FOCUS | SMALL BUSINESS Working from home during the pandemic could result in a tangle of tax issues. PAGE 10
CRAINSCLEVELAND.COM I JANUARY 11, 2021
REAL ESTATE
Property owners hope for tax relief
Values drop, but the pandemic isn’t grounds for an appeal — yet BY MICHELLE JARBOE
owed to two Canadian banks that financed the purchase of the newspaper by Black. Computershare Trust Co. of Canada is owed $55.5 million, and Canadian Imperial Bank of Commerce is owed $556,000. Another $55.3 million is owed to six employee pension and health funds. Of that amount, $43.7 million is owed to the Employees Retirement Plan of the Beacon Journal Publishing Co. The rest is divided among several union pension funds. Black Press continued to pay the pension and health care benefits until November.
Commercial real estate owners could file a flurry of property tax challenges this year, spurred by the pandemic and public health restrictions that have been particularly painful for hotels, shopping malls, restaurants and event facilities. Without state intervention, though, those appeals have long odds of success. The coronavirus prompted business closures and lockdowns across Ohio in March. But property owners are preparing to pay 2020 tax bills based on what their real estate was worth on Jan. 1 of last year — when COVID-19 was still a vague, overseas threat. That timing poses a challenge for businesses seeking succor. Real estate owners, trade groups and even some county auditors have asked for a legislative solution. But changes to the tax appeal process, to help struggling property owners stay afloat, could deal a blow to school districts that already have set their budgets for the year. “As of 1/1/2020, as I’ve been told by school district lawyers about 1,000 times, there’s no COVID,” said Steve Gill, a Cleveland attorney who represents property owners in appeals. Concord Hospitality Enterprises, a North Carolina-based hotel owner and operator, saw revenue at its five Cleveland- and Akron-area properties fall an average of 62% last year. One of those hotels, the Fairfield Inn & Suites Cleveland Beachwood, has been closed since last spring. Without concessions from its lender, Concord doesn’t have the cash to reopen the business. Property taxes typically equate to as much as 10% of annual revenues at the company’s Northeast Ohio hotels, said Julie Richter, Concord’s chief financial officer. For 2020, though, those bills will gobble up 25% to 30% of revenues. “Having such a large bill that you get, that there’s no way to get relief on, just adds to the devastation in the industry,” said Richter, adding that many hotels are surviving only due to forbearance from lenders, loans through the federal Paycheck Protection Program and reserves — lifelines that won’t last long.
See BANKRUPTCY on Page 21
See TAX RELIEF on Page 20
TENNIS, EVERYONE
SPORTS BUSINESS
The Cleveland Championships would feature a main court at Jacobs Pavilion and five outdoor courts on a nearby parking lot on the Flats’ West Bank. | TOPNOTCH MANAGEMENT RENDERING
Topnotch Management hopes to bring a WTA tournament to the Flats in August BY KEVIN KLEPS | In 2019, Topnotch Management brought
an Association of Tennis Professionals tournament to Cleveland for the first time in 34 years. Topnotch’s two-year run as the host of the Cleveland Open, which was part of the ATP Challenger Tour, proved to the company that it could do something “on a much bigger scale,” said Sam Duvall, the Cleveland firm’s president and founder. Topnotch is planning to do just that, via a Women’s Tennis Association tournament that, if it comes to fruition, would be the biggest pro tennis tournament held in Northeast Ohio in almost four decades.
Topnotch has deals in place with the WTA, the world’s top women’s tennis tour, and Jacobs Entertainment, which operates the Nautica Entertainment Complex, to bring the Cleveland Championships to Jacobs Pavilion on the West Bank of the Flats. The only thing holding the company back from going full speed ahead with the venture is a lack of firm commitments on sponsorships. The Cleveland Championships would be held Aug. 23-29, with the pavilion’s open-air amphitheater
serving as the main court and five temporary courts being constructed in a nearby parking lot. The tournament would be the week after the Western & Southern Open in Cincinnati, and the week before the U.S. Open. “From a logistical standpoint, it’s pretty good,” said Duvall, a prominent tennis agent who launched Topnotch in 2016, after he left Lagardère Sports to start his own firm. See TOPNOTCH on Page 20
MEDIA
Bankruptcy ends Beacon Journal retiree medical benefits Given little notice, November filing means about 50 former workers no longer have coverage BY JAY MILLER
A bankruptcy case is closing the books on the Beacon Journal Publishing Co., an entity created by Black
Press Ltd. of Canada, which owned the Akron Beacon Journal newspaper from 2006 to 2018. The Nov. 11, 2020, bankruptcy filing will have no impact on the publi-
NEWSPAPER
VOL. 42, NO. 1 l COPYRIGHT 2021 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED
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cation of the newspaper, which Black sold to the Gannett Co. in 2018. The greatest local impact will be felt by roughly 50 former Beacon Journal retirees, who have lost medical and prescription drug coverage. Some didn’t learn they no longer had coverage until they went to their pharmacy to pick up prescriptions. All of the retirees covered by these programs retired before the 2006 sale to Black Press. The Chapter 7 bankruptcy filing will close the business and extinguish $132.8 million in debt, since the company has little in the way of assets. Of that debt, $56.1 million is
1/8/2021 3:18:20 PM
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CLOSE DATE: JAN. 15 | ISSUE DATE: FEB. 15
HEALTH CARE
Health systems increase community benefit values in 2019 Nonprofit hospitals expect that figure to have risen again in 2020 due to pandemic, economy BBY LYDIA COUTRÉ
Health systems’ 2019 community benefit
Northeast Ohio’s health systems reported a growth in the community benefit they provided to the region in 2019 and expect that number to have grown again in 2020 due to the pandemic and economic fallout. An IRS requirement for nonprofit hospitals, annual community benefit reports provide a snapshot of the value they deliver as tax-exempt institutions. “The citizens of our community are the shareholders of Summa Health,” said Dr. Cliff Deveny, Summa president and CEO. “So this is a shareholder report in that not only do we show our clinical operational and financial performance, but we also show our shareholders how we improve the health of our community.” In 2019, Cleveland Clinic and University Hospitals each grew their respective community benefit totals by roughly 12%. The Clinic reported a record $1.16 billion in community benefit, surpassing a historic record it set in 2018, and UH reported $429 million. Summa Health’s grew by 25% to a benefit of $138.5 million. Remaining relatively flat were Lake Health (with $30.2 million) and Sisters of Charity Health System with its family of ministries ($55 million). Because it is a public health system, MetroHealth is not required to report its community benefit totals, as the other nonprofit health systems are.
The Internal Revenue Service requires nonprofit hospitals to report their community benefit every year to measure the value hospitals deliver as tax-exempt institutions. Cleveland Clinic University Hospitals Summa Health Lake Health Sisters of Charity Health System and its family of ministries SOURCE: HOSPITAL REPORTS
2019
% change
1.16 billion 429 million 138.5 million 30.2 million 55 million
11.74 12.01 25.11 no change no change
CRAIN’S CLEVELAND BUSINESS GRAPHIC
Northeast Ohio hospitals face an aging patient population, cost inflation and a challenging payor mix with Medicaid reimbursement falling short of what it costs to care for those patients. The health systems have also been expanding (such as the Clinic acquiring a hospital and a health system in Florida in 2019). All of these factors and more have contributed to the growth in health systems’ community benefit reports for the past several years. The past year has exacerbated many of those challenges, and the 2020 community benefit values, which will be reported later this year, are likely to reflect that. “We do expect that we will see an increase in both bad debt and charity care in 2020, related to the pandemic,” said Steven Glass, the Clinic’s chief financial officer. “Certainly any time you have an economic impact like this, where so many people in our community have
lost their jobs, they’ve lost their employee benefits, that translates into increased bad debt for the health care provider and increased charity care. So we’re experiencing that in 2020.” Community benefit reports include several categories. As has been the case for several years, the largest piece is Medicaid shortfall — the gap between the cost of caring for Medicaid patients and the reimbursements hospitals receive. The reports also include charity care or financial assistance, research, education, community health improvement efforts and subsidized health services (programs the hospitals offer at a loss, such as behavioral health or obstetrics). Compared to 2018, UH and Summa had increases in all reported categories. The Clinic grew in all except subsidized health services, which dropped by a few percentage points. Glass notes that this number ebbs and flows a bit, and
he expects to see it increase in 2020. Whereas charity care totals really depend on the needs of the community, research, education and community health improvement efforts are more actionable areas of investment. Though advocacy work and pushing for higher reimbursement can help address the Medicaid shortfall, hospitals have less control over that piece. Heidi Gartland, chief government and community relations officer for UH, said the system plans to be much more proactive in how it focuses its community benefit going forward. Rather than just financial support for community organizations, UH plans to partner more closely with them. “We’ve never done that before. I mean, we have had people on boards, but we’ve never really strategically said we really want to partner with this (organization), not just with sponsorship dollars,” she said. “Right now, we’ve had more unidirectional (engagement). We send dollars out but we don’t really partner. I think you’re going to see a change in how we put our community benefit report together.” The events of 2020 will impact the community benefit calculations in many ways that are difficult to predict, according to a statement from Melissa Rogers, chief financial officer of the Sisters of Charity Health System. She noted high unemployment levels with COVID-19 mean charity care will be
higher and Medicaid volumes and shortfall will also look different. Dr. Lydia Cook, president of Summa Health Medical Group, said she expects Cook Summa’s community benefit efforts to be more expansive through 2020 and 2021, given the impact of COVID-19 and the light the past year has shone on systemic and structural racism. Summa is focusing on how its outreach will play a role in making sure people are healthy, safe and educated around COVID-19, which has disproportionately impacted communities of color. “We’re looking to really help people understand that it’s not just the hospital care and the face-to-face encounter you receive with your physician or a practice,” she said. “But it is much more important for us to extend out into the community and partner with our community and some of our community organizations to really help us understand what are the needs and how are they impacting health? And then how do we work together in order to meet those needs?” Lydia Coutré: lcoutre@crain.com, (216) 771-5479, @LydiaCoutre
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January 11, 2021 | CRAIN’S CLEVELAND BUSINESS | 3
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REAL ESTATE
Realife buys Westlake building
Move gives investor properties in all of Cleveland’s office submarkets BY STAN BULLARD
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Realife Real Estate Group, a real estate investment and ownership concern based in Independence, has added a Westlake office building to its Northeast Ohio portfolio. Through RL Westlake I LLC, the company led by investor Yaron Kandelker on Dec. 24 acquired the fourfloor First Federal Lakewood Savings Bank Building, 24441-24481 Detroit Ave., for almost $3 million, according to Cuyahoga County land records. The seller of the Georgian-style office building was the Lakewood-based financial concern. First Federal plans to continue to maintain a branch office on the east end of the structure. The bank had owned the property since 2006, when it paid $1.95 million for it. Cuyahoga County estimates the building’s market value at $2.2 million for property tax purposes. During its ownership, the bank invested substantially in upgrades of the structure, which was a notable office addition for the suburb in 1973. The building was high-profile at the time, since the suburb was growing rapidly and a megaproject such as Crocker Park was listed on the city master plan as a potential future enclosed regional mall site. The enclosed mall didn’t happen, but the sprawling, open-air mixed-use center did. Although occupancy had improved during the bank’s ownership, the 37,000-square-foot structure is more than 30% empty. James Asimes, Realife’s director of acquisitions, said in a phone interview that the company already is making headway in filling the space. The largest empty area is a 5,000-square-foot former restaurant space on the first floor that has been vacant for several years. Given the “challenges of the food and restaurant business” during the pandemic, Asimes said, Realife plans
An office complex in Westlake that dates from the suburb’s rapid expansion era in the 1970s is the latest purchase by Realife Real Estate Group. | COSTAR
