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ANALYSIS
INSIDE
County, MMPI grew apart Coming split of tradeshow partners reflects divergent paths By JAY MILLER jmiller@crain.com
It isn’t hard to compare the parting of the ways at the Cleveland Convention Center and Global Cen-
ter for Health Innovation with what can happen when two people marry too young, before each really knows where their lives are headed. Cuyahoga County and its partner, tradeshow complex manager
MMPI Inc. of Chicago, are parting, it appears, because neither side has maintained the enthusiasm for the other that they had when they were courting a half-dozen years ago and then got hitched in 2010.
Last Wednesday, Sept. 18, Cuyahoga County Executive Ed FitzGerald told Crain’s his administration and MMPI are looking for an experienced convention center manager to take over operations at the complex. See MMPI Page 18
OHIO CITY HOME TO MARKET OPTIMISM
As venture funds struggle to raise cash, commission ponders investing
By STAN BULLARD sbullard@crain.com
P
By CHUCK SODER csoder@crain.com
atty and Steve Roberts recently sold their four-bedroom, Shaker Heights home with a large yard and in-ground pool to downsize, because their daughters are grown. The couple this month moved into a two-bedroom place with a one-car carport and 30% less space. The new place is a single-family home built in 1854 on Carroll Avenue in Cleveland’s Ohio City neighborhood that cost $290,000. “We know we’re at the higher end in Ohio City, but we got a really good home,” Mrs. Roberts said.
As venture capital firms step out, the state of Ohio could step in. The Ohio Third Frontier Commission is thinking about funneling more money to young technology companies that normally would rely on venture capital, which is becoming harder to find.
INSIDE: With Third Frontier’s help, high-tech companies in state are hiring more employees. Page 7
See OHIO CITY Page 17
MARC GOLUB PHOTOS
38
Bruce Carroll — right, of Schoolbelles — and other smaller Northeast Ohio retailers are seeing their school uniform business facing more of a challenge from major companies such as Walmart, Target, Kmart and TJ Maxx. PAGE 3
Third Frontier may open its wallet
Area has experienced an ‘enormous’ change in sales of houses at $200K and up
Steve and Patty Roberts’ living room
Sizing up the competition
Steve and Patty Roberts purchased their home on Carroll Ave. in Ohio City for $290,000.
In Ohio and across the country, venture capital firms are finding it hard to raise cash. Thus, they’re making fewer investments — a trend that many industry watchers expect to continue. Several members of the Third Frontier Commission and its advisory board voiced concern about the state of the venture capital sector last week during their annual retreat in Mount Sterling, just south of Columbus. See FRONTIER Page 7
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SPECIAL SECTION
GREEN CONSTRUCTION Green roofs can have a lasting impact on buildings and businesses ■ Pages 11-15 PLUS: GREEN SPACE PROFILES ■ INCENTIVE PROGRAMS ■ & MORE
Entire contents © 2013 by Crain Communications Inc. Vol. 34, No. 38
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Event planning In next week’s special section, Crain’s will get you up to date on what’s going on at the Cleveland Convention Center, highlight trends in events and provide tips from NE Ohio planning pros.
Classified ....................18 Editorial ........................8 From the Publisher ........8
D SAVE THE
You’re finally spending money like it’s 2008. The Bureau of Labor Statistics reports that average expenditures per household in 2012 were $51,442, an increase of 3.5% from $49,705 in 2011 and the first year since 2008 in which the figure passed $50,000. (It was $50,486 that year.) Here’s a breakdown of how the average U.S. household spent money last year:
Category
REGULAR FEATURES Going Places ...............10 Reporters’ Notebook....19 What’s New..................19
SEPTEMBER 23 - 29, 2013
Expenditure
Change from 2011
Housing $16,887 +0.5% Transportation $8,998 +8.5% Food $6,599 +2.2% Personal insurance/pensions $5,591 +3.1% Health care $3,556 +7.3% Entertainment $2,605 +1.3% Cash contributions x-$1,913 +11.2% Apparel and services $1,736 -0.2% Other $3,557 +5.2% ■ Note: x-Category includes payments for support of college students; alimony and child support; and giving to charities and religious organizations ■ Source: www.bls.gov
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3
Lawsuits allege Invacare slow to reveal woes Latest claim seeking class action status says FDA issues caused big hit to retirement plan By CHUCK SODER csoder@crain.com
A lawsuit that seeks class action status alleges that Invacare Corp. and its top executives kept employees in the dark about regulatory problems that caused the company’s stock price — and its retirement plan assets — to take a big hit. The lawsuit states that the retirement plan was “heavily over-invested” in In-
vacare stock because executives failed to disclose promptly the seriousness of regulatory problems that eventually forced Invacare to shut down much of its wheelchair manufacturing operations in Elyria and revamp its quality control processes. Thus, many Invacare employees — who are given the option of buying the company’s stock through the retirement plan — continued to buy and hold shares, not realizing the price of the stock was about to start falling, the lawsuit alleges. At the start of 2011, the Invacare retirement plan held $21 million in company stock, which accounted for about 12% of the plan’s assets, according to the complaint, filed Aug. 26 in U.S. District Court in Cleveland. See INVACARE Page 5
THE WEEK IN QUOTES “On average, more than once every two weeks, there is a buyer paying more than $200,000 for a home or condo in Ohio City and it has picked up recently. The number of $200,000 sales has increased 50% over the last three years.” — Roger Scheve, an agent at Re/Max Beyond 2000. Page One
JANET CENTURY
Bruce Carroll is owner and president of Schoolbelles, which has been in business since 1956. He is shown with Noi Phumchaona, who has worked for the company for 31 years.
FIT FOR COMPETITION Increasing demand for school uniforms has led to small local retailers battling national chains
By LAURA STRAUB clbintern@crain.com
T
he local retailer that became Silverman’s Discount Department Stores got its start right after World War II, when Marcus Silverman and his three brothers in 1946 opened a store in Cleveland that sold government surplus goods — stuff such as underwear, socks, shirts and rainwear. See FIT Page 9
“I think in the long run the benefits are not just money — it’s the environment and how we treat our planet. There is a cost savings overall in going green and sustainable. It’s a little bit higher up-front cost in the beginning, but the payback is there.” — Tania Anochin, Cleveland State University project manager. Page 12
“The shale revolution has created a new opportunity to meaningfully grow the U.S. economy. I believe that this is, this could be, the largest single advantage that the U.S. has enjoyed in the last century.” — Tom O’Brien, president and CEO, TravelCenters of America LLC. Page 9
“When you think about green construction, you think recycled materials, low VOCs (volatile organic compounds), energy efficiency, all things that are hard to see. … A green roof stamps a project as a visual representation of what the building owner is trying to do.” — Brian Lambert, director of products and systems, The Garland Co. Page 11
INSIGHT
Cavs are playing new sort of numbers game Data-tracking cameras are now the norm in the NBA, and team is first to use them for marketing purposes By KEVIN KLEPS kkleps@crain.com
Keen observers of Cleveland Cavaliers games at Quicken Loans Arena during the final few months of the 2012-13 season might have no-
ticed that the Q-Tube — the gigantic, fire-shooting scoreboard — was spitting out some unique statistics. When Tristan Thompson appeared at the free-throw line during the first quarter of a March 6 matchup against the Utah Jazz, the Q-
Tube showed the 22-year-old power forward’s total dribbles, touches and the miles he ran two nights earlier against the New York Knicks. At the start of the Utah game, the scoreboard displayed the average miles each player in the starting lineup had compiled in games last season — at the time, a very slight edge went to Mr. Thompson over All-Star point guard Kyrie Irving, 2.31 miles to 2.28. See CAVS Page 6
CONTRIBUTED PHOTO
Six SportVu data-tracking cameras were installed at Quicken Loans Arena in 2012.
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CRAIN’S CLEVELAND BUSINESS
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SOLD 6880 LAKE ABRAM DRIVE, MIDDLEBURG HTS, OHIO
SEPTEMBER 23 - 29, 2013
Big changes are in cards at Cleveland printing company Young owner is trying to rejuvenate Hotcards with fun and creative culture By CHUCK SODER csoder@crain.com
Newmark Grubb Knight Frank is pleased to announce the sale of 6880 Lake Abram Drive in Middleburg Heights. Terry Coyne and Kristy Hull represented the Seller.
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John Gadd no longer lives on 5Hour Energy drinks, but you wouldn’t guess it, judging from the changes he has made at Hotcards. A 27-year-old veteran of the printing industry, Mr. Gadd has spent much of the last year working to rejuvenate the Cleveland printing company, which had been flying on autopilot in recent years. Since buying Hotcards with a few other investors for an undisclosed price last December, Mr. Gadd has made big operational changes and infused the business with a fun, creative culture inspired by innovative companies such as Apple and Zappos, an online clothing retailer that puts a heavy emphasis on happy customers and happy employees. “It’s a 15-year-old company that we’re running like a startup,” Mr. Gadd said. On the operational side, Hotcards moved its printing operation from its Cleveland headquarters to a larger sister company in Columbus that can produce “a better product for a lower price with a faster turnaround,” Mr. Gadd said. He would not identify the sister company, which is one of Hotcards’ new investors. The move caused local production employees to lose their jobs: Mr. Gadd rehired only half of the 23 people who previously worked for Hotcards, which technically laid off all its employees just before the new investors bought the company. Since then, however, Hotcards has beefed up its sales, marketing, customer service and design teams and now employs 18 in Northeast Ohio.
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Other changes are more fun: For instance, when the company moved into its new, 22,000-square-foot headquarters on Superior Avenue in April, it immediately started giving the place an “Apple Store meets art gallery” feel,” Mr. Gadd said. That’s why there’s a giant, rainbow-colored mural of Apple Computer’s late CEO, Steve Jobs, in the middle of the office, which is just around the corner from the company’s old, 14,000-square-foot space on East 23rd Street. Hotcards is looking for artists interested in painting the many other white walls that lead from the company’s offices, through a wide hallway strewn with strings of lights, to the parking lot out back. The new look is intended to convey that Hotcards isn’t just a printing company that churns out business cards, brochures and other marketing materials. Today, the company focuses more on promoting its design capabilities, Mr. Gadd said.
JANET CENTURY
Hotcards owner John Gadd stands in front of a huge mural of late Apple CEO Steve Jobs at the company’s new headquarters on Superior Avenue. said. The company’s previous owner, Columbus Woodruff, moved to Houston three years ago, and since then the company’s sales have been flat, Mr. Gadd said. Revenue is starting to grow somewhat, but Mr. Gadd said its growth rate should rise as the company finishes digesting the changes he has made.
Going with the flozio
GREG HARRISS
Hotcards plans to turn 20 people into human fireballs. Ted Batchelor, the Chagrin Falls stuntman pictured here, will be organizing the event on Oct. 19 at Shooters. “We’re trying to embody creativity,” he said. That same enthusiasm permeates the business: Its customer service team is a “customer obsession team.” Employees are instructed to deliver prints wearing red oven mitts because they’re supposedly too hot to hold. Dozens of 5-Hour Energy drinks line the windowsill in the company conference room. And a giant Hotcards logo has replaced the Futon Factory sign that used to adorn the building. The previously quiet company plans to take that energy level up another notch when it attempts a highly visible publicity stunt: On Oct. 19, the company plans to host a party at Shooters, where attendees will watch 20 people be turned into human fireballs while floating on a barge in the Cuyahoga River. Among the burning bodies will be Mr. Gadd himself, who aims to beat the existing world record for most people simultaneously on fire. The record stands at 17. “I tried lighting myself on fire as a kid. … This will be different,” he said with a laugh, adding that firefighters will be on the barge to make sure nothing goes wrong during the 40-second burn. Hotcards needed a new start, he
One more big change is on the way, though: The company, which takes most of its orders via the Internet, plans to launch a new website later this year. The site will include a software tool designed to help smaller companies and anyone else on a budget design their own marketing materials. “Just because it’s self service doesn’t mean it has to look like crap,” he said. That was the general idea behind flozio, a Cleveland software company Mr. Gadd started in 2008 at age 22. Flozio raised $4.5 million from investors before it was bought for an undisclosed price by the company’s largest customer, DemandBridge LLC of Baltimore. Afterward, many of flozio’s 10 Cleveland employees went to work for Quéz Media Marketing; Mr. Gadd owned a stake in the Cleveland-based boutique marketing firm until selling it to his other partners a few months ago. Flozio also employed about 40 people at an office in India, which was closed. In Hotcards, Mr. Gadd found a company with “a great foundation” to build on, said Kendall Wouters, CEO of Reach Ventures, a Cleveland company that is helping launch multiple businesses related to data analytics. And Mr. Gadd — who started selling industrial printers for Solonbased Graphco soon after graduating from Chagrin Falls High School in 2004 — has what it takes to grow the business, said Mr. Wouters, who gave him advice during his flozio days. Mr. Wouters still rides bikes with Mr. Gadd, who always wants to ride up the biggest hills. “Literally, he’s Popeye,” Mr. Wouters said with a laugh. “The guy eats spinach and he goes nuts.” ■
Volume 34, Number 38 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of December and fifth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2013 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. REPRINT INFORMATION: 800-290-5460 Ext. 136
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Invacare: Company says it is in compliance with FDA continued from PAGE 3
But soon, revelation of Invacare’s regulatory problems would chop the value of that stock in half: From Jan. 3 to Dec. 30 of that year, Invacare shares fell from $30.49 to $15.21, which is exactly where the price stood at the close of business on Wednesday, Sept. 4. The lawsuit said Invacare should reimburse its retirement plan for the $11.5 million it has lost on company stock since July 2010 — just before the U.S. Food and Drug Administration began to conduct inspections related to Invacare’s quality control processes. The lawsuit has yet to be certified by the court as a class action. If that occurs, the case would be argued on behalf of the plan and its beneficiaries. The lawsuit names only one plaintiff, Nancy Murray, who is a former employee, according to Invacare spokeswoman Lara Mahoney. The plaintiff’s lawyers would not comment about the case. The lawsuit is the second case seeking class action status filed against Invacare this year. In May, other large Invacare investors filed a broader lawsuit against the company, claiming investors were not made aware of the seriousness of Invacare’s problems with the FDA. Many of the problems related to procedures the company used to identify and fix problems related to product quality.
