Welcome to the June 15 Monday Business Briefing, your private business intelligence digest from Insider Louisville.
The University of Louisville is gearing up to build a conference hotel, multifamily residential complex, and various commercial outlets at ShelbyHurst as part of a $189 million capital development effort, according to plans shared with IL in advance of a series of public meetings this week to present the concepts to neighbors as it seeks rezoning of the land.
The project, first announced in 2013 as the university applied for tax-increment financing at the site and now being fleshed out, is the latest phase of U of L’s multimillion-dollar makeover of its Shelby Campus, begun in 2009 as a joint effort between the U of L Foundation and NTS Development Company, a private developer. The university is the master developer of the project via an entity called the U of L Development Company (ULDC), which is housed under the Foundation, a separate nonprofit fundraising entity.
According to the plans, the hotel would be just north of Shelbyville Road with its main entrance on North Whittington Parkway. Directly south would be two commercial spaces, each roughly 7,000 square feet, with another five similarly sized parcels to the southwest of the hotel and across Whittington. North of that portion, on Whipps Mill Road, U of L is proposing a multifamily residential complex. And to the east would be a collection of 10 buildings of varying sizes all zoned commercial.
Last month, U of L President James Ramsey presented a rough outline of the plan to the board of trustees, saying construction would take place in 2017 and 2018, and create more than 2,500 temporary jobs. He said the developments would generate more than $95 million in direct and indirect income, and nearly $13 million in state and local taxes. Under the university’s TIF agreement at its Shelby Campus, 80 percent of the local taxes generated there would be rebated to U of L.
ULDC owns the tracts of land up for rezoning, and Smith said it is premature to discuss potential owners of the developed properties. ULDC and NTS have partnered to build three office complexes on the campus; so far, they are home to corporate headquarters including Churchill Downs, NTS, Semonin Realtors, and Stifel Nicolaus, a financial services company.
Kathleen Smith, Ramsey’s chief of staff, told IL the conference hotel would be equipped with the latest technology to serve the Shelby Technology Research Park, the collection of academic buildings at the center of the campus.
“This development has been central to President Ramsey’s strategy for converting non-performing university assets into revenue-generating assets to create financial aid for U of L’s students and better salaries for U of L’s faculty and staff,” Smith said. “The revenue from the Park’s development is and will continue to be channeled into resources for the university to defray the cost of college for the citizens of Kentucky.”
Ramsey has long argued that as state contributions to the university have declined, the Foundation has created new investment strategies to support the university (this year was the first in which the Foundation’s direct contributions to U of L’s academic operating budget exceeded the state’s). In doing so, it has become one of the biggest developers of commercial space in the city — ShelbyHurst and Nucleus are the prime examples — generating consternation among private developers that must compete with the taxpayer-backed juggernaut to land major corporate tenants (Atria occupies half of the Nucleus building). Ramsey seemed to acknowledge that conflict — at least in a tongue-in-cheek way — during the last trustees meeting, calling the strategy “crass.”
Foundation attorney Glenn Price of Frost Brown Todd told IL that ULDC expects to file development plans for the three tracts soon. The meetings will take place on June 16, 17, and 18 at 6:30 p.m. on the Shelby Campus.
Smith also said the university would seek to continue its partnership with NTS — which is almost 50/50 with U of L on ShelbyHurst thus far — as the next phase of developments get started, although the parties have not finalized terms.
Hudson Holdings establishing regional office in Louisville
The Florida-based developer planning an extensive historic renovation of the Starks Building is establishing a regional office in Louisville. And it plans to begin work on renovations to the 14-story tower on Fourth Street and Muhammad Ali Boulevard next month.
In a wide-ranging interview late last week, Hudson Holdings Founder and Principal Steven Michael laid out his firm’s plans for the Starks — and intentions for the city — to IL.
“We want to change the benchmark and create a new benchmark in Louisville,” he said.
That begins with the full historic renovation of Starks, he said, which he wants to become an open, inviting public space — at least in parts. Much of the firm’s plans have already been reported. Those include adding restaurants and a high-end fitness center to the lower levels, a 12,000-square-foot ballroom on the first floor, renovated Class A office space on the third through fifth floors, hotel rooms on floors six through 10 (Michael declined to name the flag, although he said a deal is close), and luxury apartments on the top four floors, as well as a rooftop restaurant and bar. They’re also replacing the mechanical, electrical, plumbing, and HVAC.
