Crain's Cleveland Business by Crain's Cleveland Business

REAL ESTATE Offers for two downtown apartment buildings could top $100 million. PAGE 2

MANUFACTURING: Labor shortages, long lead times create challenges. PAGE 10

FOR SALE

CRAINSCLEVELAND.COM I OCTOBER 18, 2021

NEW LIFE FOR HOTEL

Vacant building in Midtown set to become Delta by Marriott BY MICHELLE JARBOE

MICHAEL SCHWARTZ LIBRARY/CLEVELAND STATE UNIVERSITY

A New York-based developer plans to revive a mothballed hotel in Cleveland’s Midtown, in the first project poised to take advantage of a national historic district established this year. Crimson Rock Capital expects to transform the University Hotel & Suites, at 3614 Euclid Ave., into a 189-room Delta by Marriott. Renovating the forlorn building could be a $35 million endeavor, according to a project document filed with the Ohio Department of Development. The hotel opened as a Holiday Inn in 1965, as an expanding highway system and surging automobile travel spurred lodging construction across the country. A half-century later though, the once-glimmering 10-story building east of Interstate 90 is a blight near a key intersection. “We’re very excited about the potential to turn that property around,” said Richard Barga, vice president of economic development for neighborhood nonprofit MidTown Cleveland Inc. “It’s been an eyesore for quite some time.” Crimson Rock, a private equity firm focused on hospitality deals, acquired the property in 2019 through a sale process

MICHELLE JARBOE/CRAIN’S CLEVELAND BUSINESS

The Euclid Avenue building was part of a nationwide wave of Holiday Inn construction in the 1960s. A postcard from the era shows the hotel, with its classic roadside sign.

See HOTEL on Page 21

COVID response fund takes next step Storm7 Labs wants to help BY LYDIA COUTRÉ

The funding partners who mobilized in March 2020 to launch the Greater Cleveland COVID-19 Rapid Response Fund have announced their next phase: a multiyear, long-term pandemic recovery effort. Lessons learned from Phases I and II will inform the funders’ collaborative work ahead. And

they’ve learned plenty since the early days of figuring out how to get dollars out the door as quickly as possible — how to streamline the process for themselves and nonprofits; how to break down silos internally and externally; the value of data collection; and so much more. Marcia Egbert, program director for thriving families and social justice for the George Gund Founda-

NEWSPAPER

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tion, said the biggest lesson has been that justice and equity underlines everything that happens in the community. “And to silo that or ignore it in any way misses the overarching dynamic of COVID, and probably every major social ill that we try and confront as grantmakers,” she said. See FUND on Page 20

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A CRAIN’S CLEVELAND PODCAST

10/15/2021 1:47:53 PM

REAL ESTATE BY STAN BULLARD

To use commercial real estate investment broker parlance, a whale of a potential apartment deal, with a rumored asking price of $110 million, is working below the surface at two West Ninth Street properties with views of Lake Erie, the Cuyahoga River and the downtown Cleveland skyline. Marcus & Millichap’s brokerage office has set a Tuesday, Oct. 19, closing for a call for offers for the massive Bingham Apartments — 339 units at 1278 West Ninth St. — and a few 100 feet north of it toward the lakefront, the Archer Apartments — 248 suites at 1200 West 10th St., which also have a West Ninth entrance. Within investment brokerage circles, the so-called “whisper price” is $110 million, reflecting some idea of the ownership’s expectations amid a resurgent apartment sales market. Dan Burkons, an executive managing director at Marcus & Millichap, discussed the properties the national investment concern has listed for two separate ownership groups associated with Rochester, New York-based Morgan Communities. He leads a trio of Marcus & Millichap brokers handling the listing. Morgan bought both properties after woes suffered by prior owners in the apartment conversions of old warehouses that were vanguards in the revival of residential living in downtown Cleveland. Both date from the early 1990s, when downtown loft conversions took off during the Michael R. White administration’s push for more city housing. Morgan paid $40 million in 2010 for the Bingham and $15.5 million in 2014 for for the Archer, then known as National Terminal apartments. “These are the first properties to hit the market after the pandemic shut things down,” Burkons said. “Except for the hiccup in the summer of 2020, the market has done nothing but get better.” Burkons said the ownership groups have 10-year loans on the properties that are coming due in 2022. Morgan, he said, made the decision to see what the properties could bring and offer them on the market. The deals could coast on the high prices for Northeast Ohio and downtown Cleveland projects being paid by well-heeled apartment investors from the East Coast, especially New Jersey, that make locals unlikely bidders. Apartment brokers are also busy because some long-term owners hope to sell before year’s end. Their reason: fear in the unlikely event the gridlocked U.S. Congress might pass the Biden administration’s potential reduction or elimination of favorable capital gains tax treatment to pay for its massive infrastructure and social spending agenda. Like-kind exchanges — buying a new commercial property after unloading one to shelter gains — are also a potential revenue-enhancement target. Last month, Crittenden Court Apartments, which are between West 10th and West Ninth streets fronting on West St. Clair Avenue, were acquired by an investor group led by Snavely Group of Chagrin Falls, which has recently completed multiple apartment buildings in Ohio City and develops properties in multiple markets. Snavely paid $19.75 million for the 208-suite Crittenden. It plans a substantial renovation of the building to make it more competitive with newer, more pricey downtown rent-

Offers for downtown apartment buildings could top $100M Owner Morgan Communities is marketing the Bingham, in the foreground, and the Archer, to the rear, for sale in what could become a more than $100 million deal if the same buyer springs for both loft buildings. | MICHELLE JARBOE/CRAIN’S CLEVELAND BUSINESS

als. However, that price does not include a parking garage next to the building that was designed to accommodate additional construction on a portion fronting on West Ninth Street facing the superblock where the proposed Sherwin-Williams Co. skyscraper would rise. Snavely has multi-generational construction and real estate development expertise that could allow it to capitalize on the development opportunity if it consummates its planned purchase of the garage, which is separately held from the Crittenden apartments. Moreover, 1900 Lofts LLC of Boca Raton, Florida, snagged the 1900 Euclid Lofts across the street from Cleveland State University for $7.9 million, or about $99,000 a suite last April. The seller had scarfed up that office building turned multifamily residential complex for $3.7 million

after it went through a default on a U.S. Department of Housing and Urban Development-backed loan, the same fate that the Bingham’s original Chicago-based developer faced. Other apartment buildings downtown and in the suburbs have capitalized on a big upswing in occupancy after vacancy shot upward due to new buildings hitting the market at almost the same time as COVID-19 and a riot roiled downtown Cleveland in mid-2020. Apartment owners are also seizing continued rent growth to refinance their properties at low interest rates. Such refinances are the ultimate tax shelter, as the owners don’t pay federal taxes on mortgage proceeds above the replaced loans, and offer at higher values, and continue to own the property. In the case of the Bingham, the

seller has been upgrading suites with granite countertops and the like as units go empty to snare higher rents. And Morgan repositioned the former National Terminals Apartments as a market-rate apartment building with substantial upgrades when it bought that property. Moreover, Burkons said the Archer has seven years of property tax abatement remaining from the last top-to-bottom renovation, which improves returns for the next owner. Burkons said Marcus & Millichap has packaged the properties for individual sale or as a portfolio sale in order to attract the broadest range of buyers, especially at the institutional level. He said the high 90% occupancy rates of the properties and opportunities to hike rents with new ground-up apartments in the market make for a lot of appeal to apartment groups.

Ralph McGreevy, executive vice president and chief operating officer of the Northern Ohio Apartment Association trade group, said he was “very surprised” the Bingham and Archer have gone up for sale. “They seem to be doing very well and have a strong management team in place,” McGreevy said. “I’m sure they will get a lot of interest.” Dan Siegel, who co-owns a large apartment portfolio with suburban, Tremont and Ohio City holdings operated under the Beachwood-based Integrity Real Estate name, speculated that an out-of-town group will land the deal. And what does he think they will trade for? “Whatever it will be,” Siegel said, “it will be a whole lot more than it would have been five years ago.” Stan Bullard: sbullard@crain.com, (216) 771-5228, @CrainRltywriter

2 | CRAIN’S CLEVELAND BUSINESS | OCTOBER 18, 2021

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10/15/2021 12:33:13 PM

LEGISLATURE

Treasurer wants to ‘unlock the power’ of Ohio’s $20B investment portfolio BY KIM PALMER

Cleveland Clinic pilot: “In March of 2020, when the pandemic first came to the United States, the economy began to shut down and the credit markets completely froze up,” Sprague said. While many businesses had the option to shore up costs and slow down spending in response to the pandemic, hospitals did not. Health care facilities in the state had to “run to the problem,” not away from it, Sprague points out — so to help lessen the financial pressure, the state stepped in and bought hundreds of millions of dollars in debt securities for hospitals around the state through an emergency Variable Rate Demand Obligation Stabilization Program. “We thought that an investment in our Ohio hospitals was one of the best things that we could do at that time,” Sprague said. The move helped lower interest rates for the health care providers, which had spiked to around 8%, bringing them below 2% during a six-week period of time. “That really helped our hospital systems in Ohio be able to weather the storm of that initial Sprague coronavirus wave,” he added. The move helped hospitals alleviate debt-service costs and provided a return for the state’s treasury, prompting Sprague to question what other ways he could “unlock the power of our $20 billion Ohio balance sheet and Cirino again bring Ohio tax dollars to use for Ohio institutions.” In early October, the state treasurer’s office announced three investment programs as part of its “Ohio Gains” initiative, aimed at lower borrowing costs for the state’s hospitals, its 14 public universities and the farming community. Included in the plan, which leverages Ohio’s strong liquidity position, is the formalized version of a pilot program with the Cleveland Clinic that began in 2020. The program positions the state treasury as the buyer of last resort for large hospitals that use the variable rate demand obligation debt instrument — a borrowing tool commonly employed by large institutions to finance capital projects. The proposal allows the state to use the treasury to back a hospital’s short-term debt, effectively bringing down the variable rate. The Clinic saw significant savings from the program, and now Sprague wants to expand it to help other hospitals looking to make capital investments around the state.

STATEHOUSE.GOV/CONTRIBUTED

The state’s treasury office has $20 billion in its investment portfolio, plus $2.7 billion in the state rainy day fund and ‘AA+’ rating from Fitch Ratings. The state’s strong liquidity position is something that Ohio Treasurer Robert Sprague said can be leveraged by farmers, universities and hospitals to help lower the costs of borrowing.

Ag-LINK: For farmers, the Ohio Gains initiative seeks to remove a $150,000 cap on loans acquired through the Ag-LINK program. The plan would modernize the 30-year old program, allowing the treasury to raise the maximum amount of the low-rate loans based on current market conditions, while also offering those loans to farming co-ops not eligible under the old program. “Anybody in the agricultural industry will tell you $150,000 does not go very far these days. The commodity prices, like the fuel and seed and fertilizer, have just increased dramatically. The feedback that we’re getting from the farmers in the state is that we need to adjust the caps upward,” Sprague said. Ag-LINK is one of several such programs that make up more than $2 billion, or about 12%, of the state’s overall loan portfolio. The program enables banks to lend to eligible borrowers at interest rates 2% or 3% below market when the treasury deposits that same amount with the bank. Public universities: The plan for the state’s four-year universities revolves around allowing the institutions to use the financial support received directly from the state as an asset that boosts the institution’s credit rating, making it more attractive when looking for lending for capital projects, Sprague said. The “State Share of Instruction,” as it is called, is the primary financial support schools receive from the state, and, at nearly $2 billion flowing to Ohio universities in 2020, it can be a significant addition to a balance sheet. “This creates a program that assures (that) a bondholder (who) holds the university’s bond could get paid their debt service with the state’s Share of Instruction money if the university would ever default,” said Sprague, who adds that default is extremely rare. “It is a way to use it (SSI) as an assurance for bondholders, and it enhances the credit of the university and drives down their borrowing costs,” he said.

