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Top Stories of 2012: An industry-by-industry recap

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BIOSCIENCE

2012-draftAlexion To Move to Downtown New Haven

Alexion Pharmaceuticals’ plan to relocate from Cheshire to downtown New Haven was announced in June Winstanley Enterprises, the developer of 300 George Street, home to several smaller biotech firms, will develop the proposed property for Alexion in a new 400,000-square-foot worldwide headquarters. The facility will house both the administrative and research functions of the company as well as street-level retail space and a 600- buy valium 800-car garage.

Alexion was founded by its CEO, Leonard Bell, in 1992 at its first location in New Haven’s Science Park. The company left New Haven in 2000 when it was unable to secure the space it needed as it continued to grow. In February the company purchased Enobia Pharma Corp. in a deal valued at some $1.08 billion.

The state of Connecticut supported the $100 million cost of the relocation project with potentially up to $51 million in loans and tax credits through the state's “First Five” initiative (see related story this issue). A ten-year, $20 million loan with a 1.0-percent interest rate will be tendered by the state. If Alexion creates 300 jobs, as much as the full $20 million loan will be forgiven by the state.

Alexion will receive $6 million in outright grants for construction of laboratory facilities and equipment. State tax credits of up to $25 million for "urban and industrial reinvestment" will be provided the company as well.

 

Update: Alexion spokesperson Irving Adler says the project remains on track and the company expects to move some time in early 2015. He adds that the project requires the cooperation of many entities including the developer, the state of Connecticut, the city of New Haven and others. Once the Route 34 conversion is completed and construction begins on the building that will house Alexion, the company will have a better idea of a move-in date.

Adler says that all parties are working together and cooperating on working through the many phases it will take for the project to be complete, and that the company looks forward to being in the city.

 

TOURISM AND ECONOMIC DEVELOPMENT

Still Revolutionary’ Boosts Visits to State

ct-logo-2012The “Connecticut: Still Revolutionary” campaign and brand, the second phase of the state’s two-year nearly $27 million marketing effort, was rolled out earlier this year. While the spring/summer campaign focused on highlighting state tourism destinations that reflect the spirit of the new brand, the autumn initiative supported both tourism and economic development efforts through two distinct creative executions. The goal is to retain, attract and create good-paying jobs with good benefits.

The economic development effort showcased the revolutionary and groundbreaking advances that are taking place in Connecticut because of the forward-thinking companies that do business here. The campaign employed TV, print and digital as well as a new microsite, ctforbusiness.com, which promoted why Connecticut is the right place to start or relocate a company. The new economic development TV advertising can be streamed online.

The “Still Revolutionary” statewide tourism marketing efforts continues this fall with the debut of a new seasonal campaign designed to motivate visitors to plan a Connecticut getaway for a night, weekend or an extended visit and inspire them to experience the cultural attractions, romantic inns, iconic scenery, outdoor adventures and fall foliage that Connecticut has to offer.

Since the launch of “Still Revolutionary” in May, Connecticut’s tourism website posted a 100-percent jump in traffic and the state’s Office of Tourism provided travel assistance to 51 percent more potential visitors than the previous year via traditional inquiries, Web traffic and counseling in state welcome centers. “Still Revolutionary” ads were viewed more than 182,000 times on YouTube and, through the strategic media buy, reached the target consumer more than 400,000 times with campaign messaging. To date, more than 109,000 people became fans of the Visit Connecticut website and more than 580,000 are subscribers to the Connecticut Tourism eNewsletter.

 

Update: “We launched the ‘Still Revolutionary’ brand and marketing campaign back in May of this year,” says Randy Fiveash, director of tourism and spokesman for the campaign. “It was very well received, not only here in the state but, more importantly, in the markets that we went into including New York, Boston, New Jersey and Philadelphia. There are a couple of numbers that we measure that are very important to us. One that we measure is major visitor attraction visits across the state.”

