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Businesses saw shake-ups in 2010

IBJ Staff
December 24, 2010
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Year In Review

Biglari stirs up Steak n Shake

Sardar Biglari in April rechristened the publicly traded Steak n Shake Co. as Biglari Holdings, and soon installed at every restaurant “welcome” photos that feature him front and center.

During the year, he also proposed a hedge-fund-style compensation plan that would have paid him 25 percent of any increase in the company’s annual book-value growth topping 5 percent, in addition to his $900,000 annual salary.

After shareholders protested, Biglari put a vote for the pay plan on hold—citing the need to address “misinformation and mischaracterizations of the proposed agreement by certain analysts and investors”—before winning approval of a modified pay plan.

Through it all, the Steak n Shake chain’s performance was strong, at times even dazzling.

Steak n Shake grew pretax profit in fiscal 2010 an impressive 331 percent—from $8.7 million to $37.7 million. Biglari said in a letter to shareholders that Steak n Shake went from losing $100,000 a day at the beginning of last year to making $100,000 a day this year.

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JW Marriott opening nears

Construction on the JW Marriott hotel at 10 S. West St. progressed throughout 2010 with the anticipation of a Feb. 4, 2011, opening.

The 1,005-room JW Marriott is the centerpiece of the $450 million Marriott Place, a collection of four Marriott hotels at Washington and West streets that will have 1,626 rooms.

The JW Marriott will be the largest hotel in Indianapolis. By September 2010—a full four months before it opened—the hotel had an impressive 100,000 rooms booked.

The Marriott complex increases the number of downtown hotel rooms 30 percent. Such a large influx of rooms could depress occupancy at competing hotels. And the JW’s fast start ratcheted up other area hotel managers’ fears.

But Don Welsh, CEO of Indianapolis Convention and Visitors Association, said the scheduled January 2011 opening of the $275 million, 420,000-square-foot Indiana Convention Center expansion would help bring in new convention business and help raise occupancy rates for all downtown hotels.

Including Lucas Oil Stadium, the city will have 747,000 square feet of exhibit space, almost double the 400,000 square feet it had with the Convention Center and RCA Dome.

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Luck runs out for casinos

The odds seemed to be stacked against Indiana’s racinos this year.

In March, owners of Hoosier Park in Anderson filed for chapter 11 bankruptcy after missing a $13.4 million interest payment.

Hoosier Park’s operations continue, but the venue’s owner, locally based Centaur, is selling off Colorado and Pennsylvania properties to raise cash.

Hoosier Park’s Shelbyville counterpart, Indiana Live, also is struggling. The owner, South Bend-based Oliver Racing LLC, missed an interest payment in November.

Both gambling companies are awash in debt, in part because of the hefty $250 million license fees they paid the state in return for the right to add slot machines.

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GOP to push school reforms

Republicans’ sweep into power could prove to be as much a victory for education reformers as the politicians themselves.

Gov. Mitch Daniels and fellow Republican Tony Bennett, the superintendent of public instruction, are pushing drastic changes they hope will make Indiana a national leader in education policy.

Their priorities include tying teacher pay to student performance; increasing the number of charter schools; allowing school leaders to make decisions based on performance rather than seniority; and providing vouchers for low-income students to attend private schools.

The GOP won back control of the House in November, putting both chambers of the Legislature under Republican control for the first time in four years. Republicans won 60 of the 100 House seats and added to their Senate majority.

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New rules roil ITT Educational

New federal student-lending rules will pinch profits at Carmel-based ITT Educational Services Inc.—unless newly empowered Republicans in Congress maneuver to block them.

The U.S. Department of Education unveiled data in July showing that only 31 percent of former ITT students have repaid or are paying down their federal loans four years after leaving, suggesting their time at the school did not lead to “gainful employment.”

The new Obama rules, scheduled to go into effect in mid-2011, would restrict access to federal loans for ITT students.

