Top 10 Business Stories in 2015
University Medical Center Raises the Region’s Healthcare Game
By Rebecca Friedman I Photgraphy by Benjamin Benschneider
Though the sparkling new $1.1 billion University Medical Center is a far cry from its predecessors — which include the former Charity Hospital, University Hospital and the Interim Hospital of Louisiana — their legacy is visible from the first step into the building.
From the 2,000-pound bronze case seal embedded in the floor of the hospital’s atrium — an exact replica of the one in the floor of Charity’s lobby — to the golden murals depicting the figures adorning the outside of Charity Hospital’s iconic art deco facade, the nod to history is clear.
But that’s about where the similarities end. Unlike its most recent predecessor, the Interim Hospital of Louisiana, which was never intended as a permanent home for city’s ‘charity’ care, the new UMC is 1.6 million square feet of world-class medical technology, architecture, and even artwork. And the 34 acres between Tulane Avenue and Canal Street on which it sits are projected to serve as a catalyst for development in the neighborhood, bringing more than 28,000 square feet of retail space as well as health care workers, patients and visitors to support those businesses.
Real estate in the area has also seen a bump with the hospital’s opening. Developers and real estate professionals alike have observed rising prices for home sales as well as rentals, with an increasing number of health care workers seeking housing near the BioMedical district. This trend is expected to continue as UMC expands its labor force in the coming months.
The facility houses 446 beds, including 60 for mental health patients, and is the region’s only Level 1 trauma center. With medical professionals from LSU and Tulane, it serves as the state’s leading teaching hospital, training the next generation of doctors, nurses, and medical staff, many of whom will remain in the area at the conclusion of their training.
LCMC Health, which manages UMC in addition to several other area hospitals, believes that these features, combined with the state-of-the-art facility, will increase UMC’s competitive advantage over other regional providers in attracting a greater proportion of paying patients – a segment that is critical to sustaining the hospital’s financial strength. UMC is contractually bound by the state to continue providing care to indigent patients, and maintains that service as a core part of its mission, but without adding more insured patients to its mix, the hospital’s financial future is a bit more uncertain, given the ongoing challenge of securing funding from the state.
If all goes according to plan, however, the hospital’s leadership believes that UMC can become a true destination health center, rivaling those in Birmingham and Houston to attract patients from across the South seeking high-quality care. With the $1 billion VA hospital next door slated for completion in 2016, the long-held dream of a thriving BioMedical district in New Orleans could at last become a reality, revitalizing both our local healthcare sector as well as a long-neglected downtown neighborhood.
The BP Settlement: Spreading Money Like Oil
By Keith Twitchell
Just as it was difficult to quantify the amount of oil spilled in the Deepwater Horizon disaster on April 20, 2010 — 3.19 million gallons is the most recent estimate — more than five years later, the numbers are finally coming in for the settlements. They include:
• $6.8 billion to the state of Louisiana
• $45 million to the city of New Orleans
• $53.1 million to Jefferson Parish
• $10 billion (approximately) to businesses and individuals across the Gulf South
The payments are part of an $18.7 billion mass settlement the oil giant reached with five states on July 2, 2015.
So how will it impact regional businesses?
The first factor is how the money is spent. “We will be under a microscope,” said Greg Rusovich, chair of the Business Council of New Orleans and the River Region. “It is critical to spend it with fiscal integrity and with water management in mind.”
Assuming a large portion does go to coastal restoration and water management, this creates enormous opportunities for the businesses that provide the design, engineering, construction, and eventually maintenance of these projects. Coupled with other new efforts related to water management, this could be the genesis of an entire economic sector.
There is another vital reason to go this route, observed Michael Hecht, CEO of Greater New Orleans Inc. “The most important impact of the settlement is that it gives Louisiana a major opportunity to stabilize the coast, which is a prerequisite for the future viability of the regional business community.”
There are problems, however. The first is that the funding simply comes too late to save many businesses. Further, as Guy Williams, president of Gulf Coast Bank, pointed out, “The spill has made it harder for many small businesses to compete in the Gulf region because they can’t satisfy all the new regulations.”