to try to convert the retail space to office use. “We see it as a building that will attract decision-makers who live nearby on the West Side and may want 3,000 square feet or so,” Asimes said. Over the past two years, Realife affiliates have acquired office buildings in downtown Cleveland, Independence and Beachwood. That gives it space to offer in each of the city’s submarkets, a feature once prized by office building owners when construction of office buildings was booming in the 1980s. Coverage of all the markets provided selling opportunities throughout the region. Today, it’s seen primarily as a form of geographic diversification. However, for Realife, total market coverage was not by design. “This is where we found opportunity,” Asimes said. He said the company buys based on its analysis of each property and its surroundings. First Federal had presented Realife with the structure as a potential acquisition, he said. Realife acquired a strip shopping center in 2019 from a bank affiliate, he noted, so it was willing to consider the deal. Realife is a newcomer among the
handful of investors that engage fulltime in buying and operating commercial real estate, making its first purchase in the region in 2018. Kandelker, who has declined to be interviewed, has purchased more than $35 million in the area in the past two years. The company also owns commercial property in Florida, and Kandelker divides his time between the two locales. In an email, First Federal, part of First Mutual, said it shed the property to exit the property business. Paul V. Capka, a senior vice president of First Federal parent First Mutual Holding Co. of Lakewood, said in an email that “the sale of our Westlake property is directly aligned with our mission as a mutual bank focused on our customers and communities.” He said it will continue to operate the branch to serve its area customers. Asimes said Realife will not change the structure’s name. “Everyone will probably continue to refer to it as the First Federal building anyway, due to the sign,” he said, referring to the bank’s monumental sign in front of the building. Stan Bullard: sbullard@crain.com, (216) 771-5228, @CrainRltywriter
EDUCATION
Advocates applaud move to simplify FAFSA College financial aid form will drop from 108 questions to 36 BY AMY MORONA
Tucked into the latest lengthy congressional relief package is an act that calls for simplifying the Free Application for Federal Student Aid, commonly referred to as the FAFSA form. Education advocates who have long pushed for changes say it will help students, especially those who are in need and those from underrepresented communities, potentially earn more in financial aid to attend and eventually complete college. An estimated $2.5 billion to $3 billion in student aid nationally and millions in Ohio go unclaimed annually. In 2019, College Now Greater Cleveland’s Michele Scott Taylor testified on Capitol Hill about both “the real and perceived complexity of the FAFSA form.” Now, Taylor, College Now’s chief program officer, said the provisions will bring along more adjustments than she anticipated. “We think with this new legislation and its simplification, we will probably be able to mitigate a lot of what
people perceive as it being too hard to complete,” she said. One of the most common complaints is the FAFSA’s length. The new law makes a considerable cut from previous incarnations, dropping the form from 108 questions to 36. It will cut many questions that weren’t applicable for the majority of filers. Additional questions will be removed, like ones that asked about a selective service registration or if students have a drug conviction — items that groups such as the National College Attainment Network (NCAN) say can create barriers. Other changes include retooling the calculation used to determine who is eligible for a Pell Grant. However, some say there are even more ways to potentially streamline the process for students and families. Cuyahoga Community College’s Angela Johnson, who also has been a part of national advocacy efforts, points out that completing a new FAFSA each year may be redundant since incomes typically don’t shift substantially while a student is enrolled.
“Assuming they don’t stop out, you could really use their income multiple years,” said Johnson, TriC’s vice president of access and completion. “It certainly allows them to plan financially how they’ll pay for college, with a focus on completion and completing college, not really the mechanics of the FAFSA every year.” But the changed form won’t go into effect until next fall, and in the meantime, completion rates for the high school class of 2021 are dropping amid the economic crunch of the coronavirus pandemic. These figures are one indicator higher education leaders use to predict future enrollment. The latest estimates from NCAN show that Ohio is mirroring a national trend for the high school class of 2021. Rates in the state at the end of 2020 were down roughly 12% compared with the like period in late 2019. Amy Morona: amy.morona@crain. com, (216) 771-5229, @AmyMorona
4 | CRAIN’S CLEVELAND BUSINESS | JANUARY 11, 2021
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FINANCE
Cleveland private equity vets launch the market’s first SPAC Special purpose acquisition company looks to merge with growing businesses in aviation, aerospace industries “MY EXPECTATION IS THIS COULD BE CERTAINLY ONE OF MANY ZANITE SPACS OVER THE NEXT SEVERAL YEARS, AS LONG AS THE MARKET IS RECEPTIVE TO THE VALUE IT BRINGS.”
BY JEREMY NOBILE
Steven Rosen is on the hunt for a gem — of a company, that is — and probably more than one. It’s what inspired the moniker for his latest endeavor, Zanite Acquisition Corp., a Cleveland-based SPAC (special purpose acquisition company) he’s heading up with fellow co-CEO Kenneth Ricci. The Zanite name is a variation on tanzanite, a rare gemstone. Zanite’s purpose is to acquire promising, privately held growth companies in the aviation, aerospace, defense, urban mobility and emerging technology sectors with an enterprise value of at least $750 million. Backing those efforts is $232 million in capital Zanite raised via an initial public offering in November. SPACs use the IPO process to raise capital, then park the proceeds in a trust account until deploying the money for a deal. If a deal isn’t completed in a certain time frame — usually within two years of the IPO — the money is returned to investors with interest gained while sitting in the trust. Zanite has indicated in filings that it wants to consummate a deal by May 19, though the board of directors can vote to extend that deadline a couple of times. Rosen indicated he already has between five and 10 potential targets in mind. Aviation is prime territory for Rosen
— Steven Rosen, Resilience Capital Partners founder and CEO
and Ricci, both of whom have run and invested in multiple companies in the aerospace industry over the years. Rosen is founder and CEO of Cleveland private equity firm Resilience Capital Partners, whose portfolio has featured several aviation-related companies. Those include, for example, California-headquartered Systron Donner Inertial, whose products have been used in everything from business aircraft to fighter jets to the Mars rover. Resilience bought Systron in spring 2019. Ricci is a principal of Directional Aviation Capital of Cleveland, a family office that owns several companies, among them Corporate Wings, Flexjet and Nextant Aerospace. “We’re looking at the universe of privately held companies we know with a growth story and growth characteristics … something that would capture the imagination of the public,” Rosen said. “To be the first (SPAC) out of Cleveland, with some talent from Cleveland, I think is nice. And my expectation is this could be certainly one
of many Zanite SPACs over the next several years, as long as the market is receptive to the value it brings.” SPACs, also known as blank-check companies, have become increasingly popular in recent years, with their activity hitting new heights in 2020. According to a December report by Goldman Sachs, at least 206 SPACs raised a record $70 billion in proceeds through IPOs in 2020. That accounts for 52% of all IPO capital raised last year and is more than five times what SPACs raised in 2019. Goldman analysts have predicted 2021 could be even busier. SPACs weren’t just raising money last year. They were also participating in some high-profile deals. Fantasy football betting platform DraftKings went public through a SPAC merger in 2020, as did electric vehicle company Nikola. In Ohio, Lordstown Motors Corp., a maker of electric vehicles, merged with New York SPAC DiamondPeak Holdings Corp. in June. A number of factors are behind the growing popularity of SPACs.
For target companies that might be acquired, merging with a SPAC is faster and easier than going public and raising capital through a traditional IPO. The SPAC does the heavy lifting in that process for them. A SPAC might also appeal to companies that don’t want to be controlled by an acquiring private equity firm — a reason Rosen has formed Zanite instead of, say, raising another fund via Resilience. The SPAC has its own board, of course, but management blends together differently in a SPAC merger than it does in a deal with a private equity sponsor. It’s simply a different dynamic. For investors, the state of the economy and low interest rates are helping drive interest, said John Micklitsch, chief investment officer for money management firm Ancora. In this environment, investors are shifting toward growth companies — which SPACs target — over value-based investments, he said. (Ancora is not involved with Rosen or invested in Zanite.) In addition to being an alternative use of cash, SPACs give investors the option to participate in a deal when the SPAC announces one, or cash out. “There is an investor base out there that in many instances like the optionality to be able to see the deal and move forward or take a pass on it,” Micklitsch said. “And with the low rate of return on cash right now, using a SPAC as a cash alternative and
having the possible optionality in a deal can be appealing.” With SPACs being little more than shell companies until they make a deal, Micklitsch said, investors are betting on SPAC leadership and its board of directors. “When you invest in a traditional IPO, you can see both the jockey and the horse,” Micklitsch said. “When you invest in a SPAC, you are basically betting on the jockey’s ability to find a horse to win you the race.” Among others involved with Zanite is senior adviser Ronald Sugar. Sugar retired as chairman and CEO of Northrop Grumman in 2010, helping grow the firm into one of the world’s largest aerospace and defense companies with $35 billion in annual revenue. He is currently a director at Apple Inc., Chevron Corp. and Amgen Inc., and is chairman of Uber Technologies. Zanite’s chief financial officer is Michael Rossi (a principal with Directional Aviation Capital since 2007). The Zanite board includes John Veihmeyer (retired chairman of KPMG International), Larry Flynn (former president of Gulfstream Aerospace) and Gerard Demuro (executive vice president of strategic initiatives and a member of the board of directors of BAE Systems Inc.). Jeremy Nobile: jnobile@crain.com, (216) 771-5362, @JeremyNobile
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6 | CRAIN’S CLEVELAND BUSINESS | JANUARY 11, 2021
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REAL ESTATE
Online delivery services add, drop Cleveland building plans DoorDash, despite spat with city council, leases building for DashMart operation; Amazon facility deal expires BBY STAN BULLARD
In the fast-changing world of industrial realty e-commerce, a DoorDash warehouse in Cleveland’s Flats has surfaced, while plans to build an Amazon delivery center on a 40- acre city site are off — at least for now, and maybe for good. The San Francisco-based restaurant food delivery service, despite a recent spat with Cleveland City Council over a 15% cap on food delivery services, has leased an existing building at 1968 W. Third St. to introduce its DashMart delivery service to the region. DashMart is DoorDash’s move into home essentials, from ice cream to potato chips and sundries typical for a neighborhood convenience store, to complement its online format and ubiquitous restaurant delivery service. The Cleveland service is part of the company’s nationwide expansion for the concept, according to an email from Mattie Magdovitz, DoorDash head of product and innovation communications. It already serves Cincinnati and Columbus, she said. The email did not respond to questions on operating details, such as staffing. Some DashMart locations deliver alcohol, and through its DoorDash Essentials affiliate, the company has requested an Ohio liquor permit to provide beer delivery. Cleveland City Council at its Jan. 6 virtual meeting received notice of the application. It has the right to request a hearing to object to the permit, which the city does over problem nightspots or operators that have been sources of neighborhood complaints. The request poses a dilemma for council president Kevin Kelley, a potential Cleveland mayoral candidate. It emerged on the heels of the city’s legislation Dec. 9 to limit food delivery charges to 15% because the council felt the 30% fee it imposed damaged operations of sit-down restaurants using delivery to survive the pandemic. The online delivery technology company responded with a $1 fee on deliveries within the city limits. Kelley said in a phone interview he plans to study the liquor permit question on its merits. But he’s uncertain which way he will go. “This is one of those things that as an elected official you have to be an adult,” Kelley said. “What’s it mean for the local economy? I don’t love it. I would resist my urge to be spiteful because of their behavior. Personally, it does not help that they behave this way.” Still fuming over the DoorDash Cleveland delivery fee, he said he feels a multibillion-dollar company wouldn’t respond in such a way, especially during the COVID-19 crisis that has so enriched it. Beer delivery question outstanding, DoorDash has leased the property and has a contractor that obtained a building permit to update the electrical and heating/ventilating systems in the 1950s-vintage property. The location is unexpected for a tech company, as it’s in a portion of the developer Joel Scheer’s proposed South Bank Flats project. It’s going into a tiny, 7,000-square-foot building on the southern edge of the proposed remake of part of the Third Street Peninsula as a neighborhood of construction of apartments and reusing existing buildings. A nearby structure is the proposed home of Cleveland Whiskey.