Michael said Hudson Holdings will also restore the atrium — one of the defining features of the Starks — to its original look and feel, starting with tearing out the escalators. He said the atrium would be the centerpiece feature of the firm’s broader effort to make the Starks a public space.
“We want this to be a landmark public gathering space,” he said. “It’s located right in a spot where I think it could be. That’s why we’re putting in all these public amenities.”
Michael said mixing the four uses — which is unusual here, save the coming Omni — is the only way to pay for the $80 million historic renovation, as single-use structures of that size are becoming obsolete. He added that the residences would have a separate entrance (on Muhammad Ali Boulevard), as well as concierge-style services reminiscent of a five-star hotel.
He expects construction to start early next month and be complete by the second quarter of 2017.
Michael, whose firm is looking at other properties here, including the Republic Building and the old Water Company headquarters, has clearly fallen for the city. In conversation with IL, he laid out a vision for the Fourth Street corridor stretching from Starks south to Broadway, saying he expects the continued growth downtown to drive new commercial investment in the next five years. He said he expects Hudson’s projects to lure other investors here, and to help set a standard for adaptive reuse that can be copied locally (although Henry Clay developer Bill Weyland might have already done that).
In the middle of last week, Hudson Holdings — the bulk of whose business is adaptive reuse of historic structures — made another huge acquisition: the former Huntington Building in Cleveland, once the second-largest office building in the U.S. Michael said the firm will invest $275 million in a restoration and reuse project of the grand and ornate structure that is almost identical to the work at Starks. As in Louisville, the firm is exploring state historic tax credits for the Ohio project. It will be managed from the Louisville regional office.
Here’s how much CVB is spending on incentives to compensate for the convention center’s closure
The planned two-year closure of the Kentucky International Convention Center — from August 2016 to August 2018 — to make room for a $180 million renovation and expansion is going to cost the local economy. We don’t know exactly how much; there’s been no comprehensive study of the loss in economic impact. Using existing studies, IL has determined it would result in roughly $163 million in lost spending, jobs, and wages over 24 months. The Greater Louisville Convention & Visitors Bureau says the expanded facility will increase the economic impact of the KICC by 22-25 percent; even with that, it would take a decade to cover the losses from the two-year closure. (Read that analysis here.)
Still, CVB CEO Karen Williams and Kentucky State Fair Board CEO Rip Rippetoe are defending the closure at public and private events, as they did late last week before the Rotary Club. The two officials argue keeping the convention center open during the project would increase costs and extend the timeline significantly. Rippetoe did not provide further details when asked.
In the interim, the CVB has been working to preserve the convention business it had already booked for those two years from taking off for a city with a functional convention center. Williams says of the 17 citywide conventions booked during the planned closure, seven have confirmed they will stay, two have cancelled, and the rest are negotiating. And part of those negotiations include the CVB — in partnership with local hotels — offering direct incentives, which is unusual.
Williams tells IL her agency — which receives the vast majority of its funding from taxes on hotel stays — is spending as much as $500,000 on incentives, all of it drawn from CVB’s reserve funds. Which is actually fairly low-ball — the agency has an $18 million annual budget and expects to benefit this year from a projected 5-6 percent increase in revenues from the “bed tax.” The size of the reserve fund fluctuates, as the CVB is also the legal backstop on the bonds for the convention center.
“That’s what reserves are there for,” Williams says. “In the convention business, when we have a downturn in the economy that happens, or if you have something that a group — this is what you use it for, to dissuade the concerns of people.”
Urban Land Institute now has a district council in Louisville: Here’s a positive sign that the progressive land-use thinkers and planners here are being taken seriously. The Urban Land Institute, a national and global gold-standard for forward-thinking land-use, design, and smart development policy, is getting a Kentucky district council that will be centered in Louisville. Translated: We now have a group of dedicated land-use and urban design professionals who will have at hand an international resource for publications, white papers, studies, and product councils focused on specific real estate vehicles such as retail, multifamily, and so on. Meaning Metro officials and the development community will have access to a trove of best-practice data and information.