Questions on timing The two lawsuits make many of the same arguments. They suggest Invacare executives should have mentioned the problems sooner, so that investors could have sold Invacare stock, or at least stopped buying it. For instance, the FDA in August 2010 sent Invacare a Form 483 describing how the company failed to respond adequately to recurring reports that its electric beds had caught fire and caused patients to become trapped between the rail and the mattress. The incidents caused at least three deaths, as well as other injuries, according to an FDA warning letter sent to Invacare executives in December 2010. However, the public wasn’t told about those problems until the FDA made its warning letter public in January 2011, according to the lawsuits. Both lawsuits also state that, in December 2010, the FDA sent Invacare two Forms 483 detailing problems at the company’s headquarters and its Taylor Street plant in Elyria, where the company makes power wheelchairs. The lawsuits said it wasn’t until October 2011 that Invacare CEO Gerald Blouch made it public that the company’s FDA problems extended beyond the plant that made the electric beds in Sanford, Fla. Mr. Blouch is a defendant in both lawsuits, as is A. Malachi Mixon III, Invacare’s chairman and its longtime CEO prior to Mr. Blouch assuming that job in January 2011. The broader lawsuit from May also names chief financial officer Robert Gudbranson. The lawsuit related to the retirement plan leaves out Mr. Gudbranson but names four other executives: Patricia Stumpp, Dale C. LaPorte, Michael F. Delaney and Charles S. Robb. Both lawsuits note that Invacare
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“We don’t believe they have any merit.� – Lara Mahoney, director of investor relations and corporate communications, Invacare, on the lawsuits filed against the company that are seeking class action status bought nearly $10.5 million of its own stock from Mr. Mixon, its former CEO, in March 2011 — three months after the FDA told Invacare about problems at its Elyria operations but before that information was made public. The stock purchase — 350,000 shares bought at nearly $30 each — amounted to about 14% of the Invacare stock Mr. Mixon owned at the time. Mr. Mixon, who since has bought and sold smaller amounts of Invacare stock, told the company the money from the stock sale was for “personal financial planning purposes,� according to a document filed with the Securities and Exchange Commission in March 2011, two months after he stepped down as CEO. Ms. Mahoney, director of investor relations and corporate communications for Invacare, would not provide additional detail regarding Invacare’s purchase of Mr. Mixon’s shares. The company doesn’t generally make an announcement when the FDA sends it a Form 483 detailing the results of an inspection because inspections are frequent in the heavily regulated medical device industry, Ms. Mahoney said. “It’s not something we’d typically call out beyond our normal disclosure requirements,� she said.
Rogers Group will change hands Head of recruiting company says two employees eventually will own business Nash
By CHUCK SODER csoder@crain.com
It may not be long before Rogers Group is no longer owned by Terry Rogers. The retiring founder of the recruiting company based in Middleburg Heights has struck a deal to sell the business to two younger members of the company’s leadership team, but they’re not paying cash. They’re buying the company through sweat equity. Vice presidents Chris Nash and Mark Spino each own 10% of Rogers Group today, and they’ll be awarded more shares over time, based on how much profit the company can generate. Mr. Rogers, who turns 65 at the end of October, originally estimated it might be as long as four years before they own the entire business. But then he reconsidered, given
Spino
how fast the 14-year-old business has been growing over the past few years. The growth is driven partly by the improving economy, but it also has received a boost from Mr. Nash’s efforts to market Rogers Group to clients as well as the executive and technical employees that the company recruits. “With Chris’ performance of late, it’ll probably be two-and-a-half to three years,� Mr. Rogers said. The company has 16 employees, up from 11 three years ago. Sales should exceed $2 million this year, up from $1.6 million last year and $1.2 million in 2011, Mr. Nash said. Rogers Group has marketed itself more aggressively over the past few years and ramped up its use of social media, according to Mr. Nash, who heads the company’s sales and marketing efforts. For instance, he uses LinkedIn
and online job boards to hunt for companies that are in hiring mode, which he said is a good way to identify potential clients. He’s also a big fan of using LinkedIn’s premium features and other social media tools such as Bullhorn Reach to find people to fill those positions, regardless of whether they’re looking for a job. “Everybody that we’re looking for is very hard to find,â€? he said. That effort has helped Rogers Group bounce back fast from a recession that was hard on the business, given how reluctant companies were to hire employees. Mr. Spino, 47, leads the operational side of the business. Mr. Nash, 33, said they complement each other well because they are “both good at different things.â€? It’s unclear what their titles will be after the transition is complete, but the two men already play big roles in managing the business, as Mr. Rogers spends his winters in Florida. He’ll remain CEO for now, but eventually he’ll move into a consulting role — and focus more on enjoying life. “I have no problem with these folks running the business for me,â€? Mr. Rogers said. â–
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‘We are in compliance’ The Invacare executives should have released information about those inspections because the problems identified were “serious adverse issues that impact Invacare’s current business and business prospects,â€? said Benjamin Galdston, an attorney with Bernstein, Litowitz, Berger & Grossman in San Diego. Mr. Galdston is one of the lawyers representing plaintiffs in the broader lawsuit filed in May; those plaintiffs include the Government of Guam Retirement Fund and the Cambridge (Mass.) Retirement System. Invacare’s Ms. Mahoney wouldn’t say much about the two lawsuits, given that they both are ongoing. “We don’t believe they have any merit,â€? she said. She noted, however, that Invacare has finished two of the three audits the FDA requires the company to complete before it can be released from a consent decree that severely has restricted its Elyria operations since December 2012. After completing the second audit, Invacare was allowed to resume designing wheelchairs and electric beds in Elyria. The company plans to send in mid-November to the FDA documents detailing the results of the third audit. If the FDA accepts the results, Invacare will be able to restart full wheelchair production at its Taylor Street plant. “We’re showing the FDA that we are in compliance,â€? Ms. Mahoney said. â–
5
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Cavs: Advanced stats will be part of team’s Midtown Investment Opportunity TV and radio broadcasts for the first time
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4614 Prospect Avenue Cleveland, Ohio
continued from PAGE 3
Six data-tracking cameras that were installed at The Q last winter were processing the numbers in real time. What fans saw and read were the very basics from the SportsVU basketball tracking system — miles, dribbles and times touching the ball. What the teams get from the technology that monitors player, referee and ball movement is far more complex — and profound. “The game has changed,� said Tad Carper, the Cavaliers’ senior vice president of communications.
The league buys in FOR MORE INFORMATION, CONTACT: Gregory B. West David R. Horowitz 216-861-7200 www.ostendorf-morris.com
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STATS LLC, a Chicago-based sports technology, data and content company that acquired the SportVu technology in 2009, sold its software to six NBA teams for the 2010-11 season. By the end of last season, half the league’s 30 teams had the technology. The Cavaliers’ installation was complete last December. This Oct. 29, the opening night of the 2013-14 NBA campaign, every arena will be equipped with the SportVu system — a service for which teams had been paying STATS in the “low six figures� per year, according to Kerry Bubolz, the Cavs’ president of business operations. And this time, the league is picking up the tab. The NBA is the first major sports league in the United States — and maybe the world — to invest this heavily in motion-tracking software. “Now that the league is engaged with this in totality, it widens the scope of what you can do and the stories you can tell — the seasonlong kind of progression that makes sense from a corporate partner perspective and fan engagement,� Mr. Carper said. SportVu’s technology measures players and the ball in X and Y coordinates. The ensuing data can depict such intricacies as the speed of a pass, the arc of a shot and a player’s acceleration and deceleration. There are two overhead cameras positioned over the baseline on each end of the court, a camera behind each team’s basket and two on the side of the court. The system processes the results in real time, and the data is available via iPads during the game, should a coaching staff be inclined to use the numbers on the fly. For the Cavs, the technology went far beyond Mr. Irving’s dribbles and the number of times Mr. Thompson was receiving the ball in the post.
Playing the matchup game When Brian Kopp, a senior vice president at STATS, made his SportsVu pitch to the Cavaliers in 2012, he noticed something different. In addition to Cavs general manager Chris Grant and his basketball staff, the team sent Mr. Bubolz to speak with Mr. Kopp at the team’s training facility in Independence. “I was out at the practice facility and Kerry was at the meeting,� Mr. Kopp said. “He said, ‘When are you leaving? Can you come down to the arena and talk to the rest of my staff?’ So I changed my flight and went and talked to them.� The Cavs immediately saw a
CONTRIBUTED PHOTO
The Q-Tube on March 6, 2013, displayed Tristan Thompson’s SportVu statistics from the Cleveland Cavaliers’ previous game at Quicken Loans Arena.
TRACKING THE GAME SportVu’s technology measures the following: ■Players and teams: Speed, distance, shooting, passing and defense ■Ball: Trajectory, movement, speed and time of possession Source: STATS business benefit to the data, even though the numbers were giving clubs information on such basketball-centric tendencies as pickand-rolls and rebounding. In late January, the Cavs began using some of the stats on the scoreboard and in other areas of the arena, along with the team’s social media accounts. This season, the team plans to align the SportVu stats with advertising partners by using key numbers as a selling point. “A lot of times when you’re engaging a corporate sponsor, they want to own certain things, they want to own certain words,� Mr. Bubolz said. “So we started playing matchup with words like durable, innovation, efficiency, speed, stamina, and as we find companies that are interested in words like that, you start to play the matchup game. “You say, ‘All right, Company A that wants to own this word, here’s a way you can own that word through all these channels — inarena, social channels, television, radio,� he continued. “You just start to create that true sponsor connection. These are all things that we think is really unique about it from a business standpoint.� The idea is something Mr. Kopp had hoped a team would embrace amid a sea of numbers that can be more intimidating than a healthy Andrew Bynum in the paint. The business benefit of the data “was something I had pitched to a lot of other teams, but when you go and speak with teams, you’re mostly pitching to basketball operations guys,� Mr. Kopp said. “When you mention the business side, some are like, ‘Yeah, yeah, whatever.’ There really are two sides of the
house with some organizations. In Cleveland, they are much more integrated.� In addition to corporate sponsorships, social media and the in-arena presentation, the Cavs plan to use some of the next-level stats during television and radio broadcasts for the first time this season, Mr. Bubolz said.
Mining the data for gems The value the stats provide to the basketball side of the “house,â€? as Mr. Kopp called it, is more obvious. STATS gives each team detailed reports after every game, but the more cerebral organizations won’t stop there. “The real value is how you mine the data,â€? said David Griffin, the Cavs’ vice president of basketball operations. “Because we have some experience with it and because we have been exposed to some areas of value (in the technology), we feel like we’ll exploit it better than we had before.â€? Prior to joining the Cavaliers in 2010, Mr. Griffin spent 17 years with the Phoenix Suns. The Suns were one of the organizations that served as a “test venueâ€? for SportVu’s technology prior to its launch, Mr. Griffin said. Mr. Griffin said the Cavs will have three employees whose “sole jobâ€? is interpreting the data that comes from the cameras. “It’s boundless the value that you can get out of this,â€? Mr. Griffin said. “You can just keep adding on.â€? Last year, the team hired Benjamin Alamar, a highly regarded analytics consultant, professor and author who had worked for the Oklahoma City Thunder. For “competitive reasons,â€? Mr. Griffin wouldn’t disclose the size of the Cavs’ beefed-up analytics department, but it’s evident the organization, in the words of Mr. Carper, is going “all inâ€? with the data. “You need people to interpret and harvest the data,â€? Mr. Carper said. “You have this incredible race car at your disposal, and you have to have people who can drive it.â€? â–
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Frontier: There is clear Program’s support critical to hiring jump investment capital ‘gap’ High-tech companies in state attribute REPORT ONLINE
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There, they discussed possible changes to the economic development program, which makes investments in tech companies and research projects. A few commission and advisory board members expressed strong support for the idea of using Third Frontier money to fund young tech companies that could struggle if they can’t find cash. Among them was advisory board member Tom Waltermire. The shrinking venture capital sector is the “No. 1 issue” the Third Frontier program needs to address, according to Mr. Waltermire, CEO of Team NEO, a nonprofit that works to attract businesses to Northeast Ohio. He also read a letter from former advisory board member John Huston, who wrote that the state should make a “concerted effort to attract venture capital funds to Ohio.” Mr. Waltermire voiced support for an idea proposed by commissioner Bruce Langos, who said Third Frontier should make “big bets” on the most promising companies that already have received some form of assistance through the economic development program. There’s no guarantee the commission will take action: So far, all its members have done is ask the Ohio Development Services Agency to figure out whether the shrinking venture capital market is causing trouble for high-tech entrepreneurs in Ohio. Commission member Ben Kanzeg suggested the group get the additional data, because he isn’t sure Ohio entrepreneurs are struggling to fund their businesses. “When I ask them, ‘Do you have trouble getting capital?’ they say ‘No,’ ” said Mr. Kanzeg, who serves as both deputy director of policy and science and technology adviser for Gov. John Kasich. Though the nation’s economy has been improving slowly over the past few years, U.S. venture capital investments dropped from $29.7 billion in 2011 to $27 billion in 2012, a decline of nearly 10%, according to the MoneyTree Report distributed by consulting firm PwC and the National Venture Capital Association. Figures from the first two quarters of 2013 are even lower than those in the like quarters the previous two years, according to the report, which is based on data from Thomson Reuters. Plus, fewer venture capital firms are raising money, and Northeast Ohio is no exception: Active local firms such as Early Stage Partners of Cleveland and Glengary of Beachwood are out of money to make new investments and won’t be able to raise new funds unless some of the companies they’ve invested in are sold for big bucks or go public. Plus, the $150 million Ohio Capital Fund, a taxpayer-backed entity that invested in venture capital firms throughout the state, won’t make more investments unless it is renewed.
