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$1.50/DECEMBER 6 - 12, 2010
Vol. 31, No. 48
Area public stocks outpace S&P Index shows NE Ohio companies by far outperform broader market HOW THE INDEX WORKS Bloomberg tracks the stock prices of 49 local public companies, known as the Northeastern Ohio Index. It weighs the stocks according to price, so higher-priced companies carry more weight. For instance, Lubrizol Corp. makes up 7.06% of the index, with Motors Liquidation Co. at 0.01%.
INSIDE: Charting monthly prices of the Northeastern Ohio Index against the S&P 500 Index. Page 22
By DAN SHINGLER dshingler@crain.com
Past results have no bearing on future performance, as investment firms say. But if you had invested in Northeast Ohio’s public companies since U.S. stocks hit their low in spring 2009, you’d be well ahead of the broader markets. Since they fell to their nadir in March of last year, the stocks of the region’s public companies in the aggregate have outperformed the
markets as a whole, and by plenty, according to Lakefront Capital Partners, a Cleveland-based investment management firm that tracks the stocks of area companies. Lakefront follows something called the Northeastern Ohio Index, a group of 49 companies that Bloomberg tracks via an index that allows local companies to be compared to the S&P 500 index. If you’d invested in those Cleveland-area companies on March 9, 2009, the day the local index hit its
recessionary low point — and in the same week the S&P 500 did the same — your portfolio would have been up by 172.5% as of last Tuesday, Nov. 30. That jump compares to a gain of only 74.5% for the S&P 500 during the same period, said Lakefront senior vice president and portfolio manager Brent Luce. Mr. Luce noted that some of the biggest companies in the region helped boost the index’s return. “The index is price-weighted, so higher-priced stocks do have more influence over the index performance,” See STOCKS Page 22
GCP favors new HQ in Theater District
Commercial real estate appears to hit bottom Office, industrial downsizing leads to more vacancies By STAN BULLARD sbullard@crain.com
Uncle Sam may have declared the Great Recession over, but the economic reckoning the downturn spurred battered Northeast Ohio’s commercial real estate markets again this year. That’s the picture afforded by Grubb &
Ellis Co.’s forecast of Northeast Ohio’s office and industrial markets at year-end. Vacancies produced by PNC Bank emptying a total of 374,000 square feet of office space at multiple rental buildings throughout downtown Cleveland and the region’s suburbs, plus other downsizings, will push regional office vacancies to 22% at the end of this year from
Move necessary with temp casino on deck By JAY MILLER jmiller@crain.com
See BOTTOM Page 8
TOTAL INDUSTRIAL VACANCIES 2010 estimate
Year-end 2009
12.4%
11.2% MARC GOLUB
PNC Bank has brought many far-flung workers into its downtown PNC Center, at the expense of other bank properties.
DOWNTOWN OFFICE VACANCIES 2010 estimate
Year-end 2009
Year-end 2008
22.2%
21.1%
19.8%
SUBURBAN OFFICE VACANCIES MARC GOLUB
The closing of Chrysler’s Twinsburg Stamping plant has hurt the industrial real estate market.
48
ALSO INSIDE: Ferro Corp. eyes move from downtown to suburbs. Page 3
2010 estimate
Year-end 2009
Year-end 2008
21.8%
20.5%
18.8%
■ Two container companies expand in Glenwillow. Page 7
SPECIAL SECTION NEWSPAPER
6
71486 01032 0
STAN BULLARD
The LS Brand Building, which the Greater Cleveland Partnership is eyeing for its new headquarters.
LEGAL AFFAIRS Area attorneys say requests for social media policies rise with employee usage ■ Page 15 PLUS: LOCAL FIRMS GROWING ■ PATENT REFORM ■ & MORE
The Greater Cleveland Partnership has zeroed in on a new headquarters site for the city’s chamber of commerce group. It’s in the PlayhouseSquare district at 1240 Huron Road, two sources told Crain’s Cleveland Business. With the move, GCP would part ways with Positively Cleveland, its shared services partner in the Higbee Building on Public Square. GCP and Positively Cleveland, the region’s convention and visitors bureau, are moving to allow for a temporary casino to take over their current space on the first two floors of the Higbee Building. GCP and its sister organization, the Council of Smaller Enterprises, would move their roughly 100 employees to the top two floors of the five-story building at 1240 Huron, which was constructed in 1905. It will share the building with the Liggett Stashower advertising agency, which moved in 2009 to the first three floors of the building. GCP president Joe Roman declined See GCP Page 20
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
DECEMBER 6 - 12, 2010
SAFETY FIRST
COMING NEXT WEEK Giving becomes part of the business model Some small businesses incorporate philanthropy into their operations. We talk to those business owners about their motivations. Plus, we look at the outlook for raises at year’s end.
The number of occupational injuries and illness cases in the private sector that involved days away from work fell nearly 11% in 2009 to 964,990 from nearly 1.1 million in 2008, according to the United States Bureau of Labor Statistics. It’s partly the result of the recession and fewer people working, but it’s also a measure of a more service-based economy and better workplace safety practices. The government said 2009 was the first year since it began collecting this data more than a decade ago that the number of cases fell below 1 million.
Industry
CORRECTION
REGULAR FEATURES
A Nov. 22, Page One story about Northeast Ohio companies’ accumulation of cash contained an incorrect cash balance for Lubrizol Corp. of Wickliffe. The company in the quarter ended Sept. 30 had a cash balance of $918.2 million. A chart accompanying the story had correct figures.
Classified .....................20 Editorial .......................10 Going Places ................14 Letters .........................11 List: Commercial real estate leases ............19 Reporters’ Notebook.....23
’09 cases
’08 cases
Change
Health care/ social assistance
172,820
171,300
0.8%
Manufacturing
127,240
164,940
-22.9
Construction
92,540
120,240
-23.0
Transportation/ warehousing
90,700
104,120
-12.9
Leisure/hospitality
87,740
86,190
1.8
964,990
1,078,140
-10.5
Total private industry
Delivering results. Executing for financial sponsors and middle market clients across the capital markets. September 2010
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A TASTE OF HOLIDAY CHEER Many employers plan to host parties, but spending remains marginal By MICHELLE PARK mpark@crain.com
T
he deep freeze most employers put last year on their holiday party spending is thawing, but only ever so slightly. Though caterers and party centers see some reason for cheer, few companies are returning to their party hearty ways before 2009 — the recession-plagued year when many who serve up holiday parties saw their biggest drop in business in a decade. Their observations are backed by two surveys — one local, the other national — that suggest the party scene this year will be no more robust than last year. See PARTIES Page 21
3
Another global firm mulls exit from downtown Ferro Corp. said to have targeted Mayfield Heights for relocation from East Ninth area By STAN BULLARD sbullard@crain.com
Ferro Corp., which owns its own corporate headquarters building at 1000 Lakeside Ave., is considering a move that may uproot 200 employees from downtown Cleveland’s East Ninth Street corridor. Mary Abood, spokeswoman for Ferro, confirmed the global specialty chemicals maker is in search mode but so far has made no definite plans. “We are endeavoring to find space that would allow our 200 office employees to work on a collaborative basis,” Ms. Abood said in a voice mail response to queries from Crain’s Cleveland Business. She did not return three calls with followup questions.
STAN BULLARD
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The decision puts in play the potential exit of Ferro at the same time that Eaton Corp. builds a headSee FERRO Page 8
THE WEEK IN QUOTES “Does this mean the local economy is doing well? You cannot say that. What it says is that companies here are ... figuring out what they do well and how to work the globe.”
“The problem is once it’s out there, it’s gotten re-tweeted or forwarded to people. You lose control very quickly.” — Nancy Gillette, general counsel at the Ohio State Medical Association. Page 12
— Ned Hill, dean of Cleveland State University’s Maxine Goodman Levin College of Urban Affairs. Page One
“None of my clients spend their days thinking of ways to pry into personal lives … It’s only when something goes wrong.”
“(Northeast Ohio companies) had to find markets that were growing and markets where they could expand.”
— Seth Briskin of Meyers, Roman, Friedberg & Lewis in Beachwood. Page 15
— Ward Bower, principal, Altman Weil Inc. Page 15
INSIGHT
Small banks may pay price of freedom with financial reform By MICHELLE PARK mpark@crain.com
Some area institutions plan to resist acquisition amid consolidation
The way the president of the Ohio Bankers League sees it, small banking is at a “crisis point” — and he’s far from alone in that belief. Mike Van Buskirk is one of many bank industry insiders who predict a rising number of small banks will cease to exist over the next couple years as institutions are sold or merged in the face of mounting
and costly financial regulation. It’s hard to say how much consolidation might occur, said James Chessen, chief economist for the American Bankers Association. However, Mr. Chessen said it’s reasonable to estimate 1,000 institutions will be merged over the next two or three years — most of them smaller banks, because there is a large
number of them and because of the “greater challenges” and “greater pressures” they face. The American Bankers Association estimates the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law last summer will create more than 5,000 pages of new regulations. Those rules will come atop the 50-plus
new or expanded regulations that have affected banks over the last two years, Mr. Chessen said. The specifics of the new regulations remain to be seen. However, bankers expect to deal with the imposition of higher capital requirements and changes that will decrease bank revenue and increase bank costs, the latter the result, in
INSIDE: Consolidation among small banks expected to continue. Page 21 part, of new disclosure and reporting requirements. “It’s going to be increasingly difficult for community banks to try to do (what) they have in the past,” said Dell Duncan, president and CEO of Ohio Commerce Bank, a single-office bank in Beachwood with $82 million in assets. See BANKS Page 21
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DECEMBER 6 - 12, 2010
More hyperlocal media enter fray Despite obstacles in drawing dollars, startup sites make way to area By JAY MILLER jmiller@crain.com
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Hopper has 13 years of experience in providing business banking services to his clients, having held managerial positions at other Northeast Ohio financial institutions.
“Andy is a great addition to our commercial banking team,” said Kenton Thompson, North Coast Regional President. “With his strong commitment to his clients, well-rounded financial services expertise, and involved experience with the Cleveland area business community, he’s a perfect fit with our brand of business community banking.” Hopper is a graduate of The Ohio State University and is a member of Rotary International. He can be reached at 216-288-1174.
Media companies new and old, large and small are beginning to battle across Northeast Ohio for ad dollars that have fled newspapers for the Internet. The combatants are the hyperlocals — web sites that focus on small populations such as a single suburb or maybe even a neighborhood. They come in a range of business models, from local nonprofits to giant national media companies. Designs, too, vary from the creative and splashy to rigid templates to more prosaic online adaptations of small-town newspapers. Their common link is that they share a focus on content unique to each small community — stories on town council meetings, high school sports and features on local people and businesses. They include extensive event calendars and usually directories of local businesses. The hyperlocals seek a piece of what online media seers believe could be billions of dollars spent by local advertisers. Borrell and Associates, a Williamsburg, Va., media research firm, estimates the local online advertising market will reach $16 billion in 2010. Borrell also believes the market for local mobile advertising, estimated at $285 million in 2009, will grow to $4.7 billion by 2014. Newspapers, the theory goes, are fading away, leaving butchers, restaurants, auto dealers and maybe even banks with fewer ways to reach people who want to do business close to home. The question, however, is whether local media that target geographic regions of less than 100,000 people are an effective ad medium in the digital age. Many in the media business believe they can be. Many others do not.
Patchwork of sites The 800-pound gorilla that is soon to enter the Northeast Ohio market is Patch.com, a unit of AOL Inc., a web services company that used to be America Online, an Internet service provider. It was spun off last year from Time Warner Inc. and has been recasting itself as an independent company. AOL bought Patch in June 2009, when it had five hyperlocal sites in Connecticut and New Jersey. In August, AOL officials said the company by the end of 2010 would spend $50 million on Patch in hopes of operating 500 sites by the end of the year and more in 2011. Patch already has 390 sites up and running in 18 states and the District of Columbia and plans to go live with the first of 24 sites in Northeast Ohio in the weeks ahead. The home page of the Patch web site lists three Northeast Ohio communities as coming soon — Avon, Cuyahoga Falls and Lakewood. Other national media organizations, such as online media giant Yahoo Inc., also are jumping into the hyperlocal arena. Yahoo in early November launched test sites in California, Michigan and New York through its existing Yahoo Local portals that aggregate news
NEW KIDS ON THE BLOCK National and local companies are starting hyperlocal web sites aimed at drawing ad dollars that have left newspapers. A sampling: ■ Patch.com: AOL Inc. says it will spend $50 million by the end of 2010 to start 500 hyperlocal sites. ■ Yahoo.com: It launched early last month test hyperlocal sites in California, Michigan and New York through Yahoo Local. ■ Outside.in: CNN owns this New York City business, which mainly aggregates news.
and carry some locally produced content for metropolitan areas. Outside.in, a New York City hyperlocal business owned by the CNN cable network and a group of investors, claims to serve nearly 58,000 neighborhoods, though its web sites are more news aggregators than producers of original content. Daily newspapers, including The New York Times, The Washington Post and The Plain Dealer’s online partner also are moving into the hyperlocal space. Cleveland.com, which carries news from The Plain Dealer and the Sun newspapers, quietly has launched 70 local sites using PD and Sun news and plans to expand those sites. Some of the best sites so far are homegrown, including the Heights Observer, which targets Cleveland Heights and University Heights. Similar community efforts exist in a number of Northeast Ohio communities, including Lakewood, Parma and the Collinwood neighborhood of Cleveland.
