Daily Report

This Afternoon's Headlines / Tue, July 29, 2014

BESE to join Common Core suit against Jindal; governor files his own suit

Shortly after Louisiana's state school board voted this afternoon to join a lawsuit filed to challenge Gov. Bobby Jindal's efforts to block implementation of the Common Core education standards, the Jindal administration announced the governor has filed his own lawsuit to block the use of a test affiliated with the controversial education standards. Jindal opposes the multi-state standards, while Education Superintendent John White and most members of the Board of Elementary and Secondary Education continue to support them. The board voted 6-4 at a special meeting in Baton Rouge today to join the suit filed on behalf of several parents, educators and charter school managers in the state. That suit was one of two filed over Common Core last week; another came from lawmakers who are also seeking to block implementation. The lawsuit BESE is joining accuses Jindal of illegally meddling in education policy. BESE voted to intervene as a plaintiff in the lawsuit and seeks to remove the governor's restrictions on standardized testing plans for the upcoming school year, and to resolve the question raised by the Division of Administration concerning legal authority as it relates to education policy. "Because of the governor's unilateral action to block the board from meeting its obligations under the law, it has become necessary for BESE to engage in legal action to affirm its constitutional authority," says Chas Roemer, BESE president, in a prepared statement. Jindal's lawsuit, meanwhile, seeks to invalidate the state's Memorandum of Understanding with the Partnership for Assessment of Readiness for College and Careers (PARCC). The filing challenges the MOU on the basis that it offends state sovereignty by attempting to improperly delegate the constitutional authority of BESE and the Legislature to a "consortium" of other states, Jindal's office says in a news release. See the complete suit filed by Jindal.

Ballot referendum to ban discrimination would only apply to city-parish employees

A referendum to ban discrimination on the basis of sexual orientation or gender identity that Metro Councilman John Delgado says he's aiming to get on the December ballot—if, as expected, the Metro Council votes down a so-called fairness ordinance next month—would apply only to city-parish employees and companies that do business with the city-parish. Daily Report previously reported that the referendum would mirror the controversial fairness ordinance, which would cover everyone in the city-parish and was deferred until Aug. 13 after four hours of heated debate at last week's Metro Council meeting. But Delgado says the referendum would be limited to the 5,000 or so city-parish employees and businesses that have city-parish contracts. According to the parish attorney's office, the city charter does not contain a provision for the calling of an election for the purpose of enacting a local ordinance. However, amendments to the Plan of Government may be proposed by "a petition containing the full text of the proposed amendment." The city-parish already has an anti-discrimination ban in place, which is the result of an executive order signed by Mayor Kip Holden. If voters were to approve such a measure at the polls, however, it would codify into law the mayor's order and prevent future mayors from rescinding it. It is unclear if such a referendum would have as much support as did the fairness ordinance. The Baton Rouge Area Chamber says it would have to wait to see what is in a proposed referendum before deciding whether to support it, while Joe Traigle, a leading local activist for LGBT rights, declines to comment. —Stephanie Riegel

Red River Bank buys former Teche branch on Essen

Just three months after purchasing the site for its sixth bank in Baton Rouge, Red River Bank today announced its plans for another branch in the Capital Region. The Louisiana bank has acquired an existing building at 5063 Essen Lane near Our Lady of the Lake Hospital for an undisclosed price. The building formerly housed a Teche Federal Bank and recently became available following the merger of Teche and IBERIABANK, which was completed in June. "Red River Bank is committed to serving the financial needs of the people in the greater Baton Rouge area," says Joanie Montelaro, Red River Bank Baton Rouge market president, in a press release. "Therefore, we are strategically placing banking centers in convenient and accessible locations to meet those needs." Montelaro says Red River Bank plans to open the Essen Lane location's doors in January 2015. The bank recently announced its acquisition of a disputed half-acre parcel in the parking lot of Jon Claitor's Acadian-Perkins Plaza shopping center for $901,000. Red River Bank expects to complete construction of its 2,500-square-foot Perkins Road branch on that site in 2015. —Rachel Alexander

