Baton Rouge’s biggest 2017 business stories: Industrial boom winding down, health care picking up & more

The Advocate

The Baton Rouge area continued in 2017 to grow its economy while thousands of homeowners and businesses worked to recover from the damaging August 2016 flood.

Construction from the state’s industrial boom helped buoy the job market, though it’s winding down from peak levels, while health care created a new wave of activity that will carry into the next two years. Plenty of other events made business headlines in a look back at 2017:

Industrial boom winding down

The massive industrial projects that drove the Baton Rouge area’s economy the past five years are all but complete coming out of 2017, which means growth will slow over the next two years though buoyed somewhat by several health care construction projects.

“The decline in construction employment will have an arresting effect on total employment … especially in 2018,” economist Loren Scott said in the latest version of the Louisiana Economic Outlook.

The “super-heated growth” that took place from 2014-16 will settle to a more modest pace: 0.7 percent growth, or 2,900 jobs, in 2018 and 0.9 percent, or 3,300 jobs, in 2019.

In last year’s report, Scott estimated the Baton Rouge area would add 4,500 jobs each in 2017 and 2018.

Job losses in industrial construction will be partially offset by four health care projects with an estimated combined cost of about $500 million; the Baton Rouge port; and the high-tech sector, Scott said. However, resolving the state government’s “fiscal cliff” — the $1 billion budget shortfall that will hit midyear — likely will hamper job growth.

Statewide, the oil patch-driven recession has finally ended, and Louisiana is expected to add 12,000 jobs in 2018 and 22,300 in 2019, growth of 0.6 percent and 1.1 percent, respectively.

While Lafayette and Houma-Thibodaux aren’t expected to start recovering from the oil slump until 2019, the state’s other seven metro areas will add jobs both years, according to the report.

“If our projections are on the mark, the state should reach 2,013,600 jobs in 2019, the first time it has exceeded 2,000,000 jobs on an annual basis in its history,” Scott said in the report.

Despite the industrial construction slowdown, a number of large projects now underway in the Baton Rouge area continue to generate hundreds of jobs, according to the report. The projects include Shintech’s $1.4 billion ethane cracker and related projects in Plaquemine; Shell Chemical’s $717 million olefins plant in Geismar; and BASF’s $300 million expansion in Ascension Parish.

Other projects also could help reverse the construction lull. Shell is expected to begin construction on a $200 million liquefied natural gas facility in Geismar in 2018. Shintech recently bought the Carville site from Eurochem, which Scott said suggests “a favorable new announcement” may be coming.

Meanwhile, LyondellBasell is considering Ascension Parish as a possible site for a new plastics plant with an estimated price tag of $3 billion to $4 billion, and Methanex is thinking about putting a third methanol plant in Ascension.

Health care picking up slack

The health care sector is expected to give construction a booster shot from projects underway or announced in 2017.

Our Lady of the Lake’s new $230 million Children’s Hospital is the largest project. Construction started in early 2017 on the 350,000-square-foot, 130-bed facility and medical office building. Completion should occur in 2018. Provident Protoncare is planning an $85 million proton radiation therapy center in Baton Rouge that would open in 2019 and will hire 95 people at an average salary of $105,000.

Ochsner is planning a $100 million investment in Baton Rouge, including a new medical office building and 10-bed micro-hospital and surgical center near the Mall of Louisiana. Baton Rouge General announced a $30 million, 10-bed neighborhood hospital in Prairieville that will house a 60,000-square-foot lab, 14-bed emergency room and physician office space. BRG’s second project is a $40 million expansion at its Bluebonnet site, which would add four floors, a helipad and operating room space.

Most of the projects fall within the Baton Rouge Health District, the core of which lies in the Essen/Bluebonnet/Perkins corridor.

Our Lady of the Lake opened its north Baton Rouge emergency room. Officials hope the eight-bed facility will reduce Emergency Medical Services’ response times for nearby heart attack victims.

Flood recovery powers economy

The local economy rebounded from the devastating August 2016 flood. For much of the year, home sales ran far ahead of the pace from 2016.

The housing market was powered by the tens of thousands of people who overnight needed a place to live either temporarily or permanently. Through October, the number of homes sold in the nine-parish area was up by 6.7 percent over the same period in 2016. Despite the sales gains, the median sales price was down by 0.3 percent to $189,353, a reflection of the flood-damaged houses that went on the market and were scooped up by investors.

The stigma of buying flooded properties has been minimal, except in neighborhoods that have repeatedly flooded over the years, said Bill Cobb, an appraiser with Accurate Valuations Group.

At the time of the flood, the local housing market was in healthy shape because of the strong economy. About the only point of concern at the time was the low inventory of houses.