Scheer said he could not comment on the transaction because he had signed a nondisclosure agreement. The structure is one of several that Scheer is leasing because they are not central to the larger new development plan. It’s literally just south of the Hope Memorial Bridge in the project that borders the Cuyahoga River and has views of the Tower City complex. Meantime, 2 miles south and on the other side of the river, sits Cuyahoga Valley Industrial Center, where the nearly 130,000-squarefoot delivery center for Amazon was
said. The city of Cleveland last summer approved spending about $1 million to repair Independence Road to meet Amazon’s requirements. However, Cantor said the improvements still will be needed for other users and to serve the nearby Cleveland-Cliffs Inc. steel mill. Cantor declined to discuss Amazon more broadly. Building permits sought for the Amazon project have not been issued, according to city records. The proposed construction of a warehouse the size of more than two football fields would have been a
coup for the city. Described in drawings filed with the city as a delivery center, the building would have been part of the company’s quest to boost last-mile delivery. It moved last year on plans to add warehouses in Solon, Bedford and Cleveland’s West Side that remain active. Amazon did not respond to three emails about the apparent scuttling of the proposed Cuyahoga Valley project by 10 a.m. last Friday, Jan. 8. Stan Bullard: sbullard@crain.com, (216) 771-5228, @CrainRltywriter
THE POWER OF
TRASH. A
t first glance, the expansive greenspace in Brooklyn, Ohio looked like a lush piece of land ripe for development. But beneath it sat thousands of tons of rotting trash. It was a capped landfill, and the city didn’t know what to do with it.
Regulations prohibited development, and some of the waste materials below meant it couldn’t be used as a park. The options were limited. But Katie Gallagher, Brooklyn’s mayor, worked with Cuyahoga County to turn the otherwise unproductive landfill site into a solar farm, producing an estimated 5 million kilowatthours of electricity per year.
“AN INTERNSHIP DURING MY TIME AT JOHN CARROLL TAUGHT ME ABOUT BROWNFIELDS. AND THAT BECAME EXTREMELY RELEVANT TO THE WORK WE DID ON THE LANDFILL. NOW, IT’S A REVENUE SOURCE FOR US, AND AN OPPORTUNITY TO HAVE GREEN INFRASTRUCTURE WITHIN THE COMMUNITY,” Gallagher said.
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proposed last summer near 4000 Heidtmann Parkway. The site is controlled by a nonprofit formed by the city and county to offer ready-tobuild industrial sites near downtown. Michael Cantor, managing director of Allegro Real Estate Brokers & Advisors of Cleveland, which markets the property, said the contract for the proposed Amazon building has expired. Although Cantor hopes the deal resurfaces, Allegro is marketing the same site to other prospective users. “We have (at least) three other parties interested in the site,” Cantor
Katie Gallagher, a first-generation college student, graduated from John Carroll in 2003 with a degree in political science and business management.
“IT WAS AT JCU WHERE I DEVELOPED THAT LOVE OF LEARNING AND SERVICE,” Gallagher said.
Now, elected to a second term, Gallagher has even bigger plans for the city. And if she can turn trash into energy, who knows what she’ll do next.
Find her story and others at jcu.edu/humanimpact
Shortly after graduation she earned a master’s and law degree—and took her passion for service into her work as a city council member and later, the mayor of Brooklyn.
BRAVE YOUR QUEST
January 11, 2021 | CRAIN’S CLEVELAND BUSINESS | 7 9/8/20 3:05 PM
1/8/2021 12:50:36 PM
PERSONAL VIEW
A technology re-volition is coming — I hope
RICH WILLIAMS FOR CRAIN’S CLEVELAND BUSINESS
BBY NICK YORK
EDITORIAL
Dark day W
ere the tax cuts, judges and regulatory rollbacks worth it? That’s a question business groups, corporate executives and supporters of President Donald Trump might ask themselves in the wake of the disgrace that took place last Wednesday, Jan. 6, in which the president, essentially, directed an insurrectionist mob to attack and occupy U.S. government buildings in the hopes of overturning an election he lost — but continues to try to convince the gullible that he won. Just two weeks before the Trump show’s scheduled close on Jan. 20, business groups finally decided they had seen enough of a man they had supported, mostly enthusiastically, for the last four years. The president’s race-baiting, lies, conspiracy theories, terrible management skills and anti-democratic instincts all could be overlooked, apparently, as long as the corporate tax rate fell to 21% from 35%. Encouraging armed lunatics to take over Congress briefly was the final straw. The head of the National Association of ManufacturJUST TWO WEEKS ers, which represents more BEFORE THE TRUMP than 14,000 U.S. companies, had some unusually SHOW’S SCHEDULED harsh criticism for the presCLOSE ON JAN. 20, ident, even encouraging Vice President Mike Pence BUSINESS GROUPS to “seriously consider” inFINALLY DECIDED THEY voking the 25th amendHAD SEEN ENOUGH OF A ment of the Constitution to remove Trump from office. MAN THEY HAD “Throughout this whole disgusting episode, Trump SUPPORTED, MOSTLY has been cheered on by ENTHUSIASTICALLY, FOR members of his own party, fuel to the distrust THE LAST FOUR YEARS. adding that has enflamed violent anger,” the association’s president, Jay Timmons, said. “This is not law and order. This is chaos. It is mob rule. It is dangerous. This is sedition and should be treated as such.” Good for him and for NAM, as well as the U.S. Chamber of Commerce, the Business Roundtable and other groups that
expressed outrage over the assault on our democracy and called for action to restore peace and norms. But that was relatively easy to do on Jan. 6, 2021. You don’t get full credit for sounding the alarm in the last two weeks of a four-year term. Also in the way-too-late-to-make-a-difference category: Facebook, which on Thursday, Jan. 7, suspended Trump’s accounts at least “until the peaceful transition of power is complete.” Social media companies, as well as legacy media companies that went all-in on Trump, helped spread conspiracies and false information, and gave tacit encouragement to the mob. Almost immediately, conservative media started spreading the false notion that it was Antifa, rather than Trump backers, that ransacked the Capitol. A chunk of the political right is addicted to conspiracy theories and wants a Republican Party that embraces them. This fever is going to be difficult to break. Ohio’s most high-profile Republicans — Gov. Mike DeWine and U.S. Sen. Rob Portman — said and did all the right things last week. DeWine called the violence “an embarrassment to our country,” adding, “Lawlessness is not acceptable. This is an affront to our Constitution and everything we hold dear.” Portman, meanwhile, said the Capitol “belongs to every American and is a symbol of the citadel of democracy” and that an attack on the building “is an attack on every American.” They are, typically, smart and dedicated public servants. But they also have spent most of the Trump era bobbing and weaving, doing their best to straddle a line in which they appeared serious, but also didn’t say anything to offend Trump or the Trump base. They’re talented politicians. But we needed more, and we might not have been in such dire straits last week if people like DeWine and Portman had offered more forceful critiques consistently over the last four years, and especially in the immediate aftermath of November’s election. It’s worth noting, too, that five Ohio Republicans — Steve Chabot, Warren Davidson, Bob Gibbs, Bill Johnson and Jim Jordan — were among the 139 members of the U.S. House of Representatives who voted to sustain one or both objections to the certification of the vote that makes Joe Biden the country’s 46th president. The five, as well as DeWine and Portman, will face voters again in fall 2022. That’s a long way off, but last week’s events won’t soon be forgotten.
Executive Editor: Elizabeth McIntyre (emcintyre@crain.com) Managing Editor: Scott Suttell (ssuttell@crain.com) Contact Crain’s: 216-522-1383 Read Crain’s online: crainscleveland.com
COVID-19 has been described as the great accelerant — forcing dramatic changes in travel, entertainment, education, retail and just about every other segment of our economy and society. Some of the changes will be temporary — i.e., the NBA bubble season — but others will be permanent — the dramatic reduction in retail space/shopping, etc. — simply because they were “on their way out” York is the anyway. And most will be modified to a current lesser or larger extent depending on peo- president of the ple’s ability to access and become com- Ohio IT Association and fortable with advances in technology. That brings us to another of COVID-19’s a partner at unforeseen consequences — the magnifi- Meyers, Roman, cation of the disparities in our society — Friedberg & health care, housing, education, financial Lewis. Contact and, of course, access and affordability of him at nick@ technology. Digital economy technologies ohioita.org. are touted to be the “great democratizers,” designed to level the playing fields, reduce middlemen and offer opportunity for all to compete more openly in an expanding global marketplace. Unfortunately, that vision has been blurred by the economic and societal realities glaringly exposed in the attempt to deal with COVID-19. We suddenly realized our systems and peo- THE ANSWER ple were not actually prepared for the technological revolution IS NOT STRICTLY of working remotely, telehealth, TECHNOLOGICAL. tele-education, and telemaking, buying, selling, servicing, WE HAVE THE delivering and everything else TECHNOLOGY. WHAT our economy depends on to WE NEED IS THE keep moving. The answer to these short- COLLECTIVE comings and challenges is not strictly technological. We have COMMITMENT TO the technology. What we need MAKE IT HAPPEN. is the collective commitment to make it happen. And by commitment, I don’t mean the passive: “Yes, that’s a real problem — they should definitely do something about that.” I mean the active: “I am going to do something about that.” When it comes to technology, the divide in this country in terms of access to affordable and reliable internet connectivity is a national tragedy. In many instances, rural and urban areas alike are devoid of affordable access to the technology that allows kids to go to school online, or the elderly/infirmed to participate in life- and cost-saving telehealth, or prevents millions of people from being able to work remotely or compete for higher-paying jobs, simply because of their address. Beyond a revolution, it’s time for a technology re-volition. Volition is defined as the cognitive process of deciding on and committing to a particular action; a purposeful striving. We must start to see inequality in a different light and address it accordingly. Inequality is weakness in our system. Like the weak link in an otherwise formidable chain — when exploited or broken — it negatively impacts even the strongest among us. Our digital divide is the proverbial Achilles’ heel of our democratic society and market economy. And the opportunity of a lifetime for businesses, health care providers, educators and governments to expand their services and improve their own bottom lines.
Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.
See YORK on Page 9
Sound off: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.
8 | CRAIN’S CLEVELAND BUSINESS | January 11, 2021
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OPINION
LETTERS TO THE EDITOR
DoorDash’s ‘greed is astounding’ This research found that youth who participated in On the very day Cleveland City Council passed an ordinance designed to help small businesses, drivers and SYEP were less likely to have delinquency filings and to consumers, DoorDash had its initial public offering be incarcerated in the adult jail system after placement (IPO) that instantly made it a multibillion-dollar, pub- than were individuals in a matched comparison group. SYEP participants also had better school attendance licly traded corporation. Council limited the fees that DoorDash and others rates in the academic years following their summer emcan charge our small restaurants to 15% in an effort to ployment and were more likely to graduate from high help them simply survive. Now, this multibillion-dollar school than those in the comparison group. (For a copy corporation that has become exceedingly rich during of the research results, visit www.youthopportunities. and, in part, due to the COVID-19 pandemic is charging org/SYEPReport.) Many of us establish a stable attachment to the workcustomers an extra $1 per delivery and calling it the “Cleveland fee.” DoorDash’s arrogance, gall and greed force during our late teens and early 20s. We finish our studies, obtain employment and begin to live indeis astounding. Council passed legislation limiting how much deliv- pendently. Unfortunately, some youth do not make this ery services like DoorDash could charge Cleveland businesses on Dec. 9 to help the small restaurants and COUNCIL PASSED LEGISLATION LIMITING HOW MUCH businesses hurt during this pandem- DELIVERY SERVICES LIKE DOORDASH COULD CHARGE ic. It was capped at 15% — lower than the 30% usually charged — and some- CLEVELAND BUSINESSES ON DEC. 9 TO HELP THE thing other cities were doing. The SMALL RESTAURANTS AND BUSINESSES HURT DURING mayor signed it soon after and it went Water Softener • Industrial • Food • Ice Melt • Sea Salt into immediate effect because it was THIS PANDEMIC. THAT SAME DAY DOORDASH DID AN passed as an emergency. IPO OF STOCK AND WAS VALUED AT $38 BILLION. That same day DoorDash did an IPO of stock and was valued at $38 bil- SO, OF COURSE, BEING SO WEALTHY THEY DECIDED Minimum Delivery: 1 Pallet lion. On the last day of trading in 2020, TO FLEECE CLEVELANDERS, AND IN THE PROCESS HURT the company was valued at $45.35 billion. So, of course, being so wealthy SMALL CLEVELAND BUSINESSES. they decided to fleece Clevelanders, transition from student to employee. The SYEP program and in the process hurt small Cleveland businesses. Council will immediately look into what we can do can bend this trajectory to help students, families and legislatively about this corporate greed when we come our entire community. Our work is far from over. As encouraging as the results of the CWRU study are, back into session. we have only touched the tip of the iceberg. We need the Kevin Kelley continued (and expanded) financial support of state, Cleveland City Council president local and national government agencies, as well as our community partners that provide important ancillary A summer job can change services. We also need more employers offering more a life and our community summer jobs. Even during this COVID pandemic, Y.O.U. This past year has been an awakening for our com- has been able to provide virtual job experiences when munity. COVID-19 has brought problems we knew were traditional work environments are not possible. The term “win-win” is often overused these days, but present into the forefront. We have all felt the impact, but it is undeniable that those who were already most at SYEP is a true case in point. Participating youth win, but MEDINA, OH risk were disproportionately impacted. Disengaged so do employers who give these young people one of the 1-800-547-1538 youth (ages 16 to 24) were among the hardest hit with most important opportunities of their lives. As we continue to work toward solutions that will unemployment jumping to nearly 30% in April 2020 for Salt Distributors Since 1966 bring our community out of this life-altering pandemic, this group versus 13% among older adults. www.saltdistributormedinaoh.com Research recently completed for Youth Opportunities a summer job for historically underserved youth can be Unlimited (Y.O.U.) by the Case Western Reserve Univer- one of the most effective and long lasting of all. It is imsity Center on Urban Poverty and Community Develop- portant we all step up now and make funding summer ment confirms what we knew — a job provides the best jobs for teens a priority. We urge you to support Y.O.U. path forward and is the best predictor of future success summer jobs program by employing youth in 2021 and for youth. At a critical point in their lives, teens miss the beyond and advocating for more funding. Dale Robinson Anglin, program director, opportunity to build their human capital and self-esGrimm Winter mix 2x4.33.indd 1 9/22/2020 Youth, Health & Human Services, teem, and gain the experience and skills that can change The Cleveland Foundation the trajectory of their lives. This research focused on two Blaine A. Griffith, Ward 6 councilman, areas that bring that problem into clear focus: educaCity of Cleveland tional outcomes and the criminal justice system. SpecifCharles Keenan, superintendent, ically, Y.O.U. wanted to understand the impact of its Maple Heights City Schools Summer Youth Employment Program (SYEP), which Sean Richardson, Greater Cleveland has been a highly valued public-private partnership for region president, Huntington the past 37 years.
SALT • SALT • SALT
Call For Pricing!!
YORK
From Page 8
Access to affordable 21st-century technology for ALL is the “moonshot” of the next decade. Without it, our society, in terms of health, education and the economy, will splinter even further as the digital divide widens. So the questions must not be if and when, but rather how and who. Is it wireless or satellite broadband, 5G or some to-be discovered innovation or systemic approach? Will we leave it to the private sector and market incentives? Or will we hold public sector leaders accountable for real results? Can regional broadband cooperatives/nonprofits help fill the void? What about the Innovate Ohio/ODOT/Ohio Turnpike initiatives? Was
Ohio’s House Bill 13 Broadband Access measure enough, or do we need more? Instead of pointing a finger or passing the buck, who is going to stand up and say, “This is my (our) responsibility,” and take action to get it done? Then be willing to be held accountable if they don’t, or share credit when they do. That is the “next economy” leadership that we need. When President John F. Kennedy challenged the nation to reach the moon in less than a decade, most did not believe it could be done. It was his volition that set the stage for a decadeslong accomplishment. And now it is our turn. That is the challenge before us — before me. We have some strong leaders actively engaged at the state and local levels, but we need more. So I am going to commit to do something about it. Who else will join me?
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TASTE OF SUCCESS Akron company’s in-car condiment gadget sees sales shift into high gear
SMALL BUSINESS
PAGE 14
TAX TANGLE
Businesses should brace for the possibility of withholdings that follow employees to their homes
S
BY JUDY STRINGER
mall businesses may have one more COVID-fueled operational headache coming their way. Ohio employees currently are regarded as working from their employer’s principal place of business for tax purposes, even if they are really working from home. That’s thanks to House Bill 197 passed in March. Among a number of pandemic emergency measures, the bill temporarily suspends the state’s “20-day rule,” which requires employers to begin withholding tax for a municipality when an employee has
10 | CRAIN’S CLEVELAND BUSINESS | JANUARY 11, 2021
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been working in that municipality for more than 20 days. The rule’s suspension was intended to be a “convenience to employers,” according to Richard Fry, Akron partner in charge and taxation group practice leader at Buckingham, Doolittle & Burroughs. “In effect, Ohio businesses were permitted to withhold the same local income tax rate they had been withholding before the pandemic forced so many employees to work from home, rather than having to withhold different rates depending on everybody’s residence,” Fry said. MARK DANE VIA ISTOCK
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FOCUS | SMALL BUSINESS
S
STOCK
Two bills currently in the Ohio Legislature and a pending lawsuit filed in Franklin County Common Pleas Court, however, seek to immediately repeal the 20-day rule suspension. Fry and other tax and legal experts say a repeal could open a filing floodgate for businesses that permit employees to telecommute. Companies could easily go from submitting payroll reports in one or two municipalities to being subject to dozens of various taxing rates and filing requirements, said Thomas Hall, director of taxation at payroll processing firm Ahola Corp. in Brecksville. Although many area municipalities are affiliated with RITA (Regional Income Tax Agency) or CCA (the city of Cleveland’s Central Collection Agency), Hall said Northeast Ohio is home to “a lot” of communities that tax independently, including Akron, Parma and Cuyahoga Falls. “Companies would have to register in each of those communities where they have employees working, and it can be a lot of paperwork … and a lot of communication back and forth because locations that are used to getting those taxes are going to be asking why they are no longer getting them,” he said. Beyond an uptick in payroll filings, Cleveland-based Meaden & Moore vice president of tax services Jonathan Ciccotelli said, reinstating the 20-day rule with many companies still operating remotely would likely subject some employers, particularly professional service firms, to net income tax provisions in multiple communities as well. “There are going to be cases where a company will have to appropriate income away from its principal loca-
“IN EFFECT, OHIO BUSINESSES WERE PERMITTED TO WITHHOLD THE SAME LOCAL INCOME TAX RATE THEY HAD BEEN WITHHOLDING BEFORE THE PANDEMIC FORCED SO MANY EMPLOYEES TO WORK FROM HOME, RATHER THAN HAVING TO WITHHOLD DIFFERENT RATES DEPENDING ON EVERYBODY’S RESIDENCE.’ — Richard Fry, Akron partner in charge and taxation group practice leader at Buckingham, Doolittle & Burroughs
Ciccotelli
Kall
tion, say Cleveland, to all those locations where it now has employees working, because what employees are working on is a sale,” he said. “Again, filing could significantly increase because maybe before you were only filing [business] income tax returns in Cleveland or Akron.” Even if the rule suspension stays in place, Ciccotelli thinks companies could see an increase in correspondence from tax authorities. He suspects some savvy taxpayers will apply for refunds from taxing districts like Cleveland with high income tax rates, arguing that their work was performed in their lower-in-
come-taxing residence. “When those requests are made, typically the employer has to verify that those days worked outside of Cleveland or wherever are factually accurate,” he said. “Cities aren’t going to just take my word or your word, so I think we are going to see some of those requests come employers’ way.” Of course, the impact will not be exclusive to small business. Organizations of all sizes will have to account for their work-from-home employees at a magnitude not experienced previously. But, with scant HR and accounting staffs, smaller companies will face a greater compliance challenge than their larger counterparts, according to David Kall, vice chair of the tax and benefits department at McDonald Hopkins in Cleveland. “The compliance goes up, but so does the complexity,” he said. “You have to figure out the different rates in these various taxing jurisdictions on a paycheck-by-paycheck basis.” While that process could be
“streamlined” for businesses that contract with payroll service providers like Ahola or ADP, Kall said, the cost of those services will increase with a jump in filings and do so at a time when small businesses are already struggling to absorb and manage other coronavirus expenses. “It’s pretty complicated right now from a small business perspective, and that’s putting it gently,” he said. The jury is out as to whether the 20-day rule suspension will be lifted before it expires on its own. The provision sunsets 30 days after the end of the pandemic emergency, Hall noted, which no one can pinpoint at this time. There are powerful interests that want to keep it in place — namely Ohio’s “Big Six.” According to a recent study by the Greater Ohio Policy Center, the state’s six biggest cities stand to lose $306 million in annual tax revenue if withholdings are redirected to where work-from-home employees live amid the pandemic. Companion pieces of legislation in