Mount Hope Plantation House sells for $1.4M

The owner of local event-planning, catering and reception company Highland Porch has purchased Mount Hope Plantation House, located at 8151 Highland Road, between Kenilworth Parkway and Staring Lane, for $1.4 million, according to land records filed with the East Baton Rouge Parish Clerk of Court. Lisa Anne Luther says the 4-acre historic site is the perfect complement to her small reception venue. “We do our smaller luncheons, like bridal luncheons and teas, at [Highland Porch], and then we’re going to do larger events at Mount Hope,” Luther says. “They’re going to be the perfect pair.” Built in 1817, the one-and-a-half-story antebellum home is just down the street from Highland Porch, which is located at 145 Ben Hur Road on the corner of Highland. While Luther and her husband, Gene Luther, will continue to operate it as a wedding and reception facility as did the plantation’s previous owners, they have some renovations and changes in the works, she says. The antebellum home—which Luther says is the only privately owned plantation home in Baton Rouge that operates as a wedding and reception facility—also has an herb house, cottage and upstairs room that once were used as a bed and breakfast. Luther hopes to eventually reopen that component and will keep Mount Hope open and available for parties and events as improvements are made. “We’re going to go straight in,” Luther says. “It’s not going to ever stop operating. We’re just going to make the improvements around the schedule.” According to the National Register of Historic Places website, Mount Hope is the only farmhouse of its kind remaining in the Baton Rouge area. —Rachel Alexander

Andrews: Maturing CMBS loans face challenges

One of the top selling points of permanent commercial real estate loans made through the Commercial Mortgage Backed Securities market is the 10-year fixed interest rate, and when you lock in a low interest rate for such a long period of time you can get spoiled by the cash flows. An issue that is getting more and more attention these days is the flood of these fixed-rate CMBS loans that are maturing within the next few years, and the risk that they will not qualify for renewal if market interest rates increase. The issue is not credit quality or market fundamentals, but the amount of debt that can be serviced by project cash flow at the higher interest rates and the probability that property owners will have to pay down loan balances to meet the debt coverage requirements. Trepp Research recently ran the numbers on the percentage of CMBS loans maturing over the next few years that would not qualify for renewal at current market rates, at 25-basis-point increments. For office and retail properties, the largest concentrations of loans in the CMBS pools, 8.5% of office properties and 5% of retail properties would not qualify for renewal without a paydown. At a 25-basis-point rise in rates those figures increase to 9.7% and 5.9%, respectively, and many economists predict that rates will rise far more than 25 basis points over the next few years. Given that a large paydown at maturity may be problematic for properties with multiple owners of varied ability to come up with those funds, I have recommended to my clients over the years that they set a reasonable cash-on-cash return to their investors now and deposit any excess funds into a sinking fund for the eventual paydown at maturity. Those excess funds could be used to make additional monthly paydowns on the debt if the loan documents allow partial prepayments, but most do not. The sinking fund strategy also allows for distribution of any unused funds to partners, whereas the partial prepayment approach would require an increase in the renewal loan amount to pay partners, something that lenders are hesitant to do these days. The big takeaway here is that when interest rates rise—and they will—maturing loans will likely face a paydown requirement for renewal. Concerned investors should plan for that paydown now rather than later. Failure to make such plans may result in individual owners having their interests diluted or in the entire project being lost to foreclosure.

(Brian Andrews is assistant director of the Real Estate Research Institute at LSU's E.J. Ourso College of Business. His private practice is Andrews Commercial Real Estate Services, and he can be reached at brian.andrews@acresllc.com.)

Editor’s note: Tom Cook is off this week. His column is scheduled to return to Daily Report next Tuesday afternoon.