Meanwhile, retail and vehicle sales in the parish hummed along during 2017, aided by people buying new furnishings and replacement automobiles for what they lost in the flood. Through the first nine months of the year, overall sales parishwide were up 5.2 percent to nearly $7.3 billion, according to information from the city-parish finance department.

Megaprojects and megamergers

Megaprojects and megamergers helped drive economic activity in south Louisiana in 2017, although two of the biggest announcements were misses.

Energy giant Sasol scrubbed its proposed plant to convert natural gas to diesel — estimated price $13 billion to $15 billion — as the result of a volatile market and low oil prices. The South African company said it will focus on completing its $11.1 billion ethane cracker at the complex, which was 79 percent complete as of Sept. 30.

H&E Equipment Services swung and missed on a $510 million deal for Neff Corp. after the Miami-based equipment rental firm accepted a competitor’s bid of $596 million. The deal would have nearly doubled H&E’s size. An agreement required Neff to pay $13.2 million to H&E if Neff backed out to accept another offer.

Meanwhile, Lafayette-based home nursing firm LHC Group nabbed Almost Family for $850 million worth of stock. The deal makes LHC the second-largest publicly traded home health company in the country by revenue at $1.8 billion.

Williams Partners LP sold its 88.5 percent stake in Williams Olefins in Geismar for $2.1 billion to NOVA Chemicals, a company based in Canada and owned by Mubadala Investment Co. of the United Arab Emirates.

On the natural gas export front, Houston-based Tellurian Inc. agreed to pay Bechtel $15.2 billion to design and build Driftwood LNG facility near Lake Charles. Fourchon LNG LLC began the federal permitting process for a proposed $888 million export facility at Port Fourchon.

The projects are among at least 11 liquefied natural gas plants proposed in Louisiana with total investment estimated at $88 billion.

Game changer’s rules rewritten

IBM’s Client Innovation Center in Baton Rouge — described originally as a game changer — fell far short of the 800 jobs promised at the four-year mark in mid-2017. The state had put together $147 million worth of incentives to lure the center in 2013, although there was almost no chance IBM could hire enough people to collect that amount.

The state forgave the penalty for missing the hiring goal. Instead, it and IBM announced a two-year extension on reaching the employment goal.

IBM will be required to pay a nonperformance penalty of $10,000 for each job below the 800-job threshold should it fall short of the target number by the 2019 project year. The penalty is 1.5 times greater than in the original agreement.

IBM also said it expects to create a new customer contact center in the city with several hundred additional jobs. Preparations for the new contact center will begin with recruiting activities in 2019, it said.

Separating weed from chaff

LSU and Southern University each picked vendors to run their medical marijuana businesses.

LSU went with GB Sciences Inc., a Las Vegas firm with a focus on biopharmaceutical development and patent applications for a number of cannabis treatments. Over the five-year contract, LSU will get the greater of $3.4 million or 10 percent of gross revenue.

Southern chose Advanced Biomedics of Lafayette, which guaranteed $6 million to the school over the five-year contract. The company also will support research through Southern University Ag Center’s Southern Institute of Medicinal Plants.

BRAC, LABI getting new digs

Two of the major business organizations in the state announced they are getting new downtown offices.

The Louisiana Association of Business and Industry, the state’s leading business lobbying group, announced in August it had reached a deal to buy a building at 500 Main St. and relocate its offices there in 2019. Stantec currently occupies the space, but the engineering firm is set to move into a new building in the Water Campus on Nicholson Drive about a year from now. Stephen Waguespack, president and chief executive officer of LABI, said moving the organization’s offices downtown near state government has been a goal of his since he was named head of the state chamber of commerce in 2013.

LABI moved into a temporary office downtown, taking over the 11th-floor space in the Chase South Tower that had been occupied by Albemarle.

Its temporary offices are a floor above the temporary home for the Baton Rouge Area Chamber. Like LABI, in 2017 BRAC started the process of getting a long-awaited new downtown office.

BRAC is completely gutting its office at 564 Laurel St. as part of a $3.5 million redesign and expansion. The nearly 11,000-square-foot Center for Economic Development is set to open in late summer 2018. This is the first major renovation of the building in more than 30 years.

Adam Knapp, BRAC president and chief executive officer, said the organization needed a new headquarters building. He dubbed the old building, which was covered with black glass, “the Death Star.”

“When you look at chambers of commerce around the country, just about all of them are in nicer digs than we are,”  Knapp said. “The consultants who have advised us have pointed out that the building was a detriment in our economic development efforts.”