But can they make money? While the ad dollars the firms creating hyperlocal content see are real, there is a question about whether small-market media can win a large enough share of those dollars to be successful. “Local or regional or national is almost irrelevant” online, said King Hill, president of DigiKnow Inc., a Cleveland digital marketing agency. “For someone to say they’re targeting local spaces is irrelevant; the Internet has no boundaries.” Even Gordon Borrell, president of Borrell Associates, is skeptical that a hyperlocal audience can be a valuable media buy. “Here’s the problem: The hyperlocal content everyone focuses on is news,” Mr. Borrell recently told Brandweek magazine. “But advertisers are not looking for content; they’re looking for an audience and certain (consumer) characteristics. “I still have worries about sites like Patch.com or other hyperlocal news sites attracting much less valuable audiences (for advertisers),” he said. That attitude isn’t stopping media from entering the fray in Northeast Ohio, it appears. Patch already is hiring editors for its foray into Northeast Ohio.
News vets resurface Jean Dubail, former online editor
at The Plain Dealer, and Susan Ruiz Patton, another PD alum, are Patch’s regional editors for Northeast Ohio. Mr. Dubail said the Northeast Ohio sites will run from Avon in the west to Mentor in the east and as far south as Massillon and North Canton. Patch’s communities, and hyperlocal web sites in general, focus on a single community, usually defined by municipal boundaries. Mr. Dubail and Ms. Patton are hiring local editors for sites covering Avon Lake, Beachwood, Cleveland Heights, Kent, Shaker Heights, Stow and Twinsburg. Patch also plans a site for the communities that comprise the Mayfield City School District — Gates Mills, Highland Heights, Mayfield Heights and Mayfield Village. Patch’s goal, said president Warren Webster, is to “engage the audience and connect that audience to advertisers.” Its local sites at some point will have advertising managers, but Mr. Dubail said for now the sites in this market will carry a mix of local and national advertising. “We do not have a sales team locally, but that will happen eventually,” he said. One online media editor who requested anonymity because he isn’t authorized to speak for his company said Patch in his view “is taking a ’90s approach” to building its business. “Throw money, a lot of money, at something and get it to work and then sell advertising,” the editor said.
Differing missions Mr. Dubail said unlike many current hyperlocal sites, which often are run by nonprofit organizations using volunteers in the community, Patch sites will be produced by professional journalists. “The whole idea of Patch is that it’s done by people with professional news experience or at least they’ve been to journalism school,” Mr. Dubail said. The Heights Observer — which also has a print publication — is the kind of hyperlocal site to which Mr. Dubail refers. Bob Rosenbaum, chair of the Observer’s advisory committee, said unlike a for-profit hyperlocal operation, the Observer’s primary goal is not to make money. “Our mission isn’t to create a selfsustaining model for hyperlocal journalism,” he said. “Our mission is to foster community engagement, increase the level of participation by members of the community and make sure that it can pay for itself.” In between those two ends of the spectrum is Cleveland.com, the online platform for The Plain Dealer and the Sun newspapers. Advance Publications Inc. of Staten Island, N.Y, owns all three. Cleveland.com’s 70 locals sites are just a start. It expects eventually to have sites for all the communities in its market area. “We’re expanding it so each community in Greater Cleveland will have a local home page,” said Denise Polverine, Cleveland.com’s editor-inchief. She added, “We’re giving them news and information for their communities.” ■
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IT execs optimistic on student skills Report: Private equity Board of regional leaders makes progress on firm to acquire Transtar facilitating opportunities for recent graduates By CHUCK SODER csoder@crain.com
Jim Shanahan has faith that the executives who make up the Regional Information Technology Engagement Board will do more than just talk. Why? Because of the way they talk. “From the day they showed up, they just kind of took over the discussion,” said Dr. Shanahan, director of the Entrepreneurship Innovation Institute at Lorain County Community College. For the past 18 months, 12 highlevel IT executives from across the region have been meeting monthly to figure out how to increase the quality and quantity of IT students graduating from Northeast Ohio colleges. The board, which includes executives from some of the region’s largest corporations, already has made progress, said Dr. Shanahan, who helped organize the group as part of a broader initiative called the Ohio Skills Bank. The statewide effort is intended to make sure colleges are teaching the skills businesses need. Members of one of the engagement board’s three committees are helping officials from LCCC and Baldwin-Wallace College analyze
“We’ve got a decent cross-section of people committed to making this work.” – Tom Lucas, chief information officer, Sherwin-Williams Co. their IT course offerings using a British system for classifying IT skill sets. The University of Akron and Stark State College are next to undergo the analysis. A second committee will focus on increasing the number of IT internships in Northeast Ohio, while a third committee will create a plan to convince students to pursue IT majors in college. Dr. Shanahan expects all three committees to recommend further action by June, which is when a one-year, $287,000 grant from the Ohio Board of Regents that funds the board’s work is set to run out. Companies on the engagement board also contribute money to pay for the services of a part-time project manager. By June, the group will know “just how important it is to sustain this,” Dr. Shanahan said. He expects the engagement board to continue working after the grant money expires, however, because its members are so passionate about increasing the
amount of IT talent in Northeast Ohio. “The RITE board members are just as committed today as they were a year ago,” Dr. Shanahan said. “I don’t know how to explain that.” The need for developing more IT talent, a problem often discussed in Northeast Ohio’s tech community, was documented in a 2008 study by NorTech, a technology-focused economic development group based in Cleveland. Just 20% of companies with IT employees in Northeast Ohio offer IT internships, according to the study, which indicated fresh IT graduates often lack the work experience many companies demand. Among the engagement board’s members are executives from the Cleveland Clinic, Sherwin-Williams Co., Eaton Corp. and J.M. Smucker Co., as well as smaller, IT-focused firms such as software provider e-Ventus Corp. and data center operator BlueBridge Networks LLC, both of Cleveland. The group also includes the University of Akron, which collaborates with the board as both an IT employer and an educational institution. It takes a lot to make change happen, but this group has what it takes to do it, said board member Tom Lucas, chief information officer for Sherwin-Williams. “We’ve got a decent cross-section of people committed to making this work,” said Mr. Lucas, who is chair of the committee working to help colleges evaluate their course offerings. ■
Mayfield Heights-based Linsalata Capital first bought transmission parts maker in 2005
A San Francisco private equity firm is acquiring transmission parts maker and distributor Transtar Industries Inc. from Linsalata Capital Partners Inc., according to a story posted on LBO Wire. The buyer is Friedman Ahuja Fleischer & Lowe LLC, according to the LBO Wire story, which is based on information from Standard & Poor’s Ratings Service. A spokeswoman for Transtar, which is based in Walton Hills, last Friday declined comment on the LBO Wire story. She would not confirm the transaction, saying three times in a brief conversation, “We have no comment at this time.” A call to Linsalata was referred to one of the firm’s principals, Michael J. Faremouth, who serves on the Transtar oversight team for the Mayfield Heights private equity firm. Mr. Faremouth was said to be on a telephone call and did not subsequently return a message seeking comment on the deal. Linsalata acquired a majority
interest in Transtar in 2005 from founder Monte Ahuja, who retained a stake in the company. Friedman Fleischer has confirmed the acquisition of Transtar, according to LBO Wire. A call placed to the California firm last Friday morning was not returned. LBO Wire reported that the deal involves the use of “a proposed $249 million first-lien term loan and a proposed $135 million second-lien term loan, along with an undisclosed amount of equity from Friedman Fleischer.” Friedman Fleischer’s web site describes it as a private equity firm “focused on partnering with management to create value in middle-market companies.” S&P assigned Transtar a B-plus corporate credit rating, according to the LBO Wire story. The company’s ratings benefit from its “good free cash flow prospects because of low capital spending,” LBO Wire stated, citing S&P. LBO Wire also noted that Transtar’s margins “are stronger than many of its peers thanks to its diversified lines of products and services.” Crain’s in its most recent list of Northeast Ohio’s largest privately held companies, published June 14, reported that Transtar had revenue of $450 million in 2009. ■
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Sisters of Charity offers independent docs access to resources By TIMOTHY MAGAW tmagaw@crain.com
The Sisters of Charity Health System has launched a for-profit subsidiary that looks to create ties with local independent physicians by giving them tools to better run their practices while allowing them to stay independent. Rather than buy the practices of some of the roughly 4,000 independent doctors in Northeast Ohio and make them employees of the health system, the Sisters of Charity have set up an alternate arrangement. For a fee, the subsidiary — known as Independent Physician Solutions — offers physicians resources such as access to an electronic medical records system and managed care contracting services. The arrangement also allows physicians to invest in the for-profit company, said Orlando Alvarez Jr., the system’s senior vice president for physician alignment and CEO of the new organization. Mr. Alvarez said the Sisters of Charity made a “multimillion-dollar” investment in the startup, but he would not disclose the amount.
Two container outfits finish big expansion in Glenwillow
The goal of the new organization is to create a haven for independent doctors and to foster collaboration among those who share in the health system’s faith-based mission, Mr. Alvarez said. Any excess revenue generated by the subsidiary would be reinvested in the company to better serve the physicians, he added. “This is not intended to be a huge revenue generator for the system,” Mr. Alvarez said. Mr. Alvarez said he and his colleagues plan to pursue as many of the region’s independent physicians as possible, but the aim is to have more than 80 doctors signed on by the end of next year. The arrangement is separate from the
Sisters of Charity’s Cuyahoga Physician Network, which is a group of 30 doctors directly employed by the health system. Beyond Northeast Ohio, the new group also is looking to align with independent physicians in Columbia, S.C., where Sisters of Charity also owns a hospital. “We want to make this available to everyone who feels this is right for them,” Mr. Alvarez said. To align with the system, physicians must pay a percentage of their cash collections to Independent Physicians Solutions; that percentage amounts to 7.75% for those earning more than $600,000 a year and 6.75% for those earning less. Practices also will pay a $9,000
purchase price for the electronic medical records system as well as a $200 monthly technology fee. Among the core services included in the arrangement are payment processing, account reconciliation, payroll and general accounting.
Still the boss Dr. Gregory Hall, a primary care physician in Cleveland and one of the first members of the new organization, said it’s increasingly difficult for independent doctors to survive in the evolving health care market because of the impending mandates of federal health care reform. Installing the electronic medical record system, for instance, will give physicians a slice of
billions of dollars in federal incentives for modernizing medical files. Many doctors believe they must join a hospital system in order to survive, but Dr. Hall said a healthy number of physicians in the region would prefer to remain autonomous. “It’s a matter of enjoying being your own boss and all the benefits that go along with that,” Dr. Hall said. Mark Wiedt, president and chief operating officer of Independent Physicians Solutions, echoed Dr. Hall’s sentiments. He said the for-profit company will allow the back-end operations of independent physicians to be more efficient and ultimately will save them money. “Those things take them away from their patients,” Mr. Wiedt said. ■
Side by side. Quarter by quarter. Year after year. Opportunity at every step.
By STAN BULLARD sbullard@crain.com
Cleveland Steel Container Corp. and sister company North Pak Container are the latest examples of industrial concerns expanding despite the real estate downturn. The two are scheduled to set up shop today, Dec. 6, in about 100,000 square feet of a new industrial office/warehouse property at 30310 Emerald Valley Parkway in Glenwillow. The space represents a 47% expansion from the companies’ prior Twinsburg location, where they occupied 68,000 square feet. Dennis Puening, chief financial officer for the container companies, said they needed more space because they have continued to grow through the downturn through increased sales to existing customers and new ones. He declined to disclose revenues. Cleveland Steel makes steel containers of 7.5 gallons or less and North Pak distributes Cleveland Steel pails and other products. They together employ about 50 people. James Klements represented Container Steel and North Pak in their site search with colleague Gerald Medinger of brokerage Weber Wood Medinger/Corfac International. He said the companies considered multiple locations and construction of a new building before settling on the lease at the new, 182,000-squarefoot building in Glenwillow developed by Premier Development Partners of Cleveland. Glenwillow Mayor Mark Cegelka said he was glad the companies moved to his village, but worked with them only after satisfying himself that they had exhausted options for remaining in Twinsburg. ■
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Bottom: Vacancies provide tenants leverage to make deals continued from PAGE 1
20.5% at the end of 2009. Meanwhile, the shutdown of Chrysler Corp.’s 2 million-squarefoot Twinsburg stamping plant was the largest of the plant and warehouse closings that will increase industrial vacancy to 12.4% as of Dec. 31 from 11.2% a year ago. The impact of emptying the massive Chrysler plant, where Maynards Industries Inc. of Toronto this fall sold off equipment, was muted by the 300 million-square-foot market size of Northeast Ohio’s industrial market. “It’s a blip on the screen,” said Terry Coyne, director of Grubb & Ellis Co.’s industrial unit, who sees better times ahead. “We’ve clearly hit bottom, and there is so much activity in the market we’re on the way up,” Mr. Coyne said. The fallout of Chrysler’s bankruptcy-empowered restructuring in Northeast Ohio was more profound in the southeast industrial submarket, which follows Interstate 271 through Twinsburg, as vacancy there rose to 13.8% this year from 11% a year-ago. However, it’s not the region’s weakest industrial submarket. That distinction belongs
to the northwest industrial market, which follows Interstate 90 west to Lorain County and is plagued by vacancy at Ford Motor Co.’s former Lorain assembly plant, which closed three years ago. As for Northeast Ohio’s office market, Jeff Cristal, director of the Cleveland office unit of Grubb & Ellis, sounds like his counterpart Mr. Coyne in saying he believes it has “hit bottom.” That’s largely because the long-awaited office consolidation by PNC of former National City Corp. offices hit the market this year. Statistics support Mr. Cristal’s view, as the region shed office space at a slower pace in 2010 than in 2009. The volume of vacant space downtown increased 6% to 4.8 million square feet this year from 4.6 million square feet in 2009, when the volume of vacant space rose 9% from 4.1 million square feet in 2008. Downtown vacancy hit 22% this year, up from 21% a year ago. In the suburbs, the volume of vacant office space rose 11% to 3.8 million square feet from 3.4 million square feet in 2009, when vacant space was up 14% from 3 million square feet in 2008. Suburban
vacancy climbed to 21.8% this year from 19.8% in 2009. In better times, vacancy often rose due to completion of new rental office buildings, but they were not much of a factor due to the third year of the commercial real estate credit crunch, which has made speculative development difficult. With Eaton Corp. constructing a new headquarters in Beachwood, about 300,000 square feet of rental office space downtown will be shed in 2012.