“Our challenge is to create locally relevant programming and locally relevant events that are placed in the context of national trends and events as well,” said Kevin Fennell of GBBN Architects. He and other pros have partnered with Metro officials to establish the group. ULI National approved the Kentucky focus in November, and the group is now on the move to draw in members. Here’s an example of what they do: Last Wednesday, the group brought Oklahoma City Mayor Mick Cornett to town, to discuss his city’s investment in public projects and infrastructure — and how they used it to leverage private investment at a ratio of about three to one — via its own version of the local option sales tax. Expect more along those lines.
Renovations ongoing at the Palace: If you’ve noticed some construction hustle at the Palace Theater lately, you’re not imagining things. The historic venue — which is owned by Live Nation — is in the process of a $130,000 interior renovation that includes changes to seating, the extension of viewing platforms, and the addition of 31 handicapped-accessible viewing “stalls.” That’s according to a construction permit filed with Metro’s Department of Codes and Regulations last month. Contacted Friday, Live Nation wasn’t ready to reveal full details. We’re told to expect a rollout as the project nears completion in the coming weeks.
Preservationists looking for input in advance of charrette on Omni site: We told you recently about the National Trust for Historic Preservation’s upcoming charrette, which will gather stakeholders and design professionals to consider the fate of the old Water Company building, which will be demolished to make way for the downtown Omni unless a private interest presents a plan — and funds — to move it by later this month. In advance of that meeting, Preservation Louisville is seeking public input on what to do with the building. If you’d like to weigh in, here’s your chance.
Humana engaged in contract negotiations with HCA: Louisville insurance giant Humana is engaged in what appear to be some pretty heavy contract negotiations with Nashville’s HCA, the nation’s biggest for-profit hospital operator. Should the negotiations fail, it would leave a large number of Humana’s Florida customers scrambling to find new health care providers. Humana’s Florida customers were alerted to this dispute on June 3 via a letter that said: “Effective July 10, 2015, HCA Health System hospitals and ancillary providers will no longer participate in your Humana HMO plan.” Humana has close to 1 million Medicare patients in the Sunshine State, while HCA is that state’s largest for-profit hospital chain, with 46 hospitals and/or surgery centers. Carol Gentry, writing for WGCU in Fort Meyers, Fla., reported that letters such as the one sent out by Humana are often false alarms, as insurers and hospitals typically reach agreements just before the deadline expires.
Mitch Lubitz, a Humana spokesman, sent this response to IL: “Humana’s existing Florida Medicare and commercial network agreement with HCA Florida expires July 10, 2015. Humana is actively engaged in contract negotiations with HCA, and we remain hopeful we will retain in-network access to these hospitals for our Florida health plan members.” HCA did not return a request for comment. —David Serchuk
Two local coffeeshops take national awards: If Louisville is a bourbon town at night, we’re a coffee town in the morning. And judging by two local companies’ runs in the regionals of this year’s Coffee Fest, those mornings are always better with a cuppa. Quills Coffee took first place in the Central Regional of the America’s Best Coffeehouse competition, and Vint/Heine Bros. took third. Competing baristas presented specially curated offerings and were judged on beverage quality, customer service, and their ability to work together. The Central Region included entrants from 22 states and provinces in the U.S. and Canada. The finals are in Portland, Ore., this fall. For details on the experience, check out Quills’ blog here and Vint’s Facebook page here.
Which Wich sandwich shops coming to Louisville: Here’s some news for you bun-loving gourmands: The burgeoning chain Which Wich is opening a location at Old Brownsboro Crossing by mid-to-late August. Which Wich offers 51 customizable sandwiches with the option of many more combinations, including meat and vegetarian options, as well as shakes, cookies, and chips. The local franchise is owned by partners Jason Matzek, Day Bayer, and Jason Padget. Matzek said they are committed to opening a second shop within the next year, though they don’t have a location yet. “It fills a creative void in the current landscape of sandwich shops,” said Matzek. “There’s a lot of sandwich shops, but not a lot of people doing it right.” Matzek said the partners are also committed to making large charitable contributions in the community. The plan is to hire 20 employees for the first location, with hiring to begin in July. —David Serchuk