Along with giving BRAC a modern look, the new office will allow the 30 full-time BRAC employees to again work under the same roof. The organization has been leasing additional space on Laurel Street for a number of years

Cortana Mall fades out

The final nail in the coffin for Cortana Mall got pounded in during 2017, when Sears and J.C. Penney shuttered their anchor stores.

The spring closures left the mall with four of its six anchor tenants vacant. One of the anchors is a Dillard’s clearance location that only occupies the first level of the store and the other is Virginia College.

In November, Jose Gonzales, a California investor, bought the J.C. Penney store for $850,000 at auction. The deal included the 200,000 square-foot-store and the 12 acres around it. Austin Earhart, an agent with Beau Box Commercial Real Estate, said Gonzales doesn’t know what he will do with the building, but it will be something other than retail.

For years, Cortana was the place in Baton Rouge to shop. But several factors have hurt the center at the intersection of Airline Highway and Florida Boulevard: population shifts toward the southern part of East Baton Rouge Parish, competition from the Mall of Louisiana and a changing retail landscape where the dominant brands aren’t based in malls and online shopping is accelerating.

Moonbeam Capital and Management, the Las Vegas firm that bought Cortana, had touted its experience in revitalizing declining malls, by bringing in call centers, restaurants and entertainment centers. But the company was unable to duplicate those successes locally. In August, Moonbeam put the mall and the former Mervyn’s anchor store on the market for $4 million. That’s less than the $6.15 million the company paid for both properties in 2013.

The vacant Sears and Macy’s buildings are also on the market. Reportedly, there are purchase agreements in place for both buildings.

Local commercial real estate experts have said the future of Cortana involves turning it into something other than a retail space. Suggestions include making it a hub for health care, distribution/warehousing or office space.

Redevelopment agency gets new life

For the past three years, the future of the East Baton Rouge Parish Redevelopment Authority was in doubt. The agency, which has been tasked with redeveloping blighted parts of the parish, was in danger of running out of money because it lacked a funding source. An interim executive director was in charge of the agency; she had only one employee.

But the long-term future of the RDA brightened in 2017. Mayor-President Sharon Weston Broome included $500,000 in funding for the organization in the city-parish budget for 2018. She also gave the organization additional responsibilities: administrative duties over several “pass-through” Community Development Block Grant funds that had been overseen by the Office of Community Development. In exchange, the Redevelopment Authority gets 6 percent of the grant amounts to cover administrative costs and to hire the employees needed to be in charge of the programs.

In October, the RDA board voted to hire Chris Tyson as its chief executive officer. Tyson, a professor at LSU’s Paul M. Hebert Law Center, has a background in property, real estate development, local government law, and urban land use and development.

The RDA has two major redevelopment projects underway: the Electric Depot, a 6.1-acre mixed-use development at the old Entergy site at 1509 Government St., and Ardendale, a 200-acre tract northeast of Baton Rouge Community College near Florida Boulevard, which will eventually include 850 residences, retail space and a hotel. A Baton Rouge Community College automotive training center opened on the site in 2016 and the East Baton Rouge Parish School Board’s Career Academy is under construction. The first phase of the Electric Depot, which will include apartments and retail space, is set to open at the end of 2018.

Albemarle, CB&I sell-offs

Two businesses with a longstanding presence in Baton Rouge sold off parts of their local business in 2017.

Albemarle Corp. announced in mid-December it would sell its polyolefin catalysts and components business to W.R. Grace & Co. for about $416 million. The move, set to close in the first quarter of 2018, will affect 150 of Albemarle’s employees at its Process Development Center on Gulf States Road.

The sale is the latest in a series of changes that have reduced Albemarle’s presence in Baton Rouge, where it was once headquartered. In 2016, the company completed moving its base of operations from downtown to Charlotte, North Carolina. Earlier in 2017, Albemarle announced it would close its local offices entirely and move the 200 employees out of the Chase South Tower to Charlotte. The lease on Albemarle’s downtown office expires in late 2021. At one time, Albemarle took up 10 of the 21 floors in the office tower.

CB&I, which acquired The Shaw Group in 2013, completed the $755 million sale of its Capital Services business to New York-based Veritas Capital in July. The new company, which was dubbed Aptim, has about 1,500 employees locally. Capital Services provides maintenance services, environmental engineering and remediation, infrastructure engineering, procurement and construction services, program management, and disaster response and recovery for private sector and government customers.

CB&I noted it still has more than 2,000 employees in metro Baton Rouge in its core engineering, construction, fabrication and technology businesses. This includes workers at its office on Essen Lane and at pipeyards in Prairieville and Walker. A week before Christmas, CB&I announced a $6 billion merger with McDermott International Inc. that will create a Houston-based onshore-offshore company with engineering, procurement, construction and installation services.

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