Funds not spent on debt service with large institutions like hospitals and universities can translate into millions of dollars of savings. “In this interest rate environment, the savings are up to one-fifth of a percent on a transaction, which, when you’re talking about hundreds of millions of dollars, adds up pretty quickly,” Sprague said. New legislation: The three proposals by Sprague require changes or additions to the Ohio Revised Code, so in early October state lawmakers introduced the corresponding bills in the Ohio House and Senate. Republican Sens. Michael Rulli of Salem and Kirtland’s Jerry Cirino are the sponsors of Senate Bill 241, which was assigned to the Financial Institutions and Technology committee the day after it was introduced. Cirino, who represents Portage and portions of Geauga and Lake counties and is a former Lake County commissioner and business owner, said the programs are an innovative way to leverage the treasury’s assets with minimal or no risk to the state. “It takes advantage of the liquidity of the treasury,” he said. “And it just conceptually makes a lot of sense.” The bill, he said, was proposed to provide help to sectors hit the hardest during the pandemic that are still reeling, even as other areas of the economy improve. The senator worked closely with Sprague’s office to write the bill to codify the three programs, and both are predicting bipartisan support for both the Senate and the companion House Bill 440 sponsored by Republican Reps. D.J. Swearingen of Huron and Andrea White of Kettering. “Universities, hospitals and farmers, all of whom need help right now,” Cirino said. “What this bill does, it’s modernizing things, but it is taking advantage of strengths that we have in Ohio and utilizing those strengths by bringing them to bear for, in this case, three groups that certainly could use our assistance at this time.”

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Union Savings Bank poised to enter market with Independence branch BY STAN BULLARD

Louis Beck, chairman of Union Savings Bank of Cincinnati, plans to establish an office for mortgage lending officers and associated personnel while seeking regulatory approval for a branch office and city approval for a drive-through at the bank’s just-purchased building in Independence. “This will be our home office there,” Beck said in a phone interview. “We have made loans there but never had a (Cleveland) presence. We will plant ourselves and develop from there. It’s a giant step for us, and some of our personnel will move up there soon. We have people champing at the bit to get to Cleveland.” He puts the market’s attraction simply. “It is such a huge geographic area,” Beck said. “You really see it when you fly over it. It’s a large market in our proximity for us not to be in it.” After it gets regulatory approval, USB, as Union Savings commonly refers to itself, will establish a branch office at the three-story building at 6400 Rockside Road, which it bought on Sept. 29 for $3.99 million. But its goal is not so much deposits as presence. The building has substantial office space that the prior owner, a Columbus investor group, had gutted to attract a new tenant that USB can outfit quickly for mortgage operations. It will house loan officers, loan processors, underwriters and appraisers, as well as about five people in the branch office. It will handle other aspects of the business from its central operation. USB does not sell its loans but maintains them for servicing, which Beck said it does to provide better customer service. “I’ll make a prediction,” Beck said. “We’ll be disappointed if we don’t have more than 40 people in that branch and do 3,000 loans a year.” One surprise is that USB will focus first on the Cleveland market and does not plan Akron-area offices at this time.

By loans he means home purchase loans, refinances and equity loans. “We do only one thing, residential mortgage lending, and some commercial on a relationship basis,” Beck said. “We do consumer direct, all online like (Rocket Mortgage) and traditional eyeball-to-eyeball loan officers who meet with people. We’ve found people like dealing with people and paying $250 or $500 to close a loan. The theme is low closing costs. With low interest rates, some people feel beat up on by the fees.” USB had $1.98 billion in one- to four-family residential secured loans, according to Federal Deposit Insurance Corp. data as of June 30. In terms of size among Ohio lenders, it’s clearly a David among Goliaths. Even so, USB has 35 full-service branches and lending offices in Ohio, Indiana, Kentucky and Pennsylvania, and more than 500 employees. USB dates from 1895 and is owned by Beck and business partner Harry Yeaggy. The two also own the smaller Cincinnati-based Guardian Savings Bank. USB and Guardian got spanked by the U.S. Department of Justice in 2016, when they agreed to commit $9 million to lending in certain markets to increase investments in minority areas in Indiana and Ohio. DOJ accused the companies of providing mortgages in areas with a predominance of white borrowers to a greater extent than in minority areas. The CRA rating of the banks was satisfactory, according to a February 2020 Community Reinvestment Act performance evaluation. For his part, Beck said USB provides loans in underrepresented areas. Over time, he said, the company has found it can be surprised by the niches enterprising loan officers develop; he once worried about saturating a market with loan officers, but no more. Beck said they decided the footprint in Cleveland fit USB better. The two also are partners in real estate ventures, including Janus Hotels and

Resorts of Cincinnati. Among the holdings of Janus are the Holiday Inn and Springhill Suites in Independence on the northeast corner of the I-77 and Rockside Road interchange. That also gives this real estate developer turned banker a different perspective on the Cleveland area and its slow-growth patterns compared with Columbus, Cincinnati and Indianapolis. “That interchange only gets better over time,” Beck said. “You usually don’t see that with highway interchanges.” Jessica Hyser, economic development director for the city of Independence, said in a phone interview that the city is excited to see Union Savings buy and occupy the building, given the challenges of the office-space market in the work-fromhome pandemic era. Beck’s buying more property for a related business where he already has hotel operations, she said, validates the value of the suburb in terms of its central location and business-friendly posture. The seller of the 34,000-squarefoot building had originally sought to lease space to USB. However, Jake Crocker, managing member of the Columbus-based investor group 6400 Rockside LLC, said in a phone interview it discovered USB preferred to own the building rather than lease space in it. “So like all good business deals, we worked out a win-win for them and us,” Crocker said. “We made a little and they were happy with the price.” Asked how USB expects to deal with the competitive residential mortgage market in Northeast Ohio, Beck downplays the question. He’s seen more competition. “When we became involved, there were 264 savings and loans in Cincinnati,” Beck said, and only a handful remain in business. Stan Bullard: sbullard@crain.com, (216) 771-5228, @CrainRltywriter

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Ohio marijuana industry, clamoring for reform, may finally get its wish BY JEREMY NOBILE

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These factors, among others, impede the ability for marijuana busiThe Buckeye State often is framed nesses to live up to their potential, as business-friendly, but it hasn’t been according to license holders. The regulatory system ultimately a great friend to its burgeoning marijuana industry, according to the peo- contributes to the market’s expensive retail prices, which are steep enough ple tangling with its regulatory web. They may soon get some help from to prevent patients from participating more in the industry here, according the General Assembly, however. to Ohio State University’s State Senate President Drug Enforcement and PolMatt Huffman — a Lima icy Center. For example, Republican and lead through the first half of sponsor of House Bill 523, 2021, the per-gram price of which established the marijuana in Ohio was 44% Ohio Medical Marijuana more expensive than in Control Program (OMneighboring Michigan, MCP) in 2016 — is workwhere many Northeast ing on a bill that would reOhio patients go instead. shape the program in Business operators say several significant ways. Huffman they are reticent to air A draft of this bill is circulating among business license their grievances publicly, however, holders and state regulators. Huff- due to concerns with how they man said a version could be intro- might be treated by their regulators. “The program as set up was beduced officially in the coming coming a bureaucratic nightmare,” weeks. Among various changes being said Matt Close, executive director considered, the bill aims to elimi- for the Ohio Medical Cannabis Innate the Board of Pharmacy as an dustry Association. “This bill OMMCP regulating agency. It streamlines the regulatory process would instead establish a division of and will make things easier for the marijuana control within the De- industry to operate, which will hopefully drive down prices to papartment of Commerce. Currently, businesses involved in tients.” cultivation, processing and selling of marijuana are subject to over- Eliminating pharmacy sight by both commerce and pharmacy agencies at different points. In general, license holders comThe State Medical Board of Ohio plain about the Board of Pharmacy also plays a role in the program. being more difficult to deal with than “Folks are coming to me and saying commerce. this isn’t working as well as it could,” A couple of businesses described Huffman said. “It’s been five years situations where packaging materials now, so it’s time to collect these for marijuana products were apthings, listen and use what we’ve proved by commerce but later rejectlearned to make the business aspect ed by pharmacy, requiring them to of it better. If you make it better for start over. The latter regulates dispenbusinesses, you make it better for pa- saries, so manufacturers deal with the tients.” agency even if they don’t operate a Many Ohio marijuana businesses retail store because they package the say they are frustrated with how their materials for those retailers. industry is managed by a state they In these instances, the businesses feel is too often working against them. say they wasted time and money on Complying with often-persnickety materials they ended up not being regulators across a couple of agencies able to use. Recouping their costs ofis cumbersome and inefficient at ten means raising prices. best, they say. Another business described a simiMeanwhile, businesses feel the lar situation with a company rebrand, state’s list of qualifying conditions and where they squandered resources on advertising rules are too restrictive. materials commerce OKs but phar-

macy rejects, racking up thousands in costs along the way. Simply eliminating pharmacy, they say, would be huge for license holders. That’s why it’s a key feature of the reform bill. “I think certainly there is a perception because the program is spilled across three agencies that it is somehow not run as efficiently” as it could be, said Cameron McNamee, spokesman for the Ohio Board of Pharmacy. “Our response to that is we see it more as a division of labor. We treat dispensaries like we treat pharmacies, and we already work a lot in that space.” McNamee said pharmacy regulators are aware of complaints license holders have and has been looking into them. But many fixes will require congressional action. “H.B. 523 became effective on Sept. 8, 2016, just over five years ago, so it’s not unexpected that the legislature would be interested in reviewing it and making changes,” said Jennifer Jarrell, public information officer for the Ohio Department of Commerce. “The (commerce) department looks forward to working with lawmakers to make any statutory updates determined to be appropriate and in the best interest in the program.”

Other reforms There are several other changes being considered with the bill, some of which are not in the current draft but could be added. The bill is poised to add a number of qualifying conditions, some of which previously were rejected by the state. Those new conditions include migraines, autism spectrum disorder, arthritis, terminal illness and opioid use disorder. All of these would naturally expand the customer base that, at 209,000 patients strong, is already significantly larger than what the state grossly underestimated patient rolls might be this early into the program. Meeting greater-than-anticipated patient demand is what inspired the state to increase the number of dispensaries operating today from fewer than 60 to 130. Huffman said he’s looking into another change that would enable Level

6 | CRAIN’S CLEVELAND BUSINESS | OCTOBER 18, 2021

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I and Level II growers (i.e., large and small) to expand to their maximum sizes without waiting on a solicitation from the state to do so. Large and small marijuana growers are initially permitted 25,000 and 3,000 square feet of cultivation space, respectively. Current rules allow them to expand by that base level two times in two separate steps. The maximum allowed grow space would be 75,000 square feet for large cultivators and 9,000 for their smaller counterparts. The state requires cultivators to apply to expand, and it will only approve expansions after it solicits those requests. This has been an issue for some. For instance, Akron Level II grower Fire Rock Ltd. sued the state in 2020 for not acting on an expansion application. The state is soliciting expansion requests as it releases new dispensary licenses this fall. But the OMMCP bill may permit growers to apply to expand to their maximum sizes without a solicitation. Huffman said it is hoped doing this could increase the marijuana supply, driving down retail costs while helping ensure enough product is available for these future new dispensaries. Restrictions on business advertising and communications with customers create other headaches for businesses. They are prevented from showing images of products and flower online, responding to questions or comments on social media and selling or giving away promotional

items, like T-shirts. Dispensaries also aren’t allowed to post “we’re open” signs or sandwich boards on sidewalks. “We understand there are some First Amendment issues to address here, and we are working with lawyers on that,” McNamee said. Companies say these prohibitions on advertising hinder their abilities to spread brand and product awareness — in a world that allows pharmaceutical companies to air direct-to-consumer advertisements, no less. Huffman said he is looking into this. “The bill will advance the ability to advertise,” Huffman said. “It still protects the children and vulnerable people. It’s not mass advertising. You’re not going to see billboards.” What the bill won’t do, Huffman said, is allow for home grow of plants or smoking of marijuana. However, a provision allowing for home grow of plants is a feature of the three recreational marijuana legalizing efforts under way in the state right now, which comprise separate efforts from Democratic lawmakers, Republican lawmakers and the Coalition to Regulate Marijuana Like Alcohol. The absence of provisions allowing for home grow and smoking of marijuana helped the passage of H.B. 523 in the first place, Huffman said, who notes, “I just don’t think this General Assembly would look at those two aspects fondly.”

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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Jeremy Nobile: jnobile@crain.com, (216) 771-5362, @JeremyNobile OCTOBER 18, 2021 | CRAIN’S CLEVELAND BUSINESS | 7

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PERSONAL VIEW

What does leaving LIBOR mean for you?