Fiveash says the campaign increased traffic to these attractions by 7.8 percent. The increase in the lodgings tax, an indicator of activity in hotel and motel occupancy, was up 5.2 percent, he adds.

“These numbers tell us that the campaign certainly did have a great impact on tourism in the state,” adds Fiveash. “We also attracted traffic from within the state, since we did have an advertising program running here as well. We know that from the revenue that was generated because of the campaign.” As for the estimated number of people that visited the state, Fiveash says that’s not possible to measure.

“We will continue to use the ‘Still Revolutionary’ campaign because it is also a brand for Connecticut, a brand for tourism and also for business development and talent recruitment,” says Fiveash. “We’ve done some economic development advertising this fall but it’s too early to see the results yet. It’s been a very well-received crossover brand for us.”

 

HEALTH-CARE INDUSTRY

One Hospital Merger Completed…

In September 2011, Yale-New Haven Hospital (YNHH) and the Hospital of Saint Raphael (HSR) signed a definitive agreement to merge the two institutions, a proposal that became a reality this September.

YNHH, a 1,008-bed non-profit tertiary medical center, acquired HSR, a 533-bed not-for-profit hospital and the centerpiece of the Saint Raphael Healthcare System sponsored by the Sisters of Charity of Saint Elizabeth. The deal also included the 125-bed Sister Anne Virginie Grimes Health Center that provides short-term rehabilitation services and long-term care.

Before the merger, the Yale New Haven Healthcare System — encompassing YNHH, Yale-New Haven Children’s Hospital, Smilow Cancer Hospital at Yale-New Haven and Yale-New Haven Psychiatric Hospital — also included Bridgeport Hospital, with 425 beds, and Greenwich Hospital (206 beds), already making it the second largest health-care system in Connecticut.

The move allowed HSR to retain its Catholic traditions regarding reproductive services and other matters previously supported by the hospital. The approval process included the state Attorney General’s office, the Connecticut Office of Health Care Access and the Federal Trade Commission. The Archdiocese of Hartford and the Vatican also had to approve the merger.

 

Update: “The merger was officially completed on September 12, at 12:01 a.m.,” says Vincent Petrini, senior vice president of public affairs and spokesman for Yale-New Haven Hospital. “The entire process took about 18 months, including negotiations, a letter of intent, regulatory approvals including the Federal Trade Commission, the [state’s] Office of Healthcare Access and the Connecticut Attorney General’s office. It was a pretty broad and involved process.”

Petrini says operations have been integrated. “The biggest surprise was there were no big surprises,” says Petrini. “It was a fairly complicated transaction. We acquired about 3,500 employees [from St. Raphael’s]. We had the cultural integration of two unique organizations needed to deliver seamless patient care. Just last week, we opened up our renovated patient care unit on the Saint Raphael campus. We’re making good progress, though there remains work to be done, but we’ve come a long way in the last couple of months.”

Petrini says most employees were retained with the merger, though about 100 left to find work elsewhere or retired. He says the patients seemed to have adapted well, with a census of about 1,400 patients in mid-November.

 

…While Another Fizzles and Is Supplanted…

HARDHAT,JPGThis March Waterbury Hospital, a non-profit with nearly 1,600 employees and 393 beds, and St. Mary’s Hospital, also a non-profit with more than 1,200 employees and 379 beds, were in negotiations on a merger under the aegis of LHP Hospital Group Inc., (LHP) a privately held company located in Plano, Tex. that provides hospital capital and expertise to not-for-profit hospitals and hospital systems. Upon completion of the merger, LHP would retain an 80-percent ownership of the merged new hospital while each current hospital organization will retain 10 percent. LHP is owned by affiliates of the private equity firm CCMP Capital Advisors, LLC, and the CPP Investment Board.

Darlene Stromstad, president and CEO of Waterbury Hospital, said the deal would have allowed the merged units to have the resources to provide sophisticated, high-quality health care in a modern, convenient setting, adding that alone, Waterbury Hospital would have continued to struggle.