‘Rearing its ugly head’ Ohio Capital Fund director Paul Cohn, who attended the retreat, told Crain’s he is “clearly seeing a
“When I ask them, ‘Do you have trouble getting capital?’ they say ‘No.’ ” – Ben Kanzeg, deputy director of policy and science, and technology adviser for Gov. John Kasich
“It’s a very deeply held view that we have a real funding problem pending and rearing its ugly head.” – Rick Fearon, Ohio Third Frontier Commissioner member and vice chairman, chief financial officer and chief planning officer, Eaton Corp. capital gap” when it comes to the availability of investments in the $2 million to $5 million range. Of the 27 venture firms his fund helped finance, more than half won’t make more investments unless they can raise more capital on their own. Commission member Rick Fearon sees the problem, too. “It’s a very deeply held view that we have a real funding problem pending and rearing its ugly head,” said Mr. Fearon, who also is vice chairman, chief financial officer and chief planning officer at Eaton Corp., a diversified manufacturing company in Beachwood. It’s unclear how the Third Frontier Commission would address the lack of capital, but Messrs. Langos and Waltermire said the group could partner with venture capital firms to identify some of the most promising companies in Ohio. Then both the commission and the venture capital firms could put money into a fund that would invest in those businesses. Mr. Langos specifically suggested the proposed fund make large investments in companies the Third Frontier already has helped in some way. “Look at our portfolio. What are the crown jewels?” said Mr. Langos, who also is chief operating officer at Teradata Corp., a data analytics software company in Dayton. Advisory board member Mike Hooven said the Third Frontier might be better off focusing on early-stage tech startups as opposed to more established “gazelle” companies that are ready to grow quickly. “For the most part those laterstage gazelles don’t need Third Frontier funding,” said Mr. Hooven, who has started multiple Cincinnati-area companies that have received support from Third Frontier programs. Either way, if the commission wants to funnel more venture capital into Ohio’s economy, it has the resources to do it. The group has awarded just $33 million of the $236 million in its 2013 budget, mainly because the Ohio Development Services Agency fell behind last year as it hammered out what some of the Third Frontier’s many new programs would look like. The commission has a total of $550 million to spend on high-tech economic development projects over the next few years and has voiced support for spending some of that money in big chunks. ■
increase in employees to Third Frontier By CHUCK SODER csoder@crain.com
High-tech companies in Ohio say they employ 7,800 people specifically because of help they receive through the state’s Third Frontier economic development program — and the number is on the way up. Those 1,080 companies created or retained about 7,800 jobs between 2007 and 2012. That’s up from 5,000 in 2011, a 56% increase, according to an analysis conducted by Battelle Memorial Institute, a nonprofit research and development group in Columbus. The figure stood at 3,560 in 2010 and 1,460 in 2009. The 1,080 companies in the analysis also have attracted $3 billion in the form of grants and investment capital after receiving support from the Third Frontier program, which finances technology development projects and organizations that work with startup companies. That total averages $4.60 for every Third Frontier dollar spent since 2009 — or $7.80 per dol-
lar spent, if you count new product sales that companies attribute to assistance they received from the program. Those leverage ratios would be even higher if the analysis had looked at older investments made before 2007, when the 13-year-old program made big changes to its lineup, said Deborah Cummings, senior program manager for Battelle’s Technology Partnership Practice. Even so, those ratios beat numbers posted by tech-focused economic development programs in other states, she said. So, how accurate are all these numbers? The companies were told to include only the jobs that would not exist and dollars they would not have raised without Third Frontier support, according to Keith Jenkins of the Ohio Development Services Agency. However, the state isn’t sure how well companies are adhering to that standard, he said two weeks ago, during a meeting of Third Frontier leaders. Even so, the Battelle report im-
To read the Ohio Development Services Agency’s annual report for 2013, which includes Third Frontier, go to: tinyurl.com/lmrz7fa
pressed several of those leaders, including Third Frontier Commission member Gary Lindgren. “These four pages here tell me that what we’re doing here is working,” said Mr. Lindgren, executive director of the Cincinnati Business Committee. So why did the jobs figure increase so much in 2012? The figures are cumulative, so the 2012 number gets a boost from companies that received support from the Third Frontier in the previous five years but didn’t ramp up hiring until recently. Companies also could be hiring more people because the economy is improving, according to the Battelle analysis. A large majority of the 1,080 companies in the analysis received support through intermediary groups financed in part by the Third Frontier; those groups include Ohio-based venture capital firms and organizations that help entrepreneurs, such as JumpStart Inc. of Cleveland. ■
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PUBLISHER/EDITORIAL DIRECTOR:
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John Campanelli (jcampanelli@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Park it
T
he Nov. 5 ballot in Cuyahoga County will be a crowded one, with a number of tax levies going before voters. One levy to which we give an enthusiastic “yes” is Issue 80, the tax that provides a majority of the money for the operation and investments of Cleveland Metroparks. The park system known as the Emerald Necklace is a tremendous community asset that will be celebrating its 100th birthday in just a few years. However, what began in 1917 as the Cleveland Metropolitan Park District is hardly a staid, long-in-the-tooth organization. Rather, Metroparks is going through an evolution of sorts, thanks to an agreement it reached with the Ohio Department of Natural Resources to take over the operation of Cleveland’s six lakefront parks, which include Edgewater Park and Euclid Beach. The lakefront parks sit on land that is owned by the city but until this summer had been run by the state for 34 years. As the state budget became tighter, maintenance of the parks eroded, and so did their quality. Beaches and grounds were unkempt, picnic tables and barbecue grills were decaying or worn out and bathrooms were dirty. In the few months that Metroparks personnel have had their hands on the properties, they’ve made improvements that are immediately noticeable to frequent visitors to the lakefront parks. And if Issue 80 wins voter approval, users can expect significant investment in the parks as they are linked to the 23,000 acres of the Emerald Necklace. Brian Zimmerman, Metroparks executive director, sees the lakefront parks as furthering the economic development role the park system can play in making Northeast Ohio an attractive place to live and work. “We’re really trying to fulfill that competitive advantage that I think Cleveland has versus any other industrial city in the country,” Mr. Zimmerman recently told Crain’s. The proposed 10-year, 2.7 mill levy under Issue 80 represents an increase from the current 1.8-mill rate, a change that would bring in $75 million a year versus the $53 million a year the tax yields at present. Mr. Zimmerman said the money would help finance more than $100 million of capital investments over the next 10 years. Those investments would include plowing at least $28 million into the lakefront alone in the next few years. We wholeheartedly agree with Mr. Zimmerman’s vision of pulling the Metroparks’ vast acerage north by embracing the lakefront. People connect to water, and residents of Cuyahoga County are blessed to have access to a big body of it in Lake Erie. The Cuyahoga and Rocky rivers and other tributaries to our region’s great lake long have formed the skeleton of the Metroparks system; including the lakefront parks as part of that system only adds more jewels to the necklace. Approval of Issue 80 would add $5 a month to the tax bill of the owner of a $200,000 house. It is a reasonable price to pay for an asset that adds so much to the quality of life of so many in Northeast Ohio.
FROM THE PUBLISHER
It’s Browns’ déjà vu, all over again When the trade of running back Trent can’t help myself. I know that by the Richardson made its way to social media time you’re reading this on Sunday and last Wednesday’s evening sportsat home or Monday at your desk, casts, the fury came in waves. The big, much will have been written about bruising back had played very the Cleveland Browns, includwell last year, giving the Browns ing the recent game. BRIAN their first bona fide threat in But I must weigh in, to the ex- TUCKER years. tent that the opinion of a longBut there’s no arguing that ago sportswriter and lifetime he hadn’t been the same this Browns fan matters. I hope, for season. The question is the sake of the new owner and whether that was entirely his this new management team, responsibility, or was it the that next year’s draft lifts this teammates around him? We’ll team into something akin to a see soon enough as he enters a playoff contender. backfield in Indianapolis with a Because, boy, right now, eartalented, athletic young quarterback. ly in the latest reboot, the natives are In the meantime, fans of the Browns restless. A strong-armed quarterback suffer yet again, and this time the pain can’t move the team in an offense destarts earlier than ever (except for maybe signed for a strong-armed quarterback. that humiliating blowout loss to the The offensive line is a mess, and they Steelers in the first game at the new laketrade the running back that was last front stadium). year’s top draft pick. Here’s hoping, for the sake of all those When those who have watched Joe laboring in the Browns’ headquarters in Banner work in previous markets say Berea, and all the irate fans out there, he’s not afraid to make decisive moves, that this team rallies, and gives us a reathey sure weren’t kidding. The question son to watch the games. Thank goodness remains unanswered as to whether these for their defensive squad … will be the right moves.
I
***** In a recent “duel of the op-eds” in the Sun newspapers, Cleveland State University’s Tom Bier debated former Geauga County Commissioner Skip Claypool over whether small communities should merge, something we’ve been advocating for a long time. So I really tried to set aside the bias of my personal opinion and consider Mr. Claypool’s arguments, which seemed to boil down to the fact that smaller governments are more responsive to their voters, and that as they grow they become more unresponsive. “Mergers accomplish little, other than creating a larger bureaucracy,” he wrote, claiming that the larger size somehow automatically makes them less efficient. I don’t know. It seems to me that tiny communities that share borders and are duplicating services have a lot to save by combining. And if they don’t do it now, when it can be done thoughtfully, they’ll be forced to do it later, as state government continues to cut the funds flowing to them. Remember that great line from the “Mr. Dirt” character from the old Mobil oil commercials: “You can pay me now, or pay me later.” ■
TALK ON THE WEB Re: Metroparks’ embrace of the lake ■ We are very fortunate to have such a wonderful Metroparks system. Anyone who has played a Metroparks golf course or enjoyed the many trails and sights on the Emerald Necklace realizes that it takes time, effort and money to keep it a thing of beauty. I am for the additional tax levy if that is what it takes to help maintain and improve our relationship with Mother Nature. — Joe Roman
Re: County seeks convention center changes ■ MMPI’s deal with Cleveland might be the most one-sided agreement in the history of our city. — James Anthony ■ It’s unbelievable how Cuyahoga County keeps changing the name of the building, what happens within the building, and now the people who were paid
Reader responses to stories and blogs that appeared on: www.crainscleveland.com
$4 million to manage the operation. Problem was, the county never received a market study that indicated that this building should be built. The people of Cuyahoga County spent $480 million on what will be a mixture of who knows what. The politicos will always come up with a new name and hope the voters forget. — Allan Wood
Re: Plain Dealer future ■ I understand print is dying, but Advance Publications could have offered the option of letting their “independent” contractors get the Monday, Tuesday and Thursday newspapers to deliver to their customers who were willing to pay extra. — James Evans
Re: Grocery store competition ■ Heinen’s stores are far superior to Giant Eagle’s stores. Many Giant Eagle stores just aren’t particularly clean, and their parking lots are full of trash. I was not at all impressed with the new “Market District” store. The Giant Eagle at Legacy Village is a better store to shop at. — Seth Hirschfeld
Re: Alliance Startup Fund ■ I keep seeing these business incubator-type entities in smaller communities and I think it’s awesome as long as they are actually providing seed capital rather than just hocking some cheap office space in a previously abandoned and cheaply refurbished building. Communities need to be wary of that trap that is unlikely to yield the results that they are looking for. — Joseph Marinucci
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Fit: Smaller local companies can offer wider range of choices continued from PAGE 3
Today, Silverman’s specializes in clothing of another kind — school uniforms — and it’s benefiting from decisions by a rising number of public and private schools in the Cleveland area to require students to outfit themselves in standard dress. “It’s a growing business for sure,” said Alan Silverman, president of Silverman’s, which has stores at 1450 Hayden Ave. in East Cleveland and 6601 Harvard Ave. in Cleveland. “The market has been growing every year.” Year-round uniform suppliers often work closely with school administrators to make sure they are stocked properly with clothing that fits the schools’ uniform policies. Consequently, a school’s administrators can be the most important connection between these retailers and their customers. “The principals introduce us to the parents, if you will,” said Bruce Carroll, owner and president of Schoolbelles, a Cleveland uniform maker and retailer that has been in existence since 1956. When the Cleveland Metropoli-
tan City School District enacted its uniform dress code in August 2007, it caught the attention of most other schools, Mr. Silverman said. Although the majority of charter schools in the city already enforced uniform dress codes, he said, the Cleveland district’s decision was a landmark for a local public school system.
Keep it simple When schools decide to implement new uniform standards, many come to specialty uniform retailers for advice, Mr. Silverman said. He met with both the East Cleveland and Cleveland school districts regarding their change and communicated with Akron as well. Rojeana Howell-Curtis, academic superintendent for the Cleveland district, said Mr. Silverman was essential in easing the transition into uniforms for its 107 schools. “He almost had a one-stop shop,” Ms. Howell-Curtis said. Silverman’s combined a package of two shirts, two pairs of pants and a belt for less than $50 to start students off, she said, which cut down on student excuses for not sticking to the code.