Federal student loans account for about 80 percent of ITT’s nearly $1.6 billion in revenue. Analysts say ITT would likely have to cut prices, raise admissions standards or even eliminate some programs to meet the new standards, which likely would reduce its $375 million annual profit.

ITT CEO Kevin Modany has criticized the rules for failing to account for ITT’s high percentage of low-income students, as well as students who use a federal program that requires them to pay only loan interest for up to five years.

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Tech firms scarf up venture capital

Venture capitalists have been hiding in a bunker since the economy went south, but a handful of local technology firms overcame the odds and collected millions of dollars.

ChaCha Search, the Carmel-based mobile phone search engine founded by tech entrepreneur Scott Jones, in October closed on a $20 million round of financing from VantagePoint Venture Partners and Rho Ventures. That was on top of $7 million from a venture capital fund in January.

Jones already had the financial backing of notable individual investors such as Amazon.com founder Jeff Bezos and Compaq Computer founder Rod Canion.

Also scoring big was tech newcomer Scale Computing, which makes data storage devices. In November, Indianapolis-based Scale landed $17 million from Silicon Valley venture firm Scale Venture Partners and from Benchmark Capital and Northgate Capital. In March, Scale received $9 million in venture funding.

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Up-and-comer takes ISO podium

The Indianapolis Symphony Orchestra chose a young conductor from Poland as its artistic leader.

In October, Krzysztof Urbanski, 28, was named the seventh music director in the ISO’s 80-year history. He starts his four-year term Sept. 1.

Urbanski’s appointment came a little more than a year after symphony CEO Simon Crookall made the controversial decision to oust maestro Mario Venzago shortly before the 2009-2010 season.

Urbanski currently is chief conductor of the Trondheim Symphony Orchestra in Norway, but this will be his first job as music director. He made his U.S. debut with the ISO on April 16 and was invited to return to open last summer’s “Symphony on the Prairie” series.

As “music director designate,” Urbanski will return for concerts May 20 and 21 and conduct for six weeks in the 2011-2012 season. He’ll conduct a minimum of 10 weeks the following season.

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PPM shakes up radio ratings

A new method of measuring radio listening habits launched locally by New York-based Arbitron Inc. in July shook up station ratings, sending radio operators scrambling to re-evaluate formats and ad pricing.

Arbitron debuted Portable People Meters in the market and ditched its old pen-and-paper diary system. PPMs, which are thought to be more accurate, have been introduced in 33 U.S. markets since 2007. The pager-size PPM is worn by listeners and detects radio waves reaching their ears.

Some local stations such as WFMS-FM 95.5, the local country stalwart, have thus far held their own in the People Meter era, which was used for the first time in the ratings quarter ended Sept. 15.

Under the new system, some stations, including classic rock station WJJK-FM 104.5 and soft rock WYXB-FM 105.7, saw significant ratings increases, while stations such as WIBC-FM 93.1 and WHHH-FM 96.3 saw their ratings decline.

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Sun pulls Marsh off market

The parent company of Marsh Supermarkets in August said it planned to continue investing in the local grocery chain after failing to find a buyer.

Florida-based Sun Capital Partners in late 2009 hired an investment adviser and began soliciting offers for the chain of roughly 100 stores, half in Indianapolis. Industry observers said the asking price was $130 million to $150 million. There were no takers.

Sun has cleaned up the chain’s balance sheet, spruced up dozens of stores, and tweaked the product mix since it paid $88 million in cash and assumed $237 million in debt to acquire Marsh in September 2006. But none of the moves boosted Marsh’s market share in Indianapolis, where it lags only Walmart and Kroger.

For regional and national grocery operators, acquiring a chain that’s third place in its home market is a tough sell, David J. Livingston, an independent grocery analyst based in Wisconsin, told IBJ.

Since the private equity firm took over Marsh, it has slashed $70 million in overhead, sold $80 million in real estate, and spun off non-grocery businesses including Crystal Catering, McNamara Florist and Village Pantry.•

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