Rose Awards honor area's best architecture

The American Institute of Architects Baton Rouge presented awards to 10 projects from eight different firms at the 2014 Rose Awards Gala on Friday. More than 30 projects were submitted for this year's Rose Awards, a competition that has been celebrating great architectural work by AIA BR members for more than 35 years. A new gymnasium for the LSU Laboratory School designed by Tipton Associates took home this year's sole Gold Rose Award. Judges said the design is "an inspired solution," and that "all aspects of the project, from site placement to color, have been carefully considered and integrated into a cohesive whole." Other award winners include DNA Workshop's office renovation, which picked up Members Choice and Silver Rose Award honors. The jury said the office that houses Dyke Nelson Architecture should be applauded for removing the roof in one area "to create an inspired courtyard," dramatically improving the overall look and feel of the space. AIA Baton Rouge Executive Director Kathleen Gordon says the organization is making strides in helping the public understand what architects can do for a client. She says she was thrilled with this year's work. "I'm extremely pleased with this year's entries and winners," she says. "All of these projects were of very high quality. These firms are doing wonderful things for the development of Baton Rouge that heighten awareness in our area." Check out the full list of the 2014 Rose Award winners below, and see photos of the award-winning projects here.
2014 Rose Awards winners
• Members Choice Award: DNA Workshop, for its office renovation
• Gold Rose Award: Tipton Associates, for the LSU Laboratory School Gymnasium
• Silver Rose Award: DNA Workshop, for its office renovation; Remson Haley Herpin Architects, for The Jones Walker Bar at Shaw Center for the Arts
• Rose Award: Chenevert Architects, for 438 Main Street; Remson Haley Herpin Architects, for Progress Elementary; VOA + BBA Design partnership, for the Medical Education & Innovation Center at LSU; The Architectural Studio of James Dodds and Lance Malley, for the Ferriday Music Pavilion; Cockfield Jackson Architects, for the Kilgore Residence; GraceHebert Architects, for St. Jude the Apostle Catholic Church
—Matthew Sigur

Zillow's $3.5B deal to buy Trulia creates digital real estate ad juggernaut

By the time many home shoppers call a real estate agent, they've already got a short list of properties—and data to support the prices they want to pay. As the Los Angeles Times reports, that's because real estate information websites such as Zillow and Trulia have in short order revolutionized one of the world's oldest transactions. The $3.5 billion deal announced Monday for Zillow to buy Trulia creates a digital advertising juggernaut that could control more than 70% of online real estate searches. And it could further open up information about the market to buy and sell houses, while vacuuming up advertising dollars in the process. It also could add tension to the already uneasy relationship between the sites and some agents and brokerages. Until recent years, agents had a monopoly on such market intelligence. "Before sites like Zillow, buyers would come to our office and we'd tell them what was on the market," says Mike Kelly of First Team Real Estate in Anaheim Hills, California. "Now they call us and say they want to go see houses they found themselves." Seattle-based Zillow Inc. and San Francisco-based Trulia both offer searchable databases of real estate data—complete with photo galleries and maps of recent neighborhood sales—to home shoppers free of charge. That has enabled the companies to carve out a lucrative piece of the $12 billion annually spent on real estate advertising. Some worry that the new, bigger Zillow could charge more for advertising or that big brokerages could respond by pulling listings off the third-party sites. Zillow could someday become a marketplace itself, much as Amazon and Travelocity have. Read the full story.

News roundup: Louisiana Housing Alliance listening tour to make stop in BR ... LSU researchers part of new study on benefits of running … North La. Amtrak study finally underway

Have your say: The Louisiana Housing Alliance's annual statewide listening tour will wrap up on Aug. 29 this year with a stop in Baton Rouge. The week-long tour will include stops in all nine of the state's regions to hear concerns and successes of housing providers, advocates, working families, local officials and policy makers. Among other things, LHA uses the information it collects to set its legislative and advocacy agenda for the following year. The meeting in Baton Rouge will take place at the offices of the Baton Rouge Area Foundation, 406 N. Fourth St., on the second floor, from 8:30 to 10:30 a.m.

You better run: People who jogged or ran for as little as five minutes a day reduced their risk of premature death by nearly one-third and extended their lives by about three years, according to a new study that LSU researchers were involved in. "This finding has clinical and public health importance," according to the team of researchers from LSU, Iowa State University, the University of South Carolina, and the University of Queensland School of Medicine. As the Los Angeles Times reports, researchers examined the exercise habits of more than 55,000 adults in the Dallas area who were monitored for six to 22 years. Read the full story.

Getting back on track: Howard, Needles, Tammen, Bergendorff Corp., a national civil engineering and architecture consulting firm with offices in Baton Rouge, has been tapped to conduct a 12-month study of the feasibility of re-establishing Amtrak Passenger Rail Service from Shreveport-Bossier City to Vicksburg, Mississippi, The Shreveport Times reports. Kent Rogers, North Louisiana Council of Governments executive director, says the firm will study the condition of existing railroad tracks between the cities, potential stops, hours of operation and the cost to operate the service. Currently, Amtrak does not offer passenger rail service in north Louisiana. Read the full story.
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