Crain's Cleveland Business

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12/30/2015

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VOL. 37, NO. 1

JANUARY 4 - 10, 2016

35th Anniversary

GOLF: Membership drive Solon club tries to avoid shutting down P. 2

Business of Life Source Lunch Anthony Margida dishes on the Akron tech scene

HEALTH CARE: Biometrics Hospitals get better grip on records

P. 17

P. 2

ACE Report

EDUCATION: Enrollment

CLEVELAND BUSINESS

Colleges adjust as prep numbers drop P. 4

Area experiences slight jobs drop P. 6

Investors add cash, but VC firms absent Just one traditional venture capital group receives state funding, which is concern

BY CHUCK SODER csoder@crain.com @Chuck Soder

Predictions 2016 A Cavs title? Will the new hotels be ready for the RNC? We look at those topics, plus ask area leaders for their forecasts for the year — Pages 11-15

The list of tech investors that received loans from the state of Ohio last month is telling.

Only one classic venture capital firm made the cut. And that firm — NCT Ventures of Columbus — got in by the skin of its teeth.

Instead, almost all of the $60 million went to economic development organizations, groups of individual “angel” investors and other organizations that don’t fit the mold of a traditional venture capital.

And that’s not a good sign for startups companies in Ohio, according to Ray Leach, CEO of JumpStart, a Cleveland nonprofit that works with local entrepreneurs.

Granted, he said the money will still do a lot to spark the state’s hightech economy, which is the purpose

of the Ohio Third Frontier program.

And JumpStart itself did extremely well: It received $12.5 million that it will use to invest in high-tech startups via three separate funds.

Still, Northeast Ohio needs a few more conventional venture capital firms, given that they tend to make somewhat larger investments, Leach said.

He posed a question, referring to all 20 applicants: “Who is the classic, pure Series A venture investor that invests in a broad range of technologies and companies that are pre-revenue? Pretty slim.”

Here are a few insights that can be gleaned from the list of applicants as well as the analysis that the state used to pick the winners.

First off, JumpStart dominated.

The proposal for JumpStart’s Evergreen Fund was ranked first out of 20 that were submitted. Proposals for two new JumpStart funds also were SEE INVESTORS, PAGE 19

‘Brutal’ times for shale likely will continue But experts say Utica remains the best play in the industry, and region can help pick up the slack in 2016

BY DAN SHINGLER dshingler@crain.com @DanShingler

Ohio’s Utica shale play had a tough year in 2015, as low oil and gas prices forced drillers to cut back their operations and the number of working rigs in the state plummeted.

It’s a slowdown that could last well into this year, if not longer. But with three years of drilling under their belts, leaders of the oil and gas industry say they’ve learned enough about Ohio’s shale play to know it will be profitable even when other shale plays are not, and drilling here eventually will gain pace again.

“It’s brutal,” summed up Shawn

Bennett, executive vice president of the Ohio Oil and Gas Association in an interview in December. “And 2016 is going to be a continuation of 2015,” he predicted.

“When (the slump) came, in 2015, there was a lot of uncertainty in the air,” Bennett said. “Was this a market correction or was this something larger? It took about six months for

people to realize it’s not a market correction — it’s the current state of the economy and an attack on the domestic oil and gas industry in the U.S.” Bennett and other industry experts say low oil and gas prices, resulting from production in the Middle East as well as in other parts of the U.S., have driven prices down to

Entire contents © 2016 by Crain Communications Inc.

Business of Life — Fitness Orangetheory is spreading the word locally — Page 16

the point that some wells are not attractive to drillers. The industry is cutting back, including in Ohio, where the number of active shale drilling rigs dropped from about 50 to fewer than 20 in 2015.

So what’s to like about Ohio’s oil and gas prospects? The Utica is the best, most efficient and most SEE SHALE, PAGE 10

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z JANUARY 4 - 10, 2016 z CRAIN’S CLEVELAND BUSINESS

Accurate health records are at their fingertips Northeast Ohio hospitals join growing number of facilities using biometrics to register patients, track medication

BY LYDIA COUTRE lcoutre@crain.com @LydiaCoutre

Hawthorne Valley Golf Club is a scenic course located at 27840 Aurora Road in Solon. (Contributed photo)

Solon golf club aims to stay the course Hawthorne Valley will close if it doesn’t reach 300 members

BY KEVIN KLEPS kkleps@crain.com @KevinKleps

The website for Hawthorne Valley Golf Club in Solon proclaims the Donald Ross-designed course to be “one of the area’s best-kept secrets.”

Bob Zeman, the club’s general manager for the last nine years, is trying to change that. The message is simple: Hawthorne Valley needs to increase its membership to 300, or it will close its doors.

Zeman said the club, which was private until 2009 and has been semi-private the last six years, is about halfway to its membership goal. Hawthorne Valley is asking $2,500, a price that includes unlimited golf at the 90-year-old club, plus a private locker and use of the club’s showers and workout facility. Members would also have the option of paying for 30 rounds and dividing them between friends and family.

A source who didn’t want to be identified because he works for a prominent Northeast Ohio golf course said what Hawthorne Valley is offering is a “phenomenal deal” — one he believed would make it difficult to turn a profit.

Well, that’s because Fred Rzepka, a longtime Hawthorne Valley member who bought the club in 2000, isn’t trying to make money on the course.

Even if the club gets to its goal of 300 members, “It’s an amount I’ll still lose money with,” Rzepka said.

Rzepka said he wants to be at or very close to 300 members by the end of January. If not, he will close the club, which Zeman said has 30 fulltime staffers during the golf season.

“It’s not going to be making any money,” Rzepka said. “I’ve been losing money since I bought it.”

Course is ‘a gem’ Rzepka and his brother, Peter, established TransCon Builders in 1972. The Cleveland company owns and manages apartment units, se-

nior housing and commercial real estate. Golf isn’t how he made his money, which is a good thing, since he said it’s difficult to do so because of the proliferation of courses in Northeast Ohio, especially near Hawthorne Valley’s headquarters at 27840 Aurora Road.

“Guys are getting a good deal (at $2,500), I felt,” he said. “I’m giving them another chance to come in and be like a country club.”

Zeman, the club’s GM, said Hawthorne Valley’s membership reached 175 in 2013. But to trim expenses, the club closed the locker room in 2015, and membership dropped to about 100.

“In the general scheme of things, it did work because we cut a lot of labor out,” Zeman said. “We did cut some costs. But we also lost some members.”

Zeman said Hawthorne Valley has since regained many of the customers it lost. And the club has a group of longtime members who are attempting to drum up support.

One, Geoffrey Shapiro, an attorney at Shapiro, Shapiro & Shapiro Co. LPA in Warrensville Heights, said he’s telling the guys he golfs with what “a gem” Hawthorne Valley is.

“I don’t understand why it’s not more popular than it is,” Shapiro said. “It’s a really hard model to run.

To run it and make money, it’s very difficult. (Rzepka) put a lot of money into it.”

Rainy days Hawthorne Valley was closed for 11 days in June because of flooding, Zeman said. The month, according to the National Weather Service, was the third-wettest on record at Cleveland Hopkins International Airport, with rain falling on all but nine days.

“That’s really a peak month for us,” Zeman said. “Then we were closed six days in early July. When you lose those peak days, you can’t make those up.”

Hawthorne Valley had a “great fall,” Zeman said, but the damage

done in June and July has resulted in a 20% year-over-year drop in rounds played in 2015.

The GM said that the number of rounds at the club was very consistent in the four years prior. “This year, you saw a significant dropoff,” Zeman said.

And even though the weather was unseasonably mild for much of the fall, Zeman said that, from his experience, once October arrives, many Northeast Ohio golfers “put their clubs away and they’re not playing again (until the following spring).”

Rzepka, who ended a successful 24-year run as a commissioner of the Cleveland Metroparks at the close of 2010, said Hawthorne Valley is an attractive piece of land for potential buyers.

In 2008, Solon residents approved a plan by TransCon Builders to build a senior housing development on the Hawthorne Valley grounds by a 4,556 to 3,606 margin. The rezoning issue, however, was defeated in Ward 5, where the development would have been located, which nixed the idea.

“Can I sell it? Yes,” the 84-year-old Rzepka said. “But instead of selling it, they want me to develop it. I’m at a point, I don’t want to develop it.

“Someone will come buy it,” he added. “It’s 200 acres in a great location, right off the Metroparks trail.

I’m trying to do the best I can to keep it open.”

If the membership goal isn’t met, Rzepka said he’ll turn the property over to his family.

“Chances are if nothing happens, it will stay for the grandkids,” he said. “It’s the largest piece of privately owned land in Solon.”

Peggy Weil Dorfman, Solon’s economic development manager, said Hawthorne Valley hasn’t contacted the city about a potential close. As a result, Solon has “no official comment at this time,” she said.

Rzepka hopes it doesn’t get to that point.

“I tried to do the best I can,” he said.

With one touch, Akron General patients now can be connected to their electronic health records using a fingerprint scanner.

In November, Akron General began installing SafeChx, a patient identification technology, throughout its major registration areas.

The fingerprint scanners aim to prevent medical identify fraud, improve patient outcomes and eliminate duplicate records, which can be created with misspellings or typos. Up to 10% of all medical records are duplicates, according to CrossChx, a Columbus-based company offering health care identity software including SafeChx. “We want to make sure that we don’t have duplicate medical records either, because that also slows down the treatment of the patient,” said Stacy Ickes, director of patient access for Akron General.

CrossChx, founded in 2012, offers SafeChx to hospitals at no cost, including installation, training and support. Since the state of Ohio provided funding for the pilot, CrossChx has grown through venture capital investments and revenue earned from premium applications, according to Brad Mascho, co-founder and president of CrossChx. Ickes said there have been a few instances where the scanners could not read a fingerprint, but the vast majority of patients have opted into the technology and had no problems.

SafeChx has been collecting several hundred new fingerprint IDs a day at Akron General. Once patients are enrolled, which takes about 30 seconds, they can use the technology immediately. Each day, a couple dozen returning patients use their fingerprint to check in.

Staff still check patients’ names and birthdays like always — and can continue to use that for those who can’t or don’t want to use their fingerprint — but SafeChx helps them do a better job at instantly identifying patients.

“It reduces the risk of fraudulent claims and medical errors due to misidentification,” Ickes said.

Cutting the error rate While some other area hospitals have embraced biometric technology, they’ve kept it on the employee end rather than expanding it to all patients.

For several years, MetroHealth has been using biometric technology to prevent medical errors.