the Ohio House and Senate to reverse the rule’s suspension have been stalled in committee, Kall said, and he thinks there’s a good chance they will die there. Fry said the lawsuit, filed by the conservative Buckeye Institute against the city of Columbus, could be a bigger factor in determining how future withholdings flow among municipalities. It is similar to a case currently before the U.S. Supreme Court, he said, between Massachusetts and New Hampshire. “There are constitutional protections that prohibit states and municipalities from subjecting nonresidents to tax if their income was not earned in the state or municipality,” he said. “So there is no real way to get around the constitutional issue. The question is whether an employee’s wages are considered to be earned at the employer’s location, even when the employee is working from home.” The reality is, these tax watchers concur, flexible work schedules are here to stay and “resident” municipalities providing services to homebased workers are going to demand — sooner rather than later — the income tax due to them, Ciccotelli said. “I do not think it’s just a COVID-19 dilemma we are talking about,” he said. “The pandemic greatly accelerated it, but the need to have this discussion has been building slowly over the last couple of years. “The state along with the municipalities are going to have to deal with the draconian dynamics of this tax legislation, if you will, versus the world as we know it in 2021 and beyond.” Contact Judy Stringer: clbfreelancer@crain.com
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FOCUS | SMALL BUSINESS
Building a business by building up young women Empowered & Poised shifts in new directions to further its mission BY KAREN FARKAS
Leah Berdysz created a business that mirrors her passion for empowering girls. But the COVID-19 pandemic, among other things, has forced the business owner to pivot. “It’s been a challenge for everything,” she said of the pandemic, which led school districts to terminate contracts with her company, Empowered & Poised LLC. The business promotes social, mental and physical wellness and helps young girls build their self-esteem and confidence. But with COVID came a shift: Since last spring, Berdysz has held online workshops and now is developing an online curriculum. “People could access an online curriculum from anywhere,” she said. “The main goal is to reach and impact as many girls as we possibly can.” She is not discouraged by the growing pains of her 3-year-old company, which she founded the same week she graduated from John Carroll University with degrees in exercise science and entrepreneurship. “I need to realize that it takes patience and time to build a business,” she said. “I am very, very grateful for all the people who have supported
me and the organization. I could not have done it on my own. I am really excited to see where it can grow.” Berdysz, 25, of Mayfield Heights, grew up in Twinsburg. While at John Carroll, she taught physical education to girls at the Hebrew Academy of Cleveland and emceed and danced for Rock the House Entertainment. After she graduated in May 2017, she continued at her physical education job and began working on her business at LaunchHouse, a co-working space and entrepreneurial hub. She said she had always been passionate about counseling girls and spent time with her students at the Hebrew Academy to provide social skills instruction. “I had a personal struggle with things like body image and anxiety when I was young,” she said. “I had a great support system of family and friends, and the education and knowledge where I could get help. But that is not the case for everybody. This is a calling for me.” As she developed her business, Berdysz sought advice and counseling at LaunchHouse. She was community outreach coordinator there from October 2017 to May 2019. Initially, she offered workshops for girls at community centers and recreation centers. “But what I was finding that it was not as ideal from a business perspec-
“I HAD A GREAT SUPPORT SYSTEM OF FAMILY AND FRIENDS, AND THE EDUCATION AND KNOWLEDGE WHERE I COULD GET HELP. BUT THAT IS NOT THE CASE FOR EVERYBODY. THIS IS A CALLING FOR ME.” — Leah Berdysz, Empowered & Poised LLC founder
tive, because you could reach more girls in school districts and through community organizations,” she said. Though she has held workshops for hundreds of girls of all ages, Berdysz said she focuses on girls in fourth through sixth grade. ‘It’s a very pivotal time,” she said. “They are going through puberty, their bodies are changing and they are trying to determine who they are and where they fit in the world.” Before the pandemic shifted many education institutions to remote schooling, she led 15-week programs aimed at girls in those grades during the 2018 and 2019 school years for the South Euclid-Lyndhurst school district. Berdysz would meet with about 10 girls, who were recommended by teachers and counselors, said Shannon Carlson, a social worker for the district. “She had a curriculum and a plan and sometimes brought in guest speakers,” Carlson said of the lunch time programs. “She did a really great job of connecting with the girls, offering some fun and creativity in addition to health and wellness activities.”
Berdysz continued to offer workshops, and Carlson said she and her two daughters attended a leadership program, which was a very positive experience. Berdysz said does not have any investors and did not want to discuss revenue or expenses for her company. She continues to offer online workshops and has been active on the podcast circuit. She continues to look for ways to diversify her offerings. While she is the sole employee, she has partnered with local universities to offer internships. Students from schools that include John Carroll and Baldwin Wallace University receive course credit in exchange for the opportunity to learn skills, including entrepreneurship, marketing and event management, she said. Michaela Toth spent last spring as an intern with Berdysz and decided to continue volunteering after graduating from Baldwin Wallace. “I enjoyed it so much and am passionate about the mission,” Toth said. “It is a good opportunity for me to grow my knowledge and gain more
experiences and open my network to more connections.” Toth, who works full time at Union Home Mortgage Co., said she did a variety of things at Empowered & Poised while an intern, including managing social media, recruiting bloggers for the website and contacting organizations that might host workshops. She is now a marketing specialist and helps Berdysz and interns. Berdysz has needed the extra help because she is a full-time graduate student at Case Western Reserve University. She expects to graduate this spring with masters of science in social administration with a focus on school social work. “This business inspired me to go back to school because I realized that to be a coach and mentor to these girls I have to have a deeper and greater knowledge to help them on a more clinical level,” she said. She also decided to write a book to further the mission of the business. “Conscious Empowerment: A Guide to Helping Girls Build Self-esteem and Confidence” will be published this summer. While other companies and organizations offer similar programs for girls, Berdysz is confident the market is large enough for hers to succeed. “It kind of feels like my baby. I am so passionate about this work and think that it is so important,” she said. Contact Karen Farkas: clbfreelancer@crain.com
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NOMINATIONS
OPEN
As the COVID-19 pandemic tests the health care sector in ways never seen before, Crain’s Cleveland Business is saluting the dedication, leadership and innovative achievements of Northeast Ohio's health care community. Crain’s Notables in Health Care awards are designed to recognize individuals and teams making an impact on patient care, the community and the health care sector. The 2021 Notables in Health Care feature section will be published in the May 17 issue of Crain's Cleveland Business.
DEADLINE TO NOMINATE: Monday, Feb. 15, 2021 NOMINATE TODAY: CrainsCleveland.com/nominate
FOCUS | SMALL BUSINESS
Akron firm’s condiment gadget sees sales shift into high gear COVID dining restrictions, social media help rev up Saucemoto Dip Clip BBY KAREN FARKAS
The Saucemoto Dip Clip, a holder for fast-food condiments that attaches to a vehicle’s air vent, is one of those products people say they don’t think they need until they try it. The product’s popularity, fueled by TikTok videos and a high demand for drive-thru meals due to COVID restrictions, vaulted it to a top ranking on Amazon.com, where before the holidays it rose to as high as is 21st among the thousands of products in the Kitchen and Dining Category. And the Amazon reviews for Saucemoto, which costs $10.90 for two, are overwhelmingly glowing. The three men who invented Saucemoto are not surprised by its success, but are now trying to navigate the future, said co-founder Tony Lahood in an interview late last year. All currently have full-time jobs and have plowed all profits back into the business. They have not sought investors and decided, after accepting an investment offer on “Shark Tank,” to not go forward with the deal. But that hasn’t slowed the Akron company’s growth. Initiatives for 2021 include possibly hiring their first employee, signing deals with fast-food companies and creating new products. “It is incredible for us — a local
From left, Milkmen Design co-founders William Moujaes, Tony Lahood and Michael Koury make their pitch for their Saucemoto Dip Clip product on TV’s “Shark Tank.” | CONTRIBUTED PHOTO
company competing with massive names for the top spots in e-commerce,” Lahood said of the product’s success on Amazon. “We are right up there with major national brands, and it is extremely exciting for us.”
Lahood, his cousin Michael Koury and William Moujaes, who roomed with Koury at the University of Akron, decided about 10 years ago when they were in their 20s that a condiment holder would improve
their in-car dining. In 2017, they realized they might be able to pursue the idea after Koury and Moujaes, who received engineering degrees from UA, developed a 3D printing company and created a
model. “We printed one, then it was off to the races because all of our friends wanted one,” Lahood said. “We began thinking about it as an actual business.” They formed Milkmen Design LLC. A Kickstarter campaign for Saucemoto, with clever videos, including “How to Practice Safe Sauce — Don’t Dip and Drive,” garnered tens of thousands of views. That led to local and national media coverage. The campaign raised $65,000. They sought a manufacturer in the U.S. but had to turn to China because of the costs, Lahood said. They had just gotten production underway in early 2018 when a “Shark Tank” producer contacted them. “They look for unique products and invited us on,” Lahood said. ‘We honestly hesitated then decided it would be good publicity, fun and maybe we would land a deal. It was a great experience.” Their lighthearted presentation was well-received. They sought $45,000 for 15% of the company and agreed to a deal with Kevin O’Leary, who offered $45,000 for 25% of the company. See SAUCEMOTO on Page 16
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SAUCEMOTO
From Page 14
The show was filmed in the summer of 2018. But when they discussed the terms of the deal after filming it was mutually decided not to continue, Lahood said. “They are amazing people, and we loved working with them but at the end of the day our visions did not align,” he said. After the show aired in May 2019, the company sold out of its Dip Clip within three weeks, he said. As the popularity increased, the team modified the clip to include a ramekin to hold condiments that don’t come in containers and a lip on the front, where a company name can be added so the clip can be sold as a promotional product. “Promotional is a fairly robust part of the business,” Lahood said. Because of the time and effort needed for that aspect, they licensed the rights to sell and produce Saucemoto as a promotional product — except for fast-food restaurants — to a California company. In addition to Amazon, the product is sold on Walmart.com and in Auto Zone and JoAnn Fabric and Craft stores, Lahood said. They have a design patent and a pending utility patent. “Our patent attorney is working pretty diligently to remove the knockoffs from the sites, but it is almost like a game of Whack-A-Mole,” he said. “You take it down and the next three pop up.” Two results of the COVID pandemic —bans on indoor dining and
From left, Milkmen Design co-founders Michael Koury, Tony Lahood, William Moujaes. The trio took their idea for an in-car condiment holder and turned it into the Saucemoto Dip Clip. They say they hope to create more products in 2021. | CONTRIBUTED PHOTOS
“(DINING RESTRICTIONS) AFFECTED SALES IN A POSITIVE WAY BECAUSE A LOT MORE PEOPLE ARE EATING IN THEIR CARS.” — Tony Lahood, Milkmen Design co-founder
the explosive growth of TikTok — have resulted in a huge sales spurt. “We are up 650% this year over last year,” Lahood said late in 2020. “We are projecting similar for next year.” He said the partners have agreed not to share specific sales and revenue information. Fast-food companies have cited increased use of drive-thrus since the
The Saucemoto Dip Clip was designed to make in-car noshing on fast food a little easier.