The new hospital pledged to honor the ethical and religious directives of the Catholic Church relating to reproductive services, instead relying on other non-affiliated facilities to provide them, said Stromstad. The joint venture was hailed by hospital officials as a once-in-a-lifetime opportunity to transform the health-care delivery system in greater Waterbury.

 

Update: “The transaction that we’d been pursuing with LHP Hospital Group and Saint Mary’s is not going to go forward,” explains Matt Burgard, director of public relations for Waterbury Hospital. “It reached an impasse late in the summer, so all parties have stepped away from the table and are going on their own ways now.”

Burgard says that Waterbury Hospital has announced a new partnership independently with Vanguard Health Systems, based in Nashville, Tenn., with whom it is pursuing a new joint venture. Vanguard currently includes 29 other hospitals in five states within its system.

“This new partnership will enable us to pursue a larger, improved strategy for our organization,” says Burgard. “We’re in the due-diligence phase right now and early next year, we’ll have a definitive agreement in place and be ready to submit our application to the state. Hopefully, by spring 2013, we’ll have approvals in place.”

Under terms of the proposed joint venture, the two organizations would form a Limited Liability Company in which Vanguard Health Systems would have an 80-percent ownership stake and Waterbury Hospital would retain a 20-percent interest. The venture would create a taxable, for-profit health system.

Burgard says that resolving the issues surrounding the need to comply with directives of the Catholic church were a “difficult challenge” to resolve. “We explored many, many different models to see if we could meet all the stakeholders needs but nothing seemed to work out.”

 

…And a New Medical School Takes Shape

On January 28, 2010, John L. Lahey, president of Quinnipiac University announced that the university would begin the process of opening a medical school, with an emphasis on primary care and global health. The school’s board of trustees gave its formal approval to do so after a year of internal studies and a six-month feasibility study by outside consultants, which concluded that a medical school was compatible with QU's mission and that the school had the financial and physical resources necessary to open one.

The process was expected to take several years to complete, including discussions with possible hospital and health system clinical partners, as well as the Liaison Committee on Medical Education (LCME), the accrediting body for U.S. medical schools. Quinnipiac aimed to enroll its first medical school class by autumn 2013 or 2014.

Lahey said that, for the proposal to be successful, the university would need to secure a major hospital or health system clinical partner and also meet the high and demanding accreditation standards of the Liaison Committee on Medical Education.

With the addition of a medical school and its existing schools of law, communications, business, education, health sciences and College of Arts and Sciences, QU continued to raise its national profile. There are only 200 American Bar Association-approved law schools, 135 approved U.S. medical schools, and only 89 universities in America that have both law and medical schools.

 

Update: Bruce Koeppen, MD, founding dean of the School of Medicine, says the school began hiring faculty and is progressing on infrastructure modifications of the former Anthem property in North Haven, which will house the medical school.

“We had planned on hiring 20 full-time basic science faculty,” says Koeppen. “We had over 900 applicants for the positions and we have filled 19 of the 20, with one more candidate to interview, so I think we’ll be done by next week.”

Koeppen says that curriculum is being developed by the faculty already in place and that should continue until completed in time for classes starting in August of next years

“We were accredited in October and received approval from the state for licensing to award the medical doctor degree,” adds Koeppen, who grew up in the Midwest but came east in a fellowship program at Yale University. From there, he served on the faculty of the University of Connecticut Health Center from 1982 to 2010, when he accepted his position as founding dean of Quinnipiac’s medical school. “We’re in the process of recruiting our charter class and, to date, have had over 1,400 applicants for 60 slots.”

Interviews of applicants began at the end of November. The four-year program is focused on general medicine and primary care. That is usually followed by internships and residencies in specialized areas of medicine.

Koeppen says the construction and renovation project is slightly ahead of schedule and that it appears the buildings will be ready for occupancy in March 2013.

