Welcome to the April 21 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 minutes before we post.
A reminder: This afternoon … the Big One. Our Insiders Meetup on the Belle of Louisville is from 4:30 p.m. to 6:30 p.m.
Today’s Meetup topic is the upcoming Centennial Festival of Riverboats, with special guest Neville Blakemore, chairman of the festival.
(There is free parking next door at Joe’s Crab Shack. When you arrive at the parking lot, an attendant will ask which event you are attending. Tell the attendant you are with the Insider Louisville Meetup.)
We’re making this the “if you want the job done right, you might was well do it yourself” edition of Monday Business Briefing.
• Despite Business First reporting that Greater Louisville Inc.’s hunt for a new CEO is going just fine, insiders assure us it ain’t. BizFirst dutifully reported Friday it’s a good thing the GLI search went from a promised few weeks to months because there are so darn many worthy candidates. In fact, several people, including former PNC executive Craig Grant, have passed on the job. We understand a woman business leader is a top candidate.
Which is fine.
But we at MBB decided to strike out on our own, with contributors and insiders brainstorming not the names of run-of-the-mill candidates, but the big gets. Our first call was to Chip Hamm, who went from being Yum! Brands’ national real estate manager and franchise developer to an entrepreneur. Chip is involved in multiple deals ranging from franchising Comfy Cow ice cream shops to developing indie restaurants in Louisville and Nashville, including a new spot at Steve Poe’s RiverPark Place development.
And, oh yeah, he’s an attorney with Miller Wells. Chip demurred, pointing out he already has like five jobs, so it would be tough to squeeze in being GLI CEO. But he had a suggestion … a suggestion that makes perfect sense on several levels. Former Kentucky Secretary of State Trey Grayson is resigning as director of Harvard University’s Institute of Politics effective June 1. Grayson, a moderate Republican, wants to return to Kentucky to raise his kids and to be closer to family. Guess who used to be classmates at the University of Kentucky ….
Obviously, we would be surprised if a guy with Grayson’s credentials would jump from The John F. Kennedy School of Government at Harvard to GLI. But if Grayson wanted to make a real contribution in a high-profile Louisville job while positioning himself for another run at office (he lost to Rand Paul in the 2010 GOP senate primary), succeeding boldly at GLI would be a great coup.
We’ll have more on this later today ….
• This is getting serious. The effort to bring a professional soccer team to Louisville raised an additional $300,000 late last week, moving in on the estimated $1 million they need to raise. As IL’s Kevin Gibson reported last week, the team doesn’t have a name yet, but it does have a home pitch and a head coach, so United Soccer Leagues pro soccer is inches from having a Louisville franchise starting with the 2015 season.
And while the deal isn’t signed and sealed, it appears to be getting close!
At a presser last week at Mockingbird Valley Soccer Complex, investor Wayne Estopinal said an agreement is in place with Slugger Field and there are already 1,500 season ticket commitments, including members of the Louisville Coopers, a group of Brits and Americans supporting Estopinal’s drive to bring pro soccer here.
• In 2012, we started hearing from U of L insiders the university is on a downward spiral administratively. In the July 30 Monday Business Briefing that year, we aggregated what they were telling us, including executives such as Dr. Larry Cook making $1 million salaries without actually working.
Those sources also were exasperated over the failures to replace deans. Insiders told us U of L President James Ramsey and Provost Shirley Willihnganz nixed at least 11 candidates in the years since former College of Education and Human Development Dean Robert Felner went to jail in 2009 for misappropriating more than $2.3 million from a federal research grant and school-system contracts.
Only on April 2 did U of L finally name Ann Larson as permanent dean; Larson has been a professor at U of L for 19 years.
Now, we’re hearing from more insiders, as is The Courier-Journal, which has had a series of stories documenting everything from repeated internal fraud to payouts for the people closest to Ramsey, including at recent $347,000 to its retiring lead counsel, Angela Koshewa. (By the way, we hear Jenni Elliot, formerly with Stites & Harbison, will replace Koshewa.)
From an insider:
A recurring pattern there is that of getting rid of folks who are seen as “difficult” – usually these folks simply point out counter arguments or the down side of decisions. The result is a setup for “group think” where the other side of difficult issues isn’t represented. Which leads to bad decisions.