RICH WILLIAMS FOR CRAIN’S CLEVELAND BUSINESS

BY CHRISTOPHER DOYLE

EDITORIAL

Aim high E

veryone in the Cleveland area — students, faculty and staff most directly, and employers more broadly — has a stake in the success of Cuyahoga Community College. Officials at the college, then, carry a huge responsibility as they begin the process of finding a successor for president Alex Johnson, who last week announced he will retire June 30, 2022, from the institution he has led so well for the last eight years. Johnson has set a high bar for the next person in the job, as it should be. The search committee, chaired by Tri-C trustee Victor Ruiz, executive director of Esperanza, plans to start candidate interviews in February 2022 with the goal of announcing a new president by spring. Committee members will have done well if they find a person as capable as Johnson has been in bolstering the college’s performance and its ambitions, even in the face of the challenges presented by the pandemic. Tri-C describes its mission as one of providing “high-quality, accessible and affordable educational opportunities and services ... that promote individual development and COMMITTEE MEMBERS the overall quality WILL HAVE DONE WELL improve of life in a multicultural IF THEY FIND A PERSON community.” To that end, Tri-C under AS CAPABLE AS JOHNSON Johnson’s leadership established Centers of ExcelHAS BEEN. lence in six critical areas — creative arts; hospitality management; information technology; manufacturing technology; nursing; and public safety — and it currently offers more than 1,000 credit courses each semester in more than 200 career and technical programs. The Centers of Excellence have helped focus Tri-C on training students for roles in the most vital areas of Northeast Ohio’s economy. As employers more than ever struggle to fill positions, they need Tri-C to continue to find ways to preserve and expand the pipeline of qualified workers. Thanks to the support of Cuyahoga County taxpayers, who in 2017 approved a $227 million capital bond issue, Johnson was able to oversee a physical transformation of the college that included the Western Campus STEM Center, the Wests-

hore Campus Liberal Arts and Technology building and the Advanced Technology Training Center at the Metropolitan Campus. Those upgrades have been critical in making it possible for Tri-C to work with the corporate community and design updated, relevant training that employers need from the people they hire. The Wall Street Journal reported last week that more than a year-and-a-half into the pandemic, the U.S. is still missing around 4.3 million workers, a figure extrapolated from the February 2020 workforce participation rate of 63.3% vs. September’s 61.6%. The work of Tri-C and other community colleges will help close that gap. The pandemic has forced a reconsideration of how colleges can deliver the education they promise to students, and at Tri-C, classes now are about a 50-50 mix of remote and onsite. Pivoting that quickly is a major technological and administrative accomplishment, for which Johnson and Tri-C officials deserve credit. At least in the short term, though, the pandemic has created another challenge: declining enrollments at community colleges. Tri-C’s current enrollment is down about 7% from fall 2020, the result in part of a labor market that needs people right away and affects the decision between school or work. At Tri-C, more than 60% of students are women and nearly 40% are minorities — groups disproportionately impacted by COVID-19. As the pandemic and its lingering after-effects reshape how work is done, and how people want and are able to attend college, the next president of Tri-C will need to be a creative thinker in continuing to improve educational access. Johnson has placed a heavy emphasis on access, retention and completion, and the school’s numbers in those areas have shown improvement. He told Ideastream last week that he’s most proud of “our student achievement and outcomes,” noting that “our graduation rate and the time in which it takes individuals to complete their education” are significantly better, and that the “number of certificates and degrees awarded this year are the highest in the history of the institution.” Although Johnson said retirement was “a difficult decision,” he noted, “the time is right to let new leadership take the reins and build upon what we’ve accomplished.” It’s vital to the region that the progress continues.

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

For more than 40 years, the London Interbank Offered Rate, or LIBOR, has been a key benchmark for setting the cost of floating-rate debt around the world. LIBOR also plays a big role in pricing debt issued by corporate borrowers. Following the 2008 financial crisis, the integrity of LIBOR was questioned due to manipulation concerns. A contraction Doyle is in the unsecured interbank lending commercial market has also substantially reduced sales leader for the volume of transactions on which to KeyBank in base panel bank estimates. With LIBOR Cleveland. rates a less reliable benchmark, regulatory guidance requires banks to stop making new LIBOR loans by the end of 2021 and shift existing LIBOR loans to other indexes by June 30, 2023. To help speed the transition, the Alternative Reference Rates Committee (ARRC), a group of private-market participants, was convened by the Federal Reserve Board and the New York Federal Reserve Bank to seek alternatives to LIBOR. ARRC is leading the transition away from LIBOR and is responsible for publishing recommended best practices to outline important transition activities and milestones. Additionally, the International Swaps & Derivatives Association (ISDA) is leading the transition of the U.S. dollar LIBOR derivatives (e.g., interest rate swaps) markets away from LIBOR. ISDA and ARRC work closely together to confirm alignment in their objectives. In 2017, ARRC recommended a new overnight, risk-free benchmark, the Secured Overnight Financing Rate (SOFR), as a replacement benchmark for U.S. bond and loan market transactions. The New York Federal Reserve Bank now publishes SOFR daily, as well as SOFR Averages and a SOFR Index. The Daily Simple SOFR convention, also recommended by ARRC, calculates and aggregates interest daily and is being used for many types of business loans. However, the transition to SOFR is not without its challenges. Because Daily SOFR reflects overnight borrowing rates, borrowers may dislike it because they are less able to predict payments, and their loans wouldn’t reflect expectations of rate changes — one of the key attractions of LIBOR. To address this issue, on July 29, 2021, ARRC formally recommended the Chicago Mercantile Exchange Group’s forward looking 1-month, 3-month and 6-month term SOFR rates for commercial loans, and the number of SOFR-linked products is growing. Another issue is that unlike LIBOR, the new rates fail to capture the credit risk that banks assume when they lend. As a result, some market participants and industry groups advocate for, and in some cases employ, an established benchmark like Prime, or newly created benchmarks such as the American Interbank Offered Rate (AMERIBOR), Bloomberg Short-Term Bank Yield Index (BSBY), or ICE Bank Yield Index (BYI). While alternatives to SOFR — including credit-sensitive rates — continue to be discussed, most market participants are following the ARRC recommendation to use SOFR as the replacement benchmark rate. If you have an adjustable-rate loan based on LIBOR, find out what index your lender will be switching to. If you’re considering new adjustable-rate debt, ask your lender about options. While there might not be set answers now, keep an eye on the situation. A switch to a different index could potentially mean a change in your base rate in the future.

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.

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8 | CRAIN’S CLEVELAND BUSINESS | OCTOBER 18, 2021

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OPINION

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Eight years ago, I started OpinionRoute almost as a zig to my industry’s zag. While competitors went toward automation-at-all-costs models, I set up a company that presented a return to traditional best practices coupled with great technology. In 2021, we are repeating history with a new zig. As many companies scramble to a remote-worker bandwagon, we pivoted to hiring in-person talent from a robust Cleveland talent pool. In the last few months, we created or relocated a dozen roles back to our downtown headquarters, making us two-thirds in-person/in-office overall. Here’s what we did to make this possible:

McCarron is the CEO and founder of Cleveland-based OpinionRoute.

incredible cost-of-living value it offers, and this needs to be optimized with livable wages. Mid-year, we instituted a $50,000 entry-level salary for all full-time employees in the company. We feel that this compensation will attract bright young minds who want to enjoy life while also contributing to a company that invests in them.

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LETTER TO THE EDITOR

Advice for the life you lead

Tax code change would harm oil, gas industry As Congress debates yet another massive spending plan, it’s disappointing to see legislators consider language that targets one of Ohio’s most historic and largest industries in the state: natural gas and oil. Before our elected officials target Ohio’s natural gas and oil industry they need to consider the significant economic burden it will place on Ohioans. It’s fair to say Ohio’s history is intertwined with natural gas and oil. Ohio has been an oil-producing state since 1860. The natural gas and oil industry now supports nearly 5.3% of Ohio’s overall workforce and 8.5% of Ohio’s overall gross domestic product. For every single direct job in the sector, another 3.8 jobs are created in other industries. Having a strong natural gas and oil industry has led to new jobs in industries like manufacturing and transportation, as well as provided billions of dollars to fix our roads and build community infrastructures like schools. Currently talk in Washington, D.C., is focusing on changing a tax code for the industry that has been in place since 1913. This change could place an unfair tax burden, one that other industries will not be subjected to. It will result in a swift reduction in drilling and likely halt future oil and gas exploration. Fewer wells drilled means less energy to power our modern economy. All

Americans will see higher prices at the pump, increased energy bills and more dependence on foreign rivals to supply U.S. energy needs. But natural gas and oil don’t just power your home and car. This industry also supports the creation of medical, technological and sporting equipment, to name just a few of the thousands of products made from our industry. If you take a look around your house, a significant amount of your possessions are likely made from gas and oil byproducts, especially petroleum. Punishing the oil and gas industry through the tax code will negatively impact every single Ohioan and their way of life. It is time we look at our natural resources as a gift and be more about innovation and less about elimination. Recently, the state legislature passed Ohio Senate Resolution 176, which calls on Congress to protect Ohio’s natural gas and oil industry from disproportionate tax increases and other punitive measures of the current administration. Our local representatives understand the importance of the industry. We hope our representatives in D.C. do too. Ed Mowrer, president Jim Milleson, board member Ohio Valley Oil and Gas Association

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INVESTING IN SUPPLY CHAINS Northeast Ohio’s manufacturing base is primed to be a crucial part of America’s new, improved supply chain strategy.

MANUFACTURING

PAGE 13

Container shipping is being delayed by congestion and labor shortages at major ports, compounded by labor shortages in the trucking industry. | LOREN ELLIOTT/BLOOMBERG

THE WAITING GAME Supply chain disruptions persist for manufacturers as companies try to catch up

BY RACHEL ABBEY MCCAFFERTY

Manufacturers — and, subsequently, retailers and consumers — have been facing the effects of supply chain challenges since the COVID-19 pandemic began. And it doesn’t seem like those problems are going to wane any time soon. The strong demand following the short, pandemic-induced recession “has caught everyone off-guard,” said Mike Williams, executive vice president for the North American manufacturing practice group for Swiss insurance provider Chubb. Inventories of raw materials and finished goods weren’t high enough to meet that demand, and, while companies have tried to catch up, the existing labor shortages in manufacturing and transportation have slowed that progress.

“THE REALITY IS, MANUFACTURERS OF ALL SIZES TODAY, THEY NEED TO PLAN AHEAD. AND THEY NEED TO BE AWARE OF THE EVOLVING EXPOSURES.” —Erik Olsen, executive property specialist for Swiss insurance provider Chubb

“And we have a big problem on our hands,” Williams said. In the Sept. 8 Beige Book, the Federal Reserve Bank of Cleveland noted that “supply constraints limited many firms’ ability to keep up with growing demand,” particularly manufacturers, auto dealers and homebuilders, as companies faced shortages and delays. It also noted “intense” labor shortages. And those shortages, combined with the supply chain challenges, were leading to higher prices. And the impacts of the supply chain challenges have been wide-reaching across industries. Take, for example, Cleveland-based paint and coatings giant Sher-

win-Williams Co. The company recently lowered its guidance for consolidated net sales and diluted net income per share for 2021, citing challenges with raw material supplies and prices. Or look at car sales. Auto dealers in Northeast Ohio saw new-vehicle sales drop by about 26% year-over-year in September, which the Greater Cleveland Automobile Dealers’ Association attributed to the lack of new cars on lots. Manufacturers are having a “good year” overall, following the COVID disruptions of 2020, said Matt Mueller, managing director of the Citizens M&A advisory team. But they could be doing better if the

10 | CRAIN’S CLEVELAND BUSINESS | OCTOBER 18, 2021

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issu bor wer leng “N exp are Th Som face pan peti ope “A mak tigh Mue A sho teria and ing L gest pen form Dav O tion con lead sam ago. that grow the lead wer O to l stee

FOCUS | MANUFACTURING

is a’s

issues in the supply chain and the labor shortages facing the industry were resolved. And that latter challenge is the big one. “No one I’ve spoken to really has explained where those employees are at this point,” Mueller said. There are a lot of factors at play. Some potential employees may still face child care challenges due to the pandemic, he said, and wage competition is an issue with so many open positions. “All those factors, in aggregate, are making the labor market a little tighter than what people expected,” Mueller said. And if suppliers are facing labor shortages or trouble getting raw materials, that causes challenges up and down the supply chain, expanding lead times. Lead times continue to be the biggest issue facing members of Independence-based Precision Metalforming Association, said president David Klotz. One of the questions the association asks in its monthly business condition report is whether average lead times are longer, shorter or the same compared to three months ago. The share of respondents saying that average was longer started to grow significantly last October. In the September 2021 report, 61% said lead times were longer than they were three months prior. One of the big issues contributing to long lead times is a shortage of steel, Klotz said. There’s not enough

domestic production in the United States to meet current demand, he said, and tariffs are affecting international supply. That demand is already high from industries like automotive, but stands to grow higher if the infrastructure bill passes and steel is needed for work on roads and bridges, Klotz said.