Crude Reality: Oil Prices Plummeted
By Chris Price
With gasoline prices as low as $1.67 a gallon in New Orleans at the end of October, drivers were smiling when they pulled up to the pump. But their glee is offset by distress in the local oilfield industry and government leaders who rely on the commodity to fill coffers and deliver on budgets.
In the past year, crude oil prices have dropped 46.5 percent, from around $80 a barrel to $42.80. In the same 12-month period, local gas prices dropped 33 percent from an average of $2.85 to $1.91, according to louisianagasprices.com, a website with real-time oil and local gas prices.
Don Briggs, president of the Louisiana Oil and Gas Association, said 73 active oil and natural gas drilling sites across the state were operational in 2015, compared to 110 last year at this time. Only seven on-shore drilling sites are working in south Louisiana, compared to 13 last year.
That reduction has caused the New Orleans area to lose as many as 8,800 jobs in oilfield support services and construction this year, according to The Louisiana Workforce Commission.
Low prices have already caused layoffs in the oilfields and could impact other industries, including health care and higher education. About 13 percent of the state’s revenue is tied to oil and gas industry taxes, Briggs said. Without that income, services have to be cut.
“Every time the cost of a barrel of oil drops a dollar, it’s equivalent to about $12 million dripping out of the state budget,” he said.
The forecast for improvement is murky at best. Fourth-quarter gas prices are generally lower because winter-blend gasoline is cheaper to produce than summer blend. In addition, OPEC has not been keen to increase prices as an economic slowdown in China has limited demand for fuel and the pending deal with Iran to stop nuclear weapons development would allow a glut of Persian oil to enter the world market, further increasing supply.
By Rebecca Friedman
More international carriers, increased direct flights and added flight connectivity are just some of the economic drivers behind the $826 million Louis Armstrong New Orleans International Airport development.
A three-story, 650,000-square-foot, world-class terminal budgeted at $650 million and scheduled to open in May 2018 will be constructed on the north side of the airport close to Interstate 10. The new terminal will include two concourses, 30 gates and a consolidated security (?) checkpoint.
In addition to 13,000 construction jobs, the project is expected to have a $1.7 billion dollar impact from construction and an annual $3.2 billion economic impact on tourism. Existing concourses A and B will be torn down, as well as part of concourse C, to make way for businesses that need to locate near the airport.
“A well-designed and functioning airport is essentially a shopping mall with airplanes,” says Michael Hecht, president of Greater New Orleans, Inc. “You want to drive as much non-airline revenue as possible, including retail, to reduce the burden on airlines themselves.” The goal is to lower fees charged to airlines, which in turn would lure more domestic and international flights to New Orleans.
“One of the most important factors is the ability to increase international travel to New Orleans,” adds Lt. Gov. Jay Dardenne. “International visitation increased by 26 percent during my time as lieutenant governor, and there’s potential for even greater growth.”
Efforts are underway to bring additional international flights to New Orleans. While Copa Airlines began offering nonstop service to Panama on June 24, Hecht says talks continue with British Airways and Air France to start direct service to London and Paris.
Adding to the airport’s new efficiency plans are seamless connections between concourses and 2,000 parking spaces. The overall development plan includes an $87 million flyover to improve access from the interstate, a $72 million dollar power plant, and $17 million for an on-site hotel.
“The key is to try to make New Orleans more attractive as a potential hub for airlines in the ever-changing world of air travel,” says Dardenne. “Any improvements to an aging facility is going to make this city more attractive to travelers.”
A Thriving Port
By Pamela Marquis
This October marked the first anniversary of the return of Chiquita Banana to the Port of New Orleans after four decades.
“This has been a great boom to the port, both in terms of the inbound cargo of bananas to our port, but also the outbound cargo of paper and supplies back to South America,” said Matt Gresham, director of external affairs.
After more than 10 years of back-and-forth negotiations, the port and Louisiana economic-development officials succeeded in their bid to win back Chiquita from the Port of Gulfport in Mississippi.
The proposal included: $11.3 million to offset the company’s costs over the next 10 years, $2.2 million for a ripening facility and another $2 million offered by the port for infrastructure improvements such as refrigerator-container electrical connections. The $11 million is performance-based on the amount of cargo Chiquita actually brings to New Orleans.