Tenants call the shots The result of all the vacant space is predictable. “It’s a tenant’s market,” said William Saltzman, a Grubb & Ellis vice president. Tenants who seek better office space may find it a good time to move up, he said. Or, it may be a good time to renew leases at existing offices while landlords worry about the future, Mr. Cristal noted. “Landlords will do everything they can to retain tenants over the next 18 months,” he said. However, tenants often must look to find situations where existing suites work for them, Mr. Cristal said, as some landlords have had
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difficulty scraping together cash for renovations to their offices. In only one office market can landlords be selective, and that is the eastern suburbs, Mr. Saltzman said. Thanks to the dominance of locally owned companies based in the eastern suburbs, the vacancy rate there is 19.8% this year, down from 19.25% last year. The eastern suburbs were the only market with substantial new rental office space as Developers Diversified Realty Corp.’s headquarters addition in Beachwood included extra space for future expansion by the real estate investment trust, which made that space available to the rental market this year. Most of that space rented up, but it created other vacancies in the submarket. The western suburbs remain the weakest office market, with a 27% vacancy rate this year, up from 23% last year, largely due to difficulties for older buildings on Center Ridge Road in Westlake and Rocky River. The south suburban market, which follows Interstate 77 south, saw vacancy climb to almost 23% this year from 20% last year.
‘Crazy busy with prospects’ On the industrial front, Mr.
Coyne sees the situation as a tale of two markets. Newer buildings with 30-foot tall ceilings are in demand so much that landlords are exacting higher rents for many of them than a year ago, while older buildings with 19foot ceilings go begging until the right prospect comes along. Much of this year’s industrial activity was in new warehouse buildings completed in 2007 and 2008, Mr. Coyne said. After arriving just in time for the recession, buildings such as Diamond Center One in Glenwillow Village languished until this year. Another sign of resurgent demand was in industrial construction, the most active area aside from corporate build-to-suit structures. More than 1 million square feet of industrial space was added this year, more than double last year’s figure, Grubb & Ellis reported. However, half that action came in a handful of large buildings of more than 100,000 square feet. A dour 2010 aside, Grubb & Ellis brokers look for improvements in the coming year. The reason? “We’re all crazy busy with prospects,” Mr. Saltzman said. ■
Ferro: Exit would be next blow to financial district continued from PAGE 3
quarters in Beachwood to replace its longtime corporate home in the namesake Eaton Center, two blocks southeast of Ferro on East 12th Street. Real estate insiders who asked not to be identified say Ferro may not have made a decision, but it’s so far along that its site search is focused on the former Novelis Corp. regional headquarters, 6060 Parkland Boulevard in Mayfield Heights. Novelis, an aluminum sheet and foil producer, is reviewing several options for how to handle the several years remaining on its Mayfield Heights lease, said company spokesman Charles Belbin. He declined to
Nine12 District. The goal would be to encourage the conversion of empty office space along the corridor to mixed-use residential and retail space and to take steps to enliven the street atmosphere.
Mayfield’s tax advantage Joseph Marinucci, president and CEO of the nonprofit Downtown Cleveland Alliance, said he has discussed Ferro’s site search with the company and its real estate representatives. He declined to say whether remaining downtown is an option for Ferro. “Ferro is a very important company to us,” Mr. Marinucci said. “It
“Ferro is a very important company to us. It has a long history in Cleveland and in downtown Cleveland.” – Joseph Marinucci, president and CEO, Downtown Cleveland Alliance
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elaborate on any specifics. Novelis this summer completed the consolidation of its former regional headquarters from Mayfield Heights to its U.S. headquarters in Atlanta. Novelis has 40 employees left in Mayfield Heights, but will have no office presence there by next March 31, Mr. Belbin said. A sublease typically may provide a bargain for a new tenant because the original tenant may subsidize some of the rent to reduce the cost of space it no longer needs. Davis Development Group of Solon owns and developed the building at 6060 Parkland. Owner Jeff Davis did not return two calls on the fate of the Novelis space. If Ferro exits its East Ninth Street home, it would aggravate a vacancy problem along Cleveland’s former financial district that has prompted the Downtown Cleveland Alliance and real estate interests to formulate plans to promote it as the
has a long history in Cleveland and in downtown Cleveland. I’m always trying to retain companies in downtown Cleveland.” Mayfield Heights Mayor Greg Costabile said he has not had any contact with Ferro, but the former Novelis space has had several companies look at it recently. The space was renovated in 2005, Mayor Costabile said, so the decision by Novelis to consolidate its regional office with its national office was a particular shock. Mayor Costabile noted that the 1% income tax rate in Mayfield Heights is an incentive in its own right. Cleveland’s municipal income tax rate is 2%. Ferro has owned the 45,000square-foot building at the corner of Lakeside and East Ninth Street since Jan. 31, 1989, according to Cuyahoga County land records. It sits in the shadow of the North Point, AT&T and Celebrezze Federal Building office towers. ■
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PUBLISHER/EDITORIAL DIRECTOR:
Brian D. Tucker (btucker@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Boxed in
G
overnor-elect John Kasich campaigned on the inability of current Gov. Ted Strickland to hold on to jobs in Ohio over the last four years. American Greetings Corp. will put Mr. Kasich to an interesting test to find out just how far he’s willing to go to persuade a big employer to remain in the Buckeye State once it starts talking about moving away. Companies across Ohio will be watching to see the precedent Mr. Kasich sets in his handling of the situation at American Greetings, which has raised the prospect of shipping its headquarters to the Chicago area. The greeting card company and the 2,000 jobs now at its headquarters in suburban Brooklyn aren’t out the door yet, and even if it does relocate, it may opt for a new home in one of four Cleveland-area suburbs instead. But by indicating that it could leave the state altogether — and that it will make its decision known by the end of its fiscal year in late February — American Greetings has managed to put Mr. Kasich in a box. The incoming governor won’t want the stigma of losing a large employer within the first few weeks of his term. Still, he also must be mindful that whatever aid he extends to American Greetings in the way of low-interest loans, tax breaks and outright grants of state money only may encourage other companies to use the “we may take our jobs elsewhere” gambit to extract fat giveaways from the state. And these companies are sure to cite American Greetings as the standard by which they’ll judge the state’s generosity. In our role as a cheerleader for Northeast Ohio, we want to see the state draw on its arsenal of economic incentives to keep American Greetings here. However, we also recognize governments only can go so far in accommodating employers before it no longer pays for them to retain these prized possessions and the jobs they provide. The best scenario would be for American Greetings and officials at the state and local levels to find a middle ground that is livable for the company and the government bodies involved. We hope a spirit of compromise is present as representatives of all sides discuss how to retain a valued employer and solid corporate citizen in our region.
FROM THE PUBLISHER
Gilbert should put heat on the NBA
W
has enough evidence to force NBA Comell, don’t you feel better missioner David Stern to take action.” now? The Player Who I don’t know if that’s true or not, but I Must Not Be Named has hope it is. Dan Gilbert seems to me to be come and gone. Cleveland a determined guy, and I believe the is still in one piece, as are the region’s league and its commissioner have done pro basketball fans. little to control this player manipulation, As I wrote this Thursday, in the midst of something that’s being speculated is in the kind of media onslaught that left me the works by other NBA players longing for the recent political angling to join new teams with commercials, no one knew how BRIAN pre-selected free agent partners. those in Quicken Loans Arena TUCKER The Cavaliers are right to would react when LeBron James investigate. All fans should returned as a hated member of know whether Pat Riley was the Miami Heat. involved in this, as well as What we did know, however, Heat superstar Dwayne Wade. is that the Cavaliers organizaMeanwhile, I hope our local tion had begun its own legal fans support our local team, as investigation into how this a first-class organization and a whole thing transpired with the solid coach build for success in team’s former star joining our new, “superstar-less” reality. former Toronto standout Chris Bosh in That would suit Northeast Ohio fine. jumping to the Heat to chase a ring. **** The Akron Beacon Journal, in a story THAT SAME ISSUE of the Akron that almost seemed dwarfed by all the newspaper contained this quote from other pre-game nonsense, referred to a Cavs ticket owner Bud Hagy, who Yahoo! Sports story that used unidenticlaimed he turned down $10,000 for his fied sources who claimed Cavs owner four courtside seats for last Thursday’s Dan Gilbert vowed “not to stop until he
game by saying: “Kiss my (fill in this blank yourself). It’s going to be a fun night.” Now, I don’t know Bud Hagy, but I hope his evening was worth the 10 grand he turned down. Not sure I would have made that choice, but then, I wouldn’t have owned those seats in the first place. **** AND FINALLY, AS IF the bankers don’t have enough challenges from a public that blames them for our economic woes and business owners who castigate them for holding onto their money and refusing to make loans. Now comes news of this Fifth Third Bank settlement. Without admitting guilt, the Cincinnati-based bank — Ohio’s biggest — last week agreed to pay $10 million in fines over claims it was manipulating the order in which it posted debits in order to create more overdraft fines. You can be sure that Fifth Third and all other Ohio banks are scrambling to make sure this doesn’t happen (or continue to happen) again. We need banks to be healthy, and to start to loan to business again ASAP if we’re going to get the economic recovery fully engaged. ■
THE BIG ISSUE Does the WikiLeaks release of classified government documents, many revealing foreign affairs secrets, provide a good look at what the U.S. government is doing, or does it unnecessarily harm our relationships abroad?
Love story
Y
ou could say the $42 million gift that Jane and Lee Seidman are giving to University Hospitals for the new cancer center that will be named in their honor all began with a
Simca. Car buffs may be the only people who remember the European automobile, but it was a Simca dealership that gave Mr. Seidman his start in the car business. Fifty-one years and 36 franchises later — as Mr. Seidman modestly summarizes on his business card — the founder of the Motorcars Group and his wife continue to share their wealth with the community they love. We applaud these Cleveland natives for their ongoing generosity to the city they still call home.
NATHAN LILLY
BILL SMIRNOFF
NORM SIRIANNI
TRACY WARD
Cleveland
Cleveland
Chicago
Cleveland
I think it’s going to cause mass hysteria. … Anybody can get this information, really?
That’s a tough question. … Do we have to know everything the government’s doing? I don’t know.
Put them in jail. It’s damaging relationships with other countries.
It can cause harm. You need to keep things in the industry private.
➤➤ Watch more people weigh in by visiting the Multimedia section at www.CrainsCleveland.com.