This is all driving steel prices high, he said. “It’s an issue that we’re costing our metal stampers out,” Klotz said. And international deliveries are still being delayed by issues like labor shortages at the ports, Klotz said. But the biggest issue is the labor shortages in the trucking industry.

“And I don’t see where the relief is,” he said. “My understanding is there’s a lot of people that retired early.” He expects that issue to persist for at least the next year. And manufacturers themselves are still facing labor shortages, which compounds the supply chain struggles they face. On top of the existing supply

Rachel Abbey McCafferty: (216) 771-5379, rmccafferty@crain.com

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One of the big issues contributing to long lead times is a shortage of steel, according to David Klotz, president of the Independence-based Precision Metalforming Association. That in turn is driving prices higher. | GEORGE FREY/BLOOMBERG

chain challenges, Erik Olsen, executive property specialist for Chubb, sees “more frequent and severe weather events” due to climate change, like hurricanes or water shortages, as an emerging risk to the market. Williams noted a recent energy crisis in China that was partially driven by drought conditions. All this means that companies have to work even harder to ensure their supply chain is diverse. Olsen said geographic diversity is key. And Williams noted that, as companies begin working with more suppliers, they need to make use of the real-time data available to them to remotely manage supply chain and quality control. That does add yet another challenge to the supply chain, as it’s up to all parties to keep data secure. One mistake can open up the entire supply chain to “bad actors,” Williams said. Ultimately, supply chain management today is all about preparation, Olsen said, managing inventories based on how long it could take to replace critical needs. Companies need business continuity plans that encompass transportation challenges and redundancies in the supply chain. “The reality is, manufacturers of all sizes today, they need to plan ahead. And they need to be aware of the evolving exposures,” he said.

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FOCUS | MANUFACTURING

Investment part of administration's long-term supply chain plan BY KIM PALMER

The ongoing pandemic and weather-related disruptions affecting the global shipping system, coupled with increases in demand, have meant unpredictable bottlenecks and congestion at coastal ports, resulting in consumer goods and raw material supply shortages across the country and in Northeast Ohio. Shipping costs between China and the West Coast have increased more than 90% compared with 2019, while containerized cargo volumes rose 40% in the first half of 2021 compared with the like period last year. Strong demand and coastal bottlenecks are threatening both domestic manufacturing and consumer needs going into the winter holidays. In Ohio, manufacturers have reported steel shortages, which raised prices, and a microchip shortage, which threatened automotive production, according to a Federal Reserve Bank of Cleveland survey. “Lots of people predicted that there was going to be something like what we're dealing with right now with the supply chains related to the pandemic,” U.S. Deputy Secretary of Commerce Don Graves told an audience this month at a Team NEO event in Independence. Graves said these short-term supply chain disruptions are believed to be temporary, albeit significant enough for President Joe Biden to sign an executive order in February commissioning a 100-day report to assess the country’s supply chain vulnerabilities; monitor any new developments; and to suggest actions to minimize impacts on workers,

Northeast Ohio is primed to be a crucial part of the Biden administration’s supply chain strategy. | KIM PALMER/CRAIN’S CLEVELAND BUSINESS

consumers and businesses. “What we are realizing is that there are some things the government can do to get out in front of those supply chain challenges,” said Graves, adding it is crucial to research and monitor prevailing conditions specifically with the West and East Coast ports to “give business leaders more advanced warning, more information about where we see potential problems.” The “Building Resilient Supply Chains, Revitalizing American Manufacturing and Fostering BroadBased Growth” report, published in June, found a host of long-term problems with the way supply chains work and how they had evolved. A combination of unfair trade practices; private sector and public policy prioritization of low-cost labor; a focus on short-term returns over longterm investment; and the prevalence of “just-in-time production” were identified as reasons behind the gut-

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ting of the county’s industrial base by siphoning off innovation and stifling growth in wages and productivity, according to the report. The report also found, Graves said, that in order to strengthen the resilience of these critical supply chains, steps need to be taken to spur a movement to bring supply chains closer to production — and support that move with investments in U.S. manufacturing. “What we are trying to do is position the federal government to provide the resources, especially in those areas of innovation … advance manufacturing … and the things the region is known for,” Graves said. What does shortening the supply chain mean for Northeast Ohio? The COVID-19 pandemic and resulting economic fallout highlighted crucial vulnerabilities in the supply chain system, but for U.S. Rep. Tim Ryan of Youngstown, none of it comes as a great surprise.

“These are issues I have talked about for my entire career,” said Ryan, a Democrat who represents the Mahoning Valley. “The pandemic really revealed the vulnerabilities that are out there, and now we have critical shortages and dependence on a lot of foreign powers, because we are relying on key materials and component parts needed for our industrial base.” Ryan and Republican U.S. Rep. Bill Posey of Florida introduced the “Critical Supply Chain Commission Act,” a bill that would establish “an expert commission of 12 members tasked with increasing American manufacturing supply chain resilience.” Among the goals of the legislation is to deliver information to private industry and businesses that would provide strategic and relevant insight about existing global supply chains. The proposed commission would be tasked with providing recommendations to fix shortcomings in the coun-

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try’s existing national manufacturing strategy and to be prepared for the next crisis. “By providing this information, businesses can question: Are these international supply chains worth it for businesses? Is it really cheaper to ship in these products when something like this pandemic happens?” said Ryan, adding that he wants companies to question how much of their profits are being lost in these conditions and how many years will it take to recoup those loses. The end goal, Ryan said, is to encourage a possible public-private partnership to help build out a domestic supply chain and spur manufacturing sector growth in places like Northeast Ohio. “We want to bring it back ... bringing manufacturing back and really try to drive those investments into the communities that were damaged because of all that offshoring and all the outsourcing,” Ryan said. Incentives to onshore, he said, could include possible tax incentives, brownfield remediation funding, workforce development programs and a host of infrastructure build-out — all things that are part of President Joe Biden’s agenda. “Government spending on this would certainly be worth it. It would be a great investment,” Ryan said. “That's what the government is supposed to do, to get in front a little bit on these things to make them happen. In the end business is going to benefit, and the workers are going to benefit.” Kim Palmer: kpalmer@crain.com, (216) 771-5384, @kimfouroffive

Due Date Non-Life Insurance: Nov. 1, 2021

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OCTOBER 18, 2021 | CRAIN’S CLEVELAND BUSINESS | 13

FOCUS | MANUFACTURING

Sunset Industries settles into Mentor Invests ahead of anticipated aerospace recovery BY JUDY STRINGER

in the U.S. for less than a decade when they founded Sunset IndusCOVID-19 hit Northeast Ohio tries in 1959. The two men were World War II refugees from Slovenia manufacturers hard. The cut was especially deep for and had met while living in a disSunset Industries Inc., 80% of whose placed persons camp in Austria berevenue comes from the belea- fore immigrating to the United guered aerospace industry. To make States. “They were only 19 and 20 years matters worse, the Euclid machining company was in the midst of a old at the time. They had no money, and they didn’t speak English,” costly move. Second-generation owner Tony Hauptman said. Each worked in various CleveHauptman said he and his partners already had invested “significant land-area factories, saving up enough money to launch their own “WE FEEL STRONGLY THE AEROSPACE machining business. According to MARKET IS GOING TO COME BACK, AND Hauptman, there IT’S GOING TO COME BACK WITH A were five original Sunset Industries VENGEANCE. WE JUST HAVE TO BE investors, four of PATIENT.” whom were immigrants from Slove— Tony Hauptman, Sunset Industries co-owner nia. When they dollars into renovation” of a larger started the company out of a garage building in Mentor when orders in Collinwood, “the attorney that incorporated them stated that they plummeted. “In May 2020, we were down by wouldn’t last a year,” he said. But the friends persevered. They 60%. We thought, ‘What the heck were we getting into?’ But my broth- eventually bought out the three er and I decided we were just too far early investors, and after 10 years in into it,” Hauptman said. “Plus, we two different Collinwood locations, recognized Dad had it much harder they moved the company to Euclid, where it operated for 50 years. than us, even at that point.” Hauptman now owns Sunset InIvan Hauptman and his longtime business partner, Frank Hren, were dustries with his brother, Peter, and

Sunset Industries co-owners Clem Hren, left, and Tony and Peter Hauptman at an August ribbon-cutting for the company’s new headquarters in Mentor. | NEVIO PROSEN

Frank Hren’s son, Clem. It supports customers like Parker Hannifin and Eaton in the production of a variety of aircraft components, such as pumps, braking mechanisms and fuel nozzles. Sunset Industries also has a small group of industrial clients. Prior to the pandemic, Hauptman said, the company was grow-

Make the leap and take your company to the next level Weatherhead Executive Education can help you get there.

ing at “a 5-10% clip a year” but had no way to expand its “landlocked” Euclid plant. The owners began thinking about alternative sites as early as 2015 and had finally pulled the trigger on a purchase in January 2020. “Our customers were growing, and they were asking us to grow with them,” he said. “My brother and I saw this building in 2019 and knew it would be a perfect fit — great location, give us room to grow.” At 26,000 square feet, the Tyler Boulevard plant in Mentor is twice the size of the firm's former location. The company officially moved into the new site in June 2020 but, because of the coronavirus, waited until two months ago to celebrate a grand opening. Hauptman said Sunset Industries

currently employees 25 people. Because of the tight labor market, sales growth has been built on automation and cycle-time improvements in recent years. He expects to continue that strategy as the aerospace industry slowly recovers. Just this year, Hauptman said Sunset Industries has invested $600,000 in new equipment. “We feel strongly the aerospace market is going to come back, and it's going to come back with a vengeance. We just have to be patient,” he said. “Once the business travel comes back and the conferences come back and international travel comes back, we will be ready for it, and that's why we're investing now.” Contact Judy Stringer: clbfreelancer@crain.com

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14 | CRAIN’S CLEVELAND BUSINESS | OCTOBER 18, 2021

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FOCUS | MANUFACTURING

Experts: Small, midsize manufacturers must ‘get smart’ in digital transition BY DOUGLAS J. GUTH

Manufacturing is an industry of change, dating back to the 18th century when new machine-centric processes resulted in dramatic reductions in material costs and production time. Although technology remains at the forefront of today’s marketplace, small and midsize manufacturers are lagging behind larger enterprises in terms of innovation. And much to their detriment, noted John Ovsek, vice president of Mentor-based factory automation firm South Shore Controls. “If suppliers want to remain competitive, they must invest in technology, given this is their only edge,” Ovsek said. “If you don’t adopt technology, you’re not going to survive.” Operating on the bleeding edge is nothing new for big-ticket manufacturing concerns. But it’s SMBs that must assess their digital maturity now that “Industry 4.0” is more than a buzzword, observed industry onlookers interviewed by Crain’s. What’s more, implementing smart manufacturing — another name for Industry 4.0 — is vital for small manufacturers to stay relevant in an increasingly global economy. Smart manufacturing describes innovations that utilize internet-connected machinery to monitor production, automate operations, and harness data analytics for safer and more efficient manufacturing. Ethan Karp, president and CEO of Cleveland’s Manufacturing Advocacy and Growth Network (MAGNET), points to collaborative robots as one crest of the current technological

wave. Real-time machine data monitoring is another crucial “smart” innovation, while AR/VR tools are now used to guide workers through complex machine assemblies. “Those are the broad categories that SMBs need — then there’s the wide world of sensors and predictive analytics just coming to the forefront,” Karp said. “This is all Industry 4.0.” Over 70% of all U.S. manufacturing workers are employed by an SMB — Northeast Ohio has about 7,000 such companies, according to regional business development organization Team NEO. While large companies are bolstered in their smart manufacturing efforts by robust IT staff and technical budgets, smaller entities mostly lack these elements, making their transition into a new era far more difficult. “A robot is affordable, but not many people at small manufacturers have time to implement it,” Karp said. “Understanding how to apply these technologies is not plug and play. How does a robot work in operational flow? How do I program it? How do I add fixtures that allow it to grip and pick things up?”