St. Vincent's Medical Center, of Bridgeport, has been named the medical school's primary clinical partner. The affiliation with St. Vincent's is significant because it establishes a medical school-hospital affiliation in the state's largest city, whose residents will have more access to health care as a result of the collaboration. The school also has affiliations with MidState Medical Center in Meriden and Middlesex Hospital in Middletown.

 

REAL ESTATE & CONSTRUCTION

Real Estate

The Connecticut Business & Industry Association (CBIA) reported in March of this year that conditions in commercial and industrial real estate markets showed what was reflected in general economic surveys, according to its First Quarter 2012 Commercial and Industrial Real Estate Survey.

The survey found that, while conditions in February 2012 were weak, future trends looked up from past surveys. Most of those surveyed (53 percent) rated overall current market conditions in Connecticut as fair, according to CBIA. More than a third (38 percent) described them as poor. The CBIA survey also reported that nine percent said conditions are good, and no respondents said conditions in March were excellent. Predictions on overall market conditions statewide during the next three months said that 52 percent of those surveyed expected fair conditions, 33 percent poor, and 15 percent good.

Fifty-two percent described market conditions in the retail sector as fair, 27 percent rated them as poor and 21 percent said conditions were good. Only one percent called them excellent. Forty-nine percent rated the office sector fair and 40 percent as poor. Eleven percent ranked conditions as good, with one percent describing them as excellent.

 

Update: “For residential properties, the market is in a recovery mode that’s lower in Connecticut than it is in other places,” says Barbara Pearce, owner of H. Pearce Real Estate in North Haven, with offices in New Haven, Wallingford and along the Shoreline. “It’s slower in New Haven than it is in other parts of Connecticut. It’s because Connecticut has lower job growth, but we’ve been last for 20 years and I think now we’re close to last.”

Pearce adds that the state has lagged in the recovery of pricing and that in New Haven, it’s even slower, with prices continuing to decline.

“The fastest recovery is going on in places like Arizona and Nevada, where the prices tumbled much farther down that they did here,” says Pearce. “That’s not to say that Arizona is the best housing market in the country, but in fact, it’s got the highest increase [in home prices]. We are in a recovery, a slow recovery. The amount of housing stock has declined but it’s not as low here as it is in some other places, particularly with properties worth over $1 million.”

She adds that the residential vacancy rate in New Haven is the lowest in the country, hovering at 2.0 percent according to numbers provided by her office.

On the commercial side, depending on the type of space, the vacancy rate is high, says Louis Proto of the Proto Group in North Haven.

“It all depends on the property, the location and the terms,” explains Proto. “We’re finding that, in the retail segment, activity has been brisk. Local tenants have been active over the last six months, but we’ve seen decreased sales and leasing. On the office space side, it’s been quieter. The industrial market is stable. There is product out there.”

“I think business is improving overall,” adds Proto. “I think in the commercial world, it’s different than buying a house. There is a need and a demand, and the people that need product can go out and find it, because there are people that need to sell their commercial property.” He says that in North Haven, where his company manages properties, the buildings are “fairly full.”

“I think business in general is good,” Proto says. “We’ve seen a steady increase over the last couple of years. Compared to 2010 and 2011, I think we’ve turned the corner. We’re not where we were before that, and we may not get there for quite a while, but we have had an uptick in business.”

 

Construction

In March of this year, the downturn in the nation’s economy affected construction in Connecticut as well, with new residential construction spending rising only 1.2 percent in December 2011 following a 1.9-percent increase in November 2011, according to the latest information provided by Reed Construction Data (RCD). Single-family construction spending increased 1.5 percent but multi-family construction spending fell by 0.2 percent in December 2011, according to RCD.

RCD also reported that the total pre-bid phase value of all commercial construction projects in the state currently was $9,455,713,698, with nearly $139 million in bid phase values and over $25 billion in post-bid phase values.