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Clark Reliance acquires Texas outfit Strongsville company now has an entrance into mining with filtration system for excavation By DAN SHINGLER dshingler@crain.com
Clark Reliance Corp. of Strongsville has bought Texas-based Oil Filtration Systems for an undisclosed sum, the two companies announced today, Dec. 6. Richard Solon, president and CEO of Clark Reliance, said his company bought Oil Filtration because the Texas business has technology that complements technology Clark Reliance already has and should speed its entry into new markets. Clark Reliance makes filtration
and instrumentation equipment for users that include petroleum refineries. Oil Filtration makes a filtration system used on-site at mines and major excavation projects. The system filters fuel and lubrication oils used by heavy machinery. “They’re biggest penetration has probably been in mining,” Mr. Solon said. “They really weren’t a competitor of ours at all.” The transaction gives Clark Reliance an entry into the mining market. It also provides technology it can offer to existing customers and gives it a real presence in Texas — something the company long has
wanted. As for Oil Filtration, it needed the resources of a larger company to continue growing, said co-founder and president Duke Cooper. Mr. Cooper and his partners started Oil Filtration 11 years ago from his garage, he said, and since have grown it into a 32-person operation. Mr. Cooper said he will remain with the company and continue to head Oil Filtration as a division of Clark Reliance. Neither of the private companies discloses sales, but with more than 230 employees, Clark Reliance is much larger than Oil Filtration. Mr. Solon said his company easily could do another similar-size transaction, if the opportunity presented itself, and would like to complete one or two such deals each year. ■
Fudge’s contributions reach many areas ■ The Crain’s compilation of Who’s Who in Northeast Ohio in your Nov. 22 issue is missing an important contributor in the public sector. As the communications director to Congresswoman Marcia L. Fudge, I would like to point out some things about Rep. Fudge’s impact on the region that should put her on your radar. The congresswoman is the ranking Ohio Democrat on the Science Committee, the committee that controls NASA’s budget. In that capacity, she was instrumental in obtaining a three-year moratorium on job cuts, protecting the jobs of hundreds of employees at NASA Glenn Research Center in Cleveland in the most recent reauthorization bill. She was directly involved in striking down an amendment that precluded all states except Texas and Florida from having a shot at landing a retired Shuttle Orbiter. Ohio now is in the running. The congresswoman and her staff worked very hard to make this happen. The congresswoman brought home $10 million in appropriations to her district in the 2010 fiscal year. Almost every major public institution and employer in Cuyahoga County is based in the 11th District, which includes downtown Cleveland, Midtown Corridor, University Circle, the Cleveland Clinic, University Hospitals, John Carroll University, Case Western University, Cleveland State University and two out of three campuses of Cuyahoga Community College. She has directed appropriations to benefit almost all of those entities mentioned. As an example, $1.5 million was awarded to a startup biotechnology company Arteriocyte, which is developing advanced cellular therapies to improve healing of battlefield injuries for our troops. Rep. Fudge was instrumental in providing increased funding for work force development training funds, directed through the county. On the Education and Labor Committee as well as the Science Committee, Rep. Fudge has been a strong advocate for increased funding for STEM (science, technology, engineering and math) education for under-represented students, namely girls, Hispanics and African-Americans. In her first full term, Rep. Fudge introduced the first Childhood Obesity
LETTERS Awareness Month. By the way, she introduced it before First Lady Michelle Obama came up with her “Let’s Move” campaign. The House approved Rep. Fudge’s resolution with overwhelming bipartisan support. It galvanized community and medical resources nationwide and led to creation of a national council of groups such as the YMCA that continues to focus on the epidemic of child obesity. The congresswoman was instrumental in bringing National Science Foundation and House Science Committee staff to Cleveland for a Technology Transfer workshop in August. The event attracted people from nearly a hundred startups and established companies eager for information that could help them grow. Sherwin-Williams Co. has $2 million it would not otherwise have had (through her efforts) to conduct research in “PaintShield,” a coating technology. This is a cost-effective, dual-use (military and civilian) interior paint platform that will render microbiological threats harmless upon contact. The appropriation also is funding other R&D programs (money to support jobs) at the SherwinWilliams R&D facility in Cleveland. Finally, I would point out Ms. Fudge received a higher level of support from voters (82%) than any other member of Congress in the region, probably the state of Ohio. I offer this for your consideration. You may not find the congresswoman frequently in the headlines, but please know she gets things done for the people and employers in her district. Belinda Prinz Communications director Office of Congresswoman Marcia L. Fudge
Workers also suffer from misclassification ■ The Nov. 29, Page 3 story on the government’s increased scrutiny of employers that misrepresent employees as independent contractors focused much on the cost of misclassification to employers. More could have been said about the cost of misclassification on individual workers and
our community. For individuals, misclassification often results in wage theft, because true independent contractors are not entitled to minimum wage and overtime pay. The National Employment Law Project did a study in 2009 of low-wage workers in Chicago, New York City and Los Angeles. It found that 26% of the workers were paid less than the minimum wage in the previous work week. Of the workers who worked more than 40 hours in the previous work week, 76% were not paid the required overtime rate. More than likely, some of these workers did not receive the minimum wage or overtime pay because they had been misclassified. Misclassification happens at all levels and in a variety of industries. Misclassification particularly harms low-income workers, who may be unable to pay rent, utilities, medical bills and other necessary expenses because they are not receiving the proper pay. In addition, workers are often hit with huge tax burdens because an employer has not been withholding taxes. Thus, misclassification can be linked to growing poverty in Northeast Ohio. In the community, misclassification harms employers who are playing by the rules. They cannot fairly compete against contractors who enjoy an unfair cost savings from not having to pay workers’ compensation premiums, unemployment tax and overtime. And — as stated briefly in the story — misclassification robs state and local governments of revenue to which they are entitled. Government entities are losing millions of dollars to dishonest employers who defraud the system for their own gain. In a time when Ohio has significant budgetary problems and increased poverty, we cannot afford to give employers who misclassify workers a free pass. Katie Laskey-Donovan Staff attorney The Legal Aid Society of Cleveland
The ultimate measure of client loyalty The Harvard Business Review says the best measure of client loyalty is the Net Promoter Score (NPS). It’s a way to understand how many companies are your “promoters,” not just past clients. Average companies have scores below 10. “Gold standard” companies have scores in the 70’s. The Watkins Survey* interviewed 200+ corporate real estate decision makers about their real estate service providers. Jones Lang LaSalle was rated #1. Even better, our clients gave us an NPS of 72.1 - a “gold standard” score. In fact, our overall NPS was double that of our closest competitor. Call a Jones Lang LaSalle real estate expert today. See for yourself where we rank. Robert J. Roe, SIOR | tel + 1 216 861 7171
WRITE TO US Send your letters to: Mark Dodosh, editor, Crain’s Cleveland Business, 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 e-mail: editor@crainscleveland.com
*Source: Watkins Research Group, Inc. 2009 Business Development Opportunities Survey for Corporate Real Estate Services Providers. Used with permission of Watkins Research Group.
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Physicians’ use of social media rises, raises ethical questions Litigation possible if docs’ activity were to go awry By TIMOTHY MAGAW tmagaw@crain.com Sevilla
Dr. Michael Sevilla considers himself the least-anonymous doctor out there. That might come as a surprise considering Dr. Sevilla — a private practice family physician in Salem, east of Alliance — operates the “Doctor Anonymous” blog, where he highlights medical trends, industry news and the impact social media can have on the medical field. “Physicians do have a story to tell,” Dr. Sevilla said. “And that’s why a lot of them are using (social media) to get their voice out there.” Social media have impacted most business sectors. But the emergence of Twitter, Facebook, blogs and other sites in the medical field has spawned so much interest that the Ohio State Medical Association in October issued guidelines to help medical providers navigate the murky ethical waters of social media. The American Medical Association
followed suit and issued similar guidelines a month later. The guidelines note that sloshing into social media comes with risks by opening the doors for liability and privacy concerns, and if those lines are crossed, doctors could face litigation or even jail time. And once something is on the web, there’s no turning back, according to Nancy Gillette, general counsel at the state medical association. “The foremost thing is that the damage is already done,” Ms. Gillette said. “You need to think about not doing those impulsive things to begin with. The problem is once it’s out there, it’s gotten re-tweeted or forwarded to people. You lose control very quickly.”
Best practices When Dr. Sevilla started his blog in June 2006, it was — at least to his knowledge — anonymous. For about six months, he posted about experiences with patients and the tribulations that come along with being a family physician. “I wanted to let the public know what it’s like to be a doctor and to
know about the frustrations we go through,” Dr. Sevilla said. Once he discovered that nothing on the Internet is truly anonymous with the ability to trace IP addresses, he halted the practice and re-tooled the idea behind the blog. He started to focus more on trends and using the blog to network with other physicians. Those anonymous blogs, however, are still out there. One run by “a few cantankerous American physicians,” for example, recently posted what they claim is a patient chart (with the patient’s name changed to Mickey J. Mouse) to demonstrate their frustrations with new electronic medical records systems. Ms. Gillette said a thorny issue for doctors is whether they should respond to medical inquiries on blogs or other web platforms. If a patient posts on his or her physician’s Facebook wall, for instance, and the physician responds, an electronic record of an exchange has been created that could be viewed as a physician-patient relationship. Those conversations, Ms. Gillette noted, should be between a physician and the patient — not a person’s entire social network. To avoid such encounters, the
The more things change, the more they stay the same.
CM
A lesson learned Medical students at Case Western Reserve University’s School of Medicine are immersed in the issues surrounding social media and health care during their first days on campus.
We’ve changed our name.
During one of their first meetings, medical students are reminded of their emerging identities as members of the medical profession, said Kathy Cole-Kelly, a professor of family medicine and director of communication and medicine at Case Western Reserve. Ms. Cole-Kelly noted that once students start working with patients, they might be inclined to post about their experiences on Facebook or Twitter, so it’s important to remind them early on about the confidentiality issues that could arise. “That’s why we’re planting the seeds at the very beginning of their careers. That’s something they should be mindful of at day one of medical school,” Ms. Cole-Kelly said. At Northeastern Ohio Universities Colleges of Medicine and Pharmacy in Rootstown, faculty members constantly remind their students of the professional standards to which they must adhere, said Dr. Elisabeth Young, the school’s associate dean for academic affairs. Dr. Young, a practicing physician, said it’s important for medical students to understand the importance of not discussing patients when they’re in a personal environment — whether that’s on Twitter, Facebook or, for instance, a football game. Meanwhile, Dr. Sevilla has taken social media on as his cause. Recently, he spoke at a conference in Hershey, Pa., where he addressed what role social media can play in family medicine. Doctors have a story to tell, the self-ascribed social media enthusiast noted. As for Dr. Sevilla’s story? He still has fun at his job. “When you talk to a lot of docs, a lot of them are angry and frustrated, which I understand because we have an imperfect medical system in United States,” Dr. Sevilla said. “I want to portray that even though I have frustrations in my job, I still love what I do and I love seeing patients.” ■
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state medical association recommends physicians create a professional page for patients to join rather than “friend” them on their private web sites. Dr. Sevilla, however, said he’d accept friend requests from his patients, albeit selectively, just like he chooses his friends outside the office. “I’m in a small-town America,” he said. “Doctors have been friends of patients even before there was the Internet. It’s not unique to social media.” Dr. Boris Vinogradsky, a Cleveland-area private practice surgeon, said his Facebook page hasn’t presented any problems as it relates to patient confidentiality. If a patient were to pose a medical question, he would urge them to call his private number to discuss the matter in order not to cross any ethical or legal boundaries. Dr. Vinogradsky’s blog — “Russian Surgeon in America” — also carries a disclaimer stating any information obtained from the blog is not a substitute for an evaluation by a health care professional. He emphasized that no personal information about his patients is “ever, ever discussed in public.” As a founder of the Russian American Medical Association, Dr. Vinogradsky also has used Facebook, his blog and other social networks to connect with other Russian medical professionals who are looking for advice about where to go or who to ask about practicing medicine in America. “This social network really helps a lot of people who are here in various parts of the country who want to get back to practicing medicine who have all sorts of questions,” Dr. Vinogradsky said.
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GOING PLACES
HEALTH CARE
MANUFACTURING
JOB CHANGES
MOSKEY DENTAL LAB: Michael Lerch to prosthetics manager.
EATON CORP.: Julie Scheck Freigang to vice president, IT operational excellence.
EDUCATION URBAN COMMUNITY SCHOOL: Tom Gill to director of development.
FINANCE
GROUP INC. — HAWTHORN: David D. Legeay and Steven M. Appledorn to senior vice presidents and senior investment advisers; Bradley D. Knapp to vice president, investment adviser; Michael J. Monroe to vice president, senior wealth strategist.
FIFTH THIRD BANK, NORTHEASTERN OHIO: Bill Burke to vice president, treasury management sales manager; Kimberley Hoffman to vice president, treasury management officer; Bill Jaconette to vice president, director of private banking.
REA & ASSOCIATES INC.: Jeremy Senften to senior manager; Dan Bialek and Kyle Johnston to senior accountants.
FINANCIAL SERVICE
GOVERNMENT
BANK OF AMERICA MERRILL LYNCH: Jon E. Lawrence to associate director.
OHIO REHABILITATION SERVICES COMMISSION: Steven Kyman and Adra Smith to consumer support advocates.
PNC FINANCIAL SERVICES
RETIREMENT SOLUTIONS: Korey Leonhard to associate financial consultant.
PARMA HOSPITAL: Dr. Ara Kallibjian to medical director, Wound Center. SUMMA PHYSICIANS INC.: Dr. Jay C. Williamson to chief medical officer.
LEGAL BUCKINGHAM, DOOLITTLE & BURROUGHS LLP: Neil Bhagat to associate. ROETZEL & ANDRESS: Michael J. Carey to associate. TUCKER ELLIS & WEST: Juliana Crist, Erica James, Corena Larimer, Chelsea Mikula and Drew Odum to associates. ULMER & BERNE LLP: Matthew T. Wholey to associate.
RW BECKETT CORP.: John Bohan to vice president of business development; Brad Moore to marketing manager; Tony Kulig to marketing coordinator.
Lerch
Kallibjian
Williamson
Bhagat
Carey
Crist
James
Larimer
Mikula
Odum
Freigang
Telesz
MARKETING STEVENS STRATEGIC COMMUNICATIONS: Steve Toth to senior art director; David Toth to senior web programmer. WYSE: Julie Telesz, Linda Bremkamp, Steve Lageson and Lane Strauss to vice presidents.
REAL ESTATE CB RICHARD ELLIS: Eric Verh to
Bremkamp Lageson
Strauss
director of project management. KOWIT & PASSOV REAL ESTATE GROUP: Michael Weiss to retail sales agent.
BOARDS ASSOCIATION OF CORPORATE COUNSEL-AMERICA, NORTHEAST OHIO CHAPTER: Woodrow Ban (PolyOne Corp.) to president; Natalie L. Peterson to vice president; Elizabeth A. Rader to secretary; John D. Moran to treasurer.
Send information for Going Places to dhillyer@crain.com.
ON THE WEB
Story from www.CrainsCleveland.com.
Voinovich aide joins Huntington Diane M. Downing, who has served as district director in Cleveland for retiring U.S. Sen. George Voinovich, has joined Huntington Bank’s Greater Cleveland office as senior vice president and regional manager of corporate affairs. Ms. Downing will develop strategies to expand the bank’s community involvement. She will report directly to Dan Walsh, Huntington regional president of the Greater Cleveland market. Mr. Walsh said Ms. Downing “has the kind of exceptional experience we need to expand our outreach to the community in terms of dollars invested as well as volunteer opportunities for our colleagues.”
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INSIDE
16 ADVISER: MULL ASPECTS OF PURSUING LITIGATION.
Some law firms add to ranks, footprints Mergers help to extend reach, grow new markets By MICHELLE PARK mpark@crain.com
T
SOCIAL MEDIA’S TANGLED WEB Recent action over worker’s Facebook post about manager shines light on issue of employees’ actions in cyberspace By MICHELLE PARK mpark@crain.com
T
hey are sites where people “like” and “tweet” things, post photographs and more. However, in recent years, Facebook, Twitter and other social media used by many as a means for personal expression have come under the watchful eye of employers. Northeast Ohio attorneys say they are drafting more social networking policies than ever before. Some of these policies restrict employees from acting as company representatives online. Others prohibit workers from defaming a company or releasing trade secrets and other confidential information. “It seems like every week there’s another news report of an employee’s Facebook posting getting that employee in trouble,” said Susan Anderson, an
attorney with Walter & Haverfield LLP in Cleveland. In a recent example that’s gained a lot of attention, the Hartford, Conn., office of the National Labor Relations Board on Oct. 27 alleged that an ambulance service illegally terminated an employee who posted negative comments about her supervisor on her Facebook page. The unfair labor practice complaint has called into question the right of an employer to control what employees say on social media — at least the matters they discuss among themselves — and underscores the importance of careful policy-making.