Employee fingerprint scanners

help ensure patients receive the correct medications, said Donald Reichert, vice president and chief information officer for MetroHealth. Each floor with in-patient rooms has a unit for dispensing medications, where nurses and other providers must go through a series of security measures, including a fingerprint scan.

A thumb print and password logs users into a screen that shows only the patients on that floor. The system links to a patient’s records, including any drug order from the doctor. Once a medication is selected, a drawer — divided into a series of individual compartments — will open. Only the door containing what was ordered opens.

In a patient’s room, the barcodes on the single-dose medication packet and on the patient’s wrist are scanned into the computer to ensure a match. Alerts will flash on the screen if the drug or its dosage weren’t ordered.

These measures, starting with a fingerprint scan, help prevent human error and identify any intentional abuses, Reichert said. Someone overriding the alerts or repeatedly entering barcodes manually instead of scanning could send up red flags.

Similar measures are in place for breast milk and blood.

“I think it improves certainly the safety,” Reichert said. “If we’re administering drugs or blood, (we’re) making sure that we’re dealing with the right patient and giving them the right medications or whatever that the physicians ordered, and we make sure that it’s safe.”

Indexing data MetroHealth hasn’t gotten to the point of using patient biometrics for identification.

“Not that we couldn’t — I’m sure we could — but we have not moved in that direction,” Reichert said.

MetroHealth’s IT department is testing retinal scanners for computers, which he sees as the direction biometric technology is headed. Reichert said he’s looking to test products as more information is available about the benefits of biometric technology in health care.

At Akron General, patients largely have accepted the new scanners, Ickes said. She wants to see as many patients register their fingerprints in the system as possible, not only for ease of records during registration, but also for times when they may not be able to identify themselves.

“So if something would happen that then they would come back and be unresponsive, all we need to do is try their right index finger,” Ickes said.

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z JANUARY 4 - 10, 2016 z CRAIN’S CLEVELAND BUSINESS

Colleges widen nets during tough times

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With a declining number of local students graduating from high school and an improving economy, Northeast Ohio’s colleges and universities are refining their recruiting strategies. “It’s never been this competitive,� said Timothy Bryan, chief of staff and vice president for enrollment and marketing at Malone University in Canton.

The number of high school graduates was expected to plateau starting in the 2013-2014 school year through the 2019-2020 year, after decades of growth and a few years of decline, according to a 2012 report from the Western Interstate Commission for Higher Education. And that’s just nationally. Ohio was expected to see high school graduate population losses of about 5% to 15% from the 2008-2009 school year to 2019-2020.

But tuition revenue is what Bryan called the “lifeblood� of an institution, so schools like Malone have been taking a variety of steps to reach more students. The university has targeted areas out of state where it’s historically seen interest, like western Pennsylvania, and buying more names at the beginning of the process. The school also focused more on its identity as a Christian school, reaching out to churches and youth groups.

And it has created more personalized ways to get students on campus for a visit, like a behind-the-scenes theater event, a chess tournament and academic summer camps. From Dec. 15, 2014, to Dec. 15, 2015, the college increased significantly its applications, visits — and its admissions, to 664 students from 433. “You’ve got to make your net wider,� Bryan said.

That’s certainly an approach the state’s public universities are taking.

Shopping season College recruiting is going through a “period of disruption,� said Rob A. Spademan, associate vice president of university marketing and communications for Cleveland State University. That’s due to the stagnant number of high school grads, to the student debt conversation and to the digital revolution, which has led to more out-of-state advertising. Students can “shop around� more easily now than ever, and universities are realizing they have to look at students as customers, Spademan said.

Cleveland State set out to grow its pool of potential applicants about six or seven years ago, recruiting students who were of a similar background to its existing students (firstgeneration students from inner-ring suburbs) in farther-flung regions like

RECRUIT COUNT SLIPS Ohio is expected to lose a significant amount of possible students from its traditional higher education recruitment pool in upcoming years.

According to a 2012 report from the Western Interstate Commission for Higher Education, the state is expected to see its high school graduate population drop by 5% to 15% from the 2008-2009 school year to the 2019-2020 year.

The most recent figures the state has for 2015 enrollment are the preliminary 15th-day headcount for the public colleges and universities in Ohio. Private schools were not included.

According to these numbers, university main campuses saw a 0.63% increase in enrollment, from 283,705 in fall 2014 to 285,480 in fall 2015. Regional campuses, on the other hand, saw a drop of 2.78%, from 45,413 in fall 2014 to 44,150 in fall 2015. — Rachel Abbey McCafferty

Michigan or Indiana. In Northeast Ohio, the university looked to grow interest outside the inner-ring suburbs, Spademan said.

Spademan said the number of freshmen at the college had almost doubled from about 950 in fall 2009 to about 1,800 in fall 2015. But total enrollment dropped just a bit in the past year, from 17,345 in fall 2014 to 17,260 in fall 2015.

At the University of Akron, expanding its horizons has meant moving beyond the primary focus areas of Ohio and Pennsylvania to include states like Michigan, Indiana, Illinois and New York, said Lauri Thorpe, the school’s associate vice president for enrollment management. The school also has streamlined the admission process, providing certainty to parents and students by letting them know decisions about admission and financial aid earlier.There was a 2.7% drop in total enrollment between fall 2014 and fall 2015, from 25,865 to 25,177, Thorpe said. But, she said, the entering freshman class rose 3.6%, to 4,278.

Youngstown State University has seen a similar trajectory in recent years. When Gary Swegan, associate vice president for enrollment planning and management, came to the school in November 2013, the university had seen three straight years of enrollment declines.

The university brought in an outside company for direct recruitment marketing, which helped widen the application pool, Swegan said. After that, Youngstown State saw a 90% increase in applications. “We’re getting it turned around here,� Swegan said.

But in terms of enrollment, Youngstown State is still down. It dropped from 13,381 in 2013 to about 12,551 in 2014 and 12,471 in 2015. A large portion of that was a drop in continuing students, Swe-

Volume 37, Number 1 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright Š 2016 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373.

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gan said — a combination of a lack in retention and in smaller class sizes in the upper classes. The retention piece started to turn around in the first year of selective admission in 2014, Swegan said.

Sticking around Retention is an important component to total enrollment. At Baldwin Wallace University in Berea, it’s one of the four factors that vice president for enrollment management Scott Schulz cited as part of the school’s enrollment strategy. Enrollment rose from 3,987 in fall 2014 to 4,017 in fall 2015.

The other factors are the school’s use of data predictive modeling to help identify students who will be a good fit, the messaging around its unique brand and the new programs it offers, many of which are in health care.

Walsh University in North Canton has been increasing its academic offerings based on what needs need met.

Teresa Griffin, vice president for marketing and communications, said Walsh has added 14 new undergraduate majors in the past two years, including Spanish for health care, and is increasing the number of certificates it offers on the graduate side.

The school has revamped its website to be more responsive, increased the number of campus visit days it offers and moved to a test optional model to become more accessible. Walsh saw a slight drop in enrollment from fall 2014 to fall 2015, from 2,957 students to 2,899, but Griffin said inquiries and applications are both up this year.

Establishing an identity At the region’s small private schools, finding a way to stand out is critical. “We can’t be everything to everyone,� said Lindajean Heller Western, vice president for enrollment for Hiram College.

Hiram doesn’t do much with mass mailings and email, but instead focuses on a targeted approach. It buys names after the ACT and SAT so it can contact students who would be a good fit and recently started offering small on-campus events for athletic and academic groups. Western said the college recently revamped its admittance approach to better fit the standards of a moderately selective college, instead of trying to compete with state institutions.

She wasn’t sure the environment was more competitive now, but with so many small liberal arts colleges nearby, the school has always had to make differentiation a priority. Enrollment rose from 980 in 2014 to 1,100 in 2015. “We’ve sort of always had to keep our eye on the ball and know who our students are,� Western said.

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z JANUARY 4 - 10, 2016 z CRAIN’S CLEVELAND BUSINESS

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Employment in the seven-county Cleveland-Akron metropolitan area is being projected to dip ever-soslightly in November. The estimated decline — 1,400 jobs or 0.1% of the employment in an economy of nearly 1.2 million jobs — reflects an annual slowdown in the manufacturing, or goods-producing, sector, according to the latest Ahola Crain’s Employment (ACE) Report.

The decline is the first drop since July and reflects an estimated increase of 834 jobs in service employment that is offset by a loss of 2,233 jobs in goods-related businesses.

Year-over-year, though, employment is up, according to the ACE numbers, with a modest gain of 5,427 since November 2014, a 0.58% seasonally adjusted increase.

“The region in recent history registers softer employment gains for the goods-related sector, typically in the later months of the year, and we are not overly concerned about the contractionary reading (for November) as the region remains in expansion territory,” said economist Jack Kleinhenz, who compiles the ACE data.

“The recent trend of performance

is indicating further economic activity and job growth, but perhaps at a slower pace,” Kleinhenz said.

The regional economy continues to lag the national economy. Private employment nationally rose by 2.1% over the last 12 months, according to current employment data compiled by the federal Bureau of Labor Statistics.

The two sub-metro areas in the region are performing similarly, though Cleveland is doing narrowly better than the Akron metropolitan area.

Estimates by the Ohio Department of Jobs and Family Services (ODJFS), which analyzes the BLS data, found that the number of people employed grew by 0.018% over the last year in its Akron metro area, which includes Portage and Summit counties. Employment in the fivecounty Cleveland metro grew 0.019% from November 2014 to November 2015. The ACE estimates cover only private sector employment; the BLS data include all nonfarm employment, including the government workforce.

Similarly, unemployment for the

Cleveland metro was 3.7%, according to ODJFS, down from 5% in November 2104, while the two-county Akron metro had an unemployment rate of 4.6%, down from 5.3% a year ago.

Regional employment is expected to continue to grow, though slowly.

Economists at PNC Financial Services Group, parent of PNC Bank, found optimism in October when the company surveyed small and middle market business owners in Ohio.

Because of optimism about the outlook for their own businesses and for the local economy, 19% of business owners surveyed said they planned to hire in the months ahead, compared with only 10% who had plans to hire six months earlier.

In addition, 36% of those employers — PNC did not disclose the size of its sample — said they expected to increase employees’ pay, up from 26% who were planning pay raises in the spring. Of those planning raises, 59% said they planned to give raises of 3% or more during the next six months.

— Jay Miller

CNB Financial to buy Lake National Bank Lake National Bank of Mentor has agreed to be acquired for nearly $25 million by Clearfield, Pa.-based CNB Financial Corp. (NASDAQ: CCNE), the parent of CNB Bank.