Supporting a high-tech transition In June, MAGNET — alongside 150 nonprofits, community groups, educators and industry officials — announced the launch of “Make It Better: A Blueprint for Manufacturing in Northeast Ohio.” The blueprint envisions the region’s manufacturing future, with high-tech manufacturing a key pil-

Ovsek

Karp

lar of its foundation. Goals include creating 30,000 new manufacturing jobs and raising the area’s industry profile. However, actually getting to the ecosystem stage entails the type of risk-taking for which the industry is historically known. “It’s like manufacturers have always done, growing out of entrepreneurs and sowing their wild oats,” said Karp. “New, hungry owners are ready to put their money to work by continuing to upgrade talent. Many owners already do this today, but more need to see technology investment as a requirement, not a niceto-have.” The Clean Energy Smart Manufacturing Innovation Institute (CESMII), funded by the U.S. Department of Energy, is doing its part to smarten up the industry in Cleveland and elsewhere. The program, which accelerates the integration of advanced sensors and data platforms, will be built out into a Smart Manufacturing Innovation Center (SMIC). Hosting the Cleveland SMIC is the Institute for Smart, Secure and Connected Systems (ISSACS) at Case Western Reserve University. The innovation hub will unite regional partners including the IoT Collabo-

rative, a partnership between Case Western Reserve and Cleveland State University, as well as Team NEO’s smart manufacturing cluster, MAGNET and arBarendt tificial intelligence solutions company Bennit AI. Nick Barendt, executive director of ISSACS, who also will direct the Cleveland SMIC, said manufacturing SMBs can address their technical limitations through a multipronged approach of awareness-building, education and development of “right-sized” smart manufacturing services. Barendt suggests studying where customers and suppliers fit into a company’s processes, then upgrading various systems as budgets will allow. An online IIoT Readiness Assessment survey from Team NEO is one tool a company can use to evaluate its fitness for digital implementation. “MAGNET is a great source, too,” Barendt said. “You can do an internal assessment, but bringing in an external resource is valuable because they’re going to see more solutions.”

Taking the leap Automation doesn’t mean oneto-one replacement of a worker with a machine, said Ovsek of South Shore. In general terms, a shop-floor employee may work 2,000 hours annually at a total salary (including in-

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surance) of $65,000. Meanwhile, a robot on a punch press may have a purchase price of $30,000 to $60,000 — a figure that doesn’t encompass vision systems, end-of-arm tooling and other integration costs. New machine tools and systems keep South Shore itself on the cutting edge, Ovsek added. About three-quarters of the company’s software platforms and additional tech derives from Rockwell Automation, a necessity considering that most of South Shore’s customers are Rockwell adopters themselves. For Ovsek’s clients, staying abreast of the newest innovations comes with material cost as well as a deficit around the specialized talent critical for digital upkeep. “There aren’t many schools specifically teaching controls engineering,” Ovsek said. “You also need people who went to school for electrical engineering, and know about upgrading robots or a converting line.” MAGNET’s Karp said digital optimization can start anywhere along the company supply line. It’s just a matter of taking the leap. “Look through your plant and see what you have, or go to trade shows and see what’s out there,” Karp said. “What are your processes and pain points, and how can technology solve those? You’ll find technologies to experiment with, and see what benefits accrue. The bigger risk is not doing anything. The downsides are fairly minimal with the exception of monetary spend.”

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OCTOBER 18, 2021 | CRAIN’S CLEVELAND BUSINESS | 15

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HEALTH CARE

SummaCare looks to grow its membership network BY LYDIA COUTRÉ

Recent moves by SummaCare — including a new commercial network in Akron and adding Cleveland Clinic into its Medicare Advantage provider network — are strategic steps made by its new president to help the insurer regain its position as the “dominant regional plan in the market.” SummaCare’s total membership had gotten a little “stagnant” in recent years, said Bill Epling, who became president of Summa Health’s health insurance company in August 2020. In its Medicare, commercial and individual marketplace offerings, SummaCare currently has about 60,000 subscribers, a total that’s been declining. “Our objective now is to change that trend and start adding some positive growth to those numbers of lives,” Epling said. He wants to get back on track, move toward responsible growth and “re-establish SummaCare as that core Akron-area market leader from a health plan perspective across all of the product lines,” he said. Epling is uniquely familiar with SummaCare’s stance in the marketplace, having spent a couple of decades running its longtime competitor. He served as CEO of HomeTown Health Network, a provider-sponsored health plan once based in Stark County, but no longer in existence. Many health systems have gotten out of the business of provider-sponsored health plans over the years,

SummaCare recently added Cleveland Clinic into its Medicare Advantage provider network. | DUSTIN FRANZ/BLOOMBERG

even in cases of plans that were by all metrics (bottom line, enrollment, reputation, prestige) successful, often because running a health plan isn’t necessarily their core competence, said Allan Baumgarten, Minnesota-based health care consultant who studies the Ohio market. SummaCare is “sort of a story of persistence,” he said. For 20 years, Epling competed directly with SummaCare before shifting to a couple of other jobs — as president at WellCare of Ohio Inc. and in the pharmacy benefit management space. He was thinking about semi-retiring when the SummaCare opportunity came up, bringing him full circle. Epling is thrilled to be back in the

space of provider-sponsored health plans, he said. SummaCare has worked to expand its network in recent years. In 2018, it brought Aultman Health Foundation into its Medicare and commercial networks, and in 2019, it added Lake Health to its Medicare network. In 2017, it announced it would co-brand its existing Medicare products with University Hospitals. Though these and other efforts helped expand the footprint and ability to add covered lives, SummaCare was missing a key component, Epling said. “Anybody that does business in this industry in Northeast Ohio knows that there are challenges when you have limitations to your

network, particularly when most of the other competitors have all systems in their network,” he said. “Most of our competitors always included the Cleveland Clinic system and the networks and providers in their offerings. That was a significant network disadvantage for SummaCare.” Two announcements made late summer this year aimed to solve for that missing piece. In August, SummaCare added Cleveland Clinic to its Medicare Advantage provider network. And in September, it announced the launch of a new commercial network that includes Summa, Cleveland Clinic and Akron Children’s Hospital. The notion of must-have providers plays a major role in commercial networks, but insurers may have a little bit more flexibility in the Medicare Advantage or individual plan space when they are not trying to reach out to large or midsize employers, Baumgarten said. “Whether it’s for geographic coverage or whether it’s for sort of name brand recognition, it’s very hard to be in the employer group insurance market and not have access to basically all the major hospital systems in your geography,” he said. The new network, known as the Preferred Choice Network, will grant members access to the providers of all three health care organizations and both of Akron’s Level 1 adult trauma centers. “That really is, I think, key to leveling the playing field,” Epling said. “Bringing to the market a very locally focused, high-quality health plan that now brings access to all of the

adult facilities across the market, particularly in the Akron market, with the inclusion of Akron General and that Preferred Choice Network as well.” Epling hopes the moves will help SummaCare attract members and support its ability to competitively price products in the market. Adding the Clinic to the network is one example of the ways that Epling would like to improve SummaCare’s cost structure and contracts with providers, he said, noting that he plans to continue to improve provider contracts in an effort to make costs more competitive. He also sees the individual product line as a growing market going forward, as the current administration expands subsidies and eligibility for exchange products. As he works through these and other parts of his strategy to return SummaCare to a dominant force in the Akron market, Epling recognizes the challenges ahead. “The same challenges that are in front of SummaCare are in front of the entire health care delivery and financing systems across the country,” Epling said. “But I think we’ve got an advantage by being again a locally based, integrated organization that is likely more nimble, probably doesn’t have as many resources as some of our large competitors, but they’re not as nimble and flexible and as integrated as we are, which will allow us to continue to compete in a highly competitive market.” Lydia Coutré: lcoutre@crain.com, (216) 771-5479, @LydiaCoutre

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16 | CRAIN’S CLEVELAND BUSINESS | OCTOBER 18, 2021

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SPONSORED CONTENT

October 18, 2021

THOUGHT LEADER FORUM

MANUFACTURING THE FUTURE IS NOW

U.S. manufacturing output has experienced a 31% increase over the last decade, rising from $1.797 billion in 2010 to $2.346 billion in 2019, according to current data from the National Association of Manufacturers. Manufacturers account for nearly 11% of total gross state product. From a regional standpoint, the manufacturing sector is a vital cog in Northeast Ohio’s economy, representing 21% of the total gross regional product, according to Smart Manufacturing Cluster of Northeast Ohio. Both locally and nationally, the manufacturing sector is undergoing an unprecedented transformation driven by the Fourth Industrial Revolution (a combination of advances in artificial intelligence, robotics, the Internet of Things (IoT), 3D printing, genetic engineering, quantum computing and other technologies). These changes are likely to provide an opportunity for continued economic growth over the next several years. Here is a look at some current and future considerations associated with change and disruption in manufacturing:

IN THE FAMILY

E-COMMERCE A TOP PRIORITY

OPENING NEW DOORS

About 30% of family-owned businesses in general survive from the first generation to the second generation. Only 12% pass from the second to the third generation, according to SCORE, a partner of the U.S. Small Business Administration. Manufacturing may be a little different, although the organization points out that the data indicate manufacturers nonetheless face challenges in incentivizing future generations of owners.

Most manufacturers are planning to invest in e-commerce. Twothirds of manufacturers (66%) say that activating digital marketing and sales over the next two years is a high or very high priority, according to PwC’s 2021 COO Pulse Survey. In fact, e-commerce for industrial companies is expected to accelerate from virtually zero percent of online sales to more than 60% of online sales over the next several years. Some companies already are bolstering their e-commerce activity and pivoting from B2B to B2B2C models.

Northeast Ohio’s manufacturing sector is positioned to become a key player in the global smart manufacturing sector. Per MAGNET’S Blueprint initiative, four keys will unlock this potential: 1. Recruiting and retaining advanced, high-tech manufacturing jobs 2. Adoption of smart manufacturing in modern production 3. Embracing innovation 4. Endowing the smart manufacturing sector with bold leadership

RIGHT NOW Current strategic trends are shaping the momentum of manufacturing sector growth, according to Gartner, a Connecticut-based technology research and consulting company. These trends include: • The intersection of the digital and product experience • The blend of technology and interaction to increase long-term customer and employee engagement • Global consumer goods companies engaging in ecosystem partnerships • The monetization of data by global asset manufacturing organizations COMPILED BY KATHY CARR, CRAIN’S CONTENT STUDIO-CLEVELAND

SOURCES: THE ASSOCIATION FOR MANUFACTURING TECHNOLOGY, CRAIN’S CLEVELAND BUSINESS, GARTNER, MAGNET, PWC, SMART MANUFACTURING CLUSTER OF NORTHEAST OHIO

Future Trends in Manufacturing TED MOTHERAL Chair of the Walter | Haverfield Business Services Group tmotheral@walterhav.com 216-928-2967 Ted Motheral focuses his practice on corporate transactions, mergers and acquisitions, private debt and equity financing.

With M&A activity in the manufacturing sector at a historic high in the first half of 2021, it’s important to look at some of the current and future worldwide trends in this industry that are driving activity and growth and affecting the M&A market. AN AGING WORKFORCE FOSTERS M&A AS A MAJOR GROWTH TACTIC Family-owned manufacturing companies are facing challenges as succession planning is complicated by an aging workforce. The baby-boomer generation, especially for lower middle market and middle market manufacturing companies, is finding it increasingly more difficult to succession plan for their companies when

they don’t have family members to take over. Skilled labor availability and the younger generation’s interest in the manufacturing industry is waning. This is causing two major trends – one is the realization that aging business owners need to contemplate an exit of their business altogether, and the other is that owners who do not want to exit their businesses are looking to acquire companies in order to get the skilled labor that they need to continue to grow their company. Both trends have caused record M&A growth in the manufacturing industry, and we expect these trends to continue as the baby-boomer generation steps into retirement, and the world steps

out of the economic uncertainty of the COVID-19 pandemic. SHIFTING FROM B2B TO B2C In recent years, many manufacturers have opted to transition from a traditional business-to-business (B2B) model to a business-to-consumer (B2C) model. The B2C model boasts a number of appealing benefits, including increased profits (companies can get the MSRP as opposed to the wholesale prices for their products), faster time to market, brand control, price control, and better customer data. To effectively move from B2B to B2C, more and more manufacturing companies are improving and implementing e-commerce operations in order to deliver on fulfillment and tracking, secure payments, manage customer service and oversee sales/marketing activity while creating a full look at all customer interactions. All in all, this shift from B2B to B2C enhances the modeling of the business as a whole, which creates a better, more attractive M&A candidate.

predictive maintenance means big data is an even bigger trend than ever before. IoT, which entails the interconnection of unique devices within an existing internet infrastructure, has enabled manufacturers to make informed, strategic decisions using real-time data and achieve a wide variety of goals, including cost reduction, enhanced efficiency, improved safety, product innovation, and more. The ability to collect data from a multiplicity of sources, combined with increasingly powerful cloud computing capabilities, make it possible for manufacturers to slice and dice data in ways that provide them with a comprehensive understanding of their business — which is absolutely essential as they work to reevaluate their forecasting and planning models and develop a successful COVID-19 exit strategy. From an M&A perspective, this will create more accurate valuations if these manufacturing companies go to exit, and it will also emphasize the intellectual property nuances of any sale of these manufacturing companies.