First response The National Labor Relations Board action against American Medical Response of Connecticut Inc. is the See POLICY Page 17
hough recent years have been a time of unchanged or shrinking staff size for many law firms, some in Northeast Ohio have spent this year striking merger deals that both increase their numbers and expand their footprints. The players include Squire, Sanders & Dempsey LLP, which announced this fall its largest merger to date with Hammonds LLP, a United Kingdom firm, and Benesch Friedlander Coplan & Aronoff LLP, which closed a deal in March to expand into Indianapolis. The activity here is reflective of an overall pickup in law firm mergers across the country, said Ward Bower, a principal of Altman Weil Inc., a Newtown Square, Pa., legal management consulting firm. Altman Weil counted an average of eight mergers during each of the first three quarters of the year. Six weeks into the fourth quarter, however, it already counted nine, and Mr. Bower expects that number to increase to 12 or 15 by year’s end. As of mid-November, Altman Weil counted 33 mergers this year, down from 53 in 2009 and roughly 60 in 2008 and roughly 70 in 2007. The firm expects more than 40 mergers to occur next year and possibly more than 50 in 2012, Mr. Bower said. “It costs money to do mergers. You’ve got to invest a lot of time and money in getting them done,” he explained. “During the recession, nobody wanted to be spending any more cash. “I think that firms are beginning to have some confidence,” Mr. Bower said. “Now they’re back to implementing their strategy, which might involve geographic growth.” Lateral hiring has shown signs of life, too, but the industry is seeing more inorganic growth — that from merger or takeover — than organic growth from increased output, Mr. Bower said. One reason: Organic growth is more expensive.
Growth spurts The deal between Squire Sanders, which has its main administrative offices in Cleveland, and Hammonds LLP will become effective Jan. 1. The merger will create a firm of 1,275 lawyers in 37 offices in 17 countries. Squire Sanders currently See HIRE Page 16
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Hire: Industry consolidating continued from PAGE 15
has 800 lawyers in 32 offices and 15 countries. The merger was attractive, said Squire Sanders chairman Jim Maiwurm, because Hammonds has similar practice strengths and a footprint in the United Kingdom and other areas of Western Europe — places where Squire Sanders wanted to be stronger. An increasingly globalized world is one driver of Squire Sanders’ mergers, the last of which occurred in 2005 with a firm with offices in Florida and Latin America, Mr. Maiwurm said. The firm will continue to have Cleveland serve as a “nerve center of a much larger law firm,� Mr. Maiwurm said. He said he does not expect the combination to have a negative impact on the firm’s employment in Northeast Ohio, but said he’s unsure of plans for future hiring here. Cleveland-headquartered Benesch Friedlander Coplan & Aronoff LLP also expanded its footprint through a combination with the 43-person Dann Pecar Newman & Kleiman in Indiana. The merger proceeded because Benesch saw a “cultural fit� in the core areas in which it wants to grow, including litigation and real estate, said Ira Kaplan, Benesch managing partner. Benesch also expanded earlier this year into White Plains, N.Y., where it hired two attorneys and opened a small office, Mr. Kaplan said. It currently is “taking a very hard look� at Chicago and is in preliminary discussions with more than one firm there.
“Frankly, it’s a growth market, and Cleveland to this point has been less of a growth market,� Mr. Kaplan said. “Chicago makes a lot of sense. It’s close and we have clients that are pulling us there anyway.� Some firms also have posted moderate growth via lateral hiring. Walter & Haverfield LLP has grown by about 10% a year over the last two years, said Ralph Cascarilla, managing partner. The Cleveland firm hired four attorneys in 2009 and five this year and now employs a total of 54 attorneys. Another midsize firm, Hahn Loeser & Parks LLP, has added 6,000 square feet to its Cleveland office in anticipation of growth and plans to more than double the size of its Fort Myers, Fla., office when it moves the Florida location in the second quarter of 2011, said Larry Oscar, CEO and managing partner. Since January 2009, Hahn Loeser has hired 43 people, including 20 attorneys. Twenty-three of the 43 were hired in and around Cleveland and Akron, Mr. Oscar said.
Dissecting the growth Historically, Northeast Ohio firms have expanded geographically because the region was recognized decades ago as a market that was unlikely to grow, Mr. Bower said. “They had to grow elsewhere,� Mr. Bower said. “They had to find markets that were growing and markets where they could expand.� Another driver of recent merger activity, he explained, is the consolidation of legal work by clients. Beginning roughly five years ago, firms that may have used a hundred different law firms across the
country began cutting that number to manage their legal work more effectively and to control costs. Michael Ungar, president of the Cleveland Metropolitan Bar Association and partner with Ulmer & Berne LLP, also believes the growth of local firms is due, in part, to the stability and maturity of firms here. People, he noted, are seeking stability. “They look out and see some of the instability that has reigned supreme throughout the legal profession these past few years, and they look at the Cleveland firms and they say, ‘Here’s some stability,’� he said. Recent deals, Mr. Ungar asserted, make it clear that law firms and lawyers are sizing up Cleveland firms as “good, solid, stable, well-run law firms with storied histories.� “That’s a good thing for Cleveland,� he said.
Merits to merging While mergers such as Squire Sanders’ don’t necessarily mean more lawyers are working in Cleveland, it’s positive for the region when firms with a local presence thrive, Mr. Ungar said. “There’s Cleveland DNA in firms like Squire Sanders, Jones Day, Baker Hostetler, so when they expand on a worldwide platform it’s good for them, and it’s good for the Cleveland legal community, generally,â€? he said. “It puts us on the map.â€? Mr. Ungar and others say they won’t be surprised to witness more mergers and more acquisitions by Cleveland-based firms next year. Based on “work in the pipeline,â€? Mr. Cascarilla is confident Walter & Haverfield will continue to grow. And Mr. Maiwurm of Squire Sanders said the firm continues to look for opportunities. “This is not a finished product,â€? he said. “Probably will never be.â€? â–
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Evaluate legitimacy of pursuing lawsuit with another party Scrutinize all claims to protect business
L
itigation can be unpredictable, expensive and distracting. And companies more often than not play the role of the “big bad defendant.� Given the general negative context, it is not surprising that business owners and in-house attorneys have an overall disdain for the litigation process. Unfortunately, this natural aversion has led countless companies to abandon valid claims that may help them recover money, property or otherwise advance their business interests. Of course, not even all legitimate claims ought to be pursued, but they should be scrutinized carefully and treated as company assets throughout the decision-making process. The failure to do so could be tantamount to leaving money on the table. So who decides when it’s appropriate to sue a vendor or service provider who has done the company wrong? While business owners generally make the ultimate decision, in-house attorneys or outside counsel can help with analyzing the potential impact that litigation will have on the company. Using a general framework of questions, you can better assess which claims are best resolved through litigation. It also can help make your case to your executives. The following highlights some key considerations in evaluating whether to pursue claims through litigation. ■Are you likely to win? Simple as it sounds, first ask, “Is this a winnable case?� If you do not believe your company is likely to win, do not file suit. Filing a lawsuit that you recognize from the get-go to be a roll of the dice may not necessarily be a good investment. A proper feasibility analysis will require an up-front investment in legal research and pre-suit investigation. The good news is that competent outside litigation counsel can conduct this research and use it to prepare a complaint if the decision is made to file. ■Does the potential recovery exceed the expected expense of litigation? As a general rule, litigation is not well advised when the recovery costs are likely to exceed the recovery itself. There are situations, however, when this rule should be disregarded. For example, if the purpose is to preserve a company practice, such as enforcing non-competition agreements or to protect an asset in the case of patent infringement, then the fact that the potential monetary recovery is less than the likely costs is of less consequence. If the conduct at issue is something your company cannot ignore, then the amount of the potential recovery becomes less critical. Consider whether there are interests, other than monetary, that justify
KIMBERLYMOSES
ADVISER the litigation. ■Who is your defendant? At the beginning, consider whether your defendant is personally collectible and any potential recovery can be covered by insurance. If the defendant has no money or property, any resulting judgment will be worthless. Literally. In addition to assessing the collectability of the defendant, be sure to assess whether the defendant is likely to assert a counterclaim, as well as if the defendant is likely to sue your company if you don’t file first. In considering whether your lawsuit might draw a counterclaim, consider whether the counterclaim would be legitimate or simply a bargaining chip to facilitate a settlement. You and your counsel usually can figure out what type of counterclaim is most likely, as well as how defensible it is likely to be. If the defendant is likely to sue, consider filing first in order to control the jurisdiction and venue. And do not underestimate the positive public relations that you may get from being the plaintiff. Like it or not, if your company is the plaintiff, you are more likely to be viewed as the entity that was wronged. ■Tell your executives what to expect from the litigation process. Litigation has its ups and downs. Explain to your company’s executives that every day will not be a good day. Some information gathered during discovery is going to be favorable for your case and some may not. Your company will receive good discovery and motion practice rulings, and likely some less favorable. Your executives should understand that litigation is going to have intermediate roadblocks, but that it is the long-term outcome that matters. Do not let management believe that interim setbacks mean that the litigation was a mistake. Sometimes it makes good business sense to sue. But the determination should only be made after careful consideration and following a detailed discussion with your company’s management. Careful analysis of the strengths of your case, the potential recovery and impact on the company and its stakeholders will facilitate whether it is in your company’s best interest to pursue its claim. ■Kimberly Moses is a litigation partner at Calfee, Halter & Griswold LLP.
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Policy: Employers drafting guidelines Lawyers boost efforts to ease ex-cons into society Choosing to monitor
continued from PAGE 15
first formal complaint by the federal agency to pertain to Facebook, said board spokeswoman Nancy Cleeland. According to the complaint, when the female employee was asked by her supervisor to prepare an investigative report concerning a customer complaint about her work, she asked for and was denied union representation. Later that day, the employee posted remarks on her Facebook account — including one that implied her supervisor was a psychiatric patient — that then drew supportive responses from her co-workers, Ms. Cleeland said. The employee, Dawnmarie Souza, was terminated in late 2009 for her postings because they violated the company’s Internet policies, the complaint states. The regional National Labor Relations Board office found that the woman’s Facebook posts were protected under federal law that allows employees to discuss the terms and conditions of their employment with co-workers. The complaint requests the employer be required to pay Ms. Souza interest on any back pay and other awards. Asked if he’s had clients who’ve clashed with employees over social media, Seth Briskin of Meyers, Roman, Friedberg & Lewis in Beachwood said one Northeast Ohio client discovered last spring that an employee not only identified on her Facebook page the company she worked for, but included information on “very adult, erotic activities� she participated in, complete with “racy pictures.� “It had come back to (the company) from a customer, and it did not look good,� he said. The company, which Mr. Briskin declined to identify, asked the woman to remove the company mention. The woman obliged and continues to work there. “None of my clients spend their days thinking of ways to pry into personal lives,� he said. “It’s only when something goes wrong, or when they hear something, that they will look into it.�
The marketing team of The Cleveland Clinic does monitor sites such as Facebook and Twitter daily, but it monitors its own web pages, not employees’ individual accounts, said Paul Matsen, chief marketing and communications officer. Additionally, the Clinic uses a third-party company to help it monitor the blogosphere. Mr. Matsen said the Clinic has not had problems with any of its 42,000 employees making negative posts about co-workers or the Clinic itself. The top priority in its monitoring is patient privacy, Mr. Matsen said, noting the Clinic has not had a problem with inappropriate posts about patients either. Charles Billington, an attorney for Vorys, Sater, Seymour and Pease LLP, said he sees clients monitoring sites to protect copyrights and control the use of company names and logos. He said he also is aware of local examples in which employees were disciplined after they called in “dead sick� and later revealed the contrary online. One risk in employers monitoring Facebook and the like is that online pages can be created by anyone in anyone’s name, said Jason Morris, president of EmployeeScreenIQ, a Cleveland-headquartered employment screening firm. Also, Mr. Morris noted, cracking down on employees for what they say on social networking sites — beyond possibly drawing the attention of the National Labor Relations Board — can prove to be “a major PR nightmare� for companies.
Putting it into policy Mr. Briskin said he’s drafted probably a dozen policies this year that tackle social media; other local attorneys cited similar numbers. Many say the policies often require employees to follow other company policies while on social media, for example, not harassing or intimidating others. However, employers may not restrict employees’ ability to discuss the terms and conditions of their work, Mr. Briskin emphasized.