In a news release, CNB said it will

pay $22.50 per share in cash, or $24.75 million in aggregate. Lake National Bank, which was founded in 2005 by the late Lake County businessman and philanthropist Jerome T. Osborne Sr., had $152.2 million in

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total assets and $14.1 million in shareholders’ equity as of Sept. 30.

The transaction is expected to close in the third quarter of 2016, CNB said. It’s expected to be accretive to CNB’s earnings “in the first full year of operations,” according to the company’s news release. After the deal is complete, CNB will have more than $2.5 billion in assets and 40 offices in central and western Pennsylvania and northern and central Ohio.

Lake National will operate as part of the ERIEBANK division of CNB, according to the release.

CNB said in the release that “it is anticipated that customer-facing personnel at Lake National Bank will be largely unaffected, and ERIEBANK plans to grow its business origination effort in Lake County following closing and integration of the transaction.”

Andrew Meinhold, president and CEO of Lake National, will continue with CNB in the ERIEBANK division after the deal is complete. Lake National board members Jerome T. Osborne III and Lance F. Osborne will join the advisory board of ERIEBANK. In addition, Joseph T. Svete, chairman of Lake National; Richard T. Flenner Jr., vice chairman; and Richard J. Kessler, a director, will launch the ERIEBANK OH Advisory Board.

Lake National operates two offices, both in Mentor.

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CRAIN’S CLEVELAND BUSINESS z JANUARY 4 - 10, 2016 z PAGE 7

Boston Heights bringing in big retail

BY MARY ETHRIDGE clbfreelancer@crain.com

For decades, there have been two primary reasons to visit the village of Boston Heights in northern Summit County: to commune with nature or to merge onto the Ohio Turnpike.

But a year from now, the village will be a magnet for a whole new breed of driven wildlife: shoppers and those who serve them.

Between the new Arhaus Furniture headquarters and the emerging Marketplace development — which has inked deals with Bass Pro Shops and Costco Wholesale as anchors — this 6.9-square mile village is taking on a new vibe.

However, village officials say they’ve worked hard to make sure Boston Heights doesn’t lose its bucolic charm.

“We need the businesses here so we can maintain what we enjoy about living here,” said Bill Goncy, mayor of the village of nearly 1,300 residents. “To preserve everything else, we need to have a tax base.”

Homeworks Inc., which does business as Arhaus Furniture, already has begun the months-long process of moving to its new $43 million headquarters and distribution operation on East Hines Hill Road in Boston Heights from Walton Hills.

“We just outgrew the space (in Walton Hills), and there was no way to expand,” said Greg Teed, chief financial officer of the 30-year-old Arhaus, which is known for its inhouse designed and globally sourced furnishings.

Arhaus is making the move in the midst of a beefed-up expansion ef-

Arhaus Furniture soon will move into its $43 million headquarters in Boston Heights. (Contributed rendering) fort; at least 11 new Arhaus stores are planned for 2016. From 2010 through 2014, Arhaus opened two to four stores a year, according to Furniture Today, a trade magazine based in North Carolina. This year, it opened eight new stores, including its first in Arizona and Southern California.

The Arhaus complex includes a 650,000-square-foot distribution center and a 120,000-square-foot, two-story office building. The office building is low slung on purpose so that it is nearly invisible behind the mounded landscaping that surrounds it. The company wanted to help maintain the quiet feel of the village for the sake of residents.

“Change is hard for everyone. We understand that,” said Teed. “We plan to be there for a long, long time.

We want to be good neighbors.”

Several village residents objected to the new developments when plans emerged a few years ago.

None was as vocal as Edward Kuchar Sr., owner of Plastic Process Equipment in Macedonia who has

lived in Boston Heights for more than 30 years.

“I didn’t bargain for all this when I moved here. I didn’t want all this,” said Kuchar, who sued the village over its plans but later dropped the suit for fear of hurting his hometown financially. Now that he sees how they’ve designed the new developments, he’s at relative peace with it.

“The community needs the progress. I think it’s going to be all right,” said Kuchar. “I still think it’s going to be a zoo there at that place on weekends, but I can live with it.”

Boston Heights mayor Bill Goncy said the others in town who objected seemed to have quieted down, too.

“Everyone has calmed down.

They see how carefully we’ve worked to make the landscape attractive and how we’ve directed the traffic so there’s minimum disruption,” he said.

Retail heavy hitters Arhaus, which has 61 stores, said it plans to add about 200 employees

in its headquarters by 2016.

The two tenants that will anchor the Marketplace — a retail center currently under construction by Petros Development Corp. on the site of the former Boston Hills Country Club — are heavy hitters.

Bass Pro Shops — a supplier of outdoor gear for fishing, hunting, camping and golfing — is the nation’s 98th-largest private company, according to Forbes magazine. It has 94 retail stores in the United States and Canada, with estimated sales of $43 billion.

Bass Pro operates two Ohio stores: outside Toledo and in the Cincinnati area.

Costco Wholesale, operator of members-only warehouse stores that sell everything from groceries to tires, will locate its fourth Northeast Ohio store in the new development.

Costco has nearly 700 stores worldwide and approximately 81 million members.

Marketplace developer Sam Petros said an additional five retailers are to be housed in outbuildings within the shopping center. Tenants for those spaces have not been firmed up, but will likely include a restaurant, Petros said.

Bass Pro and Costco both declined to name an opening date for their Boston Heights locations, but Goncy said he expects Bass Pro to open in the fall of 2016 and Costco by next Christmas.

The Marketplace is located near the junction of the Ohio Turnpike and state Route 8, and is easily accessible from nearby Interstate 271.

On Dec. 4, village officials cut the ribbon on the $1.8 million widening of Hines Hill from a two-lane road to a three- and four-lane road with

turn lanes, traffic signals and other safety improvements to handle increased traffic, especially from trucks.

Most of the money for the widening came from state grants, low-interest loans and the retailers, Goncy said.

Robert Cooper, president of the Akron office of CBRE, said Boston Heights is an appealing place to large retailers because there isn’t much room left in prime markets for expansion.

Boston Heights’ proximity to Cleveland and Akron, as well as the improved roads in the area, make it ideal.

“The location is excellent now that the expressway and roads have been improved. At the same time the housing growth in northern Summit County has also been significant. It all increases the appeal for these retailers,” Cooper said.

He added that the retail areas of nearby Hudson and Peninsula, which focus on charm rather than size, enhance the mix.

“There will be a synergy there they all will benefit from,” said Cooper.

“This is a big plus for our area in all kinds of ways. They’ve done this the right way in a well-traveled market, and I think it will be a great thing for our region.”

Goncy said that as much as he’d like to keep things the same as they’ve always been in Boston Heights, the community can’t thrive without businesses.

“Everyone wanted to keep the golf course just as it was — we’d all love that — but we have to move forward,” he said. “This was a long time in the planning, and we’ve worked very hard to get it just right.”

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z JANUARY 4 - 10, 2016 z CRAIN’S CLEVELAND BUSINESS

Opinion From the Editor

Predicting a year of plenty for NEO

Editorial

A needed spark Downtown Cleveland’s resurgence got a boost in mid-December when the state announced the Union Trust Building at 925 Euclid Ave., better known as the former Huntington Building, would receive a $25 million tax credit.

As tax credits go, that’s a whale.

And the fact that it swam upstream to Cleveland (Cincinnati got the last such grant), means Cleveland can eliminate a white elephant in the downtown core and keep the city’s redevelopment rolling.

Some developers expressed dissatisfaction when the Ohio Historic Preservation Tax Credit Program awarded the grant to 925 Euclid Ave. over the historic May Co. building, which also needs to be redeveloped and needs the financial help to make that happen We understand why developers who are invested financially and emotionally in other real estate projects would be dissatisfied. It’s a very competitive business.

But let’s look at this from Cleveland’s point of view: We landed a valuable tax credit that will bring huge benefits. The state calls it a “catalytic award” because it is an investment that can transform.

It’s a win.

The General Assembly created the historic preservation tax credit program in 2006.

Between 2007 and 2014, $482.3 million in tax credits were approved for 238 projects. Those credits are projected to stimulate more than $3 billion in private funding and federal tax credits, according to the state. That translates to every dollar in tax credit attracting an average $6.20 in private investment.

No wonder such credits are so sought after by

developers.

Individual tax credits awarded by the state are normally capped at $5 million — with no more than $60 million in tax credits given out each fiscal year. In 2014, the state upped the ante when it created the catalytic program, which allows a credit of up to $25 million for a single large project during each state biennium.

Take a look around downtown Cleveland. Much of what’s happened post-recession involves repurposing landmark buildings into mixed-use developments.

The Cleveland Trust rotunda, vacant for decades, reopened in 2015 as a Heinen’s, a much-needed full-service grocery store in the central city.

The downtown Heinen’s is part of The 9 hotel and apartment complex that also breathed new life into the historic Ameritrust tower, which was on the brink of demolition.

The Higbee building was reborn as the Horseshoe Casino in 2012.

It took years for these projects to attain financing once the right developer came along with the right vision for the project.

The former Huntington Building may soon join the ranks of the reborn thanks to the tax credit.

And so, too, one day, will the May Co. building. We urge the developers behind that project to continue with patience and persistence.

The May Co. property is a valuable piece of real estate that will only become more valuable once Public Square’s makeover is complete.

It will become a jewel once more.

A massive state tax credit may not be the catalyst for that, but Cleveland’s hopefully relentless renaissance will be.

ACTING PUBLISHER AND EDITOR: Elizabeth McIntyre (emcintyre@crain.com)

CLEVELAND BUSINESS

MANAGING EDITOR: Scott Suttell (ssuttell@crain.com)

“Porkapoolza” has become an annual New Year’s Day tradition in our home. On Jan. 1, we celebrate the new year with a handful of close friends. We gather around our dining room table, which is laden with pork tenderloin, pork roast and succulent Clevelandmade kielbasa and sauerkraut.

The plethora of pork is a reflection of my father’s German roots.

Tradition says that if you start the new year eating pork, you’ll be rolling in money all year. You wish each other as much wealth and good luck as the number of cabbage shreds in the sauerkraut.

But aside from the superstitious traditions, it’s just a great way to kick off another year with friends, food and a lot of fun.

The fun part of “porkapoolza” comes after dinner, when we push back from the table and make our New Year’s predictions.

We begin with a thorough review of the past year’s prognostications, many of them purposely preposterous.

