Sunday, December 28, 2008
2008: Year of the downturn
The latest from The Ticker blog
Southwest Virginia felt the national recession of 2008 in job losses, sluggish real estate sales, a longtime local company's merger with a larger out-of-state firm, and pending changes to the region's biggest bank.
Defying the downward trend, Carilion Clinic in Roanoke continued to add employees and remained bullish on its vision of becoming a multispecialty clinic paired with a medical school and research institute, but not without bearing some sharp scrutiny.
The Roanoke Times' business reporters have recapped 10 of the top stories from their beats this year.
Roanoke insurance firm merges after big losses
Shenandoah Life Insurance Co., which has sold policies for 92 years, announced in late November the signing of a letter of intent to merge with a large Midwest insurance holding company.
Shenandoah Life, with 280 employees, will cease to be independent. It will answer to executives of American United Life Insurance Co., come mid-2009.
American is best known for operating OneAmerica Financial Partners, whose products include retirement plans and services, life insurance, long-term care plans and employee benefit packages.
Shenandoah Life was founded in Roanoke in 1914 and began selling policies in 1916. It is the second-largest Virginia-based life insurer.
The merger is timed to remedy financial challenges that befell Shenandoah Life this past fall. In September the company revealed it had lost money in the stock of secondary mortgage market entities Freddie Mac and Fannie Mae. The companies have been taken over by the federal government in the wake of record defaults on home loans.
The public got a first look at how heavy the losses were when Shenandoah filed a financial report covering the first nine months of the year with the Virginia Bureau of Insurance. The report said Shenandoah Life made money selling insurance, but its investments lost $69.9 million, resulting in a net loss of $61.5 million. During the same period last year, it earned $4.7 million.
The same day that report became public, Shenandoah announced the merger plan, calling OneAmerica a source of strength and opportunity.
Shenandoah Life said in the November announcement that it expects to keep its name, Brambleton Avenue headquarters and existing work force.
-- Jeff Sturgeon
Layoffs dominate fourth-quarter headlines
A sluggish national economy turned into a slugfest economy during the fall, and many regional employers found themselves on the ropes. Hundreds of layoffs resulted.
Many manufacturers suffered, especially ones tied to suppliers to the domestic auto industry. But other sectors shed jobs, too -- including technology with Luna Innovations, package delivery with ABX Air, health care via the hospital chain HCA Inc., and online retail with the Home Shopping Network.
A big hit occurred in May in Pulaski County when Volvo Trucks North America laid off 973 people. By late August, the company said those former employees met the federal definition of "permanently laid off" because the workers are unlikely to be recalled anytime soon. The company announced two reasons: the slumping economy and the strategy to make Mack-brand trucks in Pennsylvania instead of Dublin.
Gov. Tim Kaine's proposed state budget calls for the elimination of 1,500 government jobs, including 1,100 layoffs.
Statewide, experts predict more job cuts in early 2009.
-- Duncan Adams
Real estate sales plunge, developments stall
Home sales slowed across the Roanoke Valley in 2008, mirroring the fall of the real estate market nationally, though not at nearly the same levels.
As of November, Roanoke Valley home sales were down 20 percent, compared with sales through November 2007, according to the Roanoke Valley Association of Realtors. The association has not yet reported December sales.
The region felt less of the foreclosure pain than other parts of the country. Foreclosure filings in the Roanoke and New River valleys were up slightly in the first nine months of the year, but the totals were at significantly low levels compared with other parts of Virginia, according to data by RealtyTrac.
Several large real estate developers hit tough times. In August, developers struck a deal to trade a completed luxury condominium project at Smith Mountain Lake for a release from a $20 million loan they could not repay, a bankruptcy lawyer said. Bridgewater Pointe, on Virginia 122, was to be put back on the market.
Meanwhile, the owners of the planned residential community Mason's Crest fell short of reaching a goal to erect 347 homes, a clubhouse and resident amenities on a bluff beside the Blue Ridge Parkway in Southwest Roanoke County. The owners cited weakened real estate market conditions as among the reasons the project was scheduled for auction.