pandemic began. The NPD Group in September reported that drive-thru restaurant visits increased by 26% in the quarter that included April, May, and June and represented 42% of all restaurant visits. Even in July, as more restaurants began to allow onsite dining, drive-thru visits increased by 13%, the group stated. “(Dining restrictions) affected sales in a positive way because a lot more people are eating in their cars,” Lahood said. And TikTok users embraced Saucemoto and posted video reviews. “We knew it existed, but hadn’t spent a lot of time thinking about it,” Lahood said of TikTok. “But during the quarantine, it became the biggest app out there and that surprised us. Today’s social media and e-commerce like Amazon make products so accessible. It is really incredible how quickly you can kind of build a pretty substantial company with your product if people like it and share it.” The company has an office in Akron and the three principals regularly meet to discuss Saucemoto and new products, Lahood said. They say they “design, manufacture, and market consumer products to solve problems that should have never existed in the first place.” “We want to pursue more versions of new products and are working on ideas outside of the sauce realm,” he said. “As we grow, we have created workflows for the future. We know where we are headed.” Contact Karen Farkas: clbfreelancer@crain.com
heart integrity expertise Certified public accountants (CPAs) and business advisors personally invested in the success of your business. www.maloneynovotny.com | 216.363.0100 Cleveland, Canton, Elyria, Delaware, Columbus
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THE WEEK
Sleggs, Danzinger & Gill, Co., LPA
Reducing Real Property Tax Assessments Throughout Ohio And Across The United States
Carlos Carrasco and Francisco Lindor — shown hugging after Carrasco made his return from a battle with leukemia in 2019 — were traded to the New York Mets for two infielders and a pair of prospects. | JULIO AGUILAR/GETTY IMAGES
When you hire Sleggs, Danzinger & Gill, you work directly with Sleggs, Danzinger and Gill. Each client is directly represented at all levels by a Partner of the firm with a combined 90 years of experience. No pyramid, no associates, no on-the-job training. Our clients deserve the very best representation, so we structured our firm to allow each client, throughout the entire process, to work directly with Todd Sleggs, Robert Danzinger and Steve Gill. Our philosophy is to work cooperatively with school district and county officials to ensure that our clients pay the lowest possible real property tax obligations. If a fair resolution requires litigation, Sleggs, Danzinger & Gill have the depth of trial and appellate experience to handle the most complex valuation issues. Whether the valuation relates to large industrial plants, apartments, shopping centers, warehouses, office buildings, hotels or any other type of commercial property, the attorneys at Sleggs, Danzinger & Gill will ensure that you receive the best counsel, legal advice and litigation expertise. Most importantly, Sleggs, Danzinger & Gill wishes everyone continued health as we navigate through the Covid-19 pandemic. Todd W. Sleggs, Esq tsleggs@sdglegal.net
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FAREWELL, FRANKIE AND COOKIE: A trade of Francisco Lindor seemed inevitable as the Cleveland Indians cut payroll the past two years. But when the Tribe finally did pull the plug on a blockbuster deal with the New York Mets on Thursday, Jan. 7, the club also included starting pitcher Carlos Carrasco — a beloved player who battled back from leukemia to have a solid 2020 season. In exchange for Lindor and Carrasco, the Tribe received major league-ready infielders Andres Gimenez and Amed Rosario, plus prospects Josh Wolf and Isaiah Greene. The trade could save the Indians about $30 million in 2021 salaries. MORE FLATS APARTMENTS: An end-ofyear land sale sets the stage for the next major building at the Flats East Bank project, where developer Scott Wolstein and Chicago-based Akara Partners are honing plans for 325 apartments, with parking and retail space. Cuyahoga County records show that an Akara joint venture on Dec. 30 paid $6.1 million for a 2.5acre parking lot at West 11th Street and Main Avenue, between the Flats at East Bank apartments and the Ernst & Young office tower. Wolstein, who controls the broader 23acre riverfront development site, confirmed that he has a stake in the joint venture. But he wouldn’t discuss the details of his deal with Akara. “We certainly hope to be under construction within a year, and we’re working on financing,” Wolstein said of the project. ON THE GROW: With a $7.5 million gift, University Hospitals will establish the Steve and Loree Potash Women & Newborn Center as part of UH Ahuja Medical Center’s Phase 2 expansion. The gift from Steve and Loree Potash of Bentleyville allows UH to bring UH Rainbow Babies & Chil-
dren’s and UH MacDonald Women’s hospitals to the eastern suburbs, introducing maternal-fetal care and a full spectrum of labor and delivery services to the UH Ahuja campus in Beachwood. Steve Potash, a member of the UH board of directors, is the president and CEO of OverDrive, a company he and his wife, Loree, founded in 1986 that is now a leading platform for digital media. VALUABLE WATCH: Mariner’s Watch, an apartment project on the West Side of Cleveland that ushered in the current run of multifamily construction near downtown, now is part of real estate developer Chad Kertesz’s My Place Group holdings. Cuyahoga County property records show the property changed hands but do not disclose a sale price. The county assigns the 62-suite Mariner’s Watch a market value of $8 million for property tax purposes, close to its original construction cost. Industry estimates put the sale price for the property in the range of $15 million, or more than $240,000 per suite. SOMETHING NEW IS BREWING: Saucy Brew Works closed on its acquisition of a 3.2-acre parcel in Independence that will be home to the Cleveland-founded craft brewery’s latest expansion project. Located off I-77 on Rockside Boulevard near the I-480 exchange and the Topgolf facility that opened in late 2019, the future Saucy operation there is projected to be about 26,000 square feet and feature a restaurant, taproom, production facility, event space, large outdoor area and even some administrative offices. The property, marketed by CBRE Group, where it was listed for $2.5 million, was purchased for $2.1 million, said Saucy CEO and co-founder Brent Zimmerman. Additional costs to build and open the facility are estimated at $15 million to $20 million. A joint venture between Chicago-based Akara Partners and Flats East Bank developer Scott Wolstein plans to build a roughly 325-unit apartment project, with ground-floor retail, on this parking lot along West 11th Street. MICHELLE JARBOE/ CRAIN’S
18 | CRAIN’S CLEVELAND BUSINESS | JANUARY 11, 2021
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TOPNOTCH
From Page 1
The Cleveland Championships would be a WTA 250 event, putting it on the third rung of the tour’s scale, which ranges from 125 to 250, 500 and 1000. It would also be one of only 10 WTA events in the U.S. The inaugural Cleveland Open drew almost 5,000 spectators at the Cleveland Racquet Club in Pepper Pike in 2019. The debut event, part of a Challenger Tour that can serve as a springboard to the ATP (the top men’s circuit), wasn’t profitable, but the tournament was in the black by Year 2, Duvall said. The entrepreneur and agent, who represents the likes of John Isner and Caroline Garcia, envisions a similar scenario for the Cleveland Championships.
‘Really cool concept’ The initial costs for the Cleveland Championships would be significant. In addition to a fee paid to the WTA and rental costs associated with hosting a weeklong tournament at a premium venue, one of the parking lots on the Nautica Entertainment Complex would have to be repaved to meet WTA standards for outdoor courts. The complex — which, in addition to Jacobs Pavilion, includes the Greater Cleveland Aquarium, Shooters Waterfront Cafe and the Improv — offers several options for the five courts (two match-play and three practice surfaces) that would be placed on the redone parking lot. Topnotch has pavement and sports surface specialists heading to
TAX RELIEF
From Page 1
The Ohio Hotel & Lodging Association says that the average hotel has declined in value by 25% since the start of the pandemic. Executives at Trepp, a commercial real estate data provider that tracks properties with loans that have been bundled together and sold to investors, are seeing even bleaker numbers across the nation — a 35% or so slide in value for financially troubled hotels and plunges of 60% or more for shopping malls, which were flailing even before the coronavirus hit. “I think, at this point, it’s undeniable that there’s been an impact” on real estate values, said Lonnie Hendry, Trepp’s Texas-based head of advisory services. “The challenge is just trying to figure out how to fairly and equitably account for that across the spectrum.” Legislation introduced last year in the Ohio General Assembly would have given county boards of revision — the bodies that consider property tax complaints — the ability to consider the impact of the pandemic in 2020 tax challenges. House Bill 38 also would have allowed for more frequent appeals, temporarily waiving limits for properties impacted by the coronavirus. The bill won Senate approval on Dec. 22, but, racing against the end-ofsession clock, failed to make it back to the House for a vote on amendments. Its sponsor, Uhrichsville Republican Rep. Brett Hudson Hillyer, expects to resurrect the proposal this week. “If we truly believe that our goal is to help businesses in Ohio, this is probably the best relief we can give them, as an opportunity to make their case,” he said.
Nautica the week of Jan. 11 to help determine which lot will be the most suitable for the project, director of public relations and Cleveland Open tournament director Kyle Ross said. “All things being equal,” Topnotch would prefer a lot that borders the Cuyahoga River, Ross said. The main stadium court at Jacobs Pavilion would have 2,500 to 3,000 seats. The Greater Cleveland Sports Commission, which is helping Topnotch with logistics and partnership opportunities, estimates that the tournament could draw 40,000 fans over the seven days, assuming the U.S. is in a much better place when it comes to the COVID-19 crisis. Mike Mulhall, the sports commission’s vice president of business development, called Topnotch’s WTA initiative “a really cool concept” that is ideal for the city because of the worldwide appeal of the women’s tour. The WTA said its 54 events that were held in 29 countries in 2019 drew a broadcast audience of more than 696 million. The tour estimates that 43% of its fans are female, and 68% of its backers are between the ages of 16 and 49. The pandemic is continuing to make attendance at all events, even those seven-plus months away, uncertain. Still, the sports commission thinks the Cleveland Championships eventually could attract visitors from all over. “You can start packaging it with the Rock and Roll Hall of Fame and some of our other assets. Then you have a nice package to offer to make people want to travel,” Mulhall said. Topnotch wants the tournament to be an annual staple on Cleveland’s summer schedule. And should it come to fruition, it would be the most
Complicated schedules Under current law, boards of revision can’t consider pandemic-based claims until early 2022, when taxpayers will file complaints based on 2021 valuations. The staggered reappraisal schedules across the state also complicate matters. Counties conduct mass reappraisals every six years and update values at the three-year mark. Property owners can appeal only once during every intervening three-year period, with some exceptions. Cuyahoga County is scheduled to update values in 2021. That means a property owner could file an appeal this year and another in 2022, for the first year of the new triennial. But in Summit County, 2020 was a reappraisal year. So Akron-area property owners who appeal their 2020 values — regardless of the grounds, or the outcomes — largely won’t be able to file again for 2021. Forty other counties, including Franklin County, home to Columbus, are in a similar situation, fresh off reappraisals or updates. In written testimony submitted to a Senate committee in December, Franklin County Auditor Michael Stinziano advocated for House Bill 38. Changing the law won’t guarantee that property owners succeed in securing pandemic-based tax reductions, he noted. But it will give them a chance to make the argument, without being penalized. “This is not to reward failed business endeavors, but to recognize when necessary government orders affect the capacity of a property to generate income and value,” he wrote. Tax complaints are due by March 31, so the General Assembly has a
Topnotch Management operated the Cleveland Open, an ATP Challenger Tour event, at the Cleveland Racquet Club in Pepper Pike in 2019 and ’20. VALERIE PROVOST
notable professional women’s event on the local calendar. “How cool would this be to have it for the next 10 years and really build some equity with it?” Mulhall said.
