kentucky, but lectured state officials for their ineptitude.
• A conversation we keep having more and more frequently is about Louisville’s sexy project deficit compared to other neighboring cities. We make no bones about it … Insider Louisville is pro-business and pro-smart growth. We like to post stories about multi-million investments such as Lifestyle Communities’ new $40 million apartment project off English Station Road. We just don’t have very many. Downtown Nashville has more going on just in the Gulch – think NuLu with condo towers – than we have in all of Jefferson County. Nashville just opened its new Music City Center convention center. Just a few days ago, The West End Summit project was announced. Two towers will have about 1 million square feet of corporate headquarters, research facilities, retail, restaurants and a hotel. A $300 million project. Cincinnati has Mercer Commons, a $63 million commercial/residential development in previously ghetto-like Over the Rhine. Even Lexington is redeveloping Rupp Arena. All that said, we’re being told at least one huge downtown project is flying far below the radar, with a Whiskey Row hotel still in the works, as well as several downtown urban bourbon distilleries. There are big-ish deals working in Portland, Old Louisville and Germantown. Local officials are still trying to figure out what to do with the Kentucky International Convention Center. Still, we seem to keep falling farther and farther behind …. As one city official said, “We don’t have the capital. Or at least people who are interested in investing that capital here.” Of course, Business First had the big scoop in April about Cordish reviving its $245 million City Center project. But, say our city econ-dev sources, “No one expects that to happen.”
• The commercial real estate world was buzzing this week about two projects. Here’s the first. That new construction in front of Mall St. Matthews is a freestanding building for Jared the Galleria of Jewelry location. The company is based in Akron, and that’s all we know. But apparently it was a very fast deal since no one even sent out any news releases about the new construction, which is on Shelbyville Road. Jared the Galleria is a big jewelry store chain. They have locations in 40 states, with 13 locations in Ohio alone. There must be a lot more money in the jewelry business than we thought. We asked General Growth Properties spokeswoman Dee Snyder about the rumors swirling about new retailers coming. (Swedish fast-fashion giant H & M just announced they’ll open a 27,000-square-foot store at Oxmoor Center.) “Do you have more coups coming?” Her reply was, “Oh yes! Lots!” Stand by.
• The second mystery project is a large white converted farmhouse at 4070 Westport Rd., just east of Trinity High School. The property is owned by Gilmans Point, which includes Ted Mitzlaff and Stuart Ray and Bradford Ray, late of Steel Technologies. Neighbors tell IL that they’ve been assured it will become a flooring company after an extensive, incredibly detailed renovation, which had to follow historic preservation guidelines. But other sources say there’s a totally different operation coming. And the Insiders who know are being uncharacteristically circumspect …..
• It’s really not our story anymore. But everyone is talking about the family feud over Holiday World, a feud that just keeps escalating. The Indianapolis Star has a long story about how members of the Koch family are unceasing in their loathing for one another. The former president tried to suck all the money out of the Santa Claus, Ind. theme park/family business by inflating his salary fourfold … not counting the bonuses he awarded himself. Before he was kicked out. Which makes us wonder what would have happened if the Kochs had followed through on their plans to acquire Kentucky Kingdom and turn it into “Bluegrass Boardwalk.” Beside the inane name.
Actual Business Briefing briefs:
• Sources tell us TNG Pharmaceuticals just came back from a successful trip to Alabama for a capital raise; $700,000 to the former UofL MBA team. The ultimate goal is to raise $3 million to $4 million. Steve Kaufman wrote about these guys at the end of 2012. TNG Pharmaceuticals developed a vaccine called FlyVax, a vaccine that can prevent horn flies from inflicting infectious bites on milk cows. The group already has raised tens of thousands by winning pitch and business plan competitions. A year ago, the company accepted an offer from Greater Louisville Inc. of discounted rents at Nucleus: Kentucky’s Life Sciences and Innovation Center, plus in-kind services from law firm Frost Brown Todd and accounting firm Strothman & Co. Jenny Corbin, student-turned-TNG CEO, wrangled the deal from GLI. Corbin teammates, Larry Horn, Max Brudner, Cory Long and Terry Tate, all graduated from Louisville’s MBA program in 2011. Very cool.
• Ft. Collins, Colo.-based SIDIS is investing in Louisville-based MobileMedTek, taking a majority stake in the company. MobileMedTek integrates hardware, software and cloud-based computing to develop mobile medical technologies (iPad apps, we’re guessing) which improve patient care. MobileMedTek’s first product, ElectroTek is scheduled to be available in 2014.
• The 2nd edition of the Official Guide to Bourbon Country is coming in September. This is the Greater Louisville Convention and Visitors’ Bureau’s publication dedicated to bourbon enthusiasts who are interested in visiting Bourbon Country … our region and our distilleries. It will include stories about master distillers, food and cocktail recipes from the region’s top bourbon chefs and mixologists, as well as a calendar of bourbon events. The theme for guide No. 2 is “The Trip That’s Worth the Sip.” Though we have to agree with one insider who says, “The Sip That’s Worth the Trip” makes more sense.
• Former Lily’s and Tologono Chef Josh Lococo is opening a new restaurant, say our insiders. When we asked where, several sites came up. More as we find out more.
• Jeff Stum, founder of Rooibee Red Tea, has been spotted in discussions with Lil’ Cheezers food truck owners.
• The History Channel is coming to Louisville to shoot a segment on historic hotels.