“Clearly you don’t want employees to be defaming you in the public,â€? he said. “That being said, it’s a very fine line between free expression and causing harm and damage to a company’s reputation.â€? SS&G, an accounting firm headquartered in Cleveland, soon will introduce a new policy on blogging and personal web sites, said Rebecca Osborne, director of human resources. With the help of lawyers, the firm added the policy because it was updating its handbook and because it thought it prudent to provide employees guidance. The policy, which is to go into effect about mid-December, asks that those who identify themselves as SS&G employees on online social sites make it clear that the views on their pages are theirs only. Additionally, it prohibits employees from disclosing confidential or proprietary information and from making defamatory or discriminatory statements about SS&G employees, partners and clients. Some attorneys were hesitant to opine on the recent complaint issued by the National Labor Relations Board, noting that no final decision has been made. A regional hearing on the case is scheduled for Jan. 25. Though it’s unclear what the outcome will be, Ms. Anderson said employers need to scrutinize their social networking policies now. “This is a very fluid area of law right now,â€? she said. “The best step for employers is to make sure they do have policies in place, but to be cognizant of the fact that with each day there could be changes that affect the content of those policies.â€? â–
By AMY ANN STOESSEL astoessel@crain.com
N
o driver’s license. An incorrect background check. Bankruptcy. There are all sorts of complications that might be faced by those re-entering society after incarceration. Some Northeast Ohio lawyers, however, have stepped up in recent months to offer their assistance to those facing what often can be a rocky transition back to society from the criminal justice system. “They’re facing lots and lots of obstacles,� said Brian Lamb, a partner at Thompson Hine. “If you can remove the legal ones, you are drastically improving their chances of success.� To that end, the Cleveland Metropolitan Bar Association has started hosting pro bono advice clinics at the North Star Neighborhood Reentry Resource Center, which is operated by the Oriana House on East 55th Street in Cleveland. In all, nearly 60 people have been seen during four intake clinics, with more than 15 coming to the first one in August. Sessions are scheduled through July, and the clinics on average have been staffed with two to three attorneys and one law student. The North Star advice clinics, which are targeted toward those with re-entry issues, were modeled after those already held through the Cleveland Homeless Legal
Assistance Program, a partnership program of the Cleveland Metropolitan Bar Association’s Committee to Aid the Homeless and the Northeast Ohio Coalition for the Homeless. Julianne Kurdila, a chief assistant director of law for the City of Cleveland and chair of the bar association’s Justice For All committee, said the new pro bono program was initiated after the Justice For All committee was approached by the Cleveland nonprofit Towards Employment with a request to get more lawyers involved with issues surrounding re-entry. Ultimately, Ms. Kurdila said the aim of the clinics is to assist with the legal obstacles facing the re-entry population such as financial, child support and expungement issues. But, she noted, “We are just one spoke in the wheel.â€? Concurrent to the clinics, Thompson Hine’s Mr. Lamb also is behind a more grassroots effort known as the Cleveland Lawyers’ Initiative on Reentry. Mr. Lamb, who is on the board of Towards Employment, has brought together about 25 attorneys to further tackle re-entry issues. In addition to volunteering to staff the advice clinics, Mr. Lamb and his initiative have hopes for an employer awareness seminar in the spring and are aiming to set up a system that would enable exoffenders to review their own background checks for errors. “The main thing we’re doing is trying to collaborate,â€? he said. â–
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Patent reform may have ‘no clear-cut winner’ But some worry rules may stall advancement, add more costs to process By JOEL HAMMOND jmhammond@crain.com
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y no means does Bob Schmidt, the chairman of a group of Northeast Ohio medical device companies, think the United States’ existing patent laws are perfect. Obtaining a patent is an arduous, time-consuming process, one that for Mr. Schmidt’s companies — including Cleveland Medical Devices, Orbital Research Inc., NeuroWave Systems and Flocel Inc. — has taken as long as six years. Mr. Schmidt said he owns 40 patents, with another 60 working their way through the U.S. Patent Office, many of which have been there upwards of six years. Mr. Schmidt’s vehement opposition, then, to pending patent reform legislation — the Patent
Reform Act of 2010, currently in the Senate — is telling. “It’s going to make getting a patent incredibly more expensive, and once you have the patent, it’s going to be worthless,” said Mr. Schmidt, who said the patents he has obtained have cost anywhere from $10,000 to $50,000. But that figure would rise under the proposed legislation, which offers more road blocks, Mr. Schmidt said. The legislation provides a more formal opposition period, more commonly known as post-grant review. That process, which takes place after a patent is granted, allows challenges from competitors or, as Mr. Schmidt fears, anyone — foreign governments, large corporations — looking to increase a patent holder’s costs. Post-grant review takes place after an earlier review, often referred to as issuance of prior art, that currently is in place and will remain. All that, Mr. Schmidt says, will prevent companies like his from obtaining the angel and venture capital funding necessary to move forward with their next idea.
That’s not to say each company in Northeast Ohio will be affected the same way. Area patent attorneys say there is no one-size-fits-all effect. “There is no clear-cut winner,” said David Cupar, the co-chair of the intellectual property practice at McDonald Hopkins LLC. “The No. 1 objective is to harmonize laws with the rest of the world.” But the increasing costs of doing business also concern William Whittenberger, the president of Garrettsville-based Catacel Corp., which makes heat-exchanging materials and catalyst supports that enable breakthroughs in production and energy efficiency. The company owns 22 issued patents and has more than 20 others pending in the U.S. Patent Office. “I have to make sure it’s worth the cost of filing the patent,” he said. “We have all kinds of ideas all the time, but if we filed them all, we’d go broke.” “(The current rules are) a bit of a morass. There are a lot of patents out there. You can spend an awful lot of time searching, and get scared to death.”
“We have all kinds of ideas all the time, but it we filed them all, we’d go broke.” – William Whittenberger president, Catacel Corp.
A little more certainty The legislation, backed by a bipartisan group of 25 senators, including U.S. Sen. Sherrod Brown of Avon, likely will not move much from its spot in the Senate during the current lame-duck session. That doesn’t mean it won’t eventually pass, though. Mr. Cupar said, similar to prior legislation, this bill likely will pass at some point over the next two-year congressional term. Mr. Cupar and other Northeast Ohio patent attorneys, who agree the process is costly, point to greater predictability provided by the proposed changes. “Patent cases have become very expensive, and protecting resources and research and development has become an unpredictable process,” said Josh Ryland, a partner in the intellectual property and patent litigation groups in the Cleveland office of Taft Stettinius & Hollister LLP. “In the time since the last overhaul, we’ve had game-changing technology, and we need to put the proper incentives on protecting it.” Damages have garnered a lot of attention in this reform bill. Proof of willful infringement now would be necessary for enhanced damage awards, limiting the amount parties alleging patent infringement could seek without justification. The legislation won’t cap damages, so if a company can prove a massive competitive injury, it’s entitled to what a jury awards. “You’re going to have to prove lost profits, not just throw numbers out there,” said Megan Dortenzo, the intellectual property group practice leader at Thompson Hine LLP. But proving that competitive injury, and its scale, is another area that concerns Mr. Schmidt. “I’ve spent $250,000 to $500,000 on a patent, and now I have to spend thousands more on an attorney at $400 an hour to prove
lost profits,” he said. On the other hand, proving competitive injury also may help root out claims by non-practicing entities, or what Ms. Dortenzo calls the “ambulance chasers” of intellectual property law. She said those firms don’t produce anything; instead, they obtain patents and file lawsuits against anyone who comes near them. That competitive injury requirement also would apply to false marking, another focal point of the reform act. Currently under the false marking statute, anyone — not just competitors, but any Joe Jones or Jane Smith — can sue for false marking, meaning someone can find a dozen pairs of headphones, each marked with a “This product is covered by Patent Y” disclaimer, and then seek $500 per occurrence if that patent no longer is valid. “Many lawyers are going through Walmart shelves and finding things with expired patents, then suing,” Ms. Dortenzo said. “This would put parameters on that. Not just anyone would be able to sue.”
Leave the money One area on which many will be keeping an eye is appropriations of the United States Patent Office’s funding, now in limbo because of Republicans’ new control of U.S. House of Representatives. Ms. Dortenzo wonders if Republicans, battling with President Obama, will restrict his ability to reappropriate to the general fund excess funds in the patent office. That would be music to Mr. Schmidt’s ears. “They’re taking money out of this wealth creation mechanism and using it to pay for wars and Social Security,” he said. “The office is underpaid, there are not enough examiners. The fees I pay for a patent amount to an invention tax.” ■
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20101206-NEWS--19-NAT-CCI-CL_--
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DECEMBER 6 - 12, 2010
CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
19
LARGEST OFFICE LEASES RANKED BY SQUARE FEET
Rank Building
Address City, Zip
Square feet
Tenant
Tenant representative
Landlord representative
115,417
Calfee, Halter & Griswold LLP
The Gatto Group Inc.
NA
1
Calfee Building
1403 E. Sixth St. Cleveland, 44113
2
Stonegate Corporate Center I
4125 Highlander Parkway Richfield, 44286
83,370
Cisco
Jones Lang LaSalle
NA
3
Rosetta Center
629 Euclid Ave. Cleveland, 44114
80,713
Rosetta
Grubb & Ellis
NA
KeyBank Center
800 Superior Ave. Cleveland, 44114
55,523
KeyBank
Jones Lang LaSalle
NA
3656 Massillon Road
Uniontown, 44685
52,000
InfoCision Management Corp.
NAI Cummins
NAI Cummins
6225 Oaktree Blvd.
Independence, 44131
41,442
Goodrich Corp.
Ostendorf-Morris Co.
Ostendorf-Morris Co.
1925 Enterprise Parkway
Twinsburg, 44087
37,450
Windstream Communications Inc.
Partners National Real Estate Grubb & Ellis Group
8
Skylight Office Tower
1660 W. Second St. Cleveland, 44113
34,100
GSA
Studley
CB Richard Ellis
9
Pioneer Building
4800 E. 131 St. Garfield Heights, 44125
34,055
Solid Waste Management Cuyahoga County
NA
Dalad Realty
North Point Tower
1001 Lakeside Ave. Cleveland, 44114
32,900
CGI Technology & Solutions Inc.
CB Richard Ellis
CB Richard Ellis
29000 Aurora Road
Solon, 44139
32,500
Cleveland Clinic Foundation
CB Richard Ellis
Midwest Real Estate
4600 Northfield Road
North Randall, 44128
30,000
NA
NA
Seiger Realty
Lincoln Building
1367 E. Sixth St. Cleveland, 44114
29,683
Oswald Cos.
Jones Lang LaSalle
NA
Park Center Plaza I
6100 Oak Tree Blvd. Independence, 44131
28,300
U.S. General Services Administration
Jones Lang LaSalle
CB Richard Ellis
AES Business Campus
388 S. Main St. Akron, 44311
27,275
Pathways to Success
NA
Schipper Group Ltd.
2500 Enterprise Pkwy.
Twinsburg, 44087
26,128
Experient
Ostendorf-Morris Co.
Chartwell Group
8249 Mohawk Drive
Strongsville, 44136
25,200
Enterprise Rent-A-Car
CB Richard Ellis
Carnegie Development
Reserve Square
1701 E. 12th St. Cleveland, 44114
25,000
Southwestern Acquisition LLC
NA
Ostendorf-Morris Co.
19
Enterprise Place
3401 Enterprise Parkway Beachwood, 44122
24,413
University of Phoenix
Allegro Realty Advisors Ltd.
Goldberg Cos.
20
Southpointe Corporate Center
6770 W. Snowville Road Brecksville, 44141
23,541
NVR Mortgage Finance Inc.
Jones Lang LaSalle
Dalad Realty
21
MK Ferguson Plaza
1500 W. Third St. Cleveland, 44115
22,434
SP Data LLC
Grubb & Ellis
CB Richard Ellis
22
Western Reserve Building
1468 W. Ninth St. Cleveland, 44113
22,038
KA Inc.
Allegro Realty Advisors Ltd.
NA
23
Eastpoint II
6095 Parkland Blvd. mayfield heights, 44124
21,869
The Austin Co.
Jones Lang LaSalle
NA
24
Park Center Plaza III
6050 Oak Tree Blvd. Independence, 44131
21,549
Farmers Insurance
Jones Lang LaSalle
CB Richard Ellis
25
Euclid Building
24701 Euclid Ave. Euclid, 44117
21,200
University Hospitals
NA
CB Richard Ellis
26
Tower at Erieview
1301 E. Ninth St. Cleveland, 44114
20,736
Wells Fargo
Jones Lang LaSalle
NA
27
Spectrum Building
6060 Rockside Woods Blvd. Independence, 44131
19,997
The Cleveland Clinic
NA
Dalad Realty
28
One Cleveland Center
1375 E. Ninth St. Cleveland, 44114
19,855
Attevo Inc.
Jones Lang LaSalle
CB Richard Ellis
29
One Cleveland Center
1375 E. Ninth St. Cleveland, 44114
19,270
Mannion & Gray Co.
Chartwell Group LLC
Gatto Group Inc.
30
Crown Centre 1
5005 Rockside Road Independence, 44131
18,902
Bureau of Alcohol, Tobacco, Firearms and Explosives
Jones Lang LaSalle
Cresco Real Estate
31
Sprague Center
14955 Sprague Road Strongsville, 44136
18,800
National Automotive Experts
Pinnacle Real Estate Services
CB Richard Ellis
32
Aclara
23905 Mercantile Road Beachwood, 44122
18,695
Tremco
Ostendorf-Morris Co.
Ostendorf-Morris Co.
33
Lincoln Building
1367 E. Sixth St. Cleveland, 44114
18,000
The Renaissance Group
Breen & Co.
Breen & Co.
Cleveland Technology Center
1525 Rockwell Ave. Cleveland, 44114
16,800
XO Communications
Jones Lang LaSalle
NA
700 Beta Drive
Mayfield Village, 44143
16,181
Health 360 Group LLC
Grubb & Ellis
NA
Eton Tower
28601 Chagrin Blvd. Woodmere, 44122
15,472
Meyers, Roman, Friedberg and Lewis LPA
Ostendorf-Morris Co.
NA
37
Highpointe Corporate Park
9885 Rockside Road Valley View, 44125
15,240
M & S Media Inc.
Acadia Holdings
Grubb & Ellis
38
Webster Square
1366-1370 Market Ave. N. Canton, 44714
15,136
Stark County Community Action Agency
NA
REM Commercial
Midtown Square
3634 Euclid Ave. Cleveland, 44115
15,043
Cleveland Center for Arts and Technology
NA
Ostendorf-Morris Co.