TravelCenters CEO: ‘Shale revolution’ is good for trucking Tom O’Brien sees what he termed “the shale revolution” coming to the trucking business, and indicated his company and many others are intent on participating in it. Mr. O’Brien, president and CEO of TravelCenters of America LLC in Westlake, made his observations in his keynote speech Wednesday morning, Sept. 18, at the Great Lakes Truck Expo at the Cleveland Convention Center in downtown Cleveland. He spoke at length about the impact that natural gas exploration in the Utica and Marcellus shale regions of Ohio and Pennsylvania could have on the nation, the trucking industry and TravelCenters. “The shale revolution has created a new opportunity to meaningfully grow the U.S. economy,” the head of the operator of highway travel centers told his audience. “I believe that this is, this could be, the largest single advantage that the U.S. has enjoyed in the last century.” Mr. O’Brien said growing demand for natural gas by the transportation sector “seems surely to mean that at the very least, natural gas, particularly liquid natural gas, is likely to be a true alternative, a true option for fueling alongside diesel, in the coming years.” “And now it comes to all of us to figure out how to best bring this resource to bear positively,” he said. “It is now up to us — the equipment manufacturers; all of those in the infrastructure and distribution arena; all of the companies and the drivers who are actually going to use alternative fuels — to work together to use our new advantage wisely. This is the latest in a long, historical string of U.S. competitive advantages, and future alternatives to for-
ON THE WEB Story from: www.crainscleveland.com eign-based, pollutant-heavy fuels are here today and here to stay.” According to Mr. O’Brien, many large trucking fleets “are actively evaluating, testing or converting their fleets or portions of their fleets.” “Some studies have predicted adoption rates of 15% of new Class 8 heavy-duty truck purchases over the next three to five years, and as high as 25% by 2020,” Mr. O’Brien said. “That means we could have well over half a million Class 8 trucks running over the road on natural gas in well before the end of this decade. Some predict that natural gas vehicles could ultimately reach 40% of the heavy-duty truck market.” Mr. O’Brien noted that TravelCenters and energy giant Shell announced earlier this year a plan to create a nationwide natural gas refueling and repair network. Shell will distribute liquefied natural gas, or LNG, at up to 100 of its TA and Petro locations. “We plan to create at least two LNG fueling lanes at each of these sites,” Mr. O’Brien said, noting that it is “not an inexpensive undertaking.” “The first couple of LNG lanes at a site will cost about six to seven times the cost of a diesel lane,” Mr. O’Brien said. He said adding incremental lanes “costs less per lane, of course, but, on average, today’s apples-to-apples comparison is that the cost of a natural gas lane is about twice the cost of a diesel lane.” — Mark Dodosh
Mr. Silverman gives some pretty standard advice when advising schools developing uniform policies. “We encourage people to stick with basic colors because those are readily available and keep the price down,” he said. The most common choices are black, blue and khaki pants and white shirts, he said. However, some schools opt for embroidered tops and customized spirit wear. Schoolbelles has a handle on specialty items such as these, and amid competition with large chains for standard uniform pieces, Mr. Carroll has noticed an increase in this facet of his business. “Chains pretty much handle the bread and butter,” he said. Schoolbelles also offers a wider range of uniform sizes than most retailers, Mr. Carroll said. “We still manufacture about half of our girls’ items in our factory right here in Cleveland,” Mr. Carroll said. The rest of the clothes are made by Schoolbelles, but in the Dominican Republic. “When we make a commitment to a school, we make a commitment to outfit every child in that school,” Mr. Carroll said. “We promise that we can fit every single kid.”
Davids vs. Goliaths The increased demand for adult sizes to outfit high school students has brought an entire new group of customers to these year-round uniform retailers, Mr. Silverman agrees. “In the last five years, four high schools have gone to adult sizes,” he said, which has been a boon to sales. National chains such as Walmart, Target, Kmart and TJ Maxx also
have noticed the increase in schools adopting uniform policies and have jumped on the uniform bandwagon. The increased competition is affecting some uniform retailers in a negative way even with the increasing market size. School Uniform Center at 3734 Pearl Road in Cleveland has noticed decreased business in the last two years, said Ahmed Paterno, coowner and manager of the store. Mr. Paterno said he must work to compete with big retailers such as Walmart and Old Navy for customers. But he thinks being open year round and offering coupons directly to schools with uniform policies during the back-to-school season helps keep him afloat. Mr. Carroll has seen the rise in competition at Schoolbelles, too. “In the past two years our sales have stalled due to competition in the market,” he said. “It’s difficult for a company like mine to compete with large chain retailers because of their buying power.” However, Schoolbelles has been a Cleveland staple for 57 years, Mr. Carroll said, and it knows how to compete with the chains.One way is by creating what Mr. Carroll called “wholesaling partnerships” with various schools, in which Schoolbelles allows schools to buy the uniforms at wholesale prices and sell them directly to students at a profit. Although the wholesale program has the potential to benefit schools financially, Mr. Carroll prefers to handle the logistics of the sales through Schoolbelles, allowing the school districts to concentrate on educating. As an alternative to wholesaling, Schoolbelles will give schools that qualify — based on a minimum level of sales and commitment to the Schoolbelles brand,
among other things — a commission payment. “I can tell you that Schoolbelles has given back millions of dollars,” Mr. Carroll said. Coupons targeted at specific schools help keep the relationship between retailer and educator strong as well. Both Silverman’s and School Uniform Center offer coupons through websites of schools with uniform policies.
Helping hand Although prices are low at these uniform retailers, not all low-income families can afford them. So, in 1990, Mr. Silverman founded the nonprofit organization Uniforms for Kids to help outfit these students. The program is run solely by volunteers and donations; however, Mr. Silverman matches each donation dollar for dollar. The need for the program only has grown throughout the years, he said. “CMSD has a waiting list of over 700 people who are in poverty and can’t afford school supplies,” Mr. Silverman said. Silverman’s also offers a trade-in uniform program. Families can trade in uniforms in good condition in return for a discount of up to $6 on a new purchase. The old uniforms are cleaned and mended and then donated. Although parents have their choice of where to buy the mandated uniforms, Ms. Howell-Curtis of the Cleveland city schools said she believes everyone is reaping the benefits of being a uniform district. That’s especially true of the students. “It looks like they’re ready for school, they’re ready for learning,” she said. ■
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
SEPTEMBER 23 - 29, 2013
GOING PLACES JOB CHANGES DISTRIBUTION ASW GLOBAL: Charles Cline to national director, CPG/Retail Services.
ENTERTAINMENT HORSESHOE CASINO CLEVELAND: Donna Hogan to vice president, finance.
Bernier
Bingham
Greenhill
Coffin
TIMKEN CO.: Mark D. Ritucci to regional manager, commercial vehicle aftermarket sales, eastern regions of the U.S. and Canada.
FIFTH THIRD BANK, NORTHEASTERN OHIO: Anne E. Bingham to private banker, Fifth Third Private Bank.
MARKETING Goberish
Gecewich
AXA ADVISORS: Paul Bernier to regional vice president; Ryan Greenhill and Robert Coffin to financial consultants; Ryan Donzelli to financial professional.
senior retirement plan specialist; Joseph Granzier to financial advisor.
Lewis
Bendula
INSURANCE
PAYTIME INTEGRATED PAYROLL SOLUTIONS: Dustin Small to vice president, sales.
SS&G: Michael Demko to senior associate and Jonathon Mathoslah to associate, assurance services; Lindsey Lakis to senior administrative assistant; Margaret Jordan to associate, marketing.
H.C. MURRAY GROUP: Emery M. Szekely to commercial lines manager; Irene Ott to personal lines manager; Joyce Nesbitt Rogers to operations manager; Wendy Fandrich to customer serivce representative.
HEALTH CARE
LEGAL
REHMANN: Susan Morris to client service manager; Bill Boyer to
METROHEALTH SYSTEM: Karim Botros to chief strategy officer.
MCDONALD HOPKINS: Mary I. Edquist to associate.
KEYBANC CAPITAL MARKETS INC.: George Sent to director, Mergers & Acquisitions Group.
Sent
MANUFACTURING
FINANCE
FINANCIAL SERVICE
Donzelli
THINK MEDIA STUDIOS: Kasey Drzazga to camera operator/editor.
SERVICE SAFEGUARD PROPERTIES: Amy Nauer to assistant vice president, property preservation and REO operations; Holly Fletcher to director, client relations; Brian Gecewich to director, field quality control and serivce quality assurance; Steve Goberish to director, application development, vendor systems; Robert Lewis to
Fletcher
Nauer
attorney. TENABLE PROTECTIVE SERVICES: Cynthia Bendula to administrative manager.
STAFFING AREA TEMPS INC.: Joseph Yaro, Al Langford, Donna McDonald and Alesha Tapp to sales representatives; Tom Carder, Jamie Neufer, Carmen Maldonado and Derond Dozier to sales coordinators.
UTILITY FIRSTENERGY NUCLEAR OPERATING CO.: Ernest J. Harkness to site vice president, Perry Nuclear Power Plant.
Send information for Going Places to dhillyer@crain.com.
Cleveland plant could be a key for ArcelorMittal By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com
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ArcelorMittal believes in Cleveland. The Luxembourg-based steelmaker is investing in its Cleveland plant, an operation that produces a small, but increasingly important, part of ArcelorMittal’s steel output. Louis Schorsch, a member of the company’s group management board, said the Cleveland plant ships about 3% of the nearly 100 million tons of steel the company ships each year. But ArcelorMittal is positioning the plant as the place where new, advanced high-strength steel will be piloted and produced. The steel will serve the automotive industry, where new, more stringent fuel efficiency and emission standards have led to a need for stronger, lighter steel. Mr. Schorsch spoke about the investments during a City Club Business Leaders event at the Aloft Cleveland Downtown hotel last Wednesday evening, Sept. 18. He spoke with Crain’s about the issues on Wednesday afternoon. The Cleveland plant has a hot-dip galvanizing line that is critical to producing advanced, high-strength steel. Mr. Schorsch said the company has invested about $70 million in that galvanizing line in the past eight to 10 years, and it is on the path to approve spending another $25 million in improvements on that line in the next year and a half. The Cleveland plant wasn’t designed to make this type of steel — the galvanizing line was originally a heat-treating line — but all the necessary parts were there, Mr. Schorsch said. As demand grows for advanced, high-strength steel, ArcelorMittal can add capacity to produce it in other parts of the world. But for now, Cleveland will be critical.
ON THE WEB Story from: www.crainscleveland.com The Cleveland plant now has about 1,850 employees, 350 of whom are salaried, a big change from the recession when the plant was basically idled. About 150 of those employees were hired in the last year, when the company restarted its West Side steel shop. Mr. Schorsch said the Cleveland plant has the highest productivity in all of North America — 1.15 worker hours per ton produced, to be exact, said Eric Hauge, vice president and general manager in Cleveland. Much of that product goes to the automotive market, and Mr. Hauge said about half stays in Ohio. ArcelorMittal is making other investments in the Cleveland plant, too. Earlier this month, the plant took down one of its blast furnaces for $55 million of updates. The furnace last was updated about 24 years ago. “It’s a pretty big event,” Mr. Schorsch said, noting that it’s one that demonstrates the company’s dedication to the plant. Steel is the incumbent material in the auto industry, Mr. Schorsch said, but recent regulations regarding fuel economy and carbon dioxide emissions have opened the doors for companies to consider other materials and for steelmakers to scramble to meet the challenge. Of ArcelorMittal’s 1,300 to 1,500 research and development employees, about 400 are dedicated to working on these new products, he said. Despite recent softening in the market, Mr. Schorsch sounds confident in the future of steel. There is usually seasonal weakness in the fourth quarter, he said, but he feels good about inventory levels heading into next year. ■
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CRAIN’S CLEVELAND BUSINESS
SEPTEMBER 23 - 29, 2013
INSIDE
12-13 A LOOK AT SOME NOTABLE GREEN SPACES.
11
GREEN CONSTRUCTION
JENNIFER KEIRN
Bert Diehl, left, the director of facilities management, is shown on Lakeland Community College’s green roof with Tim Hollo, territory manager for The Garland Co. The Cleveland company installed Lakeland’s roof.
