Louisiana’s economy took a hit in 2015 from plunging energy prices, yet benefited from petrochemical producers and industries that feed off of plentiful oil and natural gas.
Baton Rouge lost corporate offices and executives, yet picked up others. It lost a Mid City emergency room but could benefit from that hospital’s conversion and development planned around its sister facility on Bluebonnet. Other development is apparent — a Water Campus, downtown’s IBM building and hotels there, and apartments around LSU.
Here’s a look at those top business stories from 2015:
Low oil, gas prices hit Louisiana
It seems almost impossible to believe, but 18 months ago the price of oil was $110 a barrel. Over a year, a dollar drop in the average price of oil chops $12 million out of Louisiana’s revenue. The state has re-estimated the price of oil, and mineral revenue, several times but has yet to catch up to the plunging price of crude. The most recent budget projections rest on $48 oil, a number that some say appears optimistic with oil trading of late around $35-plus a barrel.
In the past year, more than 10,000 Louisiana residents have lost jobs in the oil and gas industry. Natural gas prices haven’t helped, hitting a 16-year low this winter amid mild temperatures.
On the plus side, many of the oilpatch’s job losses have been offset by gains in the construction industry. Petrochemical and chemical companies have or are investing billions in new manufacturing facilities or expansions to take advantage of abundant supplies of natural gas, a fuel and a feedstock for the plants.
Economist Loren Scott said more than $60 billion worth of projects were under construction or have been completed in Louisiana. However, more than $80 billion worth of expansions and new plants remain in the design and permitting stages. Some companies have tapped the brakes on some of the projects because they want to see whether the oil price drop is temporary.
Here today, gone tomorrow
The Baton Rouge area suffered two major hits to its corporate headquarters community, as publicly traded firms Albemarle Corp. and Amedisys Inc. announced the relocation of their corporate headquarters and executive offices, respectively.
Albemarle continued its transformation from a specialty chemicals and pharmaceutical maker to a company more tightly focused on performance chemicals, including lithium. Albemarle completed the $5.7 billion acquisition of Rockwood Holdings Inc. in 2015 and also shed its flame retardant and specialty chemicals businesses.
Albemarle said it will move about 120 of its workers to a new headquarters in Charlotte, North Carolina. Somewhere between 60 and 80 of those workers will come from Baton Rouge, but Albemarle said it will still have about 500 employees locally.
Albemarle officials said Charlotte was selected because it is easier to fly to and closer to other facilities the company owns, including in Frankfurt, home to the German headquarters of Albemarle’s Rockwood Lithium and Chemetall business units.
Amedisys moved its top executives to Nashville, Tennessee, and sold its corporate offices on Sherwood Forest Boulevard to the parent company of Our Lady of the Lake Regional Medical Center.
The home nursing giant’s CEO said the Nashville office will make it easier to recruit certain executives in a more centrally located area where the health care industry is growing.
The company will move its corporate offices here to 3854 American Way, Suite A, over the next six months. Amedisys still has about 400 staffers locally, but some industry analysts have said another move would not come as a surprise.
Brown & Root plants roots
An agreement with CB&I, the Shaw Group’s buyer, forced former CEO J.M. “Jim” Bernhard to wait two years before competing with his old firm. Once the noncompete expired, Bernhard wasted little time in assembling another engineering and piping power and brought Brown & Root from Houston to Baton Rouge.
In February, four firms — Bernhard Energy in Lafayette, Bernard Mechanical in Baton Rouge, EP Breaux Electrical in New Iberia and TME in Little Rock, Arkansas — came together under a holding company called Bernhard.
The firm supplies engineering, energy conservation, mechanical and electrical construction and maintenance services. The deal gave the holding company 13 offices and about 725 employees nationwide.
A month later, Epic Piping, an affiliate of Bernhard, announced a $45.3 million pipe fabrication plant in Livingston Parish that will employ 560 people. Three months after that, another Bernhard-affiliated group — led by Bernhard Capital Partners Management — acquired Willbros Group Inc.’s downstream engineering services in Baton Rouge and heater engineering services in Tulsa, Oklahoma.
In July, Bernhard Capital Partners combined its newly acquired Wink Engineering firm with Houston-based KBR Inc.’s industrial services group and resurrected the Brown & Root brand. The new firm is known as Brown & Root Industrial Services and employs 6,000 people worldwide. In a separate deal, Epic Piping bought KBR’s Canadian pipe fabrication facility.
Brown & Root also countered the trend of executives leaving the area, announcing the company would transfer 50 executives from Houston to Baton Rouge by the end of 2016. Brown & Root provides industrial services for refineries, petrochemical, chemical and manufacturing plants. The executives will be based out of Citiplace on Corporate Boulevard.
Code Blue for BR General’s Mid City ER
Baton Rouge General closed the emergency room at its Mid City campus and announced plans to turn the half-vacant facility into a hub for seniors and patients with chronic illnesses and mental health issues.
Hospital officials said dumping the ER allowed Mid City to cut millions in losses each month, the cost of caring for people who don’t have insurance.
Local residents, community leaders and politicians vigorously protested the closure, saying they were never consulted about the impact on the area or allowed to pursue alternatives.
Officials with the health system said there was no other choice.