8001 E. Pleasant Valley Road
Independence, 44131
14,000
NA
NA
NA
Great Northern Tech I
25111-25221 Country Club Blvd. North Olmsted, 44070
13,267
First Data
Jones Lang LaSalle
Amicus Holdings Ltd.
5700 Darrow Road
Hudson, 44236
13,210
Beauty Systems Group LLC
The King Group
Davis Development
Euclid Building
24701 Euclid Ave. Cleveland, 44117
12,800
University Hospitals
Grubb & Ellis
CB Richard Ellis
4 5 6 7
10 11 12 13 14 15 16 17 18
34 35 36
39 40 41 42 43
Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com. Source: Information provided by CoStar Group Inc. www.costar.com and the tenant and landlord representatives. Information is for Cuyahoga, Geauga, Lake, Lorain, Mahoning, Medina, Portage, Stark and Summit counties for Oct. 1, 2009, through Sept. 30, 2010 and includes new leases.
RESEARCHED BY Deborah W. Hillyer
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CRAIN’S CLEVELAND BUSINESS
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GCP: Visitors bureau’s future locale unclear continued from PAGE 1
Mr. Gilbert said the two to discuss his organizaorganizations have not yet tion’s new home until a chosen a new headquarfinal deal is signed, but two ters but should resolve sources said the group their plans early next intends to move to what is year. Positively Cleveland now called the LS Brand has about 35 employees Building. The sources, one and the sports commisin the real estate business, GCP president sion employs 11 in an the other associated with Joe Roman office in Terminal Tower one of the organizations on Public Square. involved in the shuffle, asked not to The ground-floor space in the be indentified because of their Higbee Building that Positively proximity to the deal. Cleveland occupies has provided a Positively Cleveland will move highly visible location for its tourist separately and will share space center. It likely will be looking for with the Greater Cleveland Sports space that offers the same visibility Commission. On Jan. 1, sports and foot traffic. commission president David A casino cometh Gilbert will add the presidency of Cleveland casino developer Positively Cleveland to his business Rock Ventures LLC, a part of the card.
Contact: Phone: Fax: E-mail:
AUCTION December 15, 2010, 11:00 AM
Bambeck Auctioneers Inc. www.bambeck.com
Story from www.CrainsCleveland.com.
K&D Group brings on CFO K&D Group, the apartment and hotel developer based in Willoughby, named Steven Osgood, a financial executive with strong banking relationships and public company experience, to a newly created position as its chief financial officer. K&D CEO Douglas Price said the company has no current plans to go public. However, he said Mr. Osgood has experience guiding companies through initial public offerings that could be valuable if forming a real estate investment trust becomes part of K&D’s plans. — Stan Bullard
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In recent months, talk in the real estate community was that GCP would end up in the PlayhouseSquare area, though some hoped the organization would end up closer to the East Ninth Street and Euclid Avenue area, where it could have kicked off revitalization of that part of downtown. Last May, Mr. Roman said he was notified by Forest City Enterprises Inc., his Higbee Building landlord, that he should start looking for new space. GCP and Positively Cleveland moved in 2007 into the Higbee Building from Terminal Tower. Forest City also owns Terminal Tower and Tower City Center. ■
REAL ESTATE
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domain of Cleveland Cavaliers owner Dan Gilbert, is exploring the idea of opening what’s called a “Phase I casino” in the lower levels of the Higbee Building to bring gambling to Cleveland as quickly as possible. Design work is under way for a permanent casino building, or Phase II, along the Cuyahoga River behind Tower City Center. The permanent building is not expected to be completed until 2013. A temporary casino in the existing Higbee Building would be able to open sooner. While Mr. Gilbert hasn’t committed to the Phase I casino, Rock Ventures spokeswoman Jennifer Kulczycki said the company “is still moving forward in its assessment of the opportunity.”
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20101206-NEWS--21-NAT-CCI-CL_--
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DECEMBER 6 - 12, 2010
CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
Banks: Regulations often can be suffocating continued from PAGE 3
“If you’re not making money today, chances are with financial reform … it’s unlikely you’re going to be able to make it work tomorrow,” Mr. Duncan said. “I think that, realistically, some of the community banks are going to come to the conclusion: ‘Let’s put a for-sale sign up.’” One challenge affecting small banks disproportionately is the manpower it could take to navigate a more heavily regulated industry. Whereas large banks have dozens of compliance officers to grapple with new regulations, smaller banks don’t, Mr. Chessen said. Take Portage Community Bank, a two-branch bank with $250 million in assets. It reported to the Federal Deposit Insurance Corp. that it employed 48 full-time equivalent employees as of Sept. 30. One staffer is a compliance officer, CEO Rick Coe said, though he noted that other employees, including branch managers and mortgage originators, share in the compliance responsibility. Charlie Crowley, managing director of Paragon Capital Group LLC., an investment banking firm in Mayfield Heights that provides merger advisory services to banks, said most small banks “were victims of the financial meltdown — they were not causes of it.” “And yet now they’re all paying the price” of the giant banks’ indiscretions, said Mr. Crowley, who noted that in addition to higher compliance costs, there also are higher FDIC insurance premiums to be paid. Despite these potential hurdles, executives of some of Northeast
Ohio’s smaller banks indicate they’re not about to give up their independence.
Sell? ‘No, thanks’ During the past three or four months, Western Reserve Bank, a bank with $200 million in assets and locations in Brecksville and Medina, has been asked by three investment banking entities to discuss merger opportunities, said Ed McKeon, president and CEO. Each time he’s brought such requests to the board, Mr. McKeon said, “Our response has been: ‘No, thanks.’ “(The media) all say the same thing, that the community banks are in trouble with more regulation,” Mr. McKeon said. “Look, we’ll figure out a way to do it. … I just don’t know how.” The disappearance of some small banks may be influenced less by rising costs and more by rising frustration among managers and board members with the mechanics of running the business, according to Mr. McKeon. He said he now spends two to three times the amount of time he once did dealing with regulation and regulators. His aggravation level, he admits, is “off the charts.” “Like most small bankers, I am not really running a bank for the customers and the shareholders,” he said. “I’m running a bank for the regulations and regulators. “After a while, when you spend a higher and higher percentage of your time dealing with this stuff … many bankers and boards say, ‘You know what? Life’s too short. Let’s sell the bank. Let’s merge it,’” Mr. McKeon said. There are no such plans for West-
ern Reserve Bank, Mr. McKeon said, noting he has no interest in deals, particularly after the bank’s stock “was just hammered” and is now nearly $10 a share from $32 in May 2007. He also has no plans to hire more people to handle the new regulation; instead, he said, “we will have to learn it.”
A freeze likely to thaw Portage Community Bank does plan to hire staff to handle new compliance demands. After a twoyear hiring freeze, the bank already has reassigned some duties to “leverage the people we’ve got,” and Mr. Coe anticipates hiring up to five people over the next three years. Larger banks likely won’t need to increase their staffs by 10% like his bank, he noted. Yet despite what likely will be a higher cost of doing business, Portage Community Bank isn’t looking to merge with another bank, Mr. Coe noted.“We can see the changes, we can see those costs, but as long as we continue to have our eye on the customer, we will be able to weather that through,” Mr. Coe predicted. “There’s a need for community banks, and I don’t think that will ever change.” Longtime bank investor Umberto P. Fedeli agreed.
Dinosaurs won’t survive “Small banks that do a good job with products, services ... will not be a thing of the past,” predicted Mr. Fedeli, who said he is the single largest shareholder in the parent companies of Lorain National Bank, with assets of more than $1.1 billion, and Park View Federal Savings Bank, with assets of nearly
Parties: Lavish bonanzas a thing of the past continued from PAGE 3
Nick Borelli, marketing director of Executive Caterers at Landerhaven, said the big event center in Mayfield Heights is seeing a 20% year-overyear increase in the number of corporate holiday parties booked. But while some companies that bowed out last year are back in partyplanning mode, few gatherings will be ostentatious. “I don’t think that putting on the lavish party for the employee is going to be the case ever again,” Mr. Borelli said. “If you didn’t give everyone a raise (and) then you have that party … every drink they have, every steak they have, they think to themselves, ‘This could have been my raise. This could have been the person we let go.’” While Mary Lessick does not anticipate a better year than 2008, the director of sales and marketing for The Corner Alley expects to do more in sales this year than in 2009 despite fewer bookings at the popular bowling alley and banquet hall in downtown Cleveland’s East Fourth neighborhood. Ms. Lessick said the number of company parties booked thus far for December is roughly half the 260plus in December 2008 and is 50 fewer than last year’s 172. However, she said some companies have made pricier menu selections than they dared to last year, which will boost revenue.
$900 million. Banks that provide the services customers demand and that diversify their offerings can take on larger institutions just as a small chocolatier such as Malley’s can compete with Godiva, said Mr. Fedeli, who also is a Park View board member. Those that don’t will be “dinosaurs,” he said — “potential targets for other banks to pick up market share” or “statistics” of bank failure. Some local bankers see opportunity amid the challenges. Mr. Duncan of Ohio Commerce Bank predicts as smaller banks are acquired and larger banks institute fees to make up lost income, business owners will look to bank elsewhere. “We’re looking forward to the merger and acquisition activity,” he said. “Certain customers (will) look for alternatives, and that’s what we are: an alternative.” Community banks can capitalize on the displacement going on, agreed Daniel E. Klimas, president and CEO of Lorain National Bank and its parent, LNB Bancorp Inc. Lorain National, Mr. Klimas said, is “certainly willing to look at opportunities to acquire other organizations” as long as such actions make sense for the bank’s shareholders. Mr. Klimas is one of many who hope regulators will tailor new regulations to the risk and size of institutions. “It’s much more difficult to implement (regulations) that way than to create a generic solution and apply it across the board,” Mr. Klimas acknowledged. “But we’re hopeful there will be a thoughtful approach to implementing the (Dodd-Frank) bill based on each of our unique situations.” ■
and you’re looking at cutting costs, guess what? Holiday parties and things that aren’t absolutely crucial to the business are things that get cut,” Mr. Clarke said.
The surveys say …
Both Mr. Borelli and Ms. Lessick also noted this trend: It’s early December, and the phone still is ringing. “Now I think companies wait for their second- and third-quarter reports to come out, and then in the fourth quarter they decide if they have the money to spend,” Ms. Lessick said. Such last-minute planning was unheard of in years past, she noted. After suspending its holiday party in 2008 and 2009, Panther Expedited Services in Seville is inviting its more than 300 employees and their
families — and even the community — to enjoy cider, cookies and Santa Claus on Dec. 12 at its corporate offices. “Obviously the economy is better, and our performance is better,” said Andrew Clarke, president and CEO of Panther, which moves freight by air, ocean and ground. “The type of party that we’re having is certainly reflective (of the times). It’s not like it’s 2006, 2007, and everyone’s having rather lavish holiday parties. “When the economy is rougher
Of the 136 Northeast Ohio employers responding to the Holiday Practices Survey conducted by the Employers Resource Council (ERC) in Mayfield Village, 71% said they are planning holiday parties this year, off slightly from 73% in 2009. Among those respondents, 61% said they were budgeting the same for their parties as last year, while 5% said they were budgeting less and an equal percentage said they were budgeting more. That’s better than 2009, when 36% said they were budgeting the same, 35% said less and 2% said more. The 2010 survey by the New York executive search firm Amrop Battalia Winston revealed the “worst holiday party slump” in the national survey’s 22-year history. Conducted in September and October, the survey was answered by 103 of “America’s leading businesses,” according to a company release. Seventy-nine percent of businesses were planning some type of holiday celebration — down from 81% in both 2009 and 2008. Like the local survey, the national survey found 61% of the companies that host parties will do so at the same level as past years.
The party isn’t over for all The recession’s blow to compa-
21
Small bank consolidation now tradition The expected consolidation of smaller banks amid tighter industry regulation would be in keeping with an ongoing trend. In December 1992, the Federal Deposit Insurance Corp. collected data from more than 13,800 banks nationwide — nearly double the 7,760 institutions reporting as of Sept. 30 this year. Those numbers included 453 Ohio banks in December 1992 and 240 Ohio banks in September of this year. Much of the consolidation was the result of change in the mid1990s that allowed interstate banking, said James Chessen, chief economist for the American Bankers Association. Mike Van Buskirk, president of the Ohio Bankers League, cites another reason: the way banks have been “buried with layer after layer after layer of uncoordinated, often redundant, often contradictory regulation.” Merger-and-acquisition activity among banks and thrifts has been lower since 2008 than it was between 2000 and 2007, when an average of 262 deals were announced per year, according to research firm SNL Financial. The data reveals that 144 deals were announced in 2008, 120 in 2009 and 159 as of Nov. 23, 2010. Insiders predict M&A activity won’t pick up here, at least initially, because the region isn’t home to as many small banks as other parts of the country.
nies’ plans is evident to Ms. Lessick of The Corner Alley, who estimated 75% of party budgets remain about half what they were in better economic years. Some companies have nixed the open bar and no longer are inviting employees to bring spouses and guests, she said. Mr. Borelli of Executive Caterers likewise sees the spending shift. He said the “whole crazy seafood buffet with — you name it — lobster, crab legs, shrimp all over the place” — is being replaced by plated dinners of beef and chicken. Perhaps, then, Great Lakes Brewing Co. is an anomaly. It’s not just that Cleveland’s bestknown microbrewer has continued its off-site holiday parties for its 140person staff; it also has maintained, if not increased, its party budget, which totals thousands of dollars, and continues to give year-end bonuses, too, said Michelle Belviso, human resources generalist. “We have been successfully growing our business over the course of the last several years despite the economy,” Ms. Belviso said. “(The party) allows everybody to celebrate a year well done.” Panther Expedited Services also has continued to reward employees with performance-based bonuses, Mr. Clarke noted. This was the first year the ERC included in its survey a question about bonuses, said Marty Mordarski, director of research and membership. Thirty-two percent of employers responding said they’re planning to give employees bonuses this year at an average amount of $712. ■
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Stocks: Many companies’ prices stay true to cyclical nature continued from PAGE 1
Mr. Luce said. For example, specialty chemical maker Lubrizol Corp. saw its stock price as of last Tuesday rise by 320% since March 9, 2009, while Nacco Industries Inc., a supplier of lift trucks and coal, realized an increase of 611% over the same period. Those companies, as well as diversified manufacturers Eaton Corp. and Parker Hannifin Corp., boosted the index because they had big gains and were heavily weighted in the index, Mr. Luce said.