IT’S A LASTING VIEW Green roofs are gaining in popularity, easy to maintain and have sustainability benefits By JENNIFER KEIRN clbfreelancer@crain.com
GREEN CONSTRUCTION: BY THE NUMBERS
W
hen Lakeland Community College first considered a green roof in 2008, Bert Diehl heard some grumbling from the maintenance crew. “They said, ‘Are we going to be weeding this thing?’ ” said Mr. Diehl, the college’s director of facilities management. “It was an opportunity to educate them, ‘You don’t have to do a thing.’ ” That promise has held true. Over five years, the roof’s sedum, a hardy ornamental ground cover, has never been watered and rarely weeded or dead-headed. The green roof atop Lakeland’s S Building — the first such roof in Lake County — is helping to lengthen the life of underlying roofing materials, he said, and it is adding energy efficiency to the building. Adjacent to a science lab and rooftop greenhouse, it has become an extension of the curriculum. Best yet, added Mr. Diehl, it’s become a visible sign of the college’s overall sustainability strategy. “The location was ideal, the size was
CONTRIBUTED PHOTO
A rendering of the vegetative roof that is being installed at Case Western Reserve University’s Tinkham Veale University Center. ideal,” he said. “It was a nice opportunity to do something that would be part of our mission to educate the folks of the future.” The installation of green roofs — also called living or vegetative roofs — is on the rise across the country. According to nonprofit Green Roofs for Healthy Cities, the North American green roof industry grew 24% between 2011 and 2012. Its members reported 982 new green roof projects in 2012, totaling nearly 5.6 million square feet. See VIEW Page 12
■ Nearly half of greenhouse gas emissions in Northeast Ohio come from residential and commercial buildings, primarily from burning fossil fuels for lighting, heating and cooling. Source: GreenCityBlueLake From 2000 to 2008, the green construction market has: ■ Generated $173 billion in GDP ■ Supported more than 2.4 million jobs ■ Provided $123 billion in labor earnings From 2009–2013, it is forecasted that green construction will: ■ Generate an additional $554
billion in GDP ■ Support more than 7.9 million jobs ■ Provide $396 billion in labor earnings Source: U.S. Green Building Council, “Green Jobs Study” ■ Worldwide, 51% of architects, engineers, contractors, owners and consultants anticipate that more than 60% of their work will be green by 2015, up from 28% of firms in 2012. ■ The U.S. green building market has grown from 2% in 2005 to 44% in 2012, according to a McGraw-Hill Construction analysis of nonresidential construction project starts data. Source: McGraw-Hill Construction, SmartMarket Report, 2013
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GREEN CONSTRUCTION
12 CRAIN’S CLEVELAND BUSINESS
SEPTEMBER 23 - 29, 2013
GREEN SPACES: CLEVELAND STATE UNIVERSITY
I
n its efforts to work toward a sustainable future, Cleveland State University says it is poised to save $60 million over the next 10 years due to energy-friendly renovations and construction on its campus. CSU has three buildings that have attained LEED (Leadership in Energy and Environmental Design) certification from the U.S. Green Building Council, and a fourth that is pending certification: ■ Julka Hall, home to the College of Education and Human Services, and the School of Nursing (LEED Gold). ■ Recreation center (LEED certified). ■ Euclid Commons residence hall (LEED Silver). ■ Student center (pending). CSU project manager Tania Anochin said the university has been working to update campus buildings for the last decade, but
DOLLARS AND CENTS ■ COSTS: CSU project manager Tania Anochin estimated construction costs are about 5% to 10% higher on the front end. ■ BENEFITS: Cost savings on the back end will come out to between 10% and 20% annually because the buildings are easier to maintain and efficient systems run cleaner. only recently embraced the green and sustainable movement. While she said there are a little more costs associated with going green, the payback in energy efficiency and savings on the back end comes within five to 15 years, depending on the building and systems. Ms. Anochin said it’s too early to gauge all the benefits of going green, but students and faculty showed a
Profitability Danger to employees, lost productivity, damaged inventory, damaged equipment from a leaking roof?
keen interest in the initiative through a Campus Sustainability Coalition, which looks at all aspects of developing a sustainable campus. The university is replacing older equipment with more energy-efficient systems, including a geothermal system at the administration center, the installation of solar panels on some buildings and a 7,000-square-foot green roof on the Recreation Center. “I think in the long run the ben-
continued from PAGE 11
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efits are not just money — it’s the environment and how we treat our planet,” Ms. Anochin said. “There is a cost savings overall in going green and sustainable. It’s a little bit higher up-front cost in the beginning, but the payback is there.” She estimated construction costs are about 5% to 10% higher on the front end, but the cost savings on the back end will come out to between 10% and 20% annually because the buildings are easier to
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CONTRIBUTED PHOTO
Cleveland State has three buildings that have achieved LEED status, and a fourth that is pending. Shown here is the recreation center’s green roof.
maintain and efficient systems run cleaner. The Julka Hall project, for example, reduced water usage by 30% per year, earned two years of wind-power credits and used 30% recycled content in its building products. Euclid Commons will achieve energy savings of at least 29% per year through energy-efficient lighting systems and minimum thresholds for cooling, air circulation and filtration systems. A combination of low-flow bathroom faucets, dual-flush toilets and low-flow showerheads and kitchen sinks helped reduce water usage by more than 30% at the residence hall. “Those green initiatives are a part of the strategy for the design from the very beginning, from the site to the actual operation of the building,” Ms. Anochin said. “We’re also looking at being carbon neutral in the next 10 to 15 years.” She said the university is reutilizing as much as it can from older buildings and giving them new life through green renovation. Mather Mansion, Fenn Tower and the Campus Safety Building are among those buildings modified and updated through sustainable practices. — Kimberly Bonvissuto
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University Hospitals and Cleveland State University all have green roofs, and Case Western Reserve University will install 30,000 square feet of vegetative roof on its under-construction Tinkham Veale University Center. “When you think about green construction, you think recycled materials, low VOCs (volatile organic compounds), energy efficiency, all things that are hard to see,” said Brian Lambert, director of products and systems for Cleveland roofing manufacturer The Garland Co., which installed Lakeland’s roof. “A green roof stamps a project as a visual representation of what the building owner is trying to do.” Mr. Lambert likens a green roof to a “giant sponge” that minimizes storm water run-off in addition to the added energy efficiency and roofing durability benefits. A green roof also reduces the heat signature of a building and contributes points toward LEED (Leadership in Energy and Environmental Design) certification. “There are sustainability benefits, but there’s also a ‘cool’ factor,” said Bill Doty of Bedford-based Doty + Miller Architects, which has incorporated green roofs into five recent projects. “One of the best benefits is the biophilia response, the ability to integrate nature into our buildings.” Aesthetics played a role in Case Western Reserve’s decision to add a green roof to its two-story university center, which is adjacent to the wide open spaces of Freiberger Field, and it is on track to achieve LEED Gold status. “It’s a lower building surrounded by higher buildings, so a lot of attention was paid to how the roof would incorporate into the surrounding green space,” said Joanne Brown, Case Western Reserve’s director of planning, design and construction. As Lakeland’s maintenance crew
found, it doesn’t take a green thumb to make a green roof work in Northeast Ohio. At Corso’s Perennials in Sandusky, a demonstration green roof gives architects, contractors and roofers a look at the LiveRoof, a system made of pre-planted trays. “We try to abuse it as much as we can,” said president Gus Corso, whose three decades-old greenhouse is the exclusive LiveRoof grower for Ohio and Pittsburgh. “All of them are excited by how simple it is to install and keep growing.”
More green for green Mr. Corso got into the green roof businesses five years ago, and estimated that LiveRoof installations are now 15% of his business, with about 10 installations each year ranging from 300 square feet to 30,000 square feet. Watering may only be needed in periods of prolonged drought, said Mr. Corso, who recommends that building owners weed periodically and use a slow-release fertilizer once a year. Green roofs can be installed on existing buildings provided the roof can bear the weight, which Mr. Corso said is just 15 pounds per square foot for the shallowest LiveRoof system. Mr. Lambert usually tells clients to expect to pay double for a green roof, depending on how elaborate they become. That was the case at Lakeland, where Mr. Diehl said the cost totaled $150,000. Solar roofs can actually be less expensive, said Mr. Doty, and white reflective roofs also can achieve LEED points. But Mr. Doty said a traditional calculation of ROI shouldn’t be the deciding factor in a green roof decision. “It has to be part of an integrated sustainable philosophy.” he said. ■
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GREEN CONSTRUCTION
SEPTEMBER 23 - 29, 2013
CRAIN’S CLEVELAND BUSINESS 13
GREEN SPACES: ROCKY RIVER GREEN HOME DOLLARS AND CENTS ■ COSTS: Beverly Maloney-Fischback estimates a green remodel costs about 15% more than a traditional remodel. There are some aspects of going green, however, that can be cheaper or the same price as the traditional route. ■ BENEFITS: The financial benefits of green building include lower energy, waste disposal and water costs, as well as lower maintenance costs since the systems run cleaner. For example, 12 to 14 solar panels on the home are expected to achieve an average 20% overall reduction in electricity year-round.
F
or years Beverly MaloneyFischback and her husband, David Fischback, lived around the corner from a small, dated, poorly built Rocky River bungalow from the 1950s. But they were taken with the half-acre lot, which Mrs. MaloneyFischback described as a “beautiful oasis with a lot of natural light.” The house had been for sale on and off over five years when the Fischbacks finally decided it was the perfect opportunity to renovate the bones of the house into their dream home — or what has now become known as the Rocky River Green Home. “The way the sunsets pour into that house, we knew it was something we’d love to work with,” said Mrs. Maloney-Fischback, CEO,
Send us your sustainability nominations CONTRIBUTED PHOTOS
The Rocky River Green Home owned by Beverly Maloney-Fischback and her husband, David Fischback. For more photos go to www.CrainsCleveland.com. founder and publisher of Organic Spa Magazine. “It has a lake view, it’s on a great corner on a beautiful street, and there are century trees that sealed the deal. It’s like living in a tree house. From the master bathroom you can go out on the balcony and touch the tree and climb down it.” And so began a year of renovations to create a green-renovated luxury home. Mrs. Maloney-Fischback and Mr. Fischback, president of Cleveland-based construction firm The Krill Co., used their industry contacts to include green-build design elements, including solar panels, gray water recycling, rainwater harvesting, a high-efficiency heat pump system,
Energy Star appliances, LED lighting, bamb oo flooring, eco-friendly plumbing fixtures and an energy-efficient monitoring system. The financial benefits of green, or sustainable, building include lower energy, waste disposal and water costs, as well as lower maintenance costs since the systems run cleaner. And she said the costs of going green are on par with traditional construction. Some aspects of going green, she argues, are actually cheaper or the same price as the traditional route. An instant hot water tank, for instance, costs about the same as a regular hot water tank, but the payback is instantaneous with lower energy use. Solar attic fans
are another low-cost item at about $150, dispersing heat on upper levels and lowering cooling bills. A rainwater harvesting system should irrigate 75% to 95% of the lawn, and the 12 to 14 solar panels on the home are expected to achieve an average 20% overall reduction in electricity year-round. Mrs. Maloney-Fischback said it’s more challenging to do a green renovation on an existing home than a new green build. She estimates a green remodel costs about 15% more than a traditional remodel, although she declined to give the total cost for the project. But the payoff, she said is a healthy, green home and an investment that the couple expects to recoup in about eight years. — Kimberly Bonvissuto
Crain’s Cleveland Business in 2013 is continuing its series of “Who to Watch” sections. The next section, slated for publication on Nov. 25, will highlight up-and-comers in Northeast Ohio’s sustainability efforts. If you think you know who will be among those leading Northeast Ohio’s green initiatives of the future, drop an email to sections editor Amy Ann Stoessel, astoessel@crain.com, or call 216-771-5155. Send in suggestions no later than noon on Monday, Oct. 21. In addition, an event scheduled for 7 to 10 a.m. Dec. 11 at the CSU student center will help to highlight those included in the section. For information, go to www.CrainsCleveland.com/ WhotoWatch.
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GREEN CONSTRUCTION
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Ohio among nation’s best in sustainable projects Turner Construction survey says the difficulty of obtaining LEED certification has resulted in fewer companies seeking the status, however By DANIEL J. McGRAW clbfreelancer@crain.com
W
hile companies are taking on more environmentally sustainable building projects than ever, the pursuit of having those projects certified as meeting Leadership in Energy and Environmental Design, or LEED, standards has declined slightly on a national level. In some respects, that trend may arise because green building standards that once were novel concepts have been integrated into the marketplace as core design guidelines. Turner Construction Co.’s latest survey, in 2012, of 700 company executives found that 48% said it was extremely or very likely that their company would seek LEED certification from the U.S. Green Building Council, which is considered by many to be the most pop-
ular — and most difficult to attain — of green building standards evaluated by a third party. That figure is down from 54% in the 2010 survey, and 61% in 2008. “Cost, time and the difficulty of the certification process are the leading reasons for the declining commitment to LEED,” the study reported. Still, LEED certification has value, according to those in the local building industry, and pursuit of it remains strong in Northeast Ohio, they say. “We are seeing an uptick in our clients that are seeking LEED certification for projects we do for them, whether they are new construction projects or retrofitting older buildings to have them upgraded with a more environmentally friendly design,” said Matt Heisey, a principal with Vocon, an architectural and design firm in Cleveland. “What it comes down to is that
ESTATE
“What it comes down to is that green building designs are becoming the standard.” – Matt Heisey principal, Vocon green building designs are becoming the standard, and the cost of doing designs that can be certified under the LEED system are minor cost increases,” Mr. Heisey said. “But the decline in the operating costs for energy consumption, the real impact that a green-designed building can do for the overall environment and the health of the employees who work in such buildings, more than make up for any small higher costs,” he said.
By the numbers It is difficult to find consistent statistics for LEED-certified buildings over time as the standards have changed, and the certification process only started in 1999. As of May 2013, there are approximately 44,000 LEED-certified projects in the United States, with
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another 97,000 LEED-registered projects, according to information from the Northeast Ohio chapter of the U.S. Green Building Council. The local chapter reports that Northeast Ohio has 180 LEED-certified projects, with more than 340 additional Northeast Ohio projects registered as pursuing certification. According to the U.S. Green Building Council, Ohio ranks 11th in the nation with 1,375 commercial buildings that are LEED recognized, accounting for 133 million square feet of space. (The state is No. 1 in the nation for LEED school projects: 549 education building projects — K-12 and higher education — are LEED registered or certified.) Attainment of LEED certification in Ohio has been on the rise. In 2006, less than 1 million square feet of space in Ohio was newly certified as gold or silver LEED design; in 2012, more than 9 million square feet in Ohio was certified to gold or silver standards. Susann Geithner, director of sustainability for HSB Architects and Engineers in Cleveland, said “many companies get the LEED designation and use it as a strategy in their commitment to sustainability and as an advantage to market their company.” “Sustainability in design does impact the bottom line,” Ms. Geithner said. “There are the energy savings, but there is also the employee attitude that helps retain them, and the perception of the company by their customers. The LEED certification is also a designation that the building has all the best of the current green design standards, which will make the structure more valuable in the future.”
