Thursday, January 29, 2009

If Beale St. Could Talk

The latest from John Elkington and Robert Lipscomb on the street's fate.

Posted By on Thu, Jan 29, 2009 at 4:00 AM

A pair of names in the news, John Elkington and Robert Lipscomb, want to clarify their roles in proposed changes in and around Beale Street.

A flurry of recent news stories has centered on a bitter lawsuit over control of Beale Street, the fate of the nearby Greyhound Bus Station, and a prospective massive redevelopment of several square blocks of blighted property south of downtown called Triangle Noir.

In separate interviews, Elkington said he wants credit for the 26 years he put in managing and leasing the Beale Street Historic District. Meanwhile, Lipscomb said he isn't trying to push Elkington out in favor of a national developer with ties to singer Justin Timberlake.

"I may not have been the best, but I was not the absolute worst," said Elkington, who was called "the most incompetent property manager in history" in open court last week by attorney John Candy, representing Beale Street Development Corporation. "Most people know I was a guy who stayed in there and made it work."

Elkington said that he would gladly let someone else have the job and has told that to Mayor Willie Herenton many times. Elkington figures he is due about $100,000 a year in commissions as long as the leases he made with Beale Street tenants are in effect. More than money, he said, "I want a thank you very much for what you did" in bringing Beale Street back to life.

The city and Beale Street Development Corporation don't see it that way.

As for his possible successor, Elkington said he met a representative of the Baltimore-based Cordish Company development firm at a convention last year but they did not talk about Cordish replacing Performa, Elkington's company, on Beale Street. Cordish specializes in urban entertainment districts in cities including Baltimore, Louisville, and St. Louis.

E-mails published here last week indicate that between July and November of 2008, Cordish representatives, along with a financing firm and Timberlake's stepfather Paul Harless, sought specific information about Beale Street leases, tenants, and profit-and-loss statements. Elkington believes the city may have turned over proprietary information to Cordish under the guise of collecting it for the lawsuit.

Rey Flemings, the former head of the Memphis Music Commission, arranged meetings last summer between Lipscomb and representatives from the Cordish team "to discuss Beale Street," according to e-mails.

In an interview this week, Lipscomb said he had meetings with Cordish last year about the Memphis riverfront and its relationship to proposed downtown projects around Beale Street, FedExForum, and Union Avenue across from AutoZone Park that have been in the talking stage since at least 2006.

"We never had a discussion about them taking over Beale Street," Lipscomb said. In May, he met with Jonathan Cordish, vice president of Cordish Company, according to an e-mail that Lipscomb provided:

"The meeting is informal as they are meeting in the lobby of the Peabody for 15 minutes regarding city projects which include the riverfront development initiative. Mr. Cordish is in town for a short period of time and we would like to capitalize on the opportunity to meet with him before his departure."

Lipscomb, head of the division of Housing and Community Development, has been Herenton's point man on major development projects for several years. It would be standard practice for any prospective developer interested in Memphis to schedule meetings with him. Flemings apparently played a middle-man role for Cordish. Lipscomb said he has not gone to Baltimore for any meetings with Cordish.

"This stuff has gotten out of hand," he said. "It's a bunch of disinformation, misinformation, and all kinds of stuff."

The ongoing federal investigation of Herenton has put a mysterious cast on stories about possible new developments on and around Beale Street and the nearby Greyhound Bus Station. But Lipscomb said he has nothing to hide, and he provided copies of his own e-mail correspondence about Beale Street and Triangle Noir, a massive proposed development south of FedEx Forum stretching all the way to Crump Boulevard.

The city is seeking federal funds for Triangle Noir, as it did with the conversions of former housing projects next to St. Jude Children's Research Hospital and Le Bonheur Children's Medical Center.

"If you hope to get [funds] you have to have leverage, and that is why we looked at all the projects around it," Lipscomb said.

Thursday, January 22, 2009

Exit Strategy

Willie Herenton and Justin Timberlake: together again on Beale?

Posted By on Thu, Jan 22, 2009 at 4:00 AM

One of the lowest moments of Willie Herenton's career as mayor came on a September morning in 2006, when he appeared on the nationally televised Good Morning America program with singer Justin Timberlake.