In search of sponsorships Topnotch believes the Cleveland Championships could be a tournament that’s comparable in quality to the Citi Open, a WTA event that takes place in Washington, D.C., each summer. The 2019 Citi Open field included 2017 U.S. Open champion Sloane Stephens, along with up-andcomers Iga Swiatek and Sofia Kenin, each of whom went on to win major championships in 2020, and teenage phenom Cori “Coco” Gauff. In men’s tennis, the Truist Atlanta Open is an example Duvall cited of a limited window to act. Hillyer hopes the revived version of his bill, which touches on other topics including credit reports and mortgage-lender licensing, will gain passage by late February or early March. David Seed, a Cleveland attorney who represents school boards in tax matters, acknowledged the plight of some businesses sidelined by the pandemic and public health orders. But he expressed concern that commercial property owners, and their attorneys, will try to beat down values and prolong the reductions, shifting burdens to other taxpayers and exacerbating financial pain for schools and local governments. “If I’m representing a taxpayer, I’m going to want to argue that COVID came as early as possible and is going to last as long as possible,” Seed said.
Bracing for a jump Experts with the Newmark real estate brokerage in Cleveland, Columbus and Cincinnati predict a surge in tax complaints this year, regardless of the General Assembly’s actions. Values already were softening for some retail properties and apartment buildings in late 2019, due to an oversupply of projects and changes in the way that consumers shop. “Property owners are struggling to collect rents and make debt payments and will seek financial relief wherever they can,” wrote Laurel Keller, Kelly Fried and Robert Vodinelic, of Newmark’s valuation and advisory practice, in an email. Commercial real estate sales dwindled after March, making it more difficult to quantify the impact of the pandemic on pricing. Warehouses, distribution facilities and other industrial spaces were in high demand
high-profile tournament located in a downtown setting. In addition to courts, the ATP event constructs a temporary stadium at Atlantic Station in Atlanta. If Topnotch proceeds with its plan, the WTA tournament would be a worthy addition to a rich Cleveland tennis history that features 10 Davis Cup tournaments that were held in the area in a 19-year span that ended in 1979. Six years later, Brad Gilbert won the Society Bank Tennis Classic — the last big-time tour to compete in the area prior to Topnotch launching the Cleveland Open. In a statement provided to Crain’s, Steve Simon, the WTA’s chairman and CEO, said, “Cleveland is an exciting market for athletes to compete in and would be a great addition to our worldwide Tour calendar.” Duvall is eager to bring a WTA
Concord Hospitality Enterprises, which manages a handful of Cleveland-area hotels including the Hampton Inn downtown, is hoping for some tax relief in the midst of the pandemic. | MICHELLE JARBOE/CRAIN’S
Cuyahoga County property tax complaints Appraisers and real estate brokers are predicting a jump in commercial property tax complaints this year, driven by factors including the coronavirus pandemic. In Cuyahoga County, tax complaints typically peak at the start of the six-year reappraisal cycle (2012 and 2018, below) and jump again in the wake of a triennial update (2015). But that pattern could be disrupted by COVID-19, particularly if the Ohio General Assembly passes legislation that gives property owners hard-hit by the pandemic more flexibility to file. TOTAL COMPLAINTS Tax year Residential Commercial Total filings
2012 2013 2014 2015 2016 2017 2018 2019
12,843 6,824 6,218 7,943 4,568 3,454 10,264 2,706
6,352 1,848 1,596 2,768 1,464 1,556 4,130 1,347
19,195 8,672 7,814 10,711 6,032 5,010 14,394 4,053
SOURCE: CUYAHOGA COUNTY BOARD OF REVISION CRAIN’S CLEVELAND BUSINESS GRAPHIC
event to a Northeast Ohio tennis community he describes as “really vibrant.” “We’ve been able to prove that on a smaller level,” he added, “and think the timing is right to take this next big step for our company.” Duvall moved to Northeast Ohio with his wife, Kathryn, a Shaker Heights native, when he launched Topnotch. Two years earlier, in 2014, he attempted to bring a WTA tournament to Vermont, where a tennis tourism business in which he has a stake operates, but, after a lot of work, the plans were thwarted because of an issue with a venue. He’s more optimistic about Cleveland’s chances, though he admits now is a difficult time to try to convince companies to spend money on sponsorships. last year and are probably worth more, not less, said Manus Clancy, senior managing director at Trepp in New York. Clancy said it’s still too early to say how office buildings and apartments are holding up. Retail values broadly are down about 35%, he added, but shopping centers anchored by grocery stores, Target, Walmart or home improvement stores are bustling. “There’s actually a very small group that are going to be able to point to COVID-19 and say ‘My property values have plummeted,’ ” said Kieran Jennings, a Beachwood-based lawyer who specializes in property tax issues and who has advocated for House Bill 38. “And, truly, we should be supportive of those people who were operating, business as usual, and were told, ‘You have to close down. We’re all in this together — but you, you have to close down.’ ” The Cuyahoga County Board of Revision, which is still slogging through residential tax complaints for 2019, is bracing for a jump in commercial filings. Residential appeals also might rise, due to the financial strains of the pandemic and tax levies that voters approved last year. But the housing market has been an unexpected bright spot in an uneven economy, with fierce contests between buyers and scarce listings pushing prices higher. Ron O’Leary, the board’s administrator, said his staff is committed to getting through cases as quickly as possible. With a backlog of complaints and homeowners first in line, though, 2020 commercial filings aren’t likely to get an airing until the first or second quarter of 2022. The board, which shifted from in-person to telephone proceedings due to the pandemic, plans to start holding vid-
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Topnotch hopes to land title and presenting sponsors, each of which would pay a fee that is well above six figures. The firm also wants to land a premier partner, and sell lower-level sponsorships that would exceed five figures. The sports commission has assisted in lining up potential partners, as has Gallagher Sports, a Cleveland agency that specializes in sponsorship marketing and activation. “This is our tournament, so we are taking the risk, 100%,” Duvall said. “It’s just kind of getting some soft commitments in the next 30 days. That’s kind of where we’re at.” That would have been a heck of a lot easier prior to last March, when the COVID-19 crisis brought the events industry to a near-standstill. “After a year of cancellations,” the Nautica Entertainment Complex is excited about the possibility of holding an annual tennis showcase that could have global appeal, said Samantha Fryberger, the director of marketing at the Greater Cleveland Aquarium. The outdoor courts, coupled with the Jacobs Pavilion and the complex’s proximity to entertainment venues and tourist attractions, should make for quite a downtown scene, the tournament’s proponents say. “The action, summer in Cleveland, being right on the water — it’s going to be really cool,” Duvall said. “We just gotta get it off the ground.” Kevin Kleps: kkleps@crain.com, (216) 771-5256, @KevinKleps eo hearings on the Zoom platform this month. Property owners who file complaints can choose to pay estimated taxes, based on the reduced value they’re claiming. But that’s risky. If their appeals are unsuccessful, they’ll be on the hook for the balance, with penalties and interest. “I would leave it to their lawyers as to whether it’s a good thing to do or not,” O’Leary said. Doug Price and Karen Paganini of the K&D Group, a major apartment landlord based in Willoughby, sent a letter to legislators in late November in support of House Bill 38. K&D owns Terminal Tower and other prominent downtown Cleveland buildings and controls upward of 2 million square feet of offices and retail space in the central business district. “Our parking garages are at 50% capacity,” Price said in an interview. “Our downtown properties are at low 80% occupancy. Everything downtown is struggling.” Joe Savarise, executive director of the Ohio Hotel & Lodging Association, described the proposal as a “short-term bridge” for hoteliers and other property owners fighting to survive. “We’re talking about a once-in-a-generation, once-in-ahundred-year occurrence,” he said. “And this is a very shortterm, narrow and focused way to … help some businesses from going under — which means they aren’t going to be around to pay taxes down the road.” Michelle Jarboe: michelle.jarboe@ crain.com, (216) 771-5437, @mjarboe
AKRON REAL ESTATE
Major Fairlawn office building put on the market The $7.5 million listing might provide test of how Greater Akron office market is faring in pandemic BBY DAN SHINGLER
One of Greater Akron’s larger office buildings, at least outside of downtown Akron itself, has been put up for sale. Located at 3200-3250 W. Market St. in Fairlawn, the building has about 100,000 square feet of space and has been listed for sale at a price of $7.5 million by Colliers International. It sits across the street from Summit Mall and next to the Hilton Akron/Fairlawn hotel. Building owner Rennick Andreoli, president of nearby RDA Hotel Management Co. and the owner of the neighboring Hilton, thinks the office market might be soft, but he’s testing it to see if there’s interest in the site. Andreoli is not under pressure to sell but is ready to cash out after owning the building since it was constructed 45 years ago, he said. “I’m in my 70s and am trying to monetize some of my holdings. … It’s probably not the greatest time to take office buildings to the market, but, at any rate, I decided to pull the trigger,” Andreoli said. A sale would also allow Andreoli to focus more on his hotel business. He owns five hotels, including the Doubletree near the Hilton Akron/ Fairlawn, a Sheraton Suites in Cuyahoga Falls and the St. Paul, a boutique hotel in Wooster. If he can’t get a decent price for the office building, Andreoli said he’ll simply pull it off the market and wait for a better time. But he’s optimistic the building will do well — especially if the pandemic begins to lift — because of its location and condition. “We’ve spent a great deal of money on the property in the last 24 months renovating and updating it,” Andreoli said. The building has had an occupancy rate above 90% and continues to do so today, he added. One of his real estate representatives at Colliers, vice president Matt Davis, said the building might not be considered Class A space, simply because of its age, but that it’s like a much newer building thanks to Andreoli’s decades of stewardship and recent upgrades. “It’s a well-maintained, high-quality office property … but we’re not really classifying it as Class A or B,” Davis said. Over the years, Davis said Andreoli has worked to keep up the site because it’s a major property near his hotel. That’s included repaving the parking lot nearly every year and staying up to date on interior renovations. Andreoli recently upgraded the roof and the building’s mechanicals, he said. Andreoli estimates he’s spent about $2 million on improvements at the building over the past two years. Davis agreed it’s a challenging market for office buildings, but said he’s already shown the building to several interested parties since Colliers began marketing the property in early December. “The interest is good,” Davis said. “COVID has certainly impacted the office market, and we’re all waiting
The 100,000-square-foot office building across the street from Summit Mall has been put on the market for $7.5 million. | COLLIERS INTERNATIONAL