Just take a look at a few forecasts made on Jan. 1, 2015: “Johnny Manziel gets a DUI with a hooker in the car.” (close) “Hillary does NOT run for president.” (nope) “Browns no playoffs.” (nobrainer) “Lakewood Hospital closes.” (in the works) “Bruce Jenner gets a sex change.” (yes) Elizabeth Then we launch into the new year. Many McIntyre guesses are personal for those around the table — who will (or won’t) run a 10K, who will change jobs, whose business will grow and by how much. Laughs are plentiful. Sports, politics and celebrities are often mentioned. Amid all the laughter, we pause occasionally to reflect. And at times, melancholy sets in. After almost an hour, when silliness has overtaken seriousness, we tuck away the new year’s list in the tiny drawer hidden under the dining room table, where it will sit until we pull it out next Jan. 1.

In this week’s issue of Crain’s, we offer 2016 predictions that are guaranteed to be more informed than what’s offered during our annual “porkapoolza.”

Our writers share reported accounts of what will likely be the biggest stories in 2016: The Cleveland Cavaliers’ pursuit of an NBA championship, the Cleveland schools system’s efforts to renew a tax levy, and the serious investment Northeast Ohio is making in its infrastructure as it prepares for the Republican National Convention.

Our reporters also talked to business and civic leaders to find out what they see happening in 2016. You’ll find their insights in this issue to be informed, optimistic and realistic.

And that’s exactly as it should be in this first week of 2016. This new year is full of hope and will be unlike any we’ve seen in Cleveland in a long time. Our region will be in the national spotlight for the Republican presidential nominating convention. Are we going too far out onto a limb if we predict a contested convention? Our Cavaliers will, we confidently predict, return to the NBA Finals — and this year come away champions.

Another prediction: Northeast Ohio will shine when the lights are on. Months of RNC preparations will be finished on time. Even better, the infrastructure left behind — such as a pedestrian-friendly Public Square — will pay dividends for years to come.

It’s important, too, to pause to reflect, and to confront reality.

Our region’s ills will still be present once the delegates and the media spotlight leave town — and will still need to be addressed. Attention must be paid to the systemic problems that continue to ail our region: An economy that, while growing, still lags statewide and national trends; an educated workforce that must meet manufacturers’ needs; and a collaborative framework that brings harmony between safety forces and all those they serve and protect.

And I’d like to leave you with a wish for the new year. Like our preposterous prognosticators around the New Year’s Day dinner table, I wish you have reason to smile, to laugh easily and to enjoy the people around you. That shouldn’t be hard. In Northeast Ohio, 2016 is going to be a great year.

McIntyre also is acting publisher of Crain’s Cleveland Business.

WRITE US: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing letters@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

SOUND OFF: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.

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Web Talk Re: Fate of Lakewood Hospital Dear Save Lakewood Hospital, it is now time to fold up shop, stop these ridiculously desperate measures and begin to participate in the process of creating something new in Lakewood.

The experts, the mayor, the council, the voters of Lakewood, and the courts have all spoken, and the verdict was not yours. During this process, you had the right to dissent, but the issue didn’t go your way. That’s the way democracy works.

Time to move on.

— Jim Ryan The need for many in-patient facilities in the suburbs has drastically changed. The local folks will really benefit by an up-to-date family care and 24/7/365 emergency facility with full outpatient care.

If the folks in Lakewood were to keep status quo, who would cover the millions of dollars the facility is losing and will continue to lose every year? Not only that, but the city gets rid of a piece of real estate that is costing more millions and in return gets a great redevelopment parcel.

Looking at Lakewood, everyone should be cheering for the opportunity of new development. Change can be good!

— Neil Dick

Re: Patent ruling gets technical It is unfortunate that software should be subjected to an arbitrarily higher standard than other innovative subject matter, but I would not write software patents off just yet.

The DDR Holdings case and other post-Alice Corp. v. CLS Bank International court rulings give us some very useful guidance regarding how to couch a software invention in terms that the USPTO and the courts will find palatable.

John Biernacki, an intellectual property attorney and partner at Jones Day in Cleveland, is exactly right in suggesting that special care should be taken to explain precisely why a software invention is a specific solution to a technical problem. I think that in many software cases, the real problem underlying validity is a lack of particularity in describing how the computer code is structured to solve the problem at hand.

Time will tell, but going forward I believe that greater particularity in describing and claiming software inventions will prove to be critical to a successful strategy.

— Dominic Frisina

Re: Oberlin College and Bill Cosby The first college to accept a woman should have been among the first to revoke a Cosby honorary degree.

— Tom Leland

Re: East End Residences in Akron Love the energy and vision that (East End developer) IRG has brought to our area! We in North Canton are also benefiting from an IRG project in the Hoover building.

— Dan As a longtime resident of Akron, it does my heart good to see things finally looking up for the East Market stretch of Akron beyond Summa and the University of Akron.

Hopefully this really is only the beginning of a wave of new investment that will help to revitalize a long neglected corridor of town, as well as the east side neighborhoods whose fate and fortunes have been tied to Market Street since before the Rubber Capital era.

Kudos to Stuart Lichter and Akron city officials for finding common ground and the means to make this happen.

— AkronRonin

Readers are optimistic on economy

Our Community, Our Priority.

BY SCOTT SUTTELL ssuttell@crain.com @ssuttell

Your Law Firm

More than half of the respondents to an unscientific Crain’s Cleveland Business online survey say they expect the national economy to improve in 2016, though the outlook was more mixed for the economy in Northeast Ohio.

Respondents were bullish about the short- and long-term implications of Cleveland hosting the Republican National Convention in July, and they expect health care to carry the flag as Northeast Ohio’s strongest economic sector next year.

Crain’s in December asked readers to complete an 11-question survey about economic issues.

Eighty-three readers responded. Among the highlights: ● 56% of respondents described their outlook for the national economy as “positive” or “somewhat positive,” while just 18% said they were “negative” or “somewhat negative.” ● Asked how the regional economy will perform compared with the U.S. economy, though, 43% said “poorly” or “somewhat poorly,” compared with 35% who said Northeast Ohio would be “better” or “somewhat better” than the country as a whole. ● Within Ohio, respondents think Cleveland is holding up just fine, as 37% predicted Northeast Ohio’s economy would perform “better” or “somewhat better” than other parts of the state, while another 35% expect it will perform about the same as other regions. ● 49% said health care would be Northeast Ohio’s strongest economic sector in 2016, followed by financial services (28%), manufacturing (12%) and real estate (11%). ● Respondents are looking forward to the Republican Party’s four-day nominating convention in Cleveland from July 18-21. Asked about the short-term economic benefits of the convention, 93% expected it to have a “positive” or “somewhat positive” effect on the Northeast Ohio economy. And long-term, 72% expect “positive” or “somewhat positive” benefits from the convention.

Respondents were able to leave some comments as part of the survey. Here are a few of them: ● “The region needs to keep working its way toward a knowledge-based, white-collar economy. This has been and will continue to be a slow process.” ● “Cleveland will mismanage the Republi-

can convention. I believe it will be a fiasco.” ● “The Cleveland multifamily residential

market, specifically downtown and University Circle, will become overbuilt in the next 36 months unless there is significant growth in jobs. The bubble will burst in 2018/2019.” ● “Ecological degradation should be of

greater concern! … Northeast Ohio is well positioned ecologically. Let’s build sustainability and resilience by understanding/utilizing nature’s patterns and systems.”

Results of the survey will be highlighted during the Feb. 3 Crain’s Economic Outlook event at the Cleveland InterContinental Hotel. Information on the event is at tinyurl.com/jg3sccb.

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20160104-NEWS--10-NAT-CCI-CL_--

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z JANUARY 4 - 10, 2016 z CRAIN’S CLEVELAND BUSINESS

SHALE CONTINUED FROM PAGE 1

profitable shale gas play in the nation, observers and participants say.

Ohio, along with Pennsylvania, might become the OPEC of U.S. natural gas — a threat to producers in other parts of the country. The two states’ Utica and Marcellus shale plays are sufficiently prolific that they can satisfy the nation’s natural gas needs all by themselves, drillers say.

And it’s so much cheaper to drill in the Utica, and its wells are so much more productive than the wells in other gas plays, that the Utica likely will cause other shale plays to lose more capital, drilling activity, jobs and resource production.

“Efficiencies and the prolific rock work together,” said Michael Moore, CEO of Oklahoma-based Gulfport Energy.

Moore spoke in December at the 2015-2016 “Shale Update” conference held by the McDonald Hopkins law firm in Cleveland. Also speaking at the event were Jay Salitza, managing director of oil and gas investment banking for KeyBanc Capital Markets, and Neal Dingmann, managing director of Sun Trust Robinson Humphrey, who was named a “Best on the Street” analyst for the

energy sector by The Wall Street Journal.

Tough choices ahead While acknowledging the industry’s tough times overall, the three had good things to say about the Utica shale play.

The Utica is helping drillers such as Moore to combat low commodity prices by allowing them to drill faster and cheaper than in other shale plays, and with better results from wells that are the best-producing in the nation.

“The pressures that we see in this rock, especially in the southeastern part of the play, is very different,” Moore said. “That’s what’s allowing us to produce these wells flat (with little to no drop off in production) for such a long period of time. … It’s been phenomenal.”

Salitza agreed with Moore’s prediction that production from the Utica, and also from the Marcellus, could shut down drilling in other shale plays, because the Utica’s wells have defied the odds in terms of production.

“A decline curve with no decline in the first year is unheard of. …

You’re getting the same production

for up to18 months,” Salitza said of the Utica’s well results. “You’ll certainly see a retrenchment in other basins, outside of the Utica in Ohio.”

Dingmann, though, predicts that some drillers, including some in the Utica, might face bankruptcy.

Drillers with leases or pipeline commitments might have to drill, even if they sell their gas at a loss, he said, and some don’t have the balance sheets to withstand such a situation for long. Also, he expects credit to tighten for the weakest drillers, especially if production and cash flow drops as they slow down their drilling programs.

“It’s really going to be interesting to see what banks do. In the last quarter, production was still high enough that they didn’t have to give it much serious thought,” Dingmann said. But that will change in the spring, when the slowdown in drilling finally begins to affect production levels and causes some cash crunches, he said.

Drillers will have to make some tough choices in the coming year about where to send their few remaining rigs, which crews they can afford to keep and even which acreage they can keep under lease.

Some leases require drillers to produce oil and gas in three or five

years. Those terms will expire in many cases this year, so drillers probably will abandon some leases in the least-productive areas.