BIG DATA AND THE INTERNET OF THINGS (IOT) A renewed interest in the Internet of Things (IoT) and an increased emphasis on

This advertising-supported section/feature is produced by Crain’s Content Studio-Cleveland, the marketing storytelling arm of Crain’s Cleveland Business. The Crain’s Cleveland Business newsroom is not involved in creating Crain’s Content Studio content.

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CRAIN'S LIST | MANUFACTURING COMPANIES Ranked by full-time equivalent local employees as of June 30, 2021 FTE STAFF - JUNE 30, 2021 COMPANY

LOCAL

WORLDWIDE

LOCAL MANUFACTURING FACILITIES

PRODUCTS MADE LOCALLY

TOP LOCAL EXECUTIVE

1 2

THE SHERWIN-WILLIAMS CO., Cleveland 216-566-2000/sherwin-williams.com

4,569 -1.3%

55,993 4.8%

Bedford Heights, Massillon

Paint

John G. Morikis, chairman, president, CEO

SWAGELOK CO., Solon 440-248-4600/swagelok.com

4,335 1.4%

5,531 0.9%

Solon, Highland Heights, Strongsville, Willoughby, Willoughby Hills, Ravenna

Tube fittings, valves, hoses, regulators, fluid systems components, assemblies

Thomas F. Lozick, chairman, CEO

FORD MOTOR CO., Brook Park 313-322-3000/ford.com

3,490 1 -0.8%

Avon Lake, Brook Park

Medium duty trucks, Super Duty chassis cabs, E-Series cutaways, strip chassis, EcoBoost engines

Kevin Heck, plant manager, Cleveland Engine Plant; Jason Moore, plant manager, Ohio Assembly Plant

4 5 6 7 8 9 10 11

NESTLE USA, Solon 440-349-5757/nestleusa.com

3,184 —

— —

Solon, Cleveland

Stouffer's, Lean Cuisine, Sweet Earth entrees; Minor’s products

Steve Presley, chairman and CEO, Nestle USA

GOODYEAR TIRE & RUBBER CO., Akron 330-796-2121/goodyear.com

2,868 0.1%

69,225 19.6%

Akron

Racing tires

Richard J. Kramer, chairman, president, CEO

LINCOLN ELECTRIC HOLDINGS, Euclid 216-481-8100/lincolnelectric.com

2,752 -4.2%

10,700 -2.7%

Euclid, Mentor

Welding and cutting systems

Christopher L. Mapes, chairman, president, CEO

CLEVELAND-CLIFFS INC., Cleveland 216-694-5700/clevelandcliffs.com

2,400 2 1,900%

25,000 —

Cleveland, Warren

Hot-rolled and cold-rolled steel sheet, hot-dip galvanized steel sheet, semi-finished steel slabs

Lourenco Goncalves, chairman, president, CEO

GOJO INDUSTRIES INC., Akron 330-255-6000/gojo.com

2,240 26.7%

2,896 24.2%

Wooster, Cuyahoga Falls, Maple Heights

PURELL hand sanitizers, surface disinfectants, soaps, GOJO and Provon hygiene products

Carey Jaros, president, CEO; Marcella Kanfer Rolnick, executive chair

THE LUBRIZOL CORP., Wickliffe 440-943-4200/lubrizol.com

2,133 -1.3%

8,554 -0.5%

Avon Lake, Painesville, Wickliffe

Lubricant additives for transport fluids; engineered polymers and advanced materials

J. Christopher Brown, president, CEO

SCHAEFFLER GROUP USA, Wooster 330-264-4383/schaeffler.us

2,000 0%

— —

Wooster

Transmission systems and e-mobility components

Marc L. McGrath, CEO, Americas

ROCKWELL AUTOMATION INC., Mayfield Heights 440-646-5000/rockwellautomation.com

1,825 -2.9%

24,000 4.3%

Twinsburg

Automation products

Juergen Weinhofer; Matt Fordenwalt; Matheus Bulho; Scot Tutkovics, vice presidents 3

THE J.M. SMUCKER CO., Orrville 330-682-3000/jmsmucker.com

1,822 -9.5%

6,946 -6.1%

Orrville

Fruit spreads, ice cream toppings, syrups and foodservice items

Mark T. Smucker, president, CEO

RANK

186,000 1 -1.1%

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13 14

PARKER HANNIFIN CORP., Mayfield Heights 216-896-3000/parker.com

1,800 0%

54,640 8.2%

Akron, Avon, Elyria, Fairlawn, Kent, Mentor, Ravenna

Motion and control technologies

Thomas L. Williams, chairman, CEO

AVERY DENNISON, Mentor 440-534-6000/averydennison.com

1,760 21.2%

32,785 9.3%

Painesville, Mentor, Concord, Painesville Township

Pressure-sensitive adhesive label, packaging and graphics materials; pressure-sensitive tapes; reflective sheeting

Jeroen Diderich, VP and GM, Label and Graphic Materials North America

15 16

TIMKENSTEEL CORP., Canton 330-471-7000/timkensteel.com

1,732 -12.9%

1,881 -12.1%

Canton

Special bar quality steel and seamless mechanical tubing

Michael S. Williams, president, CEO

HOWMET AEROSPACE, Cleveland 216-641-3600/howmet.com

1,667 -10.2%

19,700 —

Barberton, Canton, Cleveland, Niles

Titanium aerospace structural components, commercial vehicle wheels, titanium ingot and mill products

Merrick Murphy, president, Howmet Engineered Structures; Randall Scheps, president, Howmet Forged Wheels

PPG, Cleveland 412-434-3131/ppg.com

1,346 -9.6%

50,000 6.4%

Cleveland, Strongsville, Barberton, Huron, Euclid

Automotive OEM coatings, specialty coatings and materials, automotive refinish coatings, architectural coatings

Greg Kerr, Cleveland plant manager

18 19 20 21 22 23 24 25 26 27 28

BWX TECHNOLOGIES INC., Euclid 216-912-3000/bwxt.com

1,320 6.5%

6,700 5.5%

Barberton, Euclid

Pressure vessels, steam generators, electro-mechanical components

Dave Broussard, GM, BWXT Nuclear Operations Group Barberton

EATON, Beachwood 440-523-5000/eaton.com

1,221 4 -12.8%

96,000 4 3.2%

Parma, Euclid

Aerospace and electrical products

Craig Arnold, chairman, CEO

SHEARER'S FOODS LLC, Massillon 330-834-4030/shearers.com

1,171 -1.2%

4,392 -1.7%

Brewster, Massillon

Snack foods: Potato chips, tortillas, extruded products (i.e. cheese curls)

Bill Nictakis, chairman, CEO

BRIDGESTONE AMERICAS INC., Akron 330-379-7000/bridgestoneamericas.com

1,099 -14.1%

48,729 -3.2%

Akron

Racing tires

Nizar Trigui, chief technology officer and group president, solutions businesses

GENERAL MOTORS CO., Parma 216-265-5000/gm.com

1,083 10.7%

155,000 1 —

Parma

Vehicle parts

Kareem Maine, Parma plant director

RPM INTERNATIONAL INC., Medina 330-273-5090/rpminc.com

1,027 3.3%

15,500 9.5%

Cleveland, Medina, Euclid, Twinsburg, Streetsboro

Roofing materials, sealants, adhesives, concrete admixtures and coatings, fluorescent colorants

Frank C. Sullivan, chairman, CEO

ASSOCIATED MATERIALS LLC, Cuyahoga Falls 330-929-1811/associatedmaterials.com

1,019 -0.2%

— —

Cuyahoga Falls, West Salem

Vinyl windows and siding, composite cladding for replacement and new construction

Brian C. Strauss, president, CEO

THE TIMKEN CO., North Canton 234-262-3000/timken.com

882 -13%

17,000 0%

Canton, Sharon Center

Tapered roller bearings, custom-engineered power transmission products

Richard G. Kyle, president, CEO

STEP2 DISCOVERY, Streetsboro 330-656-0440/step2.com

866 19.6%

1,200 20%

Streetsboro, Perrysville

Rotationally molded toys, home, garden and patio products

Anthony M. Ciepiel, CEO

GREAT LAKES CHEESE, Hiram 440-834-2500/greatlakescheese.com

780 -29.9%

3,642 —

Hiram

Packaged cheese

Dan Zagzebski, president, CEO

750 20%

863 18.9%

Olmsted Township, Strongsville

Blending equipment for home and commercial use

Jodi L. Berg, president, CEO

VITAMIX, Olmsted Township 800-848-2649/vitamix.com

Research by Chuck Soder (csoder@crain.com) | Information is supplied by the companies unless footnoted. NOTES: 1. Total employment. 2. Cleveland-Cliffs acquired ArcelorMittal USA in December 2020, contributing to this increase. 3. Titles have been condensed. 4. Includes employees from Eaton's hydraulics business, which was sold to Danfoss A/S on Aug. 2.

Get 53 companies, +350 executives and additional data in Excel format. Become a Data Member: CrainsCleveland.com/data 18 | CRAIN’S CLEVELAND BUSINESS | OCTOBER 18, 2021

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DATA SCOOP

Local employment declines again for manufacturers on list BY CHUCK SODER

Local employment continues to decline for businesses on the Crain’s Manufacturing Companies list. Companies on the full digital list saw their combined Northeast Ohio employment fall 1.6% during the 12 months ending June 30, 2021. The 46 companies that submitted consistent data for 2020 and 2021 now employ just over 56,000 full-time-equivalent local employees (the full list includes 53 companies with at least

100 local employees). That drop wasn’t as steep as last year’s 5.2% decline. But many other large local employers actually grew during the 12 months ending June 30: Combined local employment for our 100 Largest Northeast Ohio Employers list increased nearly 1% during that timeframe. And many manufacturers on this list are also on that list, weighing down that increase. We can’t say what caused this year’s decline, or whether it has any-

thing to do with the main issues that have been in the headlines — COVID-19, staffing shortages and the ongoing march toward automation. But it was a tough year for several manufacturers on the list. Revenue fell by 11.9% in 2020 for the 30 companies for whom we have two years of consistent data, which is available in the Excel version of the list. Granted, all of those figures exclude the gargantuan increases posted by Cleveland-Cliffs Inc. The

Cleveland company makes its first appearance on the list at No. 7 due to its December 2020 acquisition of steelmaker ArcelorMittal USA, which had previously been a fixture in the top 10. That deal is why its local employment figures jumped 1,900%. Another company making the top 10 for the first time: GOJO Industries of Akron, which makes Purell and other hygiene products in high demand since the coronavirus pandemic began. GOJO posted a 26.7%

increase in local employment, good enough for No. 8, up from No. 14 last year. As usual, the list is led by the Sherwin-Williams Co. at No. 1, and Swagelok Co. at No. 2. Ford Motor Co. is in the third spot; however, its employment figures are from the company’s website and represent total employment, not full-time-equivalent employment. Chuck Soder: csoder@crain.com, (216) 771-5374, @ChuckSoder

AKRON

Fight over Yellow Creek conservancy moves closer to public hearings BY DAN SHINGLER

The battle over whether a conservancy district and court should oversee the management of the Yellow Creek watershed to control flooding around Bath Township is progressing toward public hearings. Hearings could take place around or shortly after the end of the year, setting up a showdown between two very polarized sides over a contentious issue. Those hoping to form the district were providing what they hoped was the last bit of information needed for the matter to proceed last week — a list of specific streets and addresses that would be in the district and subject to its control. The conservancy’s special court, required under Ohio law, is managed by Medina County Common Pleas Judge Christopher Collier and Summit County Common Pleas Judge Kelly McLaughlin, who both requested the additional information. At issue is how to manage the Yellow Creek watershed, a roughly 32-square-mile area that includes some of the fastest-growing parts of Summit and Medina counties in and around Bath Township, including parts of Akron. Those in favor of a conservancy say it’s needed to control flooding in the watershed, which they say requires a coordinated effort to control surface runoff in the entire basin that affects low-lying areas. Those opposed, including the city of Akron and several other local governments that would be subject to conservancy rules, say such a government entity would have too much power over development and property rights and would replicate efforts already in place in Summit County — though Summit County’s efforts don’t affect what goes on upstream in Medina County. The two judges asked the group working to form the conservancy, the Yellow Creek Foundation, to provide a complete list of affected addresses for notification purposes. Foundation founder and president Brenda Borisuk-McShaffrey said in an Oct. 11 interview that her group was on track to deliver that information to the judges by the end of last week. Once that’s accepted by the judges, Borisuk-McShaffrey said she and other members of her group are hoping that the conservation court will start public hearings on the matter around the end of this year.