Such as raising $1 billion for its foundation, then building Class A office space all over the city while not bothering to renovate the medical school for decades. (Yes, we interviewed med students.) Not surprisingly, we’ve gotten push back from U of L supporters.
But then the medical school was placed on probation with its accrediting entity, and it was revealed there are literally too few seats in lecture halls for students to sit down.
More as we do our research.
• For the past three years, we’ve been asked this question over and over again: How is it there are so many tax increment financing districts in downtown Louisville, a relatively small area? KFC Yum! Center, of course, has its newly reduced TIF District, that includes 2 square miles, down from 6 square miles. But there are other existing and proposed TIF districts, including one for the Omni complex announced last month on Third Street. See the .pdf below here.
There are also taxing districts dedicated to tourist attraction projects within a block or two of each other, including the Frazier Museum at Ninth and Main, 21c Museum Hotel at Seventh and Main, as well as Fourth Street Live on Fourth Street between Liberty and Muhammad Ali.
We finally got around to calling the Kentucky Department of Revenue, which oversees the TIF districts, and Richard Dobson, executive director of the Office of Sales and Excise Taxes, took almost an hour to walk us through how TIFs work. Department of Revenue officials calculate how much money is generated in the districts, which cannot overlap, Dobson said. In order to calculate the revenue, then assign it to the various projects, “we have to know the parameters” of each special taxing district.
Calculating revenue is tricky, because each TIF has different details. That is, some TIFs direct incremental increases – the amount of tax revenue over benchmark baselines – for sales, payroll and property taxes, and some only one tax category.
Of course, the whole concept is that increased economic activity will generate increased tax revenue, which will be dedicated to projects to help pay for the state and local debt obligations. In theory, that’s great. But for the KFC Yum! Center, TIF revenue has not reached 50 percent of overly optimistic projections, requiring the city of Louisville to pay $9.8 million each year to keep the arena from defaulting.
Dobson confirmed one crucial point. More and more taxing districts within the relatively small central business district means ultimately, there will be a “tipping point” where diminishing returns will render impractical creating new TIF districts in that area.
• Last week, Seminary Woods – which has been rebranded Regency Tower – went into receivership, with NTS now the property manager for owner PNC Bank.
PNC started the foreclosure one year ago. We call it the 1400 Willow Syndrome. Norm Risen built the 14-floor luxury condo tower in 2006 as Seminary Woods. It was fabulous inside and out, and in one of Louisville’s nicest areas. It was also one of the most poorly timed major real estate ventures in Louisville history.
By 2012, at almost $40 million, it became the biggest foreclosure in the past decade with only one buyer at one point. You can see the full suit here.
Like 1400 Willow, the 23-floor condo tower in Cherokee Triangle that’s now one of the most expensive residential real estate projects in Louisville, Seminary Woods is costing its original investors a lot of pain, heartache and money.
Bad timing for Risen. Great opportunity for someone new.
We tried to talk to PNC media people in Pittsburgh to see if there are prospective buyers. But PNC spokesman Fred Solomon said the bank had previous requests to discuss the property, but declined. More as we can pull more of the foreclosure documents, which fill several boxes.
• During the past few months, we’ve lost count of how many posts IL has had about new apartments. But until an insider sent us this link to a New York Times story, we didn’t get it: There are simply too many people chasing too few good apartments in Louisville.
Same with single family homes, really.
Part of the reason for the squeeze on renters is simple demand — between 2007 and 2013, the United States added, on net, about 6.2 million tenants, compared with 208,000 homeowners, according to Zillow.
But Louisville wins largely because we have incredible neighborhoods from Fern Creek to Jeffersontown to Prospect to Iroquois Park to West End. So, in Midwestern cities such as Louisville, residents can stay below the 30-percent ideal maximum they should dedicate to shelter. In cities such as Miami, rent consumes about 43 percent of the typical household income! New York and S.F.? Don’t ask.
Here’s more on the topic from MarketWatch, which has this nifty interactive graphic for whether you should rent or buy across the United States.
• We puzzled over the recent closing of Fat Jimmy’s on Frankfort Ave., one of our two favorites along with Clifton’s Pizza. We thought it might be part of an expansion of the Heine Brothers’ Coffee next door. It wasn’t. We found out last week it will become Eggs Over Frankfort, apparently a breakfast and lunch spot. Due to open in June.