Waiting for price to be right While the pace of drilling will no doubt be slower in the first half of 2016 than it’s been for the last couple of years, Ohio probably will fare better than most other oil and gas producing states. The slump might be worse than was feared, thanks to a mild winter in much of the nation, but eventually prices will rise.

In the Utica, in particular, prices stand to rise more than in other shale plays because there are still pipelines being built and brought online in Ohio. Drillers here have had to find a way to at least break even, while selling their gas for far less than it fetches in other parts of the U.S. Now, they have their costs low, their drilling programs efficient and can benefit the most from any increase in prices.

Many Ohio drillers already have spent the money to drill their wells, so their investment has been made and they are looking for a pipeline to get their gas to market.

“The last time I looked, there were

more than 500 wells that were not online yet. … A good number of them are still looking for gathering lines,” said Jeff Dick, chair of the Geological and Environmental Science department at Youngstown State University, and himself a landowner with active oil and gas leases on his property.

Dick said he has seen a slowdown in activity, both in the shale fields and in the industry’s hiring practices. He said he knows of at least one Ph.D. candidate who is looking for a part-time teaching position because there are not jobs in the oil and gas industry itself at the moment — something that would not have happened a year or two ago.

Dingmann, Bennett and others don’t see the situation improving until at least the second half of 2016 — and even then drilling might come back more slowly than it began. But everyone agrees on one thing: The Utica is too big and too productive to ignore for long.

Oil and gas companies may come and go, but the gas will remain and eventually will be brought to the surface.

“In the long run, these are proven (well) results, and proven results always get produced when the price is right,” Dick said.

CRAIN’S BLOGS Get the latest from our editors and reporters, including: ■ Editor’s Choice: Managing editor Scott Suttell rounds up news and views about business, and stories of interest in Northeast Ohio.

■ Sports Biz: Assistant editor Kevin Kleps writes about the Browns, Cavaliers, Indians and much more.

Congratulations to

■ Real Estate: Senior reporter Stan Bullard keeps you up to date on housing, development and construction trends, plus plenty of other happenings.

Avi Greenbaum & Steve Michael

■ Food and Restaurants: Freelancer Lee Chilcote writes about Northeast Ohio’s bustling, and excellent, food scene. www.CrainsCleveland.com/section/voices

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CRAIN’S CLEVELAND BUSINESS z JANUARY 4 - 10, 2016 z PAGE 11

Focus PREDICTIONS 2016

ISTOCK

NEO LEADERS BREAK OUT THEIR CRYSTAL BALLS - P. 14

New hotels say they’ll ‘absolutely’ be ready

A Cavs title would be best kind of ‘mayhem’

Levy renewal is huge part of Cleveland Plan

BY STAN BULLARD

BY KEVIN KLEPS

BY RACHEL ABBEY MCCAFFERTY

Carpenters, carpet-layers and wallpaper hangers will be sweating along with civic leaders and politicos the next six months as downtown Cleveland makes ready for the Republican National Convention.

Construction projects big and little will need to be wrapped up before July, ranging from the essential ones at Hilton Cleveland Convention Center and the renovation of Public Square to getting tenants into normally empty storefronts, a few of which have been vacant for years.

Opening those projects will add extra excitement to the preparations. Many, such as the $272 million Cuyahoga County-owned hotel, would have been civic extravaganzas in their own right. However, the deadline also ups the ante for contractors to bring jobs in on time because it takes weeks to get new hotels operating — and downtown Cleveland will be gaining three.

The biggest of the bunch — and the linchpin of Cleveland’s successful bid for the GOP fest — is the 600-room hotel at 300 E. Lakeside Ave. Ask Martin Burgwinkle, a Turner Construction project executive on the Hilton job, whether construction will be finished on schedule by April 1 and he answers with a word: “Absolutely.”

Burgwinkle delivered the forecast after he and Jason Jones, general manager of Turner’s Cleveland office, took a show-me approach when queried about whether the structure will be ready.

They provided Crain’s Cleveland Business a tour of the project, beginning at its 32nd-floor rooftop bar and going downstairs to its basement to provide a clear indication

A month before politicians, media and thousands of other visitors descend on Cleveland for the 2016 Republican National Convention, the Cavaliers, if all goes according to plan, will be playing in their second consecutive NBA Finals.

That might not leave a lot of extra time for city and county leaders to organize a parade, but it would be a heck of a problem to have.

“If you were downtown when the Cavs were in the championship (last June), just being around that atmosphere, it’s amazing to see how great that was and think how much it would be amplified if the Cavs won the championship,” said David Gilbert, who has added 2016 Host Committee president and CEO duties to his leadership roles at Destination Cleveland and the Greater Cleveland Sports Commission.

The Golden State Warriors, who defeated the Cavs in six games in the 2015 NBA Finals, are the prohibitive favorites to repeat as champions late this spring. But if any team is going to knock off Golden State, oddsmakers say it’s the Cavs, who are practically a slam-dunk choice to represent the Eastern Conference in the NBA Finals.

Another extended playoff run would be a welcome sight for Sean O’Donnell, the general manager at Flannery’s Pub, located on 323 Prospect Ave. — a few Kevin Love outlet passes from Quicken Loans Arena. The 2015 Finals were “mayhem” for restaurants and bars near the arena, O’Donnell said.

“It’s was St. Paddy’s Day, Indians opening day for

Later this year, voters in Cleveland will decide whether they want to keep paying for a 15-mill levy that makes up a sizable portion of the Cleveland Metropolitan School District’s budget.

Clevelanders first approved this levy with 57% of the vote in November 2012 — the same year the district unveiled radical plans to improve the academic performance of the schools and to change how they’re run.

This time around, the campaign’s success likely won’t rely on what the district says it can do with the funds, but instead, what progress it has made on the plan over the last four years.

Today, the levy dollars make up about 10% of the operating budget for the schools, according to district CEO Eric Gordon, and its loss would certainly affect the classroom. And he’s not the only one who believes it’s critical.

“The renewal of the levy is going to make or break the future of the Cleveland Plan,” said Helen Williams, program director for education for the Cleveland Foundation.

Those involved in the Cleveland Transformation Alliance, like Williams and the others who spoke to Crain’s, said the district must share the successes it’s seen so far in order to get voter buy-in.

The alliance was created to help monitor the plan’s progress and its board includes representatives from the district, the city and charter schools, as well as community organizations like the Cleveland Foundation and

SEE HOTELS, PAGE 12

SEE CAVS, PAGE 13

SEE LEVY, PAGE 15

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PREDICTIONS 2016

HOTELS CONTINUED FROM PAGE 11

how far along the project is. Burgwinkle estimates construction will be 90% complete early in January.

In mid-December, open studs were apparent in sections of the 32nd-floor, but boxes of electrical components — a kit for each room — were visible as electrical workers installed wiring. On floors below, the wallboard was in place and tables for installing wallpaper were at the ready. On the 17th floor, carpet was going in, a last step before furniture arrives during the spring.

Asked if the record warm days in November and unnaturally pleasant December weather were helping things along, Burgwinkle said, “It’s a year late.”

Much of the building is now buttoned-up for weather, which wasn’t the case during snowy December 2014 as the tower’s concrete forms climbed skyward from the ground.

Weather was so tough last year, Turner and its partners on the job — Ozanne Construction and Van Auken Akins Architects — had to rejigger their plans. They moved up work in the six-story podium at the bottom of the building which houses the hotel’s lobby and banquet rooms. Then workers made up lost time through the summer.

The result: The massive banquet rooms were clad in carpet and awash in light in mid-December.

Some were waiting for just windows and furnishings. A wavy-shaped ceiling is going in at the grand ballroom.

However, the Hilton is not the only hotel that contractors are rushing to finish.

Others in the pipeline

RNC. Drury acquired the Cleveland school board’s building — and set the $40 million project — before the Hilton was planned or the city won the convention.

“Getting the RNC is consistent with everything we’ve experienced in Cleveland,” Wedemeier said.

“The news just keeps coming out in a positive vein.”

Another hotelier confident a new

Construction workers in December were sealing seams in the metal roof atop the Drury Plaza Hotel, which Herb Wedemeier, senior vice president and general counsel of Drury Southwest Inc., is confident will open well before the Republican convention. The hotel is in the former Cleveland Board of Education administrative offices at 1380 E. Sixth St.

“It’s a beehive over there. It’s going well.”

Herb Wedemeier, senior vice president and general counsel, Drury Southwest Inc. property will be ready is Adam Gurgiolo, general manager of The Kimpton Schofield Hotel, 2000 E. Ninth St. Although the inn was originally to open in 2015 as part of the epically slow redo of an office building as 122 hotel rooms and apartments, Gurgiolo said doors will open at the end of February.

“The construction company is working nonstop floor by floor to get us ready; carpet and wall coverings are going in,” Gurgiolo said. He expects furniture to arrive by late January. Kimpton has hired top executives for the property and will be fully staffed this winter. He is certain the hotel will be full by the time RNC begins.

The hospitality project with the most work stretching ahead of it is set at North Coast Harbor, where utility crews in late December were

“It’s a beehive over there,” Wedemeier said from Drury’s Cape Girardeau, Mo., headquarters. “It’s going well.”

While restored windows are still going in at some parts of the landmark building in December, he said, crews are installing carpet in other rooms. Laborers were unloading doors from a semi on the building’s Rockwell Avenue side in December.

Wedemeier said the doors were taken off site to be refinished.

Although Drury’s website says the property will be available July 30, Wedemeier said the hotel chain will “not miss the big party.” That date is to give sales personnel something to aim for after the convention, he said.

Look for the 180-room hotel to open by late April, he said, which will give hotel workers time to work out the bugs at the new property before

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removing electrical and water lines from the property to allow contractors to set to work on a $3 million lakefront restaurant, the first phase in a lakefront development by Cleveland-based Cumberland Development and Dallas-based Trammell Crow.

Cumberland president Dick Pace said the two-story restaurant will take shape by June. That will allow a yet-to-be-named restaurateur to take the helm in time to be ready for the Republican convention.

“We want it in place for the international coverage of downtown Cleveland,” Pace said of the rush to deliver the property.

Plans for a four-story building nearby — three stories of apartments and a floor of office, retail and parking spaces — are less certain.

He had planned to have the mixeduse building underway by the Republican convention, but soil samples recently showed the building will need more foundation work than originally planned. He, Trammell Crow, their team and the city plan to huddle to decide by the end of 2015 whether to delay launching the mixed-use building until after the convention.