Normally scenic and serene as it passes through Bath Township, Yellow Creek often floods after a heavy rain, something proponents of a conservancy hope to combat. | DAN SHINGLER/CRAIN’S CLEVELAND BUSINESS

That might be slightly optimistic, but shouldn’t be too far off the mark, said Medina Common Pleas Magistrate Keith Brenstuhl, who said he was authorized to speak for Judge Collier on the subject. “A lot of that will depend on what happens from here. I know we’re required to put out notice to potentially affected landowners,” Brenstuhl said. “So there’s going to have to be some period of time when the publication notice is out there. … Once we get past that, we’ll have a better handle

on it.” Once public hearings are set, the fuse will probably be lit on the real fireworks. While those in favor of establishing the conservancy vow to continue their fight for it, so too do those who oppose it. Like two prize fighters at a weigh-in staredown, both sides are expressing confidence. “I definitely feel like we’ve gained some momentum, and I’m definitely letting people know we’ve not gone away,” Borisuk-McShaffrey said.

Members of her group are, at the very least, happy that the issue appears set to get a hearing — something they’ve been seeking since 2019, when they gathered more than 500 petition signatures required to set up a conservancy court. “Right now, it’s looking like it’s moving in the right direction,” said Mark Spisak, a member of the Yellow Creek Foundation. “I think the court will convene, but I don’t know if they’ll get the public hearing in before January.”

Henry Holtkamp, one of the leaders of the opposition via a group called Citizens for Yellow Creek, said he and his supporters are not backing down either. “We don’t change our core principles,” Holtkamp said. Holtkamp said he’s also optimistic, in part because he said some people who signed the Yellow Creek Foundation’s original petition have since withdrawn their names, because they say they were not informed of all the powers a conservancy would have. One of them, 2017 Bath Township trustee candidate Brad Bowers, confirmed he had signed both the petition and the affidavit. Although he did not accuse foundation members of falsehoods, he said he didn’t fully realize what powers a conservancy would have when he signed their petition. “I was approached at a farmers market about five years ago,” Bowers said. “The gist of the pitch was that, ‘We want to improve storm-water issues in the watershed, will you sign?’ ” He did, but later found out the conservancy would not have publicly elected officers or be subject to voter oversight, which he said he does not agree with, and he also learned about Summit County’s efforts to control flooding in its part of the watershed. “Those were things that should have been discussed before I signed. That’s on me, really,” Bowers said. But Borisuk-McShaffrey said those issues were dealt with before her foundation’s petitions were certified by Summit County’s court in 2019, and the court still found that the group had gathered more than the required 500 valid signatures. As for the timing of public hearings, Holtkamp thinks the judges in charge are in no hurry, in part because they know how contentious the issue is. “I think it’s going to bleed over into 2022, if you want my opinion. Mostly because I don’t think they really want to deal with it,” Holtkamp said. “I think they’re going to do everything they can to put it off as much as they can … but there will have to be hearings.” That might be good if it would mean a conservancy would not be set up right away, but like the foundation, Holtkamp said his group hopes to have the matter resolved. Dan Shingler: dshingler@crain.com, (216) 771-5290, @DanShingler

OCTOBER 18, 2021 | CRAIN’S CLEVELAND BUSINESS | 19

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FUND

Average grant requests vs. average amount awarded All applications

From Page 1

The collaborative published a final report reflecting on 18 months of rapid response grantmaking, which totaled nearly $19 million awarded to nearly 700 nonprofit groups and community-based efforts in Cuyahoga, Lake and Geauga counties. Across Phase I and Phase II, the rapid response fund amassed more than $20 million. Dollars that remain — after administrative costs — will be rolled into Phase III, which the funding partners have dubbed the Funders Collaborative on COVID Recovery (FCCR). About halfway into Phase II, which was structured as a one-year effort that concludes this month, the partners began to think about how to structure long-term recovery work. “We start to say, ‘OK, so then first of all, are we still in this together?’ And that was a resounding ‘yes,’ which was great,” said Dale Anglin, vice president of program for the Cleveland Foundation. “OK, well what should Phase III look like?” FCCR — a partnership that Anglin spans nearly 50 foundations, nonprofits and governments — is structured through work groups: Equity- centered Data and Practices Workgroup; Homelessness & Housing Task Force; Nonprofit Resiliency Workgroup; Policy and Advocacy Workgroup; Vaccine Access Task Force; Workforce Funders Collaborative; and an Emergency Response Workgroup that’s available to be activated when needed. The funders are prepared to return to rapid response grantmaking if needed. FCCR still is collecting dollars to support the projects of its committees, each of which has its own structure to use funds. “I think since the beginning, we knew that COVID was bigger than any of our individual missions, and that our only way out of this was going to be through collaboration and partnership,” said Daniel Cohn, vice president of strategy at the Cohn Mt. Sinai Health Care Foundation. The funders knew they needed to model a new way of doing business. What made these collaborations possible Schindler was a solid history of relationships, and what made them innovative and unique was the breadth and diversity of the partners, he said. It’s been an example of philanthropy at its best, said Peter Schindler, senior program officer at Community West Foundation. “It’s really broken down a lot of doors between the individual foundations, which I think is amazing,” he said. Foundations spent the early

White-led

BIPOC ED-led

BIPOC-led

$80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Average requested

Average awarded

Average requested

Average awarded

Cycles 8-12

Cycles 1-7

Percent of average requests awarded 40%

30%

20% Cycles 1-7

Cycles 8-12

Cycles 13-18

Funding rates changes over time 60%

50%

40% Cycles 1-7

Cycles 8-12

Cycles 13-18

Note: BIPOC-led was defined as the aggregate of racial diversity of those with decision-making power (board and senior leadership). Later, BIPOC ED-led was added to refer to the race of the Executive Director solely to consider multiple dimensions of what it meant for a nonprofit to be Black- or Brown-led. SOURCE: GREATER CLEVELAND COVID-19 RAPID RESPONSE FUND

weeks of the pandemic setting up entirely new processes faster than they would have thought possible to address challenges they’d never fathomed. They realized there was no distribution system for personal protective equipment — once they learned what PPE even was, Egbert said. Ultimately, with financial support from the rapid response fund, Neighborhood Connections developed a PPE, hygiene and cleaning product distribution network that provided 2.5 million masks and six semi-trucks full of hygiene supplies throughout Cuyahoga, Lake and Geauga counties between June 2020 and July 2021. This urgency to set up systems that didn’t exist was also seen in the emergency need at depopulating homeless shelters and immediately standing up new ways of working with the population. Many nonprofits pivoted their work to food distribution to supplement the existing network of providers focused on hunger relief. “But even with that, it was simply nowhere near sufficient immediately, and so there were very basic human health and safety needs

CRAIN’S CLEVELAND BUSINESS GRAPHICS

that needed to be addressed unbelievably quickly,” Egbert said. “And nothing about the regular way of doing business was going to let that happen, so it needed to change really fast.” Foundations were able to leverage their own expertise. Those with experience in public policy and advocacy work emphasized the importance of regular, open

Average requested

Average awarded

Cycles 13-18

and their philosophies coming together at one time in the most powerful and beautiful, beautiful way,” Schindler said. While Phase I of the fund was about quickly and efficiently getting money to nonprofits, the fund was able to build more of a structure and strategy for Phase II, including data collection. Though it was difficult to draw conclusions after each biweekly grant cycle, after a few, Heather Lenz — CEO of Sangfroid Strategy, who helped to analyze the data — brought a pattern to the fund partners. The data showed during cycles one through seven, white-led organizations were funded at 56%, while BIPOC-led organizations (the aggregate of racial diversity of those with decision-making power — board and senior leadership) were funded at 47%. By nature of the first chapter of rapid response funding, grants were only awarded to nonprofits that one of the foundations had funded before or that they were otherwise familiar with, Anglin said. After a few discussions, they realized that because many of the “unknown” nonprofits were minority-led, this policy was resulting in the disparity. It was also no longer necessary, as they had the time and the staff to resume the due diligence process on applicants, so they did. By cycle 9, that disparity was corrected, according to the report. And by the cycle 1318 period, BIPOC-led organizations were funded at a rate of 65% and white-led were funded at 43%. Overall, BIPOC-led nonprofits experienced a 21.5% improvement in their likelihood of being funded

“I THINK SINCE THE BEGINNING, WE KNEW THAT COVID WAS BIGGER THAN ANY OF OUR INDIVIDUAL MISSIONS, AND THAT OUR ONLY WAY OUT OF THIS WAS GOING TO BE THROUGH COLLABORATION AND PARTNERSHIP.” — Daniel Cohn, vice president of strategy at the Mt. Sinai Health Care Foundation

lines of communication with all levels of government. Others with a focus on public health, such as Mt. Sinai and the Sisters of Charity Foundation of Cleveland, brought science to the table and in the collaborative’s initial conversations brought up vaccines and the hard work ahead around education and distribution. “You got the full spectrum of foundations and their priorities

by the rapid response fund overall, and an 18% increase in their total amount awarded (as compared to their initial request), according to the key outcomes of the fund’s final report. Lenz points to the limitations in the data — what it means to be Black- and Brown-led isn’t universally defined, and aggregating all of those individuals into the “BIPOC” category minimizes the cul-

Average requested

Average awarded

All cycles

tural differences that exist — but the sample size presented challenges. There also is no baseline dataset to compare outside of the fund, which is why they opted instead to look at disparities within the process and attempt to correct for them along the way between cycles. Though an imperfect process, Cohn said the group didn’t want to wait for perfection to move the needle toward closing the gap. “And so this was a small step, but a really important step forward in understanding and developing the self-awareness about who is accessing our dollars, what leaders were supported, what organizations and new ideas were brought to bear,” he said. “But also, a step toward really changing the way we collectively as philanthropy do business. And again, taking that smaller step toward doing it in a way that is closer to what we say we believe in.” Cohn said the Mt. Sinai Health Care Foundation and many other foundations have long been on a journey to understand equity and racism on a deeper level and integrate that into what they fund — and how and why. The experiences of the rapid response fund and now the Funders Collaborative on COVID Recovery both have helped to hone the foundation’s skills and prompted the team to ask two questions in their equity analyses: who benefits, and who is burdened? “And I realized that that sounds overly simple, but it’s actually quite complex when you dig into what communities, what groups, what histories are supported and unsupported by any single decision we make, whether it’s what word we choose in an application question or who gets a grant and who doesn’t,” Cohn said. “And I would say the rapid response fund experience has helped us get clarity on what those two questions are for us and also helped us develop the skillset to start answering those questions in a really meaningful way.” Ultimately, every foundation has to figure out what change looks like in their organization, but “philanthropy should not go back to the way it worked before,” Anglin said. “If we’re doing grantmaking three years from now the way we did it three years before, we didn’t learn anything.” Lydia Coutré: lcoutre@crain.com, (216) 771-5479, @LydiaCoutre