• Lacy T. Smith’s and Dennis Clare’s incredible Palm Springs/Chicago Gold Coast-inspired, mixed-use Main Street development is – like Museum Tower it was to replace – dead. Noooooooo!
This was going to be on the north side of Sixth and Main, where empty facades are all that’s left of the plan for the thrusting towers of Museum Plaza.
From the original announcement:
Louisville attorneys Lacey Smith and Dennis Clare hope to develop the property immediately west of the Muhammad Ali Center. Smith acknowledged that they have not yet secured any tenant commitments. But he said, “We would very much would like to build an Apple Store, an America Girl outlet, a Leggo Land store, and a Johnny Rocket Restaurant and other enterprises of this ilk.”
It was very much our favorite quote of all time! “We would very much like to build an Apple Store downtown.” Well, we’d very much like to fly to the Moon on gossamer wings, and the only thing stopping us is this inconvenient truth called “reality.” An Apple store downtown, indeed.
This from C-J reporter Sheldon Shafer last week:
(Smith) said his group’s plan was to start with a public plaza, a 24-story 300-unit apartment building atop a 600-space parking garage. Later development might have included about 40,000 square feet of retail, office and other commercial development and maybe a hotel. But Smith acknowledged that the effort had not advanced to signing any tenants, or to identifying how it would be financed.
So, no capital. No financing. No city or state incentive support. No REIT or experience developing real estate, much less retail. Nothing even vaguely resembling an actual plan (other than that Apple store.) Yet somehow, this still failed! Shows you just how tough things are right now.
• When we broke the story Wednesday that Mellow Mushroom was going up on Andy Blieden’s property at 1023/1025 Bardstown Road at Highland Avenue, he told us he was under a non-disclosure agreement and couldn’t talk. But now, Andy said, “The cat’s out of the bag.”
The Mellow Mushroom building will start construction in June and probably finish in December, he said. It’ll be two stories, with a second-floor outdoor patio. “It’s going to be a beauty.” Pate Design Group of Atlanta, and Saback Wilson & Lingo of Louisville, are the architects.
• We reported a few weeks ago that peer-to-peer, app-based ride sharing service Uber is coming, something the company has confirmed. Now, we’re hearing Lyft is coming, as well. The website of the San Francisco-based startup states, “Make $20 per hour driving your own car.” That’s all we know, but we’re trying to think through the concept, with fuel and liability issues, not to mention the charming Louisville habit of street names changing, disappearing, then restarting. For example, Dumesnil and Ormsby both theoretically run from Shawnee Park on the west to the Highlands. Except they don’t.
Monday Business Briefing briefs:
• Since the violence of March 22, sources are telling us city government has grand plans for a lot more closed circuit TV cameras, including 100 around the central business district. That’s in addition to 44 at the Big Four Bridge. Surveillance issues aside, sounds like a huge contract for some Louisville company.
• Louisville-based digital branding firm Oohology is cranking. After a move into Cincy, Mark Palmer and Sean Breslin have spun off their original Makespace web business as a separate LLC. Before, it had been a DBA, sort of the filter through which client companies either were directed toward Makespace, the small-business web development side, or toward the larger Oohology shop depending on budget, business footprint or needs. Oohology also will debut its newest company, Webcake, which will go after the hundreds of regional businesses that don’t have websites. More later this week.
• Look for the former Gray’s Bookstore on Second Street on the west side of Jefferson Community and Technical College to be redeveloped into a retail center. It looks like Walter Wagner Jr. Co. Realtors is listing it.
New 10,600 sf development planned for this site of Gray’s bookstore which is across the street from JCTCS on 2nd Street. Four different suites available for lease or they may be leased as one suite. Suite #1, 2,800 sf +/- space with a drive thru , suite #2, 2,800 sf +/-, suite #3, 3,000 sf +/-, Suite #4, 1,700-2,000 sf +/-. Suite #4 is a freestanding building that can be razed or built out. There are approximately 45 off street parking spaces, as well as, off street parking. Great uses are for coffee house, restaurant, call center, office, etc. Please contact listing agent for details.