A sample of projects on the drawing board included a $5 million pre-design project for Natchaug Hospital in Tolland, a $25 million pre-design project for the Woods At Newington condominiums, a $25 million pre-design for a multi-use office building planned for New London, and a $20 million plan for the proposed North Water shopping center in Fairfield. The University of Connecticut had begun the bid phase on the $20 million Bousfield psychology building in Storrs while the state was considering a renovation of the Judicial Branch Building in Hartford valued at nearly $2 million.

Area contractors had differing opinions on where the state was headed regarding construction, though the general feeling was one of optimism.

 

Update: “Everybody knows that in ’08, when the market crashed, the whole construction market came down,” says Todd Renz, president of OR&L Integrated Services, a construction, property management and brokerage firm located in Branford. “There was a huge restriction in liquidity and everyone has been very cautious. However, there are some projects that are moving forward by institutions that are self-funding in the areas of laboratory, research and development, pharmaceutical and healthcare. Those have kind of been where the work is coming from.”

Renz adds that some school projects have begun but they’ve made slow progress.

“There is a lot of money waiting on the sidelines that hasn’t yet been released,” says Renz. “Generally speaking, a lot of the projects for architects and engineers are starting to pick up a bit which is a precursor to construction. Things can only be slow for so long. The residential market is starting to pick up, with low interest rates and good availability in residential.”

Renz notes that funding is plentiful but lending remains constrained. “With the banks, there’s plenty of money for very sound projects,” he adds. “Underwriting process has been very strict and has never relaxed so the funding for work is tight. If you’ve got a viable project and an experienced team, there is money.”

 

ENERGY

Power in the News

At the start of 2012, reports indicated that electricity costs had been trending down for the last six to seven years, but may have reached their lowest point, according to Michelle Erca of Connecticut Energy Savings, an organization that provides detailed information on electric suppliers’ plans and rates, and allows consumers to make decisions on which company to choose as their electricity supplier. Erca said that the lowest cost Connecticut had ever seen at that time was 6.29 cents (per kilowatt hour) for residential customers. It had been as high as 14 cents several years ago.

Erca said that, due to deregulation and market competition, electricity prices themselves had come down, but the distribution system costs affecting the total remained nearly the same as past years. She noted that Direct Energy of Houston, Tex., and ConEdison Solutions of New York had offered the lowest rates to Connecticut Light & Power customers. She said that Dominion Energy of Pennsylvania, a supplier for United Illuminating Co. customers, also had rates as low as 6.79 cents, although her organization didn’t offer them as a partner. In contrast, United Illuminating showed a residential rate of 11.30 cents on-peak, and 7.8 cents off-peak, according to information from CT Energy Info.

 

Update: “The trend that we’ve seen for the entire year is that rates continued to drop,” says Michelle Erca of Connecticut Energy Savings. “Rates were going down  every month and just slightly came back up in November. That’s partly due to the fact that the cost of energy is higher in the peak seasons, those being in the winter and the summer.”

Erca says that though the increase in the winter is expected, the overall trend has been decreasing rates. But the public has not been without complaints.

“The biggest complaint would be regarding the variable rates charged by suppliers,” adds Erca. “Variable rates are those that suppliers can charge that don’t have any kind of cap. It’s whatever the market will bear. It’s like buying a car. One dealer has one price and down the road, another dealer’s price is higher. Variable rates are the one thing that can be a real surprise to consumers. That’s one thing to consider when they sign up for an alternative to local power companies.”

Erca says that consumers have been steadily switching suppliers throughout the year looking for the best rates. She adds that there doesn’t seem to be any seasonality regarding when consumers switch. She says that the lowest fixed rate plan with no cancellation fee that is currently popular comes from Direct Energy of Texas. Direct Energy serves multiple deregulated markets.

Erca says she’s waiting to see if the current downward trend continues. “It also may be due to not knowing what’s going to happen in the new year,” she adds.