The program was televised live from Beale Street, and a young, mostly white crowd booed the mayor, who was at his gracious best. Such things happen in politics and have a way of evening out — last week, for instance, Herenton got a standing ovation from the Memphis Rotary Club — but the Beale Street boo-birds stung the usually thick-skinned mayor. So much so that he brought up the incident more than a year later at his victory celebration after winning an unprecedented fifth term. He criticized both the rude spectators and the subsequent lack of outrage in the white community.

In a new wrinkle to the long-running controversy over the management of Beale Street, city officials have been talking to representatives of Timberlake and a Baltimore developer about becoming part of a team to replace John Elkington and Performa Entertainment Real Estate, the firm that has managed and leased Beale Street since 1982.

E-mails show that for at least six months, representatives of the city and the Beale Street merchants have been talking with Cordish Companies (which specializes in urban entertainment districts, including Power Plant Live in Baltimore's Inner Harbor and Fourth Street Live in Louisville); Timberlake's stepfather Paul Harless; Rey Flemings, the former head of the Memphis Music Commission; and Guggenheim Partners, a financial firm. Cordish and Guggenheim representatives asked for information about Beale Street leases, rents, profit-and-loss statements, and the status of Elkington and Performa.

The e-mails came off of computers at the Beale Street Merchants Association and were sent to Onzie Horne, executive director of the association, and Robert Lipscomb, head of the Division of Housing and Community Development and the city's point man on major development projects.

"How much of the information below can you get us and how soon can we get it?" Flemings wrote to Horne in July. Flemings included a forwarded message from Chase Martin of Cordish seeking information about Beale Street leases, profit-and-loss statements, rents, and "any other similar information we can get from the city would be extremely helpful."

In another e-mail in July 2008, Barry Klarberg of Guggenheim asked Flemings and Martin of Cordish for more information about Performa and its leases.

"Have we been able to get any more information on the nature of the relationship between the city and the Proformas [sic]? What are those leases? Have we seen a P&L?"

On July 14th, Harless wrote to Martin, "Rey is scheduling a meeting with Lipscomb. Rey, let's you, I, Barry and Chase touch base prior to meeting with Robert."

On August 16th, Flemings wrote to Lipscomb, Horne, and Martin: "We would like to arrange a team meeting to discuss Beale Street."

Lipscomb responded, "Do you want to include the mayor in the discussion or is it premature?" At that time, Lipscomb was talking with Beale Street business owners about a seven-member oversight team of three merchants and four Herenton appointees, if Elkington could be persuaded to leave by mediation or negotiation.

In September, the city undertook an audit of Beale Street businesses, sending inspectors to measure square footage and check everything from lights to toilet seats. Owners also turned over financial information they thought was covered by a judge's protective order. It is not clear how much information was shared with Cordish and Guggenheim.

Lipscomb said this week that he met with Cordish one time, and the main topic was the riverfront and the possibility of Bass Pro taking over the Pyramid. He said he has heard rumors that Herenton wants to sell Beale Street out from under the owners and take the district in another direction, but he has stayed out of it.

"It's too complicated," he said.

Horne said this week that discussions of a post-Elkington Beale Street are influenced by the ongoing lawsuit involving the city and Elkington and the recent revelation that Herenton profited from an option he sold on the Greyhound Bus terminal two blocks from Beale.

"It's complicated everything that relates to city business," Horne said.

He also has heard talk of a big new development plan called "Triangle Noir" or dark triangle to improve the blighted south section of downtown and preserve African-American history. Asked who might be driving that, he said, "I think Lipscomb might be one of the principals."

In the lawsuit filed in Chancery Court, the city and Beale Street Development Corporation are suing Elkington and Performa Entertainment Real Estate. The city owns the street and hired Elkington in 1982 to lease and manage it. At issue is how much money, if any, Elkington owes the city and whether he diverted Beale Street funds to projects in other cities. During a hearing on Tuesday, attorney Ricky Wilkins, representing the city, said Elkington has used funds from Beale Street for unrelated companies and has not provided key records.

"When it comes right down to it, they don't produce anything," Wilkins said.

Elkington's attorney, Richard Carter, told special judge Donald P. Harris that Elkington has complied with the court's order.

John Candy, representing Beale Street Development Corporation, called Elkington "the most incompetent property manager in history" and said he has charged more than $2 million in improper expenses to the district while taking a salary of $180,000, plus a 10 percent management fee and a 5 percent leasing fee.