Retrofitting is in The portion of the green construction market that is growing steadily is the retrofitting of existing buildings to incorporate green standards into rehab. According to a report from McGraw-Hill, green retrofits will grow to a third of the overall commercial
retrofit market in the next three years — representing up to $18 billion in economic activity. In 2011, green retrofit represented just about 10% of the market. One reason for the growth in the green retrofit market is the tax breaks and government grants that are available. Joe Paterniti, a senior banker with KeyBank specializing in green and sustainable projects lending, said retrofitting an existing structure with more environmentally friendly designs “make the building fiscally stronger from both an operations standpoint and its future value in the sales market.” Mr. Paterniti, vice chairman of the Northeast Ohio chapter of the U.S. Green Building Council, said tax breaks and rebates from energy providers can make the retrofit plans more financially viable. He cited a recent project in which a building owner wanted to redo the lighting in his building at a cost of $46,000 for the upgrade. Under state law, the building owner qualified for a $7,800 rebate from First Energy for reduction in electricity usage that the new lighting would provide. “I think everyone would agree that reducing use of the utilities and to have design standards that encourage local products being used are good goals to have,” Mr. Paterniti said. “But the standards can change, and the number of grants and rebates available can be different in every project, so it is good to meet with architects and construction companies and bankers to find out what options are available.” And while getting a rubber stamp of approval on the project may be an outcome, it may not necessarily be the ultimate goal. “Getting LEED certification may well be a part of that process for many projects,” Mr. Paterniti said. “But on a basic level, going for the LEED standards is a good business investment in most cases, because of the reduction in operating costs over time and ensuring the value of that property in the future.” ■
NE OHIO BUILDINGS RECEIVING LEED STATUS IN 2013 ■ Austen BioInnovation Institute, Akron — New construction, Silver ■ Western Reserve K-12 Campus, Berlin Center — Schools, Gold ■ Medline, Canton — New Construction, Certified ■ Merilee Marshall residence, Chagrin Falls — Homes, Platinum ■ CSU Euclid Avenue housing, Cleveland — New construction, Silver ■ CSU education and human services building, Cleveland — New construction, Gold ■ Howard M. Metzenbaum U.S. Courthouse, Cleveland — Existing buildings, Certified ■ KeyBank district office, Cleveland — Commercial interiors, Silver ■ mbi | k2m, Cleveland — New construction, Certified ■ NASA Glenn warehouse 351, Cleveland — New construction, Gold ■ PNC Fairfax Connection, Cleveland — New construction, Silver ■ Seidman Cancer Center, University Hospitals, Cleveland — New construction, Certified ■ Van Auken Akins Architects, Cleveland — Commercial interiors, Certified ■ YWCA Independence Place, Cleveland — New construction, Silver ■ Marymount Hospital surgical expansion, Garfield Heights — New construction, Gold ■ Geneva Middle School, Geneva — Schools, Silver ■ Platt R. Spencer Elementary, Geneva — Schools, Silver ■ SKF Solution Factory, Highland Heights — Commercial interiors, Gold ■ Maple Heights new elementary, Maple Heights — Schools, Gold ■ Milkovich Middle School, Maple Heights — Schools, Gold ■ NOSC Complex Armed Forces Center, North Canton — New construction, Silver ■ De Nora Tech, Painesville — Commercial interiors, Silver ■ Heritage Landing, Streetsboro — Commercial interiors, Certified ■ Hospice House, Westlake — New Construction, Gold Source: Northeast Ohio chapter of the U.S. Green Building Council
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Builders and homeowners are seeing the light on efficiency FirstEnergy incentive program has paid almost $1.4 million to companies that have constructed Energy Star homes
a lower HERS score,” he said. “This helps us sell houses and is a sales tool to help educate the consumer on why our house is better than the next guy down the street.”
By CHRISSY KADLECK clbfreelancer@crain.com
Matt Berges has specialized in building high-performance homes since 2000. His Cleveland company, Berges LLC, does an average of four projects a year — two new construction and two renovations. He participates in the FirstEnergy program and received the maximum incentive check of $1,800 apiece. (The cap recently was lifted.) “It’s always been frustrating that there is very little incentive for building efficiently. The rebate and incentive is so great for solar and geothermal and the widgets, but there have been so few initiatives to really encourage you to push the envelope on efficiency,” he said. “To finally have some credits that focused on conservation not production that was a thrill. It sort of offsets the upgrade costs for some of the lowhanging-fruit efficiency items.” Mr. Berges said he uses energy modeling to demonstrate the savings on utility bills. “That’s how I sell my customer on this. I tell them, ‘Don’t just do this because I’m obsessed with efficiency, do this because this report shows how your house will perform if we do it to code and this report shows how your house will perform using these specs,’” he said. “Most people, when they see the energy projection, it’s a no brainer to find the sweet spot — the balance of efficiency and affordability.” ■
A
FirstEnergy Corp. incentive program is aiming to save 10,113 megawatt hours by the end of 2015 while illuminating to builders the edge they gain in the marketplace by building energy-efficient homes. Nearly 2,100 homes have been built and have qualified for incentives through the Akron-based utility’s Ohio Energy Efficient New Homes program since its inception at the end of 2011. That figure translates to almost $1.4 million paid in incentives to the builders who constructed Energy Star homes built in the areas served by its three companies — Toledo Edison, Ohio Edison and The Illuminating Co., said Chris Eck, spokesman for FirstEnergy, which has 1.8 million residential customers in the Buckeye State. “The idea behind the program is that builders can build homes that are Energy Star compliant, and those homes will be more efficient than homes that are just built to code,” said Mr. Eck, adding that the homes in the program have to be at least 15% more efficient than homes built to code. “And they will be more efficient for the homeowners who will enjoy the efficiencies built into their home for many years into the future.” Energy Star is a governmentbacked program established in 1992 by the U.S. Environmental Protection Agency to help businesses and individuals save money and protect the environment through the adoption of energy-efficient products, practices and services. Think effective insulation, a tightly sealed thermal home envelope, highly efficient heating and cooling equipment, controlled ventilation, windows with advanced technologies and protective coatings, high-value insulation systems for floors, walls and attics, as well as Energy Star appliances, fixtures and lighting. National studies show with statistical significance that not only do buyers want an energy-efficient, Energy Star-certified home, they are willing to pay for it. One study from the National Association of Home Builders revealed that buyers will part with $7,000 or more up front for a home that saves them $1,000 a year on energy costs, said Rob Shearer, who coordinates the FirstEnergy program through Performance Systems Development of Ithaca, N.Y. “That’s a savings of $83 a month, and that is not hard to achieve,” he said. “And these energy efficiencies built into the home definitely add to a home’s resale value. When you buy an Energy Star home today, you’re literally buying the home of the future.”
Selling stars That same 2012 National Association of Home Builders’ study revealed that 26% of buyers want an
“What happens when a builder doesn’t build Energy Star is they are effectively shutting themselves out of a quarter of the market, which is probably not a good strategy.” – Rob Shearer coordinator of FirstEnergy’s Ohio Energy Efficient New Homes program Energy Star home. And a study from the North Carolina Energy Efficiency Alliance showed that Energy Star homes not only fetch high prices, they sell 89 days faster than homes built to code in the Raleigh-Durham area. “Homebuyers want that sticker, they want that certification,” Mr. Shearer said. “What happens when a builder doesn’t build Energy Star is they are effectively shutting themselves out of a quarter of the market, which is probably not a good strategy.” Mandated in 2008 by Ohio Senate Bill 221, this FirstEnergy program targeted to builders is one of many offered by the utility to reduce usage and peak demand for electricity, Mr. Eck said. “Since January 2013, 2,072 MWh (megawatt hours) have been saved, so it’s basically on track to reach its goal, with roughly 3,300 MWh per year saved,” he said. The incentive for builders averages $657 per home, which includes a $400 base per home plus an additional incentive at 10 cents per kilowatt hour saved annually. Parkview Homes is one of the 72 participating builders in the program. The family-run business committed four years ago to build exclusively energy-efficient homes as a way to differentiate itself in the marketplace, said Roger Puzzitiello, company president. “The house that we are building now is so much more energy efficient,” said Mr. Puzzitiello, whose company is on pace to sell 60 homes this year, up from 45 in 2012. “We were one of the first builders in the area to be an Energy Star builder and now we see more and more builders doing it.” The program is free and provides builders with educational seminars, support and marketing materials. Each home receives a score based on the Home Energy Rating System (HERS) Index — a national system for measuring a home’s energy performance. “The typical home has a rating of 130 on energy efficiency. The typical new home is 110, and we’re building at an average of 58,” said Ryan Puzzitiello, vice president of sales and marketing for Parkview Homes. “The HERS score is now like comparing gas consumption and MPG (miles per gallon). You’re getting more bang for your buck with
SAME PAYMENT, $11,825 MORE HOME ENERGY STAR PRINCIPAL, INTEREST AND ENERGY = $1,396
The sweet spot
Loan amount: $239,990; Estimated monthly payments: principal and interest, $1,216; electric, $126; heating, $53
BUILT TO CODE PRINCIPAL, INTEREST AND ENERGY = $1,396
Loan amount: $228,165; Estimated monthly payments: principal and interest, $1,156; electric, $162; heating, $78
Note: All calculations are for a 30-year fixed mortgage with a 4.50% APR; Source: Performance Systems Development.
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CRAIN’S CLEVELAND BUSINESS
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SEPTEMBER 23 - 29, 2013
LARGEST SUMMIT COUNTY EMPLOYERS RANKED BY FULL-TIME EQUIVALENT LOCAL EMPLOYEES
Rank
Company Address Phone/Web site
FTE employees Summit County June 30, 2013
Total number of employees in Ohio
Top local executive Title
Type of business
1
Summa Health System 525 E. Market St., Akron 44304 (330) 375-3000/www.summahealth.org
6,051
6,642
Integrated health care delivery system encompassing eight hospitals, multiple foundations and a health plan
Thomas J. Strauss president, CEO
2
Akron General Health System 400 Wabash Ave., Akron 44307 (330) 344-6000/www.akrongeneral.org
3,704
3,803
Integrated health care delivery system
Dr. Thomas (Tim) L. Stover president, CEO
3
Summit County 175 S. Main St., Akron 44308 (330) 643-2500/www.co.summit.oh.us
3,312
3,312
County government
Russell M. Pry county executive
4
Akron Public Schools 70 N. Broadway, Akron 44308 (330) 761-1661/www.akronschools.com
3,137
3,137
Public school district
David W. James superintendent
5
Goodyear Tire & Rubber Co. 200 Innovation Way, Akron 44316 (330) 796-2121/www.goodyear.com
3,000
NA
Tire manufacturer
Richard J. Kramer chairman, president, CEO
6
University of Akron 302 Buchtel Common, Akron 44325 (330) 972-7111/www.uakron.edu
2,536
2,622
Higher education
Luis M. Proenza president
7
FirstEnergy Corp. 76 S. Main St., Akron 44308 (800) 736-3402/www.firstenergycorp.com
2,458
7,369
Electric utility holding company
Anthony J. Alexander president, CEO
8
Akron Children's Hospital One Perkins Square, Akron 44308 (330) 543-1000/www.akronchildrens.org
1,985
3,757
Pediatric health system
William H. Considine president, CEO
9
Babcock & Wilcox Co. 20 S. Van Buren Ave. and 91 Stirling Ave., Barberton 44203 (330) 753-4511/www.babcock.com
1,900
2,600
Engineering, manufacturing and construction services for nuclear, renewable, fossil power and industrial customers