The city’s centerpiece Although a $5 million funding gap loomed in December for one of the most watched projects downtown — the $50 million updating of Public Square — Jeremy Paris, executive director of the Group Plan Commission, said steps are underway to close the gap with state funds. Even

so, he is confident contractors on Public Square will meet the June 1 delivery date with a functioning public space. Much of the work was planned in 2015 so as much finish work as possible could be put in place before winter set in, such as planting trees and pouring concrete.

“Our contractors ran double crews all summer,” said Paris, referring to two-shift daily operations.

Even though weather was pleasant the first week of winter, the schedule was set so that, Paris said, “We’re not counting on a great winter.” For example, plans call for steel for a one-story café to go in this winter.

The city’s biggest construction project — the $500 million replacement of the Innerbelt Bridge — is too massive to allow it to be moved up for the Republican convention and remains scheduled for completion in fall 2016. However, contractors and the Ohio Department of Transportation finished redoing the Ontario and East Ninth Street accesses to the new George Voinovich Bridge this year to ensure a pleasant look for downtown’s southern side.

Some planting went in early in that process, according to ODOT spokeswoman Jocelynn Clemings.

She said contractors and state officials were reviewing schedules and planting windows for various permanent plantings to see if more can be put in early yet still meet criteria for maximum growth and hardiness.

“This is an important gateway into our city and we felt that this was worthwhile, especially given concerns regarding increased traffic and buses at the RNC,” Clemings said.

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every (NBA Finals) game,” the Flannery’s GM said. “It was crazy.”

O’Donnell said Cavs home games provide a business bump of about 50% for weeknight home games during the regular season. On the weekends, it’s about a 30% increase.

“During the Finals, it’s a 120% jump,” he said. “The Finals are insane.”

The first three playoff rounds weren’t too bad, either.

Full house The Cavs’ 2015 postseason run consisted of 10 home games over a 59-day span in April, May and June.

In that three-month period, Cuyahoga County sales tax receipts jumped 5.1% yearover-year. In 2014, county sales tax revenue dropped slightly, 0.2%, compared to April, May and June 2013.

Cleveland hotels experienced an even larger numbers bump.

According to data provided by STR, which tracks supply and demand for the hotel industry, Cleveland occupancy rates had year-overyear increases of 5.8%, 3.4% and 3.5% last April, May and June, respectively. The demand for rooms jumped between 5% and 9.9% in each of the three postseason months, and hotel revenue was up at least 11.5% in each month.

On June 9 and 11, when the Cavs played their first NBA Finals home games in eight years, hotel revenue increased 25.7% and 58% year-over-year, and the occupancy rate jumped 23.6% for Game 4, a contest the Cavs entered with a 2-1 series lead. During the eight-day span that covered the three Finals matchups the Cavs hosted at The Q, the city’s hotels had year-over-year revenue increases ranging from 9.3% to 58%.

“The better the Cavaliers, the better (financially) we do as a region,” Cuyahoga County Executive Armond Budish said. “But it also means community pride and excitement for

The Cavs hosted 10 playoff games in 2015, including three in the NBA Finals. (Kevin Kleps) downtown at all the watch parties throughout the county.”

Budish added that he was “especially looking forward to a victory parade” in 2016.

If any team is poised to end Cleveland’s championship drought, now in its 52nd year, it’s the Cavs. Even without a title, LeBron James and his star-studded cast are giving the city coffers a needed jolt.

During the 2014-15 NBA season, the Cavs handed over $9.9 million in admissions taxes for all of the games, concerts and family shows at The Q. In 2013-14, the city’s admissions tax revenue from The Q was $4.7 million.

Attendance at the arena for James’ return season was up 18.7%. The 1.05 million fans who attended the Cavs’ 51 sold-out regular season

FINALS PROVIDE FLURRY OF HOTEL ACTIVITY The Cavs hosted three NBA Finals games in 2015. On all three days, hotels in the Cleveland market saw significant increases in revenue and rates. The breakdown, according to data provided by STR:

■ June 9: The occupancy rate jumped 8.5%

year-over-year, the average daily rate was up 14.1% and the revenue increased 25.7%.

■ June 11: The occupancy rate was up 23.6%, the average daily rate increased 25.9% and the revenue shot up 58%.

■ June 16: The occupancy rate actually dropped 0.1%, but the average daily rate and revenue increased 13.1% and 15%, respectively.

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and playoff games in 2014-15 was almost 340,000 above the total for 41 regular-season contests in 2013-14, when the club was 33-49.

‘Substantial’ city effect Mark Rosentraub, a former Cleveland State professor and dean, and current chair of the department of sports management at the University of Michigan, shares the view of many economists that the economic impact of sports teams is overstated because any money spent in or around an arena is an expense that otherwise would have been targeted for other entertainment venues. But he believes a championship-caliber team such as the Cavs can provide a major boost to a city’s bottom line.

“There’s a regional effect and a city effect,” Rosentraub said. “The more events that take place at the arena, the more money it makes for Cleveland. When people say, ‘What’s the effect on the region?’ That’s going to be quite small. For the city of Cleveland, that’s quite substantial.”

The buzz created by a team with an international following, led by one of the most popular athletes in the world, can also turn into extra bucks.

“You have to also factor in the extent to which this vibrancy that the arena contributes to the confidence level to invest in downtown,” Rosentraub said. “That matters a great deal to Cleveland. We’re really in a mode that we’re making sure we’re stabilizing the finances of the central city (in a region).”

Michael Symon, whose collection of B Spots include stands at FirstEnergy Stadium and The Q, told Crain’s that any restaurateur who is basing his or her business on being in close proximity to a sports team is “not going to be in business long.”

Symon said that even if there are 60,000 people downtown for an event, “you can only put a couple hundred people in your restaurant. You have to look at those nights as gravy.”

In the Cavs’ case, there are more helpings, thanks to the drawn-out nature of the NBA postseason.

The organization’s winning ways also bring a spiritual lift to a region that, as Destination Cleveland’s Gilbert says, takes the successes and failures of its sports teams “very” personally. And the expectation that the Cavs have been set up to be championship contenders for at least the next few years adds to the hope, just as it does the bottom line and the wideangle TV shots of a bustling downtown.

“There’s no doubt that when you look at major sports teams and their affiliations with a city, there is an inference of a city being a major city when it has a major sports team,” Gilbert said. “Winning a championship absolutely amplifies that.”

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PREDICTIONS 2016 ON BANKING

ON HEALTH CARE

“There’s a saying: if you don’t like change you’re going to hate extinction. The world is changing so rapidly and the mega-trend of 2016 — as we’ve seen the past several years — will be the impact of technology on banking. There has been a seismic shift in preferences in how people do business and client expectations.

Technology enables a pace of change and a pace of business that is unprecedented, at least in my career. In the new year, you’re going to continue seeing banks become more mindful, nimble and proactive to meet this fast evolving client expectation.”

“2016 cost increases will be greater than 2015 across all insurance products, especially for exchange products.

Technology integration (wearable devices, EMR, telehealth) will be a major focus of 2016. Retail care will continue expansion in many forms (in-store clinic, direct medical plans, employer on-site clinics). Northeast Ohio regional competition intensifies between health systems, especially in Summit County. Large population health networks (Midwest Health Collaborative, Health Innovations Ohio, Advanced Health Select Network) will move from theory to operations and gain contracts.”

— Beth Mooney, chairman and CEO, KeyCorp

— Dr. Akram Boutros , president and CEO, The MetroHealth System

ON HOSPITALITY

ON CLEVELAND “The new Public Square prior to the Republican National Convention will be a ‘wow!’ moment that will measurably change people’s perceptions of downtown Cleveland. Not only will it be in the international spotlight during the RNC and be a draw for tourists, this revitalized and vibrant public space will bring people from the neighborhoods and the suburbs downtown, where they will discover even more of what our great city has to offer. It will be a turning point.”

— Teresa Metcalf Beasley, partner, Calfee, Halter & Griswold “I’m hoping that Cleveland’s downtown population will get closer to 15,000 by the end of 2016. A few more apartment properties opening up will help us get there. That will help national retailers step up and do more than talk about setting up shop in the city. I think the RNC will bring more excitement to our city. I think we’ll be feeling good about ourselves in August. It will take some more work in the trenches beyond that to enhance our business well downtown, but many important things are in the marching phase now.”

— Jennifer Coleman, senior program officer for the arts, The Gund Foundation; founder, CityProwl.com “Steve Schimoler (owner of Crop Bistro) will start a cooking show called ‘Steve’s Full of CROP,’ which will become a national sensation.”

— Nikki DiFilippo, president, Via Vera Group, a tech marketing firm. She was in the audience when a pilot for the show was recorded.

“I just believe that the RNC, downtown and community development, the unabashed commitment to public education and training individuals for meaningful jobs will serve as the foundation for our future.”

ISTOCK

Local leaders look ahead at the people, places, themes and things that could shape the new year ON THE ECONOMY “The dollar is going to quit rising (gaining value in relation to other currencies) and may even decline in 2016. And if that happens, that means the Ohio economy is going to do quite well because of the exchange rate effect.”

— Raj Aggarwal, board of directors, Ancora Securities; former dean of the University of Akron’s College of Business Administration “As long as the level (of job creation) continues at this pace, it will be a positive for household formations and for our industry.” He added that it would also be a positive for the company’s partners in the construction business if that were the case.

— John Morikis, CEO, Sherwin-W Williams Co. “I expect labor market conditions to continue to improve in 2016, both in the nation and in our region. My assessment reflects trends gleaned from economic statistical reports and information gathered from business contacts in the region, including our bank and branch boards of directors and advisory councils, whose members generously share their insights with us. While I expect continued improvement in the coming year, there are longer-term challenges facing the labor market in the region and in the nation. We face the challenge of ensuring that people can gain the necessary skills to enter and remain productive members of the modern labor force, to raise our standards of living and make us more competitive in the global economy. Although monetary policy is not the tool for addressing this important issue, the Federal Reserve, through its role in promoting community

development, is committed to helping to identify effective policies and best practices for strengthening and increasing access to education and training.”

— Loretta Mester, president and CEO, Federal Reserve Bank of Cleveland

ON ENERGY “I’m hopeful for a cold winter and hopefully OPEC will take their foot off the gas a little bit (so oil and gas prices can come up). But I think 2016 is going to be more a continuation of 2015. When 2015 began, there was a lot of uncertainty in the air. Was this (falling price environment) a market correction or was this something larger? It took about six months for people to realize it’s not a market correction, it’s the current state of the economy and an attack on the domestic oil and gas industry in the U.S.” — Shawn Bennett, executive vice president, Ohio Oil & Gas Association

ON HEALTH CARE “In Cleveland, I think you might see more physician group acquisition, more physician integration. You might see more consolidation of what I’ll call the ancillary provider market — the diagnostic providers, the ambulatory surgical centers, the independent labs and things of that nature that are around town. Or the large physician super groups that are out there, the 30 and 40 member physician groups that provide services in communities around town.”