None of this was resolved Tuesday. The major ruling by Harris allowed Beale Street merchants to continue selling wristbands for club entry. The lawsuit figures to continue for at least several months. The bad blood between the three parties goes back to at least 1992, Herenton's first year as mayor, when the city undertook an audit of Beale Street that lasted until 1994 and apparently produced no reports in the permanent record.

Twenty-six years after its reopening, Beale Street has outlived the Pyramid and most of Peabody Place's retail operations. Its sales taxes help retire the bonds that built FedExForum. Sales are off in the recession, but there are some promising events on the downtown Memphis calendar in 2009, including the NCAA basketball regional Sweet Sixteen games in March.

Willie Herenton would like to leave the mayor's office and get into the real estate business. John Elkington would like to leave Beale Street and get out of the real estate business. A new Beale Street development team, including the star power of a Justin Timberlake, could be a good exit strategy for both of them, if only they can figure out a way to get there.

Thursday, January 15, 2009

Just a MATA of Time

Does the bus stop here?

Posted By on Thu, Jan 15, 2009 at 4:00 AM

"This whole Greyhound thing is all about minority economic development," Mayor Willie Herenton said before ducking into a waiting car and leaving the University Club, the Memphis Rotary Club, and a swarm of reporters.

The Commercial Appeal broke the story Tuesday that Herenton personally had an option to purchase the downtown Greyhound bus station and sold it for $116,000, keeping $91,000, the newspaper said.

Now comes the defense. Herenton said he would offer his reply in a column to the CA Tuesday evening for publication Wednesday or later this week. He said he would not be more specific about the option, on the advice of his legal counsel.

"You hit a home run," shouted attorney Ricky Wilkins to the mayor as he walked through the parking lot. Earlier, Wilkins introduced Herenton to the Rotary Club as someone who "has caught all the slings and arrows and remains to me that hero that I met in high school."

After Wilkins turned over the microphone, Herenton got right to the elephant in the dining room, saying "it sure feels good to be under some light" rather than under the dark cloud of a federal investigation and a 14-part history of his public life in the paper for the last two weeks.

He made a brief and perfunctory diversion to the state of the economy, crime, and consolidation — this was, after all, supposed to be a state-of-the-city speech — but then he was back at it. He read some words by Theodore Roosevelt: "It is the man in the arena, and not the critic who counts." Herenton said he had stumbled in 18 years as mayor "but I have been a man who has been in the arena."

He said his forthcoming newspaper column would delve into his views of the line between his public and private life. It was "no coincidence," he said, that the most damning story yet about him came out on the same day he was scheduled to make his annual state-of-the-city speech. The audience gave him a big round of applause for that one. Then he took some questions, one of which came from Rotarian and television anchor Cameron Harper about the propriety of that $91,000.

"I know where the line is, and I feel confident I have not crossed that line," Herenton said.

Meeting with reporters after lunch, the mayor said it bothers him that his integrity is being questioned on a near-daily basis lately. "That cuts deep," he said.

The cuts are not likely to end. Two federal grand juries were scheduled to meet Wednesday, January 14th, leading to speculation about a Herenton indictment just days before Barack Obama is sworn in as the 44th president. We'll know soon enough.

A source familiar with the investigation told me it is broader than the bus station and encompasses control of Beale Street and the property south of Beale Street and FedExForum. The Greyhound station sits between the arena, The Peabody, and AutoZone Park — an underperformer if there ever was one. Moving it out of downtown to a MATA intermodal transportation terminal near the airport is tempting because of all the federal transportation money MATA can access.

Whether it makes sense to dump bus passengers at the airport is another question, but sense didn't stop MATA from extending the trolley halfway to Midtown, or building a sham terminal at FedExForum, or proposing a $405 million light-rail line from downtown to the airport.

Asked if he is tired of the job and if he thinks he will finish this year, much less the nearly three years remaining in his term, Herenton sounded genuinely undecided.

"I'm still going through some deliberations," he said.

If the mayor were to suddenly leave office, as he almost did a year ago, things get a little complicated. The interim mayor would be Myron Lowery, the chairman of the Memphis City Council. Lowery, who just happens to be an expert on the city charter, could serve for 20 days. There would be a special election within six months. An appointed mayor would serve between the interim mayor and the elected mayor. Six months is a huge head start in a mayoral horse race and Lowery is a veteran politician who has become a bridge builder between blacks and whites on the council.