J. Randall Data, president, COO, Babcock & Wilcox Power Generation Group Inc.
10
Diebold Inc. 5995 Mayfair Road, North Canton 44720 (330) 490-4000/www.diebold.com
1,696
2,041
A global leader in providing innovative self-service technology, security systems and related services
Andy W. Mattes president, CEO
11
City of Akron 166 S. High St., Akron 44308 (330) 375-2330/www.akronohio.gov
1,694
1,730
Municipal government
Donald L. Plusquellic mayor
12
Giant Eagle Inc. 5300 Richmond Road, Bedford Heights 44146 (216) 292-7000/www.gianteagle.com
1,530
12,300
Food, fuel and pharmacy retailer
Bill Artman senior vice president, retail operations
13
State of Ohio 30 E. Broad St., Columbus 43215 (614) 466-2000/www.ohio.gov
1,319
48,342
State government
John R. Kasich governor
14
Allstate Insurance Co. 75 Executive Parkway, Hudson 44237 (330) 656-6000/www.allstate.com
1,280
1,535
Financial services and insurance
Rob Hair director
15
Fred W. Albrecht Grocery Co. 2700 Gilchrist Road, Akron 44305 (330) 733-2263/www.acmestores.com
1,232
1,541
Retail grocery and pharmacy stores
Steve Albrecht president
16
Bridgestone Americas Inc. 10 E. Firestone Blvd, Akron 44317 (330) 379-7000/www.bridgestoneamericas.com
1,206
2,284
Tire manufacturer
Hank Hara, chief technology officer, Bridgestone Americas Tire Operations
17
Jo-Ann Stores Inc. 5555 Darrow Road, Hudson 44236 (330) 656-2600/www.joann.com
1,192
1,439
Fabric and craft retailer
Travis Smith CEO, president
18
U.S. Postal Service 2200 Orange Ave., Cleveland 44101 (800) 275-8777/www.usps.com
1,020
11,300
U.S. postal service
Melvin J. Anderson acting district manager, Northern Ohio District
19
Group Management Services Inc. 3296 Columbia Road, Suite 101, Richfield 44286 (330) 659-0100/www.groupmgmt.com
860
NA
Professional employer organization
Michael Kahoe president
20
Newell Rubbermaid 3200 Gilchrist Road, Mogadore 44260 (330) 784-7141/www.newellrubbermaid.com
800
1,200
21
Lockheed Martin Corp. 1210 Massillon Road, Akron 44315 (330) 796-2800/www.lockheedmartin.com
700
700
22
U.S. Office of Personnel Management 1900 E St., NW, Washington 20415 (202) 606-1800/www.opm.gov
659
50,061
23
County of Summit Development Disabilities Board 89 E. Howe Road, Tallmadge 44278 (330) 634-8000/www.summitdd.org
570
24
Hudson City School District 2400 Hudson-Aurora Road, Hudson 44236 (330) 653-1200/www.hudson.edu
25
JB Broadous Global marketer of consumer and commercial products director, Ohio operations Flight simulators, weapon systems, laser and sensor systems, tethered aerostats, high-altitude airship, precision machining
Colleen Arthur, general manager, Akron; director, Integrated Defense Technologies market segment
Federal government
C. Frank Figliuzzi, chair, Cleveland Federal Executive Board
570
Provides services to individuals with disabilities and their families in Summit County
Thomas L. Armstrong superintendent
569
569
Public school district
Phillip T. Herman superintendent
Time Warner Cable 530 S. Main St., Suite 1751, Akron 44311 (330) 572-4020/www.timewarnercable.com
567
2,013
Provider of video, high-speed data and voice services in the United States
John H. Higgins Jr. area vice president of operations
26
Dominion East Ohio 1201 E. 55th St., Cleveland 44103 (800) 362-7557/www.dom.com
560
1,567
Natural gas distribution
Scott C. Miller vice president, general manager
27
Rockwell Automation Inc. 1 Allen-Bradley Drive, Mayfield Heights 44124 (440) 646-5000/www.rockwellautomation.com
435
2,009
Global provider of industrial automation control and information solutions
Frank Kulaszewicz senior vice president, architecture and software
28
Alcoa 1600 Harvard Ave., Cleveland 44105 (216) 641-3600/www.alcoa.com
400
1,203
Aluminum forgings for aerospace, automotive and commercial transportation markets
Eric Roegner, COO, Alcoa Investment Castings, Forgings and Extrusions; president, Alcoa Defense; Tim Myers, president, Alcoa Wheel and Transportation Products
29
Oriana House Inc. P.O. Box 1501, Akron 44309-1501 (330) 535-8116/www.orianahouse.org
380
562
Nonprofit ageny providing community corrections, chemical dependency treatment, and re-entry services
James J. Lawrence president, CEO
30
UPS 4300 E. 68th St., Cleveland 44105 (216) 641-3027/www.ups.com
375
9,926
Parcel delivery
Dwayne Meeks president, UPS Great Lakes District
Source: FirstMerit and Sterling Jewelers did not respond. Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com.
RESEARCHED BY Deborah W. Hillyer
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SEPTEMBER 23 - 29, 2013
CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
17
Ohio City: New businesses have helped create housing demand continued from PAGE 1
“We wanted a lifestyle with more freedom, a home that’s easier to take care of, and what attracted us to the city was that we did not want to be in cars all the time.” The Roberts family is not alone at that price point in the neighborhood near downtown that’s home to the West Side Market and the West 25th Street entertainment district. They are part of a re-emergence after the housing collapse of pricey urban living — a revival that is easy to overlook given the city’s foreclosure problems and housing abandonment issues. Roger Scheve, an agent at Re/Max Beyond 2000 in Middleburg Heights who works from his Ohio City home in a practice serving the city and suburbs, shared a statistic from the Multiple Listings Service that’s jaw-dropping to many longtime Clevelanders. “On average, more than once every two weeks, there is a buyer paying more than $200,000 for a home or condo in Ohio City, and it has picked up recently,” Mr. Scheve said. “The number of $200,000 sales has increased 50% over the last three years.” A study put together by Mr. Scheve shows 91 homes in Ohio City sold over the last three years for prices ranging from $200,000 to $580,000. Mrs. Roberts said she and her husband don’t fit the profile most analysts use to describe hipster neighborhoods — dominated by young professionals with a taste for urban life and distaste for commuting. Both are 58. But she said one thing that excited Mr. Roberts about the neighborhood was that he could bike to his office at Empire Valuation Consultants LLC, a business valuation firm in downtown’s Theater District, and could walk to Browns and Indians games. She likes walking to the supermarket and the entertainment district. The house search surprised her in one respect. “It was a very tight market,” Mrs. Roberts said. “I’d find something online and call our Realtor and find it had three offers.” The couple sold their home in Shaker in 60 days. She believes the Carroll Avenue house, on the market since February, was waiting for them.
Beer and burgers? Yes! For decades, the rap on Ohio City’s resurgence was that people would pour sweat and money into older homes and would have a hard time selling and getting their money out of them — a situation that became common across much of the country during the housing downturn. Tom Bier, a senior analyst at Cleveland State University’s Maxine Goodman Levin College of Urban Affairs and a longtime observer of the local housing scene, described the change in Ohio City in a word: “Enormous.” Tom McNair, director of economic and community development at the Ohio City Inc. economic development nonprofit, also appreciates the switch. “It’s great to see people getting their money out of their properties,” Mr. McNair said, calling it the culmination of years of effort to rebuild the neighborhood. He also calls attention to another key trend — buy-
ers snapping up properties that have not been remodeled and investing heavily in them. Ironically, Ohio City Inc.’s efforts the last three years have focused on the neighborhood’s commercial district near the West Side Market, in part due to the beloved institution’s 100th anniversary last year, and also the severity of the housing downturn. “We were able to fill a lot of shops,” Mr. McNair said. “We’ve taken (storefront) vacancy to 3% from 30% since 2009. The 53 businesses that have opened up in Ohio City have created a lot of demand for Ohio City living. I wish we could say we planned it that way, but we’re not surprised.” Mrs. Roberts said she has had no buyer’s remorse. Instead, she recalls a pleasant surprise that occurred the day she and her husband unpacked their grand piano that the movers had left at 11 p.m. They were tired and hungry, and wanted something to eat. “We walked to (West) 25th for beer and burgers,” she said. “It was great! I swore we would support local restaurants once a week. We’ve been out a lot more than that.”
MARC GOLUB
A ‘changed view of proximity’
This home on Whitman Avenue in Ohio City recently sold for $330,000.
Residential brokers active in the city say Ohio City has had a strong year, though they add that other walkable city neighborhoods, from Little Italy and University Circle on the East Side to Tremont and Detroit Shoreway on the west, have had good results this year as well. Scott Phillips Jr., an agent and president of the New Homes Group at the downtown Cleveland Keller Williams office, chalks up some of the renewed housing demand in those neighborhoods to what he called “a changed view of proximity.” “People are buying in the city because it does not take that long to get anywhere,” Mr. Phillips said. “You don’t need the car as much. In terms of new homes, I can sell you anything you want in the suburbs. Now at West 57th and Bridge, I have nothing for you.” Mr. Phillips noted his team, which handles newly built Battery Park condo listings in the Detroit Shoreway neighborhood, had seven resales there this year, generally for 5% or more than the sellers originally paid in the period from 2007 to 2009. A Crain’s analysis of Cuyahoga County home sales shows a house at 2619 Vestry Ave. in Ohio City that sold earlier this year for $335,000 ranks 710th highest of 2,000 residential sales through August. However, among Cleveland sales, 24 of the 100 highest sales prices were Ohio City addresses. By contrast, the sales volume and prices in 2007 in Ohio City were dominated by areas with more new single-family home building, including Detroit Shoreway, Tremont and the lakefront Edgewater area. Mr. Scheve of Re/Max Beyond 2000 said he constantly fields calls from prospective landlords who want to buy a move-in ready rental property for $20,000 to cash in on Ohio City’s hard-won popularity. “I tell them that they’ll find it in the Clark-Denison area, not Ohio City,” Mr. Scheve said.
remain. Mrs. Roberts cites friends worried about safety, but she says it’s a matter of using street smarts and staying in busy, well-lit areas. Eric Wobser, executive director of Ohio City Inc., said the nonprofit’s goal is to keep multifamily development on the neighborhood’s commercial streets in order to retain the integrity of the single-family neighborhood, which suffered less from foreclosure woes than others. The nonprofit had to work hard
Building on a ‘positive vibe’ In urban areas, some problems
to help secure a loan for two residents to build a 3,000-square-foot home on Clinton Avenue. Buyers also tolerate the heterogeneous nature of area values, with a $300,000 home next to a $20,000 one. The sales are supporting the case for construction. David Sharkey, president of Progressive Urban Real Estate, said the company’s Civic Builders affiliate is erecting a pre-sold home on West 45th Street. It is diagonally across from a
boarded-up home, although the street is most notable for multiple gorgeously painted Victorian houses. Mr. Sharkey attributes the momentum in Ohio City to West 25th’s commercial rebound and the popularity of the neighborhood among people who want to live near, but not actually in, downtown. Big-ticket downtown commercial projects are helping, too. “There’s a positive vibe in the city like none I’ve seen,” he said. ■
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
MMPI: Major players exit continued from PAGE 1
MMPI developed and now manages the 750,000-square-foot convention center under the downtown Mall and the four-story Global Center for Health Innovation at the corner of Ontario Street and St. Clair Avenue, described by an MMPI executive as the “Epcot of health care.” Mr. FitzGerald said no successor to MMPI has been chosen, but that a deal with a new manager is likely by mid-November. And he said he expects the deal would be financially advantageous for county taxpayers, who are bound by contract to subsidize the operation of the $465 million property. A spokesman for Chicago-based MMPI said the company is looking for an experienced convention center manager. The county must approve of any change in operator. Mr. FitzGerald was careful to make it clear that MMPI has not failed to meet any contractual benchmarks, which include bringing 45 shows to the exhibition hall and generating 58,500 hotel room nights in the first two years of operation. But the contract also gives the county the right to approve a successor, and Mr. FitzGerald said he believes a revised agreement with a new manager will enable the county to reduce the agreed-upon annual subsidy to the convention center operator. All of this also is a prelude to naming an operator for a hotel that will rise adjacent to the convention center on the site of the current county administration building. That decision is expected soon.
Sweet courtship The road to the unraveling of this relationship, which once was so
Contact: Phone: Fax: E-mail:
other startup expenses of the new convention center and medical mart. Besides covering most of those building costs, the county also agreed to pay MMPI an annual operating subsidy of at least $6 million, because convention centers usually are loss leaders for a community’s tourism trade.
tight, is a long one. The county and MMPI, then called Merchandise Mart Properties Inc., came together because, more than a decade ago, the city of Cleveland was unable to generate any enthusiasm, or a revenue stream, for a new convention center to replace its aging facility under the Mall. Then, in 2005, Cleveland Clinic CEO Toby Cosgrove resurrected the idea of a medical mart, a central place for hospitals to visit their suppliers. The idea had been kicked around by several cities, including Cleveland, at times over the previous two decades. Tim Hagan, then a county commissioner, was quickly onboard. He believed a medical mart would make it easier to attract to Cleveland medical and health care meetings and conventions, the fastest-growing segment of the convention business, and make a new convention center more attractive to taxpayers. Mr. Hagan brought a longtime friend from Chicago, Christopher Kennedy, president of Merchandise Mart Properties, into the conversations. MMPI was the owner of Chicago’s Merchandise Mart and other giant showrooms, many where furniture and design firms display their wares. Indeed, companies that sold furniture for hospital and doctors’ office waiting rooms already had sales outlets in the Merchandise Mart. Soon, MMPI was interested in partnering with the county. It didn’t hurt that the company knew the project would come with a substantial dowry. County commissioners in 2007 raised the county sales tax to 7.75% from 7.5% to support a bond issue to cover construction costs and
Denise Donaldson (216) 522-1383 (216) 694-4264 DDonaldson@crain.com
Love on the rocks As time passed, however, the two partners found living together wasn’t going to be as easy as it first appeared. As in any complex business union, the close contact between Cleveland and Chicago produced chafing that began early on. Downtown interests were dismayed when the company said it would prefer that the complex be located near Cleveland Clinic and University Hospitals Case Medical Center, though it quickly caved. “Having a downtown Cleveland location is better than having no Cleveland location,” Mark Falanga, an MMPI senior vice president, grumbled to Crain’s in 2008. The company then angered many Cleveland traditionalists in 2009 when it proposed putting the medical mart at the north end of the Mall, which would have shattered the original mall plan of urban designer Daniel Burnham and blocked the view of the lakefront. A year later, MMPI missed budget and design deadlines that pushed groundbreaking into 2011. The delay created anxiety locally because developers in Nashville and New York City were considering building competing medical marts and it looked like they might be moving ahead faster than Cleveland. Projects in both those cities eventually would collapse. Marketing of the medical mart did not go smoothly, either. It turned out hospitals did much of their purchasing through buying
groups and were not enthusiastic about changing their ways and coming to Cleveland to do their shopping. In 2011, the plan was revised to make the building a center for medical and health care education. That concept didn’t gain traction, so last year, James Bennett, a Clevelander and a management consultant with experience in working with health care companies, was hired by MMPI to lead the Cleveland operation. Mr. Bennett recast the building into a place where medical technology companies collaboratively could showcase leading-edge health care technology and information systems, with exhibits such as “the operating room of the future.”