— Matt Albers, partner, Vorys, Sater, Seymour and Pease

“2016 will be a strong year for the hospitality industry in Northeast Ohio — with July (and the RNC) obviously being our biggest growth opportunity in rates. I think the RNC will put Cleveland in a new light for other organizations and events that are otherwise looking at bigger cities for their programs. If Cleveland pulls off the RNC well — and I think it will — it will open the door for more organizations to hold conventions in Cleveland, and that will be a boost for several segments of the economy — not just hotels — but restaurants, retail and transportation as well.”

— Ivy Arndt, director of sales, Hyatt Place Cleveland/Westlake/Crocker Park

ON PHILANTHROPY “I think probably we’re looking for surprises. I think that the foundation — or it’s not really a foundation — but what Mark Zuckerberg formed, the idea of investing all of his Facebook earnings in this kind of charitable giving, but in his own way. I think we’re looking for those kind of surprises where people decide maybe the old ways aren’t the best way to do it.

Maybe we need to innovate and do it the way that would have the most effect.”

— David Holmes, Cleveland Lead, Foundation Center

ON POLICY “In 2016 the Ohio General Assembly and Gov. John Kasich will reverse their thinking and restore the top rate on the income tax so that Ohio can match what other states are doing and enroll more of our 4-year-olds in public preschool, help more of our low-income families with childcare costs and do much more from the state level to support mass transit.”

— Amy Hanauer, executive director, Policy Matters Ohio “A coalition of development and interest groups will push for new brownfield legislation in 2016 to expand brownfield redevelopment opportunities beyond just job creation. However, the Kasich administration will expand existing brownfield programs that will reduce the need for new legislation.”

— Joseph Koncelik, former director, Ohio Environmental Protection Agency; attorney, Tucker Ellis

— Alex Johnson, president, Cuyahoga Community College “A successful Republican presidential convention will boost the Greater Cleveland Partnership’s effort to ensure that the renaissance in our region is market-based and sustainable for a long time to come, spurring continued investments in the Warehouse District, the NuCLEus project in Gateway, Phase 3 of the Flats redevelopment, lakefront development and continued housing development downtown along with game-changing neighborhood projects like MetroHealth’s transformation and Opportunity Corridor.”

— Joe Roman, president and CEO, Greater Cleveland Partnership

ON REAL ESTATE

ON SPORTS

“By the end of 2016, I expect Cleveland to have five apparel-based retailers announce their interest in opening stores in downtown Cleveland. There will also be another real estate development announced that will rival the Flats East Bank’s second phase in size.

There is going to be a change from the old guard and Forest City Enterprises Inc. being the go-to developer downtown. There is going to be a race between the new breed of developers — Geis, Asher and others — to put up projects in the city. I also think, because of a very tight Class A office market, there will be substantial interest from tenants in ground-up construction in the city.”

“We’re going to be able to play golf all 12 months this golf season. And golf course revenue is going to be up across Northeast Ohio because of all the political dollars coming in (from the Republican National Convention) in 2016.”

— Jimmy Hanlin, TV and radio personality, and owner of three Ohio golf courses (Hanlin may or may not have been laughing when he made his first prediction.)

— Rico Pietro, principal, Cushman & Wakefield CRESCO

“I predict that in the sports industry, ticket inventory management, pricing strategies and the sales process will become a lot more sophisticated, thanks to the advancements of technology and data and analytic tools.”

— Dionna Widder (left), vice president of ticket sales and service, Cleveland Cavaliers

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the Greater Cleveland Partnership.

The foundational goals of “Cleveland’s Plan for Transforming Schools,” which took a round of contract negotiations and some state legislation to get fully in place, are to ensure that all students in the city can attend a high-quality school and that all neighborhoods have a variety of these high-quality schools to offer. To help achieve this, CMSD started moving away from a traditional district model and toward a portfolio model, made up of district schools and charter schools, and began giving better performing schools more autonomy in hiring and budgeting.

The Cleveland Plan is showing some “real evidence of success,” though there’s a long way to go, Gordon said.

the first time in “decades,” the scorecard said.

“The district is delivering, and it’s not easy,” said Williams, of the Cleveland Foundation.

In order to pass the renewal, the district will have to communicate these sorts of successes, Williams said. It needs to continue to implement the plan and carry out the promises it made to the community.

It also needs to stay aligned with external partners, like those in the Cleveland Transformation Alliance.

“The district is delivering, and it’s not easy.”

Helen Williams Program director for education,

Signs of success At the end of the plan’s first six years, the district hopes to have tripled the number of students in high-performing district and charter schools. And it wants to have completely gotten rid of its failing schools. A recent scorecard from the district suggested that some progress has been made on that front.

As of the 2014-2015 school year, 10 failing schools had been closed or replaced and the number of students in mid- to high-performing seats had increased by 19%. The numbers for this school year also found that enrollment increased for

Cleveland Foundation Williams has worked in this space for many years, and often she said plans get made and put on a shelf.

This plan has made big changes in its first three years of implementation, including moving to more school-based budgeting, reshaping the human resources function to focus more on talent recruitment and development and helping families learn about their enrollment options.

A June report from the transformation alliance also pointed to some indicators of success, includ-

Voice of Reason

FIG. 6-C

ing the fact that the number of students in failing schools fell by 11% from the 2010-2011 school year to the 2013-2014 one. The alliance is measuring schools based on performance index measures, value-added scores that show whether students made appropriate year-to-year growth and four-year graduation rates when applicable.

But not all of the indicators were positive. For example, the number of students in high-performing schools also fell by 11% during that time.“While significant progress has been made in developing district and community infrastructure to support the portfolio strategy, and while the quality of Cleveland’s portfolio of schools is growing, the overall performance of public schools in the city is not improving fast enough,” the report said.

Challenges ahead The Cleveland Teachers Union is another important partner in the plan and in the levy. The union and the district administration (which have begun contract negotiations)

may not always see eye-to-eye, but they agree on the levy renewal’s importance. It’s “critical,” said union president David J. Quolke.

The passage of the levy in 2012 gave teachers the resources and stability they needed, Quolke said, and the early test score results have been validating. The progress is never as fast as one would like, he said, but there have been gains.

But Quolke also sees areas where he thinks the promises of the Cleveland Plan have so far fallen short. He hasn’t seen enough investment in the so-called investment schools that are targeted for improvement or enough empowerment of teachers and staff.

“Morale is about as low as I’ve ever seen it in the Cleveland schools,” he said.

And he said that’s a problem if the district wants to pass a levy, considering the voters “pulled the lever” because they saw a unified district team. The union knows it needs the renewal levy to pass, but the support from the union may not be as enthusiastic as the last time around, Quolke said.

Also, another factor that could make passage more difficult is the state’s revolving door of school evaluations. The measures on which schools are rated have changed multiple times since the levy passed, so it makes it hard to have an applesto-apples comparison year-overyear, Gordon said.

Piet van Lier, director of school quality, policy and communications for the alliance, said these changes have made it difficult to get a consistent measure through which to watch for improvement. The alliance’s measure creates some consistency, but still relies on state tests.

And when those change, the overall rigor can change, as well, which van Lier said also makes tracking progress difficult.

And there’s one less tangible factor the district may have to overcome: namely, how much improvement is enough to be acceptable? For example, Gordon said, though the graduation rate has risen about 12% since 2011, whether that increase is large enough is up for debate. “‘Is it enough?’ is going to be the big question,” Gordon said.

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Business of Life FITNESS: A California touch in the Midwest Crain’s occasional look at interesting happenings in Northeast Ohio. Tell us your story: clevedit@crain.com

Orangetheory makes most of an hour

BY CHUCK SODER When Stephanie and Kurt Altenburger moved to Northeast Ohio in 2010, they had a mission: They were going to take the fitness culture they knew from California and inject it into this region.

They just weren’t sure how they were going to do it — until they heard about Orangetheory.

The Altenburgers quickly fell in love with the high-intensity workout craze, which has exploded in popularity over the past few years.

Now, they’re on a quest to spread Orangetheory throughout Northeast Ohio.

On Dec. 4, they opened the region’s first Orangetheory Fitness Studio in Rocky River. And more are on the way. As area developers for Orangetheory, the Altenburgers have sold five other franchises that will open in this region over the next two years. One of those studios, on Belden Village Street just north of Canton, is about to start selling memberships. Other franchisees are in the process of negotiating leases in Strongsville, Fairlawn, Beachwood and Solon.

But the Altenburgers won’t sell franchises to just anyone. They’re looking for people who are just as passionate about fitness as they are.

Kurt, who graduated from Berea High School, is a bodybuilder. Stephanie, who grew up near San Jose, Calif., participates in figure competitions.

“We live it every single day, from the moment we get up to the moment we go to bed,” she said.

They’ve both dreamed about opening some sort of fitness-related business for years. So what was it about Orangetheory that made them pull the trigger?

For one, it gets results. Partly because it’s hard to be lazy: Everyone wears a heart rate monitor, and that rate is displayed on a screen for everyone to see. So if you’re taking it easy, your little square on the screen will turn green or even blue, if you’re really phoning it in. Too much of that and the instructor will ask you to push harder — to get into the orange zone. If you’re really going all out, your square will turn red.

But it’s not supposed to be orange and red all the time.

The hour-long workout involves short bursts of intense exercise followed by periods of more moderate activity. For instance, someone who’s fairly physically fit will start off with a relaxed jog on the treadmill, but when the instructor tells the class to start pushing, they’ll pick up the pace. They’ll eventually reach a full run before slowing down again.

And then they’ll head over to the floor, where they’ll work out with a rowing machine, weights, a medicine ball and other equipment. No two workouts are the same.

The workout is designed to build lean muscle and burn calories long after the hour is over.

Granted, intense workouts have come under scrutiny in recent years for causing injuries. Though Orangetheory hasn’t received as much criticism as other workouts like CrossFit, injuries can happen. Thus, instructors are encouraged to make sure participants use proper form and avoid spending too much time in the red zone. Plus, the workout is designed to be low impact, and it can be altered if needed.

Kurt Altenburger said he also likes Orangetheory because it’s fun. The studio is decorated with orange highlights, even in the bathroom. In the dimly lit workout area, upbeat music pumps over the speakers.

“There are not many workouts where you can go, ‘Holy crap, I didn’t realize it was an hour,’ ” he said.