20 | CRAIN’S CLEVELAND BUSINESS | OCTOBER 18, 2021

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HOTEL

From Page 1

orchestrated by a court-appointed receiver. The hotel had been the subject of an on-again, off-again foreclosure fight for eight years, and Crimson Rock stepped into the lender’s shoes by buying the distressed debt for an undisclosed price. From the outset, the company viewed the University Hotel as a turnaround play. But the formation of the Midtown Historic District, added to the National Register of Historic Places in February, is enabling a more robust renovation — and keeping the project alive as the hospitality industry claws back from the pandemic. “If not for the historic district, we wouldn’t be having this discussion right now,” said Dionis Rodriguez, Crimson Rock’s founder and managing principal, during a recent interview. “The project would not be able to work, at least not in the short-term.” The Midtown Historic District stretches roughly from the Inner Belt to East 55th Street, bounded by Perkins Avenue to the north and Carnegie Avenue to the south. It spans 190 acres and more than 180 buildings, including 114 significant structures that, like the University Hotel, are now eligible for federal and state tax credits for preservation. In September, Crimson Rock applied for $3.92 million in state historic tax credits to help finance its hotel overhaul, which will include a full-service restaurant. The development department will announce the awards — the results of a competitive process where demand always far exceeds supply — in December. Other local projects chasing large awards include a planned apartment makeover of the Artcraft Building, in the Superior Arts District; a residential reimagining of 45 Erieview Plaza, an empty office tower downtown; and restoration of the former Phantasy Entertainment Complex, a Lakewood property that is the centerpiece of Studio West, an emerging social and entrepreneurial hub for the region’s lesbian, gay, bisexual, transgender and queer communities. Crimson Rock also expects to use federal historic tax credits, which are not competitive, and is exploring possible city incentives, Rodriguez said. He was reluctant to put a firm price tag or timeline on the project, though he said the refurbished hotel could open in 2023 or 2024. “If we can start construction in six to 12 months, I think that would be ideal. But we still have a lot of the pieces of the puzzle to solve,” he said. Rodriguez confirmed that Crimson Rock has a franchise agreement with Delta Hotels, a relatively new member of the Marriott family of brands. Marriott International Inc. bought the Canadian hotel chain in 2015 and introduced the flag to the United States the following year. The upscale, flexible brand lends itself to building-conversion projects, said Eric Hansen, director of LW Hospitality Advisors in Westlake. “They tend to be more designed with local flair than a corporate kind of thing,” he said. As development spreads east from downtown and west from University Circle, there is a case for putting lodging in between, particularly along the HealthLine bus rapid-transit route on Euclid Avenue, Hansen said. A glitzy, ground-up hotel project is on the drawing board right across the street from the University Hotel, next to the historic Masonic Temple. In

CRAIN’S CLEVELAND BUSINESS

The renovated property will be a 189-room Delta hotel, part of the Marriott family of brands, with a full-service restaurant. It could open in 2023 or 2024.| MICHELLE JARBOE/CRAIN’S CLEVELAND BUSINESS PHOTOS

May 2020, Dream Hotel Group of New York and developer Beaty Capital Group, the temple’s owner, announced a deal to build a 207-room Dream Hotel and a 400-space garage on a parking lot. The pandemic delayed that project, originally set to open in 2022. Dream Hotel Group’s website now lists an opening date of 2024. The hospitality company and Lance Beaty, president of Beaty Capital Group, did not respond to inquiries about the development. Rodriguez sees plenty of room for growth in the neighborhood, which he described as the connective tissue between the city’s “two downtowns.” The location is one factor that lured Crimson Rock to the city. The company also pounced on a deal. The purchase price for the hotel was $3.2 million, but that was a credit bid — not a cash payment — based on the outstanding debt. The Cuyahoga County Fiscal Office puts the value of the real estate, which includes a large parking lot, at just under $2 million. When Crimson Rock stepped in, the

hotel was limping along, a low-rent address on the fringes of downtown. For nine months last year, the building served as overflow housing for the homeless through Lutheran Metropolitan Ministry, which used the rooms to ensure social distancing at its men’s shelter on Lakeside Avenue. That contract ended in December. Preservation consultant Wendy Naylor said that the guest rooms and common areas of the hotel have been altered many times. But the building’s exterior remains largely untouched. After its debut as a Holiday Inn, the hotel became a Sheraton, which went belly-up in the 1970s. In 1982, Taiwanese investors bought the building and renovated it as the Shangri-La Inn, with a Chinese restaurant on the ground floor. The property later became a Travelodge, the University Square Hotel and the Best Hotel & Suites, according to Naylor’s research. “It has been continuously used as a hotel since it was constructed,” said Naylor, who is working with Crimson Rock. “And that’s really wonderful from a historic standpoint, because they are reusing the building in its historic use.” Her firm, Naylor Wellman LLC, worked with the city and MidTown Cleveland Inc. to get the Midtown Historic District placed on the national register. Naylor hopes that Crimson Rock’s proposal is a sign of things to come in the neighborhood, which is home to an eclectic mix of architectural styles. “We think putting this hotel in this specific location will serve to be a catalyst for other businesses,” said Rodriguez, adding that Crimson Rock is open to pursuing other projects in the district. “We just see it as one of many things that are happening in the city, in this specific area.” Michelle Jarboe: michelle.jarboe@ crain.com, (216) 771-5437, @mjarboe

S E P T E M B E R 3 - 9 , 2 018

PA G E 21

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CLASSIFIEDS To place your listing in Crain’s Cleveland Classifieds, contact Ainsley Burgess at 313-446-0455 or email ainsley.burgess@crain.com

CLASSIFIED SERVICES BUSINESS OPPORTUNITY

ENVIRONMENTAL CONSULTING

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PEOPLE ON THE MOVE 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

LAW

Sikich LLP

McDonald Hopkins LLC

Taft Law

Sikich LLP, a global professional services firm specializing in accounting, advisory, technology and managed services, welcomes Laura Cox as senior business development manager for NE Ohio. With over 25 years’ experience in executive sales, marketing & development roles, including driving top-line revenue through strategic growth programs and cultivating C-level partnerships, Laura will work with key firm leaders and partners to support client-focused, relationship-driven growth initiatives.

Karina Conley has been elected to the membership of McDonald Hopkins LLC. Karina’s experience includes representing employers and management in a variety of labor and employment and workplace injury matters, including but not limited to claims of discrimination, harassment, wrongful termination, retaliation, issues involving the Family Medical Leave Act, Americans with Disabilities Act, National Labor Relations Act, False Claims Act, Title IX, and both federal and state wage and hour statutes.

Michael Grund joins Taft as an associate, focusing his practice on mergers and acquisitions, private equity, and corporate governance. Michael was previously a legal fellow at The Goodyear Tire & Rubber Company. He earned his J.D., magna cum laude, from the University of Akron School of Law in 2020, where he served as Editor-in-Chief of the Akron Law Review and President of the Corporate and Business Law Society. Before law, Michael managed business operations for small and mid-sized businesses.

EDUCATION

LAW

Hiram College

McDonald Hopkins LLC

NONPROFITS

Hiram College has appointed Andrea Welch, Ph.D., an experienced leader in higher education recruitment, as Vice President for Enrollment Management and Marketing. In this role, Dr. Welch will have oversight of the College’s traditional and non-traditional undergraduate admissions, graduate admissions, transfer initiatives, marketing and media relations, and the financial aid strategy. Dr. Welch previously served as the Vice President for Enrollment Management at Chicago State University.

Joe Muska has been elected to the membership of McDonald Hopkins LLC. Joe maintains a diverse practice representing both public and private entities and individuals throughout Ohio in federal and state courts. He represents and advises clients in connection with business and commercial litigation matters, such as contract, commercial landlordtenant, securities, and uniform commercial code and warranty disputes. He also represents clients in estate and trust litigation matters.

Vitamix Foundation Natalie Haynes joins Vitamix® as Executive Director of the Vitamix Foundation, bringing over 20 years of experience in nutrition and healthcare to advance the foundation’s plant-based, whole-foods mission. As Executive Director, Natalie will lead the nonprofit’s national grant-making efforts and establish strategic partner relationships. Natalie started her career as a dietitian at WIC and holds a Bachelor of Science and Master of Science in Nutrition from Case Western Reserve University.

EDUCATION LAW

David Stec was named the first lay president of Padua Franciscan High School. During his 25 years at Padua, he served as Principal, Director of Campus Ministry and Theology teacher. He is responsible for the creation of the MedTrack® and MyTrack® programs, along with the emerging technologies of virtual reality. Under his leadership, Padua’s annual day of giving raised a record-breaking $456,818. Stec holds degrees from Borromeo Seminary, John Carroll University and Ursuline College.

McDonald Hopkins LLC Jake Weinberg has been elected to the membership of McDonald Hopkins LLC. Jake focuses his practice on commercial finance and general business counseling. He has experience assisting in the representation of national and local lenders and borrowers in a variety of transactions including: asset-based finance transactions; syndicated loan transactions; structured and mezzanine finance transactions; floor plan lending; ESOP loans; Export-Import Bank loans; and real estate acquisition.

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STORM7

From Page 1

Laura Picariello Reprints Sales Manager lpicariello@crain.com (732) 723-0569

Samic had previously started cloud computing or virtualization company Paragrid, where he worked with Ryan Berg. The company was sold to Evolve IP in 2013, where Samic and Berg continued to work post-acquisition. With Storm7, instead of serving as a data center, Samic wanted to help companies maintain and protect their legacy systems. Samic said Storm7 serves as an agent or a broker, helping each company or institution find the right solutions for them. And it offers its own “CloudNativ Platform” to help companies securely connect a workforce that may be remote or otherwise spread across the globe. This wasn’t as much of an issue before so many companies embraced remote work, but now that they have, they need a way to directly connect employees to services that maintain both quality and security. Berg said the goal is to help companies find the right service providers or technology, implement those services and then protect them. There are financial, security and quality questions to answer. It’s a personalized process, based on what each business or institution wants to accomplish. “What’s really important for us is that we’re helping our clients choose,” Berg said. And Storm7 is taking a “holistic” approach to this work, Berg said. Individual service providers are going to be focused on their own solution, as opposed to the big picture. That’s where Storm7 comes in, assessing and managing how different technologies work together within a corporation or institutional network. Storm7’s name comes from the stormy “chaos of the internet” cloud and the seven layers of computer networking, Samic said. Samic is Storm7’s chief technology officer, and Berg, who joined the company in October, is serving as its president and chief revenue officer. And today, Berg and Samic, along with director of technology Jason Turner, are the owners of Storm7. Berg said he views the company’s relaunch, which puts a stronger focus on proactive cybersecurity work, as “going from defense to offense.” Samic said he knew he wanted Storm7 to do more work preventing cyberattacks, rather than reacting to them. There was plenty of work to be done on the reactionary side. “But the problem is, we’re not doing what’s in the back of my mind,” Samic said. “And that is protecting people. That’s the key. Why always play defense?” Samic’s career has long been about public safety. In addition to his full-time jobs in technology, he worked part time as a police officer, firefighter and more for the city of Wadsworth for more than two decades. That carries into how he views cybersecurity. He’s conscious of how breaches can affect the people working at a company. Samic said he doesn’t want to be responsible for people missing a paycheck because of a security incident. He doesn’t want people sitting at home, waiting for the IT team to bring their company back online. Even before the relaunch, Storm7 had already been doing some of

Dave Samic is the chief technology officer at Storm7 Labs

this proactive work. For example, Cleveland-based Great Lakes Petroleum worked with Storm7 on a project moving some of its data from the cloud to on-premise, said IT manager Dave Dearth, securing new equipment, building a data center and more. Samic was Dearth’s main contact at the company. He knew him from previous work and said he’s always been “meticulous.” Since that initial project about a year and a half ago, Great Lakes Petroleum has continued working with Storm7 for protection from ransomware attacks or “critical failures,” Dearth said. Jared Markland, IT director for the city of Englewood, near Dayton, said he’s worked with Samic for about the past eight years, including now at Storm7. Storm7 serves as the city’s “primary security consultant,” Markland said, and the team handles much of the city’s infrastructure. “They are kind of like our city architects,” he said. Markland said Storm7’s team is good about showing how and why a system or technology works, transferring their knowledge to the employees of the company or, in this case, city, with which they’re working. And it’s been successful so far. “We don’t have to be reactive because of how proactive they are,” Markland said.

“WE DON’T HAVE TO BE REACTIVE BECAUSE OF HOW PROACTIVE THEY ARE.” — Jared Markland, IT director for the city of Englewood

In addition to the stronger focus on proactive work, Berg said there are plans to grow Storm7’s geographic footprint as well. The focus has been local to this point, but the company has begun placing job ads in cities like Detroit and Pittsburgh as it looks to expand its reach. Currently, Storm7 has eight part-time or full-time employees. Berg said the plan right now is to target growth in every “NFL city,” but they wanted to stay regional to start. The company is virtual but Northeast Ohio-based. As it grows, Berg said he wants Storm7’s customers to feel “like we did what’s best for them.” He had been impressed by how employees and customers felt about Paragrid during its sale, and word of mouth had been important to its growth. Berg declined to share annual revenue, but said that Paragrid had been on the Inc. 5000 twice and that they were looking to “eclipse” that with Storm7. Rachel Abbey McCafferty: (216) 771-5379, rmccafferty@crain.com

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e t a r b e Cel THE 2021 40 UNDER 40 CLASS!

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