Changing wants, needs However, it also became clear over time to the county that filling the convention center would be vastly more important from a revenue standpoint than leasing space in the medical mart. MMPI had no experience managing convention centers, though it was confident it could hire the necessary talent. Still, even if it did, MMPI faced a significant challenge. Its single convention center in Cleveland is a small fish in a big pond. Convention center marketing is dominated by large convention management firms that can pitch meeting planners on slots in convention centers across the country with one sales call. The biggest convention operators are SMG Worldwide of West Conshohocken, Pa., and Global Spectrum of Philadelphia. SMG manages 74 convention centers, including the Greater Columbus Convention Center, McCormick Place in Chicago and Moscone Convention Center in San Francisco. Global Spectrum controls more than 30 convention centers, including Duke
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Energy Center in Cincinnati and the Miami Beach Convention Center. It also operates the Wolstein Arena at Cleveland State University.
Family ties severed It also hasn’t helped the relationship that the men who led MMPI and Cuyahoga County to the altar are gone, and with them the emotional ties that bound the partners together. When Cuyahoga County and MMPI began their courtship in 2005, principals of both organizations — you could call them the matchmakers for their respective professional families — were old personal friends. Chris Kennedy was the son of the late Sen. Robert F. Kennedy and the grandson of Joseph Kennedy, who bought the Chicago Merchandise Mart in 1945. Though the Kennedy family sold the business to Vornado Realty Trust in 1998, Chris Kennedy stayed on as an executive. MMPI was enticed to Cleveland by Mr. Hagan, a longtime friend of the political Kennedy clan and godfather to Chris Kennedy’s sister Kathleen. Both are gone. Mr. Hagan left office when the new county charter government was inaugurated in January 2011. Six months later, Mr. Kennedy left MMPI. Since his departure, Vornado has sold at least a half-dozen furniture and design centers around the country and has told securities analysts it intends to unload the entire showroom operation, including the keystone Merchandise Mart. At this stage, neither Mr. FitzGerald, who was mayor of Lakewood when the former county commissioners did the deal, nor the leaders of Vornado have the same emotional investment as Mr. Kennedy and Mr. Hagan to make the marriage work. Divorce was the obvious solution. ■
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COMMERCIAL SPACE 1 Story Office Building 28,300 sq. ft. Furnished, deck 19’9” near airport, I-480 & I-71. Available immediately.
216-469-6170 RECEIVER DIRECTS SALE 4 Warehouse/Flex Buildings Stark & Summit Counties 4,300 – 17,000 SF Individually or as package
Ag Real Estate Group, Inc., 216-504-5000 www.agrealestategroup.com
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216.595.9828 Adam x105 or Steve x114
REAL ESTATE SERVICES The Fort Myers, Florida real estate market is heating up! Contact this former Clevelander for free info! Jeff Hathy, Agent
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List your Auction, Industrial, Commercial, Luxury Property or Retail Space Here! Crain’s Cleveland Business’ classifieds will help you fill that space.
Contact Denise Donaldson at 216.522-1383
CLASSIFIED BUSINESS OPPORTUNITY OPPORTUNITY A wine and liquor importer with a gold-medal product looking for partners and marketing specialist. Send inquiry to ferro55@aol.com
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FOR SALE CNC Machines (Used) Mori Seiki MH40 Horiz 2-pallet Fanuc Cinci Sabre Horiz 702D-A01-89-0171 Acamatic 850 Mazak H500-50 6-pallet Horiz Mazatrol M32, 80 Tools (5) White Horiz Storage System AC L/P pneumatic 5000-lb 3200
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SEPTEMBER 23 - 29, 2013
CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
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THEINSIDER
THEWEEK SEPTEMBER 16 - 22 The big story: The Cleveland Clinic, Northeast Ohio’s largest employer, is in the process of cutting $330 million from its budget for next year — a move that could result in an unspecified number of employee layoffs and thousands of early retirements. As part of the cost-cutting measure, the Clinic, which posted about $6 billion in operating revenue last year, said it will offer early retirement plans to 3,000 eligible employees. The Clinic also is placing a stricter review on filling vacant positions and reducing its operating costs. This is unconventional: The Cleveland Convention Center and the Global Center for Health Innovation are not yet fully open, but Cuyahoga County and MMPI Inc. already are looking for an experienced convention center manager for the complex. County Executive Ed FitzGerald said no successor to MMPI as convention center operator has been chosen yet. “Our biggest concern is to make sure we sign off on the operator who is the best in the country,” he said. See analysis, Page One. Shopping spree: Malls in North Olmsted and Canton were among seven properties that Westfield Group agreed to sell to affiliates of Bostonbased Starwood Capital Group for $1.64 billion. After the deal is done, Belden Village in Canton and Great Northern in North Olmsted will join SouthPark in Strongsville as Starwood Capital Group assets. Starwood bought the Strongsville mall last year. Belden Village has 826,140 square feet of selling space and Great Northern almost 1.2 million square feet.
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
There’s value in those parking spaces ■ To launch the $65 million makeover of the former East Ohio Building at 1717 East Ninth St. in downtown Cleveland as apartments, developer K&D Group paid $7.9 million for the complex on Sept. 11, according to Cuyahoga County land records. Why so much for a long-empty office building, even with 21 floors? Doug Price, CEO of K&D Group, said the value came from the busy, 500-car parking garage that came with the building. The county assigns a $6 million market value to the garage for tax purposes. Seller Sovereign Partners Ltd. of New York City paid $12 million for the complex in 2006, when the office building still had some tenants. — Stan Bullard
■ As it nears its third year in business, boutique trial and litigation firm Kaufman & Co. is branching out to New York City. On Oct. 1, the firm will open an office in midtown Manhattan at 733 3rd Ave. Eugene R. Scheiman, most recently a partner with the Arent Fox law firm, has joined Kaufman & Co. and will lead the office. Kaufman & Co., based in Cleveland’s North Point Tower, opened in January 2011. Its local office employs eight lawyers and five staff members. The firm is interviewing to hire an associate
WHAT’S NEW
BEST OF THE BLOGS
Ready to take a bite out of the Big Apple
Excerpts from recent blog entries on CrainsCleveland.com.
Development vehicles
Agents of Shield: The Cleveland Clinic is
Keep trying: Sherwin-Williams Co. completed the acquisition of the U.S. and Canadian business of Mexican paintmaker Consorcio Comex. Cleveland-based Sherwin-Williams will pay $90 million in cash and assume liabilities currently valued at around $75 million. The companies said they remain “fully committed to securing regulatory approval” to complete the acquisition of the Comex operations in Mexico. A Mexican commission in July voted 3-2 against authorizing the acquisition. A bumper Crop: Crop Bistro chef Steve Schimoler and developers of the Flats East Bank Neighborhood plan to plant two new Crop concepts with views of the Cuyahoga River and large riverfront patios in the project’s next phase. Mr. Schimoler plans to open Crop Kitchen & Vine and Cropicana in spring 2015 in 10,000 square feet in the proposed second phase of Flats East Bank.
Lending at Lorain National goes to the dogs — sort of ■ Confident that niche lending is one way to grow revenue, Lorain National Bank has hired a trio of bankers who do targeted lending to veterinarians, funeral homes, general medical professionals and dentists. The team will make Small Business Administration loans, a type that affords Lorain National the option to sell governmentguaranteed portions of the loans on the secondary market to generate more revenue, said Daniel E. Klimas, president and CEO of Lorain National. “As banks have become healthier, the challenge for banks is growing revenue,” he said. Jim Baemel joined the Lorain-based institution as its senior vice president of small business lending in late July. He will continue to work from Columbus, as he did for Park View Federal Savings Bank of Solon. Spencer Twyford also will work for Lorain National out of Columbus, and Chris Jackson will stay in Lexington, Ky. Both men previously worked for Huntington Bank in their
Howdy, neighbor: Omnova Solutions Inc. made it official by announcing it plans to move from Fairlawn to a new corporate headquarters at Chagrin Highlands in Beachwood. The specialty chemicals producer plans to buy 8.5 acres on Harvard Road in Chagrin Highlands, a development of the Richard E. Jacobs Group. It intends to construct a two-story, 57,000-square-foot building and to move to the new building by late 2014. The site is near Eaton Center, the new U.S. campus of Eaton Corp. working to turn its breast cancer vaccine into a commercial product. The hospital system has spun off a company, Shield Biotech, tasked with proving that the vaccine works in humans. The new company raised an undisclosed amount of investment capital from external sources, as well as a smaller amount from the Clinic. The cash will allow Shield Biotech to take the vaccine through animal testing and two Phase I clinical trials.
for the New York office. Steven Kaufman, the firm’s managing member, also expects to hire a paralegal within the first month. Once Mr. Kaufman is admitted to the New York State Bar, he will split his time between the offices. “We have existing clients that have indicated to us that they will turn to us if we have a presence in New York,” Mr. Kaufman said. — Michelle Park Lazette
COMPANY: Eye Lighting International, Mentor PRODUCT: 600W Blue Metal Halide grow lamp The new lamp comes from Eye Hortilux, a division of Eye Lighting, which makes lamps, luminaires, controls and related lighting products. Eye says the high-intensity discharge lamp is designed to be used as a light source for indoor gardening. The 600-watt lamp “provides a spectral distribution that closely mimics natural sunlight, according to Eye. The company says indoor gardens “are more productive with better quality spectrum coming from the lamp.” Its Blue lamp family now provides 250-, 400-, 600- and 1,000-watt options and can be used as a stand-alone light source, according to the company. The new lamp “provides indoor growers with a powerful spectrum that is needed for situations that require medium light intensities,” said Mike Anderson, director of specialty products. “Now all indoor gardeners regardless of their preferred wattage can benefit from the spectral quality provided by the Blue grow lamp family.”
■ Bus rapid transit, such as the RTA HealthLine in Cleveland, “can not only spur development, but can do so far more efficiently than light rail and streetcars,” according to a Forbes.com story on a study from the Institute for Transportation and Development Policy. “Both BRT and LRT can leverage many times more development investment than they cost. Now we can say that for sure,” said institute director, Annie Weinstock. “Per dollar of transit investment, and under similar conditions, BRT can leverage more (development) investment than LRT or streetcars.” For example, the story said, the HealthLine “has generated $5.8 billion in development — $114 for each transit dollar invested.” By contrast, Portland’s Blue Line, a light rail project completed in 1986, generated $3.74 per dollar invested. BRT’s efficiency “makes sense — bus rapid transit lines are generally cheaper to develop than rail lines (though some transportation experts balk at the comparison) — but the difference has never before been documented,” according to Forbes.com.
Got your goat ■ Cleveland writer Rebecca Meiser placed her first story into The Wall Street Journal, and it was a fun piece about websites and apps that allow users to confess their sins anonymously. One of the major efforts in this space is eScapegoat, launched as the Jewish season of repentance began. “Users anonymously upload their 120character confessions onto a cartoon goat via text or email,” Ms. Meiser wrote. “When
respective locations. The fields are a fit for SBA lending because their lack of collateral makes it “hard to bank them” traditionally, Mr. Klimas said. The team closed its first loan to a funeral home in Indiana last week. — Michelle Park Lazette
Weatherhead designs an innovation/design department ■ Case Western Reserve University’s Weatherhead School of Management has launched a department its leaders suggest will inspire students to go beyond “best practices” and work creatively to solve problems. Weatherhead’s new Department of Innovation and Design incorporates faculty from the former marketing and policy studies and information systems departments. Weatherhead says it is the first business school in the world to craft such a department. “We’re seeing change in the organizations around us, and employers are looking for people who can cross disciplines and aren’t narrowly focused,” said Richard Buchanan, chairman of the new department. “There are a lot of other schools watching what we’re doing,” he added. Among other things, students will learn how to transform technological ideas from the university’s medical and engineering programs into new products, how to build strategic plans for organizations based on consumer research, and how to improve customer experience. “This is a department that is now oriented to innovation, studying it and creating it,” Dr. Buchanan said. — Timothy Magaw
confessors press submit, they are greeted with the image of the googly-eyed goat being pushed off a cliff by a priest — the way that early third-century rabbis describe the scapegoat’s banishment.” She wrote that the site already has more than 15,000 users who “have admitted to things as trivial as ‘I wear headphones (not attached to anything) to avoid conversations’ and as serious as ‘I literally hide from my mother-in-law who lives with us, so I don’t have to be compassionate and supportive.’” Some rabbis like the app, “since they say it makes Judaism accessible,” according to Ms. Meiser. “Read more confessions on Twitter @sinfulgoat.”
In the money ■ Hey Monea!, a rock band from Canton, is one of the beneficiaries of a move by big brands to get into the music business. The band is one of the latest signees to Hard Rock Records. “A little more than a year ago, the worldwide hotel and restaurant chain, with an obvious and longstanding association to music, announced they would be undertaking a new venture — all in the name of marketing — and joined an ever-expanding list of brands that have launched private record labels in support of the music community,” Forbes.com reported. From Red Bull Records to Mountain Dew’s Green Label Sound, “it has become an increasingly popular method of raising awareness around a brand or product, and an attempt at adding a certain ‘cool factor’ to a brand’s profile,” the website noted. The deal is working for Hey Monea!, which has an album due out this month.
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BMW Cleveland
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