to see how it rebounds when employees go back to work — there’s a little caution in the office market. But this property should stand out.” Davis also said he thinks the building will attract interest because of the potential to add to the revenue it produces for the next owner, particularly by raising rents. “The property is at a certain value because we think rents are below market currently. … If a true office operator comes in, they’re going to realize this value-add,” Davis said. The building’s largest tenant is Cedarwood Development, which Andreoli said occupies about 20,000 square feet and moved there in 2019. Cedarwood executives did not return phone calls to discuss the building. Despite the pandemic, Andreoli’s building might support higher rents — and might still do well selling in today’s market, said Warren Blazy III, senior vice president at Cleveland real estate firm JLL. Blazy said he knows the building from putting some lease tenants in there and agrees it has been very well kept up by Andreoli over the years. “That ownership was great to work with and really has kept that building at a high level. He’s in the hospitality industry, so it’s really clean and like a Class A building. He’s taken really good care of it,” Blazy said. On top of that, Blazy said, the Fairlawn office market has held up in recent years as one of Greater Akron’s strongest, and there’s still demand for office space there that Blazy thinks will continue post-pandemic. “The market for Fairlawn is still very strong and rental rates have increased, though this year it’s a little flat, Blazy said. This building, though, is likely to draw interest because of its size, condition and location, Blazy said. “There’s definitely going to be interested parties — something like this doesn’t come on the market all the time,” he said. But Blazy doesn’t think the building will sell for a discounted price as some buyers might hope in the current climate, echoing Andreoli’s sentiments. “This isn’t a knee-jerk reaction. He would be doing this with or without COVID. ... Just because of the economic situation now, he’s not going to discount his building,” Blazy predicted. “But for a local regional Northeast Ohio owner that has multiple office buildings, this could be a natural fit for someone like that to expand their portfolio.” Dan Shingler: dshingler@crain.com, (216) 771-5290, @DanShingler
BANKRUPTCY
From Page 1
The company’s only remaining asset is a $294,000 ownership interest in Akron Development Fund I Ltd., an economic development loan fund operated by the Development Finance Authority of Summit County. In August, the Beacon Journal company sold the former Akron Beacon Journal building at 44 E. Exchange St. to Capstone Development Co. of Alabama for a recorded $1.1 million. The newspaper had moved to the AES Building at 388 South Main St. in November 2019. Black Press paid McClatchy Co. $165 million for the paper in 2006. GateHouse Media (now called Gannett Co.) purchased the Beacon Journal from Black for $16 million in 2018. That loss in value reflects the steep decline in newspaper revenues nationally over the past decade. When Black purchased the newspaper in 2006, daily circulation was 135,000. That is now down to 68,000. Marc Merklin, a Brouse McDowell attorney representing Black Press in the bankruptcy case, said the company has applied to the federal Pension Benefit Guaranty Corp. to take over payment of the pension portion of the employee benefits. But that left the health care and prescription drug benefits hanging. The benefits package had been protected by the 2012 settlement of two class-action lawsuits. Shortly after Black purchased the newspaper, it changed health insurance plans for retirees, substantially reducing benefits. The retirees sued and the 2012 settlement restored the health care and prescription drug benefits CRAIN’S CLEVELAND BUSINESS | pre-2006 C R Ato I Nthe ’S C L E V E L Aretirees. ND BUSINESS | Donald Screen, a Cleveland attorney with the Chandra Law Firm who negotiated the settlement for the re-
tirees, said Wednesday, Jan. 6, that the 2012 settlement anticipated that the Beacon Journal could again be the target of a newspaper acquirer. “Knowing that the Beacon Journal was likely a target for an acquisition, or some sort of a buyout or merger, we provided in the agreement that should that happen, the Beacon Journal would require the buyer to assume the health care and prescription drug benefits that we had fought for (the retirees) to have,” he said. “We consummated the agreement, and things went pretty smoothly for the past eight years until the bankruptcy filing.” But, Screen said, federal law does not provide a government program similar to the PBGC to cover health benefits. “So, because this is a Chapter 7, the Beacon Journal Publishing Co. is simply going away and there isn’t anywhere else to fund these benefits,” Screen said. Apparently, some of the retirees didn’t learn of the curtailment of their prescription benefit until they went to pick up medication. Screen said that at a Dec. 28 meeting of creditors, he asked a Black official about the lack of notification. “I asked (rhetorically) if Black knew how the retirees learned of the termination,” he said in a letter to the retirees. “Hearing no response, I informed him that they learned when they walked into their local CVS or Walgreens and were advised by their pharmacists that they had no coverage. I added that, while a lucky few discovered the cancellation in time to enroll in Medicare Part D or other private insurance, most were unaware of the issue until after the open enrollment window closed (and) are S E P T E M B E R 3 - 9 , 2 018 | PA G E 21 without S Ecurrently PTEMBER 3 - 9 , coverage. 2 018 | ” PA G E 21 Jay Miller: jmiller@crain.com, (216) 771-5362, @millerjh
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PEOPLE ON THE MOVE
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To place your listing, visit www.crainscleveland.com/people-on-the-move or, for more information, contact Debora Stein at 917.226.5470 / dstein@crain.com ACCOUNTING
CONSTRUCTION
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Winbridge
Tober Building Company
Ulmer & Berne LLP
Winbridge is pleased to announce Gordy Jones, CPA has joined the firm as Director of Fund Administration and Tax. Gordy brings with him over 10 years of private fund accounting and tax experience. He will manage Winbridge’s fund tax practice and oversee daily fund accounting and administration services. Winbridge, located in Beachwood, is a full-service fund administrator providing comprehensive accounting, investor reporting, and tax services to private equity and venture capital funds.
Lee Tucker joined Tober Building Company in 2020 and serves as Sr. Project Manager of Construction. He is a passionate builder with over 25 years of experience, where he has managed over $350M in commercial construction projects. His construction experience is diverse including Residential, Multi-Family Housing both Affordable and Market Rate, Hospitality, Class A Commercial, Healthcare and Government Projects. He enjoys preserving historically significant buildings and his projects have won national and state awards.
Ulmer is pleased to announce that Douglas K. Sesnowitz, Partner and Co-Group Leader of Ulmer’s Business Law Practice Group, has been elected to serve his first term on the firm’s Management Committee, which is responsible for guiding the operations and strategic direction of the firm. Sesnowitz represents companies in a wide range of industries in complex corporate, commercial, and financing matters, including mergers and acquisitions, divestitures, and joint ventures.
Ulmer & Berne LLP
ADVERTISING / MARKETING
Innis Maggiore
Westfield Bank Westfield Bank is pleased to welcome Arbi Raina as a private banking officer. Throughout her impressive career, Raina has excelled at providing financial solutions through a knowledgeable and consultative approach. In her role on the Westfield Private Banking team, Raina will utilize her tenured financial experience and expertise to provide our clients with personalized service to help navigate their complex financial needs. Contact Arbi Raina at ArbinderRaina@westfield-bank. com.
The MetroHealth Foundation Eric Fiala has joined the Board of Directors of The MetroHealth Foundation, which raises philanthropic support for The Fiala MetroHealth System. In November 2020, Eric was named Head of Corporate Responsibility at Cleveland-based KeyBank. He oversees community engagement; environmental, social and governance (ESG); philanthropy; and Community Reinvestment Act teams. Eric joined KeyBank in 2002. JoAnn Glick also has joined The MetroHealth Foundation’s Board of Directors. JoAnn is a registered nurse with a Glick master’s degree in community health nursing. She serves on the Board of Ideastream and on the advisory committee for the Quality and Safety Education for Nurses at the Frances Payne Bolton School of Nursing at Case Western Reserve University.
22 | CRAIN’S CLEVELAND BUSINESS | January 11, 2021
Lauren Garretson joins Ulmer as an associate in the firm’s Business Litigation Practice Group and will focus on the resolution of complex business disputes. She will initially draft pleadings, assist with review and summary of discovery documents, assess cases and prepare preliminary evaluations of client exposure and potential liability, and conduct legal research and draft memorandum analyzing a broad range of legal issues. She earned her J.D. from Case Western Reserve University School of Law. LAW
McGlinchey Stafford McGlinchey Stafford is pleased to announce national recognition of attorney Robert Savoie and its FinTech practice group in the 2021 Chambers FinTech guide. Robert’s ranking notes that “clients particularly appreciate his understanding of what license is required in every state, for every kind of business model in the FinTech space.” Robert leads the firm’s FinTech practice and advises a range of companies with regard to federal and state regulatory compliance and licensing matters.
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PRODUCTS
Innis Maggiore, the nation’s leading positioning ad agency, hired Tony Bell as director of client services. Bell will lead Innis Maggiore’s client services team in driving teamwork and collaboration as the agency works to differentiate its clients in their competitive markets. Bell’s experience includes John Deere, California Pizza Kitchen, Ford, Goodyear, Sherwin Williams and Mazda. He earned a bachelor’s degree from the University of Akron and served in the U.S. Army.
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Premier Development Partners
Benesch is pleased to announce that Corey Clay has been promoted to partner in the Labor & Employment Practice Group. Corey’s practice includes counseling companies on day-to-day personnel issues and challenges. As a litigator, he represents clients in active disputes including administrative actions, arbitrations, class actions, and other complex litigation.
LAW
Benesch Benesch is pleased to announce that Connie A. Porter has been promoted to partner in the Corporate & Securities and Private Equity Practice Groups. She focuses her practice on domestic and international corporate transactions, including mergers, acquisition and divestitures and related regulatory compliance, as well as debt and equity formation. Connie represents both publicly and privately held companies at various stages of growth, as well as private equity funds and their portfolio companies.
Premier Development Partners is excited to announce that Mark Hill has joined our team as our Senior Vice President of Business Development with a focus on project development. Mark brings with him over 40 years of experience and previously was the Vice President at Gilbane Building Company where he developed an incredible resume of projects. Mark was credited in securing key projects throughout the Midwest and the New York metropolitan area as their Regional Business Development Manager.
STAFFING / SERVICES
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Benesch Benesch is pleased to announce that Addisah Sherwood has been promoted to partner in the Energy & Natural Resources and Litigation Practice Groups. Addisah represents corporations in complex disputes involving a wide range of business matters. She also works closely with utility companies to negotiate their business disputes and assist with infrastructure upgrades.
Direct Recruiters is pleased to announce that Mitchell Herman has been named Partner. Mitchell works with many of the digital health industry’s fastest growing companies to recruit, secure and retain their human capital. Mitchell joined DRI in 2017 as a summer intern and quickly excelled, bringing his impressive work ethic and positive attitude to each search. Mitchell exemplifies Direct Recruiters’ core values, staying accountable to clients, candidates and coworkers. STAFFING / SERVICES
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Rust Belt Recruiting
Benesch
Rust Belt Recruiting, one of the fastestgrowing recruiting and staffing agencies in Northeast Ohio, is excited by the recent promotion of James Smith, to Vice President of Sales & Recruiting. Since joining Rust Belt in July 2019, James has helped to challenge, organize and improve company-wide practices. As Vice President, he will oversee the company’s recruiting team and their processes while also guiding the development and execution of Rust Belt Recruiting’s regional growth strategy.
Benesch is pleased to announce that James E. von der Heydt has been promoted to partner in the Litigation Practice Group. Jim represents business clients in complex disputes. His advocacy has played central roles in Civil Rules motion practice and appeals all over the country, in arbitrations over amounts from $120,000 to $45 million, and in difficult negotiations encompassing a wide variety of business dilemmas. He has experience in efficiently building strong cases.
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