Tessa Shagovac felt the same way the first time she tried Orangetheory. Thus, she and local restaurant owner Bobby George licensed the right to open a studio in Strongsville.

Until then, she has to get her fix, so she’s working out at the studio in Rocky River.

“People become obsessed with Orangetheory. …

There’s a wait list for almost every single class here,” she said.

“We live it every single day, from the moment we get up to the moment we go to bed.”

— Stephanie Altenburger

Top, Orangetheory customers have their heart rates displayed on a screen as they work out. Stephanie and Kurt Altenburger, above, opened the region’s first Orangetheory location in Rocky River on Dec. 4.

(McKinley Wiley photos)

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CRAIN’S CLEVELAND BUSINESS z JANUARY 4 - 10, 2016 z PAGE 17

BUSINESS OF LIFE

Source Lunch Akron is a special place for Anthony Margida, CEO of the Akron Global Business Accelerator.

As an Akron native, “you have this attachment to (the city) that’s almost involuntary,” said Margida, who followed his career away from his hometown but returned about 15 years ago.

Margida is steering the accelerator during a time of ever-increasing focus on entrepreneurship as an economic catalyst.

The College of Wooster and University of Akron grad loves what he does at the Akron Accelerator, which enters 2016 with an eye on expanding programs and growth.

— Sue Walton

What makes the Akron Accelerator different from other regional incubators?

The Accelerator has a storied history. It was the first and is the longest-running incubator member of the National Business Incubator Association and has won state and national awards.

The support our tech startups receive is top-notch. But what really sets the program apart is our ecosystem. Within the 250,000 square feet of space we occupy in the former B.F. Goodrich factory, there are more than 30 tech startup companies, free resource services, the Bit Factory software accelerator, graduate companies that serve as models of success, a software boot camp and the accelerator’s signature Technology Company Acceleration program. More than 350 people work in the accelerator building each day — all with a passion to create (or assist in creating) something.

Your education (bachelor’s and doctorate degrees in chemistry) indicates that you might have been on a different career path at one point. What attracted you to work with a technology business incubator?

I have been on a few different career paths. I spent my first 18 professional years in the silicones, adhesives and elastomers industries in technology development and commercialization for some larger corporations. I was drawn to new-business development and played lead roles in launching the magnetorheological fluid business at Lord Corp. and the global footwear adhesive business at H.B. Fuller. I frequently worked with only a handful of people to develop these new business segments. Out of necessity, I performed marketing, manufacturing and business administration tasks. It was this part of my career that instilled a passion for creating new businesses.

How has the Bit Factory, the Akron Accelerator’s Silicon Valley-style software accelerator, tailored its program to this area?

Unlike the standard model for software accelerators — a brief but intense experience for several companies — the Bit Factory has several differentiating features. First, selected companies’ programs are custom-designed for their needs so each client company’s experience will consider the business’ stage of development, industry served and entrepreneur’s experience. Second, our mentors work closely with the clients and are instrumental in creating and implementing the plan. Mentors are also software programmers, so they can understand the product being developed. Third, the program duration is based on reaching success points and not limited to industry time standards of 90 to 120 days.

Finally, no client company receives a check upon admission. Tenacity must be demonstrated, milestones set and a budget developed to reach those goals before a $20,000 to $40,000 investment will be made.

Anthony Margida

How does the tech startup scene in Northeast Ohio look these days?

I am extremely optimistic about the scene in Northeast Ohio.

Whether your company or idea is in software, energy, advanced materials, biomedical or another field, there has never been more resources and support. Startup founders can find free expert advice from entrepreneurs-in-residence, receive low-cost work space, learn from customer-development programs like iCore, join accelerator programs and tap into several, yet limited, avenues for grants and equity investment.

While there still is not an overabundance of investment capital, opportunity is on the rise.

What’s the status of the Bits and Atoms Innovation Center?

We are on track for a 2017 opening in downtown Akron. We will offer a state-of-the-art maker space, AkronMakes, and a progressive and collaborative co-working space, AkronWorks, along with a number of programs with our partners, which include the University of Akron, Stark State College, the Software Guild and a number of private companies with proven experience in product development, prototyping and manufacturing. Of course, business development support will be available through our Akron Accelerator team. The Bits and Atoms Innovation Center will provide community-accessible resources, business consultation and a space designed for collaboration of talented individuals who aspire to create.

TECHNOLOGY

FIVE THINGS: IN THE COUNTRY Margida and his wife, Andrea, live on a 78-acre farm in eastern Stark County.

ON THE RUN Inspired by his children, who are both runners, Margida competed in a half-marathon in 2014 and with his daughter completed the full Akron Marathon in 2015.

GIVING BACK The Margida family founded and operates the nonprofit Valentine Project (thevalentineproject.org), which spreads cheer to children with cancer by sending gift boxes on Valentine’s Day.

FAVORITE STOPS Rubber City Shakespeare Company, the Actors Summit Theater and RubberDucks games at Canal Park

LUNCH SPOT Nuevo Modern Mexican & Tequila Bar, 54 E. Mill St., Akron

The meal Puerco burrito and chicken quesadillas, both with Spanish brown rice and black beans. Plus chips and house salsa.

The vibe

SCREEN TIME

Updated, modern twists on classic Mexican food in an upscale yet comfortable space.

Margida and his wife prefer to watch indie films on Netflix.

The bill $24.44 + tip

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z JANUARY 4 - 10, 2016 z CRAIN’S CLEVELAND BUSINESS

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CRAIN’S CLEVELAND BUSINESS z JANUARY 4 - 10, 2016 z PAGE 19

INVESTORS CONTINUED FROM PAGE 1

in the top five. The state’s analysis — which was conducted by an innovation-focused consulting firm in Columbus called the Urban Venture Group — noted that JumpStart has achieved 12 “successful exits.” It also said the 76 companies in its portfolio have raised a total of $783 million in follow-on funding from other investors.

Those exits include all liquidity events, but JumpStart clearly made decent money on some of them. For instance, one of those exits occurred in June, when Medtronic bought CardioInsight, a Cleveland-based medical device company, in a $93 million deal. But Leach suggests that the fund’s biggest success is yet to come, noting that JumpStart holds a substantial stake in CoverMyMeds, a pharmacy technology company that has a few dozen employees in Northeast Ohio and many more in Columbus. The company told Crain’s that it generated about $100 million in sales this year.

There’s also good news for local medical entrepreneurs.

For one, there’s a new investor in town. The state awarded $3 million to a new fund created by Randy Theken, who sold three spinal technology companies for $200 million in 2008. He’s in the process of creating the LaunchDen business incubator for orthopedic technology companies and other businesses that could benefit by being housed alongside the new companies he’s building in Akron.

Plus, entrepreneurs who don’t work at the Cleveland Clinic may actually be able to raise money from the Clinic’s venture fund now: The fund, which received $10 million in Third Frontier money, plans to start considering ideas that come from people who aren’t Clinic employees.

Falling short A few other local tech investors received decent evaluations from Urban Venture Group but didn’t score high enough to get funding.

Mutual Capital Partners of West-

Contact: Phone: Fax: E-mail:

HOW THEY STACK UP The following tech investment funds received funding from the Ohio Third Frontier program last month. They are ranked according to the score they received from an evaluator hired by the state. Funds based in Northeast Ohio appear in bold.

■ JumpStart Evergreen Fund: $5M ■ CincyTech Fund IV: $10M ■ JumpStart Tech Inclusion Fund: $5M ■ Rev1 Fund (Columbus): $8M

growing Cleveland software companies: OnShift and StreamLink.

Those funds have other money to invest. Can the same be said about Valley Growth Ventures in Youngstown? Jim Cossler, CEO of the Youngstown Business Incubator, wouldn’t say whether the new fund would be able to start making investments without the $3 million Third Frontier loan it had sought. He cited regulations that limit what investment funds can say publicly about raising money.

CLEVELAND BUSINESS 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1 1230 Phone: (216) 522-1 1383 www.crainscleveland.com Acting publisher/editor Managing editor Sections editor Associate editor/Akron

■ JumpStart NEXT Fund: $2.5M

Bueller? … Bueller?

■ Cleveland Clinic Bio Validation Fund VII Plus: $2.5M ■ OTAF Fund V/Rev1 Angel Fund: $2.5M ■ Rev1 Life Sciences Fund: $2.75M ■ Launch Den Capital Fund: $3M ■ Queen City Angels First Fund V: $5M ■ NCT Ventures Project #3: $6.25M Recommended but not funded: Mutual Capital Partners Fund III, Valley Growth Ventures, North Coast Angels Fund IIIb, North Coast Venture Fund Not recommended: Akron BioInvestments Fund II, OneCommunity Broadband Innovation Fund, IKOVE Startup Nursery Fund, Northeast Ohio Student Venture Fund, OCEAN Capital Fund II. — Chuck Soder

lake narrowly missed getting money, mainly because it plans to make a small number of larger investments.

And North Coast Angel Fund fell short because of its “notably poor exit performance,” Urban Venture Group wrote. That same criticism hurt the score of a newer venture fund run by the same people.

North Coast has only had one successful exit — it generated a 400% return when it sold its stake in a Columbus-based e-commerce company called zNode. But managing director Todd Federman told Crain’s that more are on the way. He listed several companies in the portfolio that he believes are doing well, including Assurex Health, a Cincinnati-based biotech company with about 400 employees, and two fast-

Many venture capital firms that used to be active in Ohio didn’t even apply for funding. One notable absence was Early Stage Partners of Cleveland — which had filed a letter of intent stating that it planned to apply.

Why didn’t it do so?

It wasn’t an option: The firm hadn’t yet raised the matching dollars it would need to apply for Third Frontier money, according to general partner Jim Petras. However, he believes Early Stage should be able to close on a new chunk of funding by the middle of next year. After all, the firm made good money when two local companies in its portfolio, TOA Technologies and Simbionix, where acquired in mid-2014.

Raising money for venture capital funds in Ohio is harder than it used to be, Leach said. Many Ohio-based funds previously raised cash from the Ohio Capital Fund, a taxpayerbacked “fund of funds” that finished making investments a few years ago and was never renewed. Plus, some firms used to raise cash from banks — which is now illegal because of regulations contained in the DoddFrank Wall Street Reform and Consumer Protection Act of 2010.

The recession also made fundraising harder for venture capital firms, especially newer firms in the Midwest that were still trying to prove that they could generate returns in a timely fashion. Northeast Ohio is still feeling those effects, Leach said.

“It’s going to impact us for at least a decade,” he said.

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