It's all speculation, of course. But that is all anyone is doing in this gloomy-looking year 2009, the 18th year of the Herenton administration.

Thursday, January 8, 2009

Pay for Nonperformance

Shareholders suffered, but bank executives cleaned up big time.

Posted By on Thu, Jan 8, 2009 at 4:00 AM

When it comes to compensation for corporate executives, the two phrases we've heard for years are "pay for performance" and "align executives' interests with those of shareholders." This was supposed to justify their salaries, stock options, and bonuses.

But a glance at compensation for the top dogs at Memphis financial institutions suggests otherwise. The banks made lots of bad loans that generated fees and revenue and profits for a while, until it all came crashing down in 2007-2008, leaving shareholders holding the bag. Several of these executives were on the job.

For their bad practices, some of the largest financial institutions in the country got a bailout. Among them were Regions Financial, First Horizon, and SunTrust, three regional banks with a big presence in Memphis.

The banks won't tell us what they're going to do with the bailout money. But we can see how they spent their money on executives in 2006 and 2007 by looking at their proxy statements, the most revealing document that public companies disclose. The 2009 proxy statements, which cover calendar year 2008, will be coming out in the next few months. If pay for performance and aligning executive compensation with shareholders means anything, then executives should be paid like teachers.

Here's an overview of their executive compensation and stock performance.

Regions is based in Birmingham. It acquired Morgan Keegan in 2000, Union Planters Bank in 2004, and AmSouth Bank in 2006. Regions got $3.5 billion in the U.S. Treasury bank bailout. The stock price of Regions ranged from $35 to $38 in 2006, from $38 to $21 in 2007, and from $21 to $8 in 2008.

Dowd Ritter, the CEO of Regions, received $7,713,138 in compensation in 2007 and $18,433,989 in 2006.

Douglas Edwards, former CEO of Morgan Keegan, received $2,621,275 in 2007 and $3,181,408 in 2006. His compensation included a $1,873,000 bonus in 2007, even though, the proxy delicately notes, Morgan Keegan "had also been impacted by issues related to mutual fund offerings and the subprime mortgage credit issues of 2007."

Three Morgan Keegan bond funds backed by subprimes lost 70 to 85 percent of their value in 2008 and are listed as the "worst-performing bond funds" over one year, three years, and five years in The Wall Street Journal 's year-end tabulation.

Like professional basketball players, bank executives get paid royally long after their useful life is over. Jackson Moore, former executive chairman of Regions and former CEO of Union Planters, retired at the end of 2007. He received $12,290,451 in 2007 and $29,190,349 in 2006, which includes severance pay of $4,993,987 paid to him in July 2008. W. Charles Mayer, former senior VP who came to Regions in the AmSouth deal, got $14,601,273 in 2007.

Bryan Jordan, former CFO who left Regions for First Horizon in April 2007, earned $2,148,547 in 2006.

SunTrust is based in Atlanta. It acquired Memphis-based National Bank of Commerce. SunTrust got $4.9 billion in the federal bailout. SunTrust's stock price ranged from $73 to $84 in 2006, from $84 to $59 in 2007, and from $59 to $30 in 2008.

James Wells III, CEO, received $3,428,954 in 2007 and $6,147,410 in 2006.

William R. Reed Jr., vice chairman, got $1,828,736 in 2007 and $2,265,288 in 2006. Mark Chancy, CFO, received $1,810,941 in 2007 and $1,556,851 in 2006.

First Horizon is based in Memphis and is by far the smallest of the three regionals. First Horizon got $866 million in the bailout. Its stock price ranged from $36 to $44 in 2006, from $44 to $22 in 2007, and from $22 to $10 in 2008.

Gerald Baker, former CEO, received $1,707,964 in 2007 and $1,296,468 in 2006. He retired in August 2008 and was replaced by Bryan Jordan as CEO. Jordan received $1,587,722 in 2007 when he was CFO.

Kenneth Glass, who resigned as CEO in January 2007, received $968,013 in 2007 and $3,068,354 in 2006.

On its website, First Horizon says, "We continue to be committed to pay for results." The company notes that "since 2004, actual total pay for the CEO and COO has been below the 25th percentile of the competitive market."

Correction: In a column in December about his federal court trial, I mistakenly referred to former Memphis City Council member Edmund Ford Sr. as Edmund Ford Jr.

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