For now, half of the 800,000-square-foot hospital is empty.
In November, President and CEO Mark Slyter said a number of options were being considered, including leasing to tenants who could use the space for meeting areas, dining and catering, retail, wellness and education.
Slyter also announced that the General’s Bluebonnet Boulevard hospital will become the centerpiece of a 142-acre development that will go beyond health care services and could include entertainment and lifestyle programs.
There are 62 acres available for development at Bluebonnet, and the health system is talking to developers about the best options for those properties.
Water Campus rising near Mississippi River
More than a year after plans for the Water Campus were first announced, construction began on the $45 million first phase of the center for coastal research and education.
Ground was broken just south of the Interstate 10 bridge on three buildings during 2015: the LSU Center for River Studies, which will house a large-scale model of the Mississippi River; the new offices for the state Coastal Protection and Restoration Authority; and the Water Institute of the Gulf’s headquarters.
The campus is expected to become a national and international hub for river, coastal and delta research. These three buildings are just the first of what planners see as a campus that will include state and federal agencies involved in water issues, and private businesses such as engineering firms. Eventually, thousands of people are expected to work at the 33-acre facility.
Rooms to grow with downtown hotels
Downtown hotel developments continued to pop up in 2015, with an 88-room Holiday Inn Express opening in August and work starting on a 148-room Marriott Autograph hotel.
Developer Mike Wampold will turn the old State Office Building in downtown Baton Rouge into the Watermark Baton Rouge, a full-service hotel with an upscale restaurant, a Jewish deli and about 2,500 square feet of meeting space. The hotel, which will be part of Marriott’s “upscale” Autograph brand is set to open in August.
The Watermark will be close to another Marriott hotel, the 147-room Courtyard by Marriott that Windsor Aughtry Co. will develop at Third and Florida streets. Plans for the Courtyard were up in the air for a while, after the Metro Council initially rejected a tax break for the hotel. The council changed its mind and in October approved a request that will allow the hotel to keep 2 cents of sales taxes spent on the property.
Once the Courtyard opens in late 2016, downtown will have 1,179 total rooms. That’s nearly at the 1,200-room goal that tourism and downtown officials say is needed to bring larger conventions and performances to the River Center.
IBM opens downtown
IBM opened its service center in downtown Baton Rouge in May, a move that city leaders say will transform the area by putting a significant new employer in the middle of the city’s central business district.
The IBM offices are part of a $55 million public-private development that takes up a city block downtown. The block, bordered by North Street, River Road, Main Street and Lafayette Street, includes the 525 Lafayette apartment tower, five luxury townhomes and 1,000 square feet of retail space. The 85 apartments in 525 Lafayette opened during the fall, while the townhomes and retail space should be open in early 2016.
IBM started with about 200 people working out of the service center, a number that is projected to increase to 800 by 2017. Employees at the center are working on technology services, such as application development, application management and system integration for IBM clients.
The impact of IBM’s decision to build downtown was already being felt before the business opened. 440 on Third, a mixed-use development, opened a few months before IBM, bringing in Matherne’s, downtown’s first full-service supermarket in 50 years, and a new office for USAgencies Insurance.
LSU apartment market thriving
Bustling enrollment at LSU has boosted the market for student housing, with a number of new properties opening in 2015 and builders beginning work on units that will open in 2016 or beyond.
Nearly 790 units opened around the start of the fall semester. And more than 660 units are in the pipeline, with developers taking concrete steps such as obtaining permits or buying land for complexes.
The new apartment developments, like The Standard at Baton Rouge and Sterling Burbank, feature a host of amenities, from lazy rivers winding around the complex to common areas featuring large HDTV sets.
The 287-unit The Standard, located just outside the campus, opened in the fall and was sold in October to national student housing operator University House Communities for an eye-popping $108.6 million. That’s a figure real estate observers said was the most per-unit price for an apartment complex in the city. The new owners rebranded the complex as University House Baton Rouge.
Other national investment groups who bought into the LSU housing market were Chicago-based Scion Group, who bought the 147-unit University Edge complex for $32.5 million. Fowler Property Acquisitions bought the Highland Plantation Apartments, a 420-unit complex built in the 1970s, for nearly $23.9 million a few days before Christmas.
La. Health Cooperative shutting down
The state Insurance Department took over Metairie-based Louisiana Health Cooperative Inc., a nonprofit health insurance company created to increase competition under the federal Affordable Care Act.
The Consumer Operated and Oriented Plan received more than $66 million in federal loans, but the co-op failed to reach the enrollment numbers needed to make a go of it. The co-op had 9,980 members at the end of 2014, far short of the 28,106 projected.
The co-op also had egregiously high administrative expenses. According to a report by The Commonwealth Fund, the co-op’s administrative expense ratio was 35 percent, while the industry average is 15 percent.
Louisiana Health Cooperative also was punished by federal efforts to stabilize the health insurance market. One of the programs takes money from insurers with healthier customers and spreads the cash among companies with sicker policyholders. The Louisiana co-op expected to get $2.8 million from the program but instead was ordered to pay $7.5 million.
The co-op covered members until Dec. 31, and the Insurance Department-appointed receiver will oversee payment of claims and shutting down the company.