Bouncing the region’s way The index probably does not owe its recent success to Northeast Ohio CEOs being any smarter than their counterparts elsewhere. It’s more a matter of the economic sectors in which those companies are engaged, said Mr. Luce and others. Public companies in Northeast Ohio tend to be involved in industrial production, or the production of industrial raw materials, both of which are sectors that have done well during the recovery so far. “Most of the companies in the index tend to be, or are, cyclical companies,” said Mark Oelschlager, portfolio manager for Oak Associates
BIG BOOSTS The Northeastern Ohio Index is weighted, so the area public companies whose stock prices are highest have the biggest impact. Here’s four:
Weight
Nov. 30, ’10 price
7.06%
$104.56
$24.89
320%
Nacco Industries Inc.
6.60
92.61
13.03
611
Eaton Corp.
6.48
96.40
28.59
237
Parker Hannifin Corp.
5.43
80.23
27.01
197
Company Lubrizol Corp.
in Bath. “They tend to get hurt the most in a downturn, especially when that downturn is because of concerns about economic growth. Conversely, they tend to benefit the most when those fears are allayed.” That tendency has been true so far for local manufacturing companies that lost half or more of their market value in the months leading up to March 2009. But the beatdown they took in the panic of 2008 also positioned them to bounce back, said Ken Mayland, president of ClearView Economics in Pepper Pike. “Some of these companies were $2 stocks, and then they were $8 stocks,” Dr. Mayland said. “They went down more going into the troubles, so it’s natural that they’re
March 9, Change ’09 price
also bouncing back more.” Nonetheless, most of these same companies now have come close to, and in some cases have eclipsed, their pre-recession price levels. For example, Nordson Corp., a maker of automated spraying equipment, recently topped $80 a share — more than $5 a share above any price it fetched before the economic downturn.
Happy to be over-weighted Those companies, and the index they support, have done well in the recovery because manufacturing and raw material companies have been two of the sectors that have shown the strongest rebound from the recovery thus far, said Ned Hill, dean of Cleveland State University’s
Maxine Goodman Levin College of Urban Affairs. “What we’ve got is a portfolio of local stocks (that) represents our economy, so it’s over-weighted toward industrials and materials,” Dr. Hill said. “Seventy percent of what is in this index is industrial and materials.” Dr. Hill also noted that many of the area’s public companies, especially its industrial companies, do a good deal of their business overseas. Consequently, they’ve been able to take advantage of stronger growth in markets such as China, which came out of the recession stronger than the United States. However, that reality also means the stock prices of these companies have little to no bearing on the state of the economy in Northeast Ohio
or the fortunes of the many smaller, often more parochial companies that make up the local economy. “Does this mean the local economy is doing well? You cannot say that,” Dr. Hill said. “What it says is companies here are globally integrated and they’re figuring out what they do well and how to work the globe.” The region still benefits from companies with strong stock prices, though, because they are less likely to be bought out, Dr. Hill said. The future should hold more of the same, experts say. “I think they’re still coming back,” Mr. Oelschlager said. “There’s still some skepticism out there about economic growth, but in the past few weeks we’ve gotten some good news about the economy.” ■
Doing our part to keep our Great Lake great. The Northeast Ohio Regional Sewer District is proud to protect public health and our environment.
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THEINSIDER
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REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
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Providence House bids to make auction more fun
The big story: University Hospitals kicked off the public phase of a $1 billion fundraising effort with the announcement of a $42 million gift from Lee Seidman, founder of The Motorcars Group, and his wife, Jane Seidman. The gift is the largest in the health system’s 144-year history. University Hospitals CEO Thomas F. Zenty III said the sysPHOTO PROVIDED tem’s new, $260 million Lee and Jane Siedman cancer hospital at the UH Case Medical Center campus would be named after the Seidmans. The 375,000-squarefoot, 150-bed facility — branded as the Jane and Lee Seidman Cancer Center — is scheduled to open next spring. See editorial, Page 10.
■Donors no longer will need to walk the length of a football field to check out the items up for bid at Providence House’s annual Deck the Halls fundraiser. Instead, they’ll use handheld devices to bid on an estimated 200 items Providence House is selling through a silent auction at the event, which takes place this Tuesday, Dec. 7, in the AT&T City View Club Lounge at Cleveland Browns Stadium. The technology should lead to more bids because donors can scan items quickly and they receive alerts when someone outbids them, said Providence House president Natalie LeekNelson. The organization expects the system to drive up silent auction revenue by 25%, which will help pay for the emergency services it provides to children at risk of abuse or neglect, Ms. Leek-Nelson said. Plus, it will make the event more enjoyable for the 800-plus attendees who in past years spent a lot of time walking the length of the lounge, she said. “Lines were forming. People were getting frustrated,” she added. Providence House expects to pay about $13,000 to use the system, developed by BidPal Networks of Indianapolis. However, AT&T is throwing in $10,000 to sponsor the system, which is expected to more than pay for itself anyway, Ms. Leek-Nelson said.
All clear: Leaders of the city of Cleveland and Cuyahoga County signed the agreement that will clear the way for construction to begin on the new convention center and medical mart on the Mall downtown. Under the agreement, the county will pay the city $20 million for use of the space under the Mall and will pay the cost of tearing down a 1964 addition to the adjoining Public Auditorium. The city agreed to use part of that money to renovate Public Auditorium so it may be used in conjunction with the convention center. The county also agreed to raise its bed tax 1% and to use the money the increase generates to market the convention center.
Difference of opinion: Kent State University’s $250 million campus renovation and construction plan hit a wall — at least for now — as the university and the Ohio Board of Regents couldn’t agree on a method for financing the bulk of the plan. Kent State president Lester Lefton said the university remains committed to the construction initiative. The cost and the timetable could change, he said, though the university is waiting to make any further decisions until officials have a better idea of what a future state budget holds for higher education in Ohio. The governor must present a budget to the Legislature by March.
WHAT’S NEW
Numbers guys: Parker Hannifin Corp. announced a change in its CFO post. Timothy K. Pistell, executive vice president of finance and administration and chief financial officer, plans to retire next March 31 after 41 years with the company. Jon P. Marten, who has been vice president and controller since August 2008, replaces Mr. Pistell in the two posts effective immediately. Mr. Pistell retains an executive VP title during a transition period. Team players: Beth Mooney has yet to assume the CEO post at KeyCorp, but she already is setting up her management team. KeyCorp said Christopher M. Gorman was named president of Key Corporate Bank and William R. Koehler was named president of Key Community Bank. Both men will report to Ms. Mooney, who is president and chief operating officer of KeyCorp but will assume the CEO post upon Henry Meyer’s retirement next May. To keep up with local business news as it happens, visit www.CrainsCleveland.com.
Watch out for that cliff, investment strategist warns ■ Run with the lemmings, but only to a point, Bruce McCain told a crowd last Friday during Key Private Bank’s Economic and Market Outlook presentation. Growth is sluggish, inflation is a concern and public confidence is low, all of which mean investors face significant challenges, said Mr. McCain, the bank’s chief investment strategist. More than 50 people attended the event at the Cleveland Botanical Garden. “The reality is, we can’t escape the fear around us,” Mr. McCain said. “We all feel it. When fear is at its peak, so, too, are prices at their most opportunistic level. The world is not going to end. Run with the lemmings, but peel off before they go over the cliff.” Watch how the “lemmings” invest in gold, he remarked, but also know that the rapid price appreciation that occurs when people flock to an investment will come to an end and prices can drop quickly. — Michelle Park
In tough times, a bit of social enterprise wins praise
COMPANY: Goodyear Tire & Rubber Co., Akron PRODUCT: Ultra Grip Ice WRT tire Northeast Ohio has avoided significant snow so far, but it’s early, and you know it’s coming. Goodyear’s new tire is designed for those moments when roads go from dry to wet to icy in a matter of hours. The tiremaker says the Ultra Grip Ice WRT is the company’s first dedicated winter tire for SUV and light-truck vehicle segments. The tire has what Goodyear calls “Winter Reactive Technology,” a combination of features “that work together to help provide a balance of starting, stopping and turning action in a variety of weather conditions.” Goodyear says other features of the Winter Reactive Technology are two- and threedimensional tread blades, a directional tread design and a “winter grip compound.” The Ultra Grip Ice WRT comprises two distinctive tread designs — one for light-truck uses and another for SUV/crossover vehicles. The new tire line is offered in 16 sizes. It’s available for vehicles including the Acura MDX, Jeep Grand Cherokee, Toyota 4Runner, Honda Pilot, Dodge Ram and Chevrolet Suburban. For information, visit www.GoodyearTires .com.
More O-M alums find new havens ■ Three more former Ostendorf-Morris Co. agents are hitching their futures to different real estate brokerages, bringing to five this year the number of agents exiting the venerable Cleveland brokerage. Signing on with the Cleveland office of CB Richard Ellis are Barry Holtzer as vice president for corporate services and Jesse Grant as an associate. Both men worked in corporate services at O-M, with Mr. Holtzer serving as its industrial department head. Meantime, Connor Coakley has joined Grubb & Ellis Co.’s Cleveland office unit as an associate vice president from O-M. Mr. Holtzer said O-M’s recent decision to drop its Colliers International affiliation to handle out-of-town brokerage assignments made the move to CB attractive because of its network of offices around the globe. Also joining CB’s Northeast Ohio staff in a new position as director of project management is Eric Verh, previously senior project manager of construction at the Cuyahoga Metropolitan Housing Authority. Mr. Verh has a long commercial construction background, including a stint as vice president of development for Chelm Properties Inc. of Solon. David Browning, CB managing director, said Messrs. Holtzer and Grant will broaden the firm’s corporate services focus. He added that Mr. Verh gives CB the ability to add construction services for clients that need office renovation and other building services as part of their purchase or lease transactions. — Stan Bullard
BEST OF THE BLOGS Excerpts from blog entries on CrainsCleveland.com.
An Actual deal:
TransDigm Group Inc. entered into a definitive agreement to acquire the Actuation Business of Telair International Inc., a subsidiary of Teleflex Inc., for about $94 million in cash. Actuation is located in Simi Valley, Calif., and makes electromechanical products and other components for commercial and military aircraft. Actuation expects revenues in 2010 of about $25 million, two-thirds of which should come from the commercial aerospace market and the rest from the defense market. About two-thirds of its revenues come from aftermarket sales.
The system paid off when the Greater Cleveland Sports Commission used it for its Sports Awards Banquet last January, said Janet Kuiper, executive assistant with the commission. Though Ms. Kuiper couldn’t say how much of an increase in revenue it generated, it worked well enough to convince the commission to use it again for next year’s banquet in February. “We were very happy with it,” Ms. Kuiper said. — Chuck Soder
■ You had to make it through some condescension to get there, but a recent New York Times story about innovations in the economy included kind words for Evergreen Cooperatives in Cleveland. The piece began with the notion that we can’t shop our way out of economic doldrums and then asked several academics to identify promising, growth-oriented initiatives taking place nationwide. Gar Alperovitz, a professor at the University of Maryland, told The Times that local co-operatives sprouting around the country are employee-owned and are getting off the ground with private and foundation money. “Many of his favorite examples are found in Cleveland, of all places — like the Evergreen Cooperative Laundry, an employee-owned firm that provides laundry services to hospitals,” The Times said. (Of course the paper had to throw in that “of all places” phrase, as if it’s impossible to conceive of good ideas from here.) Prof. Alperovitz is tracking enterprises such as the cooperative laundry on a web site, Community-Wealth.org. He said he sees in these companies “the stirrings of a movement animated by the cold reality that neither the government nor private enterprise is on the verge of large-scale hiring,” according to the newspaper.
Cleveland’s the place to be if you hate ATM fees ■ Here are some data to make you glad you live here every time you visit an ATM.
Personal finance web site WalletPop.com reported that Bankrate’s 2010 Checking Study examined ATM fees nationwide and found Clevelanders, on average, pay the lowest ATM fees, at $1.83 per transaction. The national average is $2.33. The highest ATM fees are in Seattle, where bank customers pay an average fee of $2.69. We’re all paying more for the privilege of using ATMs. Bankrate reported ATM fees this year are up 5% from 2009.
For some, the recession is a growth opportunity ■ The Federal Reserve has diminished expectations for the economy, but that’s not affecting growth prospects for megachurches. More than 80% of such churches — those with congregations of 2,000 or more — saw more attendees this year, while just 9% reported lower attendance, according to the “2010 Large Church Economic Outlook Report.” David Fletcher, executive pastor at The Chapel of Akron, said in the report that the recession has had a positive impact on churches. “The recession is helping us focus on what we really need and want to do,” Pastor Fletcher said.
She had banking in her blood from the start ■ Forbes.com ran a Q&A with KeyBank’s Maria Coyne, founder of the Key4Women business initiative, and from what she says, it’s obvious Ms. Coyne has followed the right career path. Banking is a longtime passion for Ms. Coyne. The telling anecdote: While childhood friends played with dolls, she played bank teller, using play money from her Monopoly set.
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