Crain's Cleveland Business

VOL. 39, NO. 25

JUNE 18 - 24, 2018

Source Lunch

Akron High-end apartments targeted for Middlebury neighborhood. Page 32

CLEVELAND BUSINESS

Author and academic Andrew R. Thomas Page 35

The List The region’s top-paid non-CEOs Page 30

ECONOMIC DEVELOPMENT

Illustration for Crain’s by Daniel Zakroczemski

CLEVELAND’S ECONOMY FAILS TO GAIN TRACTION

A better job of measuring performance is key to turning around region’s fortunes

By JAY MILLER jmiller@crain.com @millerjh

While there is some question about whether he actually said it and exactly how he said it, business thinker Peter Drucker is credited with a mantra that has wide acceptance in management circles: “You

can’t improve what you don’t measure.”

Expanding on that maxim, the need to better measure the strengths and weaknesses of the Northeast Ohio economy, as a prelude to improving it, may end up being a key takeaway from Jon Pinney’s June 8 speech at the City Club of Cleveland.

There, the managing partner of the Kohrman Jackson & Krantz law firm

Focus: Prep and parochial schools Elite high schools are trying to stay ahead. Page 11 >> Saint Martin’s facelift Page 14 Entire contents © 2018 by Crain Communications Inc.

pronounced that the Northeast Ohio economy was “dead last or near the bottom in most economic metrics.”

He cited recent national media coverage, such as Forbes’ “Best Cities for Jobs” survey, which ranked Cleveland last out of 71 major metro areas, and Business Insider’s ranking of the country’s 40 best and worst regional economies, where Cleveland also placed last.

Slow start: A vibrant economy requires tech-driven startups, but many say Northeast Ohio is slow to nurture them. Page 7

As Business Insider reported, Cleveland had the highest February 2017 unemployment rate, at 5.7%, among the 40 biggest metro areas, and its job growth was the second-lowest, with non-farm payroll

employment rising just 0.3% between February 2016 and February 2017.

The struggles of the region’s economy are nothing new. Some data make that point when they are periodically announced, such as Census Bureau reports that show the region’s population decline and when the Labor Department announces the monthly unemployment rate.

SEE METRICS, PAGE 6

SPORTS BUSINESS

LeBron’s decision will have wide-ranging impact on region

By KEVIN KLEPS kkleps@crain.com @KevinKleps

Zack Bruell opened Chinato, an East 4th Street restaurant that is a few LeBron James outlet passes from Quicken Loans Arena, in January 2010.

Fewer than six months later, James announced he was headed to the Miami Heat, and the Cleveland Cavaliers didn’t win more than 33

games in any of the four seasons that followed.

Now, with Decision 3.0 looming for James, who can become an unrestricted free agent by opting out of the final season of his contract later this month, Bruell has an obvious reason for hoping the world’s best player commits to the Cavs for the long term.

But the award-winning chef is looking at James’ decision from a wider lens — which, in the case of a global superstar with a bigger follow-

ing than any athlete in North America, has considerably more layers than the Cavs have players.

“I hope he comes back for the city and region, and not because of any economic impact,” Bruell said. “It’s because of the national exposure that the region gets.”

The spotlight is at its brightest during the NBA Finals, which the Cavs have reached in each of the four seasons since James made his triumphant return.

SEE LEBRON, PAGE 26

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CRAIN’S CLEVELAND BUSINESS

F O U N D AT I O N

Medical Mutual leases old American Greetings space

By STAN BULLARD

CAN YOU SPELL C-O-M-P-E-T-I-T-I-O-N? The Third Annual Cleveland Corporate Spelling Bee will be September 13, 2018 at The City Club. Teams compete in four categories: Legal, Financial, Corporate and Community.

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sbullard@crain.com @CrainRltywriter

Electricians, plumbers, painters and drywall installers are about to start work on a $23 million project in Brooklyn as Medical Mutual of Ohio begins to heal some of the damage from the 2016 departure of American Greetings Corp. from the suburb for Westlake.

That’s because a lease for 324,539 square feet of office space was consummated May 23 between the insurer and Cleveland American LLC, an affiliate of Solon-based Industrial Commercial Properties LLC and Los Angeles-based Industrial Realty Group LLC in the former corporate offices of the greeting card company.

Ray Mueller, executive vice president and chief financial officer of Medical Mutual, said the company plans to begin consolidating multiple suburban operations to one in Brooklyn in early 2020.

The health insurer is deciding which staffers will be relocated to Brooklyn and will notify them internally later this summer. Medical Mutual now has large offices in leased spaces in Beachwood, Copley and Strongsville. The company has told the suburb it will locate about 750 workers in Brooklyn.

The company’s drive to consolidate suburban offices surfaced in 2017 with a letter of intent to lease space at One American Road at the same time as it acquired its downtown headquarters at The Rose Building complex at 2060 East 9th St. Medical Mutual has said its employee head count at the 10-floor downtown building would be unchanged as the suburban consolidation took place.

Both tangible and intangible gains are sought with the Brooklyn consolidation of suburban offices.

“Aside from the financial advantages, we see the opportunity for better employee collaboration,” Mueller wrote in an email to Crain’s Cleveland Business about the recently consummated lease. “The space available at the Brooklyn facility allows us to bring teams together who have, in the past, been spread across facilities. This allows employees to have more direct contact and work more efficiently to better serve our members.”

Andi Udris, Brooklyn economic development director, said Medical Mutual meticulously reviewed the details involved in the major move to Brooklyn.

“They wanted to be sure the city completed repairs to the access road in 2019,” Udris said, and ready for employees to occupy the space in early 2020.

Medical Mutual and the landlord plan to invest a total of $23 million in improvements to the building, according to a Community Reinvestment Act between the city and the company. The CRA reduces the company and its landlord’s property tax bill for the improvements to half what they otherwise would be for 10 years, although it has to provide an annual fee and other concessions to the city, according to the agreement.

Brooklyn also agreed to a job creation incentive for Medical Mutual to bring 750 jobs to the city and a payroll of at least $57 million to the suburb. Under that incentive, after the company has staffers in place for a year, the suburb will cut it checks totaling from $1.3 million to $5 million over six years, depending on how many workers are actually located in the city.

Chris Semarjian, the owner of Industrial Commercial Properties, declined comment on the project.

However, Udris described the improvements to the former headquarters of American Greetings as extensive.

“They’re completely redoing and modernizing the building,” Udris said. The 2020 occupancy date indicated in the lease also reflects how extensive the construction will be, as it allows for up to 18 months to finish the job.

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PA G E 3

Prospect Avenue to gain new apartments

By STAN BULLARD sbullard@crain.com @CrainRltywriter

Columbus-based Woda Cooper Cos. is starting to rebuild the five-story Stuyvesant Building near Cleveland State University as 42 apartments in a $10 million project, but it’s taking a different tack from the plethora of rentals being added downtown.

The building at 1937 Prospect Ave., to be called Prospect Yard, is being financed with low-income and affordable tax credits so it will provide downtown housing for $354 to $860 monthly — far less than the going rate of $1,000 monthly. Prospective tenants will be people with annual incomes ranging from $15,000 to $40,000, although actual rents and income will vary due to the number of people