-- Jenny Kincaid Boone and Jeff Sturgeon
Carilion Clinic continues transformation, growth
No Southwest Virginia business found itself more in the news in 2008 than Carilion Clinic.
In the middle of a massive restructuring that officials say will alter the region's health care landscape, the billion-dollar nonprofit broke ground on its medical school, was the subject of two inquiries and a scathing article in a national newspaper, was consistently attacked by area health care and business opponents and continued to grow despite charges of monopolistic business practices.
Carilion has continued its aggressive transition from a chain of hospitals to a multispecialty clinic, including hiring more than 150 new physicians and purchasing three formerly independent medical practices.
The number of Carilion employees surpassed the 12,000 mark in 2008, keeping the nonprofit organization secure in its position as the region's largest employer.
Carilion also initiated a $65.8 million project to install a state-of-the-art electronic medical record system.
Meantime, the state broke ground on the $59 million Virginia Tech Carilion School of Medicine and Research Institute building this fall. As the medical school started the accreditation process, Carilion and Virginia Tech spent the year solidifying the collaboration of academic research with patient care.
But for part of the year, Carilion was being investigated by two federal authorities, one for a business acquisition and the other for a lapse in patient safety.
Inquiries by the Federal Trade Commission, which is ongoing, and the Centers for Medicare & Medicaid Services, only scratch the surface of the public concerns that arose during the year.
A scathing Wall Street Journal article in August accusing Carilion of driving up the cost of health care in the region fueled a public outcry among some who say the region's largest health care provider constitutes a monopoly.
An organization of physicians critical of Carilion spurred the creation of the Citizens Coalition for Responsible Healthcare. Reports of financial conflicts of interest involving Carilion board members, coupled with the thousands of patients the hospital takes to court over unpaid bills, caused the same critics to question Carilion's tax-exempt status eligibility.
The CMS investigation stemmed from a patient suicide at Roanoke Memorial Hospital. The hospital said the problem was corrected.
Carilion's August purchase of the Center for Advanced Imaging is the basis for the FTC inquiry.
-- Sarah Bruyn Jones
NRV-based bank merges; Wachovia faces change
Western Virginia's banking scene features a few new names not present a year ago, and more change is coming.
Early in the year, a longtime banking fixture turned out the light.
On Feb. 28, First National Bank of Christiansburg, founded in 1906, merged into Virginia Financial Group Inc. to form StellarOne Corp. On May 27, the two merged their banking subsidiaries to complete the deal and form what executives said would be the largest independent commercial bank in the state.
StellarOne bases the daily operations of StellarOne Bank in Christiansburg at the one-time FNB headquarters while the corporate office is in Charlottesville.
People who said they wanted to preserve FNB and were upset by the merger fueled an effort to create NewRiver Bank in Christiansburg. It is open and operating as a branch of HomeTown Bank in Roanoke.
By July, bad subprime mortgage debt had triggered bank failures and other damage on the U.S. financial services industry, but state banking industry leaders said Virginia had solid banks.
Federal leaders reacting to the financial crisis have since sent $16 million of the economic rescue money to the Roanoke Valley by investing in Valley Bank. The bank expects the money to trigger an extra $200 million of new loans during the next several years assuming borrowers are interested.
As the year draws to a close, one other bank well known in Western Virginia is on the cusp of change.
Charlotte, N.C.-based Wachovia Corp., with more deposits in the Roanoke Valley than any other bank, has struck a deal to be acquired by Wells Fargo & Co. of San Francisco. The transaction is expected to close Wednesday.
Wachovia employs about 2,200 people in the Roanoke region.
-- Jeff Sturgeon
Downtown living revival continues to take hold
The trendy downtown living movement has expanded in big ways throughout Roanoke's downtown district in the past year.
In May, The Hancock on West Campbell Avenue, one of the largest apartment dwellings in downtown, opened its doors with 58 units. Marketed as affordable, the apartment rents start at $600 a month and rise to at least $1,200. It is 100 percent occupied.
Ed Walker, a local developer, owns the property with business partner Scott Graeff. Walker has led much of the downtown residential movement.
The development of condominiums also spread into the western edge of downtown Roanoke, with living spaces that are being carved out of old structures on Campbell Avenue and Sixth Street.
Walker, who resides in a downtown condo himself, is heading up renovations and redevelopment of the former Virginia Mills Cotton Products Plant on Sixth Street for 108 apartments or condos. When complete, it would house the largest number of living spaces under one roof in the downtown district.
-- Jenny Kincaid Boone
Local Fortune 500 firm opens Minnesota office
The Roanoke Valley experienced jitters when the new chief executive officer of Advance Auto Parts Inc. made good in 2008 on plans to establish a regional office in his home state of Minnesota.
Company spokeswoman Shelly Whitaker said last week that the office is open and 100 people work there, while 1,500 people work in the Roanoke Valley.
The Minnesota office that CEO Darren Jackson approved is a three-story office building in suburban Bloomington, outside Minneapolis.
"The company's headquarters will continue to be based in Roanoke," spokeswoman Whitaker said in response to questions about the Minneapolis area office.
The official address that the more than $4 billion company lists with the U.S. Securities and Exchange Commission is 5008 Airport Road in Roanoke, which is found on the east end of Crossroads Mall.
Jackson has an office there that he uses on a part-time basis.
Advance, founded in Roanoke in 1932, will report its 2008 financial results early next year. It earned $213.6 million on revenue of $3.95 billion during the first nine months.
-- Jeff Sturgeon
'Green' efforts take root among city, employers
Several large employers in Roanoke, as well as general contractors, architects, engineers, developers, local governments and many others, earnestly embraced "green" this year.
Regional colleges and universities also announced green projects and practices, which emphasize environmentally friendly building, energy efficiency, recycling and the like.
Roanoke City Councilwoman Gwen Mason, businessman Stan Breakell and Skip Decker, the city's solid waste manager, were among other leaders working in 2008 to plant seeds of green.
Several new building projects or extensive renovations of existing buildings earned prestigious LEED certification from the U.S. Green Building Council. LEED stands for Leadership in Energy and Environmental Design. Certification criteria examine energy efficiency, building material sources and a host of other measures.
For his advocacy of environmental design and development, Breakell, president of Breakell Inc., was named Business Person of the Year by the Blue Ridge Business Journal.
-- Duncan Adams
Ukrop's struggles to gain a foothold in Roanoke
After a year and a half in business, officials at Ukrop's Super Market say they need more shoppers in Roanoke. Though the grocery store arrived with much fanfare, the Richmond-based chain's local store isn't meeting sales expectations.
In a letter to customers in late November, Ukrop's officials implored local customers to give the store another chance. The retailer's ability to keep its doors open in Roanoke depends on it.
A $9 million tax incentive package from the city rides on success of Ukrop's. IMD Investment Group, the developer of Ivy Market, which houses Ukrop's, would receive incentives from the city over 15 years. But the center must produce up to $600,000 in tax revenue annually to qualify.
Bobby Ukrop, president and chief executive of Ukrop's, blamed the store's faltering sales on lack of development at Ivy Market, which is at the corner of Franklin Road and Wonju Street.
--Jenny Kincaid Boone
Downtown Roanoke icon sees peril and promise
Controversy swirled in the fall around the Roanoke City Market Building downtown, its food court vendors and health inspections. The reports pointed both to the city's lackluster maintenance of the structure and to food-handling problems among vendors.
Happier headlines accompanied the long-anticipated opening of the nearby Taubman Museum of Art. November's opening attracted about 10,000 people to the $66 million building. Merchants downtown hoped the museum would combine commerce and culture.
The museum's launch accelerated debate about the market building's future. The historic building has been described as downtown's jewel. But its sparkle has faded.
A downtown foundation, Downtown Roanoke Inc., business organizations and other parties consulted with the prestigious Project for Public Spaces to submit a proposal for the market building's redevelopment and management. City officials rejected the plan and issued a request for proposals for design and engineering work.
On Sept. 19, the city temporarily padlocked the building after health inspectors found widespread infestation by mice and food-handling problems at the 10 food vendors. Follow-up inspections in November found few problems, but vendors said sales were off because of lingering stigma.
Most vendors' leases expire at the end of February. The small-business owners continue pressing city officials for details about the vendors' future.
-- Duncan Adams