According to port officials, the return of Chiquita gives the local economy a major boost. In addition to bringing almost 350 full-time, high-paying jobs, the move is expected to have an impact on the port of about $485 million over the first 10 years of activity.
Also, beginning in April 2016, Carnival Cruise Line will offer long weekend cruises on Carnival Triumph, which will set sail from New Orleans, headed to Cozumel and Progreso, Mexico. This expands capacity on the company’s four- and five-day short-cruise program from New Orleans by 34 percent.
“We hear again and again that when people choose to use New Orleans for their cruises they get two vacations in one,” says Don Allee, the port’s director of cruise and tourism. “They get all that is New Orleans: the food, culture and music, and then they get to embark on a blue water cruise.”
Allee says that New Orleans is one of the fastest-growing cruise markets in the country and that he expects to see continued increases to that segment of the port’s business. That’s good news — according to Allee, last year 1 million passengers cruised out of New Orleans.
Yuhuang Chemical is Moving In
By Pamela Marquis
LEFT TO RIGHT: Charlie Yao, CEO of Yuhuang Chemical Inc.; Jay Dardenne, Lieutenant Governor of Louisiana; and Jinshu Wang, Chairman of YCI Parent Company, Shandong Yuhuang Chemical Co. Ltd.
More than a year ago, St. James Parish learned that one of China’s leading chemical companies, Shandong Yuhuang Chemical, and its newly formed Yuhuang Chemical Inc. (YCI), would build a $1.85 billion methanol complex in the parish. The move marks the first major direct investment in Louisiana by a mainland Chinese company.
“We had an official groundbreaking on September 18 in St. James Parish,” said Charles Goebel, plant manager, Louisiana operations, Yuhuang Chemical Inc. “We were honored to host Lt. Gov. Jay Dardenne, as well as Consul General Li Qiangmin for this event.”
The three-phase project will begin in earnest with the construction of a methanol plant next to the Plains All-American Pipeline terminal beginning in 2016. Operations will begin there two years later. Yuhuang Chemical holds an option to buy more than 1,100 acres to build on in the future.
In the next phases, the company plans to build a second methanol plant and a methanol derivatives plant. The two methanol plants will have a combined annual capacity of 3 million metric tons of methanol.
“To date, we have used several Louisiana firms to help us with our early project development activities; these firms include regulatory consultants, engineering firms, surveying firms and legal assistance,” Goebel said. “YCI has engaged with Amec Foster Wheeler for the EPC portion of our project. Amec Foster Wheeler is in the process of building their local vendor list in the execution of construction, which includes businesses and services from St. James Parish and the state of Louisiana.”
In addition, YCI, along with its partners Amec Foster Wheeler and Air Liquide, will host a vendor information session in the first quarter of 2016 to provide information to St. James Parish and Louisiana businesses interested in joining them in the execution of this project.
The Proposal to Yuhuang
The state offered Yuhuang Chemical an incentive package that included $9.5 million to be paid over five years beginning in 2017 to offset infrastructure costs of the project; and $1.75 million to be paid over 10 years to partially defray the costs of necessary riverfront access and development. The project expects to create 400 new direct jobs, with an average annual salary of $85,000 plus benefits. In addition, Louisiana Economic Development (LED) estimates the project will result in 2,365 new indirect jobs, for a total of more than 2,700 new jobs in the southeast region of Louisiana and surrounding areas of the state.
St. James Parish President Timmy Roussel said he’s excited for what the jobs will mean to locals.
“I come from industry,” he said. “I worked for more than 40 years at various plants, and it afforded me a great style of life, one where I could afford a lot of things for my family. Having Yuhuang here means those living in St. James will have those same opportunities.”
Goebel praised Louisiana for its support of the move.
“The state of Louisiana and the Louisiana Department of Economic Development have been wonderful partners since the beginning,” he said. “Working with us to determine the optimal site for our mega project, the incentive package they offered, were all factors in our location decision. In addition, the local St. James Parish community leaders and government have been open and welcoming to us.”
YCI has already begun hiring. The company hopes employment will reach 200 by 2017 and 400 six years later.
“We’ve encountered the same challenge as everyone else during this economic renaissance — the shortage of skilled labor,” said Goebel. “We have been working with LED and other community organizations to engineer solutions.”
How Cultures Blend
In August of last year, St. James Parish embraced YCI and its Chinese heritage by unanimously passing a resolution allowing Roussel to sign a letter of intent formalizing ties between the parish and Dongming County government. Dongming County, a region of nearly 700,000 people, is located in Shandong province in northeastern China about 400 miles south of the country’s capital, Beijing. Notably, the city of Heze in Shandong is headquarters of Shandong Yuhuang Chemical Co.
Goebel said there are a lot of similarities between the two cultures: “Louisiana culture is about food, family, faith, and football,” he said. “Chinese culture also reflects deep traditions involving family, faith and food. We don’t reflect on our differences but instead seek to learn different approaches to commonalities. Both cultures share the same high work ethic, so we have come together as a high-powered team to execute our project.”
About Shandong Yuhuang Chemical Co. Ltd.
Shandong Yuhuang Chemical (Group) Co. Ltd. (SYC) is a China-based petrochemical group of companies with total fixed assets of $5 billion, 2013 sales over $4 billion and more than 5,600 employees. The company ranks No. 456 among the leading 500 Chinese companies and No. 24 among China’s top 25 chemical companies. Shandong Yuhuang produces and markets a range of chemicals, including propylene, isobutene, butadiene, isoprene, styrene, toluene and others.
More Methanol for St. James
In mid-October of this year, Syngas Energy Holdings, LLC located in Channelview, Tex., announced it will invest $360 million to build and operate a grassroots methanol production plant, also in St. James Parish, on a 130-acre tract of land with access to the Port of South Louisiana.
The proposed plant will have a production capacity of 500,000 tons/year. Syngas Energy Holdings will buy the property from NuStar Energy LP, San Antonio, which operates a nearby 11-million-barrel crude oil terminal and logistics complex that provides storage and shipping capabilities for specialty liquids such as methanol at that site.
NuStar’s St. James complex will provide rail and barge transportation services for the proposed methanol plant, and Syngas Energy plans to also build additional on-site storage capacity at the plant to enable product shipments by truck.
Yuhuang employees at the groundbreaking ceremony in St. James Parish on September 18.
According to officials, details such as permit approvals and a final investment decision have yet to be completed, but Syngas Energy expects to begin construction on the project during second quarter of 2016. In addition, the company plans to start hiring additional senior management for the project in the first quarter of 2016, with broad hiring of operators and other plant functions due to begin during in the third quarter of 2017.
To secure the project, the state of Louisiana offered a competitive incentive package that included the comprehensive solutions of LED FastStart – the state workforce development program. The company also is expected to utilize the state’s Quality Jobs and Industrial Tax Exemption programs.
A Louisiana-China Economic Forum
To further explore the new and continuing union between Louisiana and China, and the increasing importance of the Chinese market for Louisiana, on November 20 the Confucius Institute of Xavier University hosted the first-ever Louisiana-China economic forum to analyze the overall business and investment environment in the state.
“As an academic unit, the Xavier Confucius Institute aims to provide a platform of discussions among government officials, business leaders, and the academic community on the current state of economic exchanges with China,” said Yu Jiang, director of the institute. “This communication of different perspectives and ideas will help us better understand where we are and how we could improve in drawing external investment, supporting business operations, and creating jobs.
The forum explored three themes: contextual, operational and job opportunities and workforce preparations; focus on the overall investment environment in Louisiana; and how Louisiana competes with other states for these valuable industries.
Other topics included potential jobs that exchanges with China will bring, and the skill set students should acquire in preparation for such jobs.
The institute aims to contribute to regional economic development by enhancing its students’ international competency and providing first-class Chinese-language education on the Xavier campus and at local K-12 schools.
“Because of a fine balance of manufacturing work and environmental protection, the establishment of the Yuhuang Chemical complex in Louisiana could create hundreds of direct and indirect jobs, and contribute great benefits to regional economic development,” Jiang said.
“We are really blessed to have so many opportunities, and that makes it a good thing,” said Roussell. “We have been very fortunate to have those companies making methanol locate here. With a 35 percent procurement rate for all these industries in our parish, we are going to have a lot of good things to offer our residents and businesses.”
Film Tax Incentive Cap
By Kim Singletary
Since Louisiana first began offering tax incentives to the film industry in 2002, production in the state has been steadily growing, eventually earning the state the nickname of “Hollywood South.” In 2013, Louisiana surpassed California as the “film production capital of the world” — frequently drawing big budget films and gaining notoriety as the backdrop for Oscar-winning productions including “The Curious Case of Benjamin Button” and “12 Years a Slave.”
Thirteen years into the boom, Hollywood South took its first big hit this year with the passage on June 19 of HB 829. The bill placed the first cap on tax incentives, and one that was much lower than anticipated: $180 million.
Considering that during the most recent fiscal year ending June 2015, Louisiana issued $308 million in credits, the industry was understandably concerned.
While it’s too early to gauge all the effects of the bill, estimates are that while the state may see a decline in large studio projects — which have included big budget action flicks like “Jurassic World,” “Dawn of the Planet of the Apes,” and “Fantastic Four” — smaller independent projects will likely increase.
In the August issue of Biz New Orleans, Leonard Alsfeld, president and CEO of FBT Film, the largest film credit broker in Louisiana, said the cap may prove good for the industry.
“Sixty percent of the credits issued in the last five years were to the big studios: Paramount, Disney, MGM,” he said. “I think that with the cap, those $100 million-plus movies probably won’t be coming back in the next three years, but I don’t read that as a bad thing. Those studios import so much of their work that local workers are often given the lower level jobs, not the high paid jobs we want.”
HB 829 actually provides greater incentives for local workers and projects, including an additional 15 percent credit if a film if a Louisiana company owns or options the project’s copyright for a year, and an additional 15 percent for the use of Louisiana music. The bill also lowers the minimum amount that smaller local filmmakers have to spend on a film to qualify for credits from $300,000 to just $50,000.
The Restaurant Boom
By David Lee Simmons
PICTURED: Alon Shaya
The post-Katrina restaurant boom was a bit of a delayed explosion — say, around 2010 — but it continued in rare form this year with a massive number of restaurant openings that dwarfed the closings (both in quantity and quality).
As New Orleans marked the 10th anniversary of the devastating hurricane, a new restaurant opened practically each week, and we’re not just talking about the mom-and-pop shops like Big Cheesy, either.
The year saw the much-anticipated opening of both Alon Shaya’s solo namesake effort, the Israeli restaurant Shaya, as well as “Top Chef” contestant Nina Compton’s Compere Lapin. Neither diners nor critics were disappointed: Shaya received rave reviews from local critics, and Esquire iced it by naming it the “Best New Restaurant in America.” Compere Lapin, which also benefited from a rock-star drinks team of bar manager Ricky Gomez, Abigail Gullo and Zac Augustin, drew similar praise and remains a tough reservation to get.
There also were notable openings by such familiar names as Justin Devillier (Balise), John Besh (Willa Jean) and Adolfo Garcia (Primitivo), as well as the massive St. Roch Market. Where, or when, will it end? Not anytime soon, especially considering that, as Biz New Orleans’ Peter Reichard recently noted, restaurant sales have eclipsed grocery sales for the first time ever.
It says something that a sudden rash of brazen robberies — at Patois, Café Atchafalaya and Monkey Hill Bar — hasn’t prevented diners from going out.
“We don’t think it’s reached a saturation point,” said Erica Burns, communications director for the Louisiana Restaurant Association, who called 2015 one of the best of the post-Katrina years. “Some will succeed and some won’t. More restaurants opening doesn’t take away from others (already open). We are of a mind there’s room for all kinds of restaurants. It gives people a choice.”
While openings far overshadowed closings — which included the loss of two popular barbecue joints, NOLA Smokehouse and Squeal BBQ — there were different kinds of losses in a city that loves its restaurant history. This year saw the loss of Brennan patriarch Dick Brennan Sr., soul and Creole food legend Willie Mae Seaton, and of course, the godfather of Cajun cuisine, Paul Prudhomme. Their restaurants live on, but the city’s spirit dampened just a little with their passing.
Federal Historic Tax Credit Continues to Shape Downtown
By David Lee Simmons I Photo Cheryl Gerber
The transformation of New Orleans’ Downtown continued with a vengeance in 2015 as a steady stream of older, often historic buildings received major makeovers — thanks to the federal historic rehabilitation tax credit program.
The Saenger Theatre, Oretha Castle Haley Boulevard, and an endless stream of Downtown condos, hotels and mixed-use residential complexes —were all bolstered by a 20-percent tax credit offered on rehabilitation costs to income-producing buildings that are on the National Register of Historic Places or are contributing members to a National Register Historic District.
The tax credit program is administered through a joint effort between the National Park Service and Internal Revenue Service. To qualify, rehabilitation expenses must amount to greater than the value of the building, must be completed according to the Secretary of the Interior’s Standards for Rehabilitation and must be retained for five years.
According to some estimates, the Downtown population has doubled since Katrina, with occupancy at nearly 100 percent. Just a few of the recent residential projects include the Kailas conversion of the 19-story Canal Bank & Trust Building at 210 Baronne St. to the Four Winds residence (which still houses First NBC Bank at the bottom), and the 29-story skyscraper at 225 Baronne St. (once the home of Boeing back in the 1960s), which now hosts an Aloft Hotel and The Strand apartments — courtesy of HRI Properties. Also there’s the conversion of the old 1926 Triangle Building at 833 Howard Ave. by de la Tour Holdings into The Howard, an upscale residential spot.
When will it end? No time soon, apparently. The new year could see Ley Line Development’s makeover of two old commercial buildings into the Catahoula Hotel on Union Street. There’s also the anticipated (and controversial) building of condos where the historic Woolworth Building once sat at the corner of Canal and Rampart streets. There are others planned for 2016, but all eyes are on the planned redevelopment of the towering World Trade Center overlooking the Mississippi River into a Four Seasons hotel, though that might not see completion until 2018.
Dynastic Dilemma: The Benson Family Feud
By Chris Price | Photo AP Photo/Stacy Revere
Attorney Randy Smith, who represents the estranged family members of Tom Benson, reads a previous ruling from a Texas judge outside of Civil District Court in New Orleans on Tuesday, Feb. 10, 2015.
After a decade-plus of grooming his granddaughter, Rita Benson LeBlanc, to take over ownership of the New Orleans Saints and New Orleans Pelicans, Tom Benson called an audible and announced in January his intent to hand over the franchises to his wife of 10 years, Gayle Benson.
With an estimated combined value of $2.17 billion, the change in plans for the franchises split the family — with sides lining up in opposition to litigate the teams’ future.
Benson’s daughter, Renee LeBlanc, who was to receive a 60 percent interest in the family businesses, and her children, Ryan LeBlanc and Rita Benson LeBlanc, who were to receive 20 percent each, filed suit to challenge the change of plans, saying Benson’s age and illness prevent him from properly running his business empire.
There is a lot of money on the table, and there’s the potential for a lot more to be made in the coming years.
According to Forbes magazine, the Saints rank 23rd out of 32 NFL franchises with an estimated value of $1.52 billion, 36 percent higher than a year ago. Meanwhile, the Pelicans rank 28th out of 30 NBA teams with a value of $650 million, a 55 percent increase from the previous year.
Forbes says the average NFL team is worth $1.97 billion, 38 percent more than last year, while the average NBA team is worth $1.1 billion, 74 percent more than last year. That increase was the biggest one-year gain since the magazine began valuing teams in the four major U.S. sports leagues in 1998.
With the possibility of two NFL teams moving to Los Angeles, the second-largest media market in the country, league owners stand to benefit substantially from the upcoming contract to broadcast games that the league will negotiate with networks.
Pelicans star Anthony Davis is expected to become the best basketball player on the planet within the next few years. He is garnering global attention, which provides the Pels further opportunities for growth and profit.
The issue is still in court, and neither side is talking publicly. But whichever side recovers possession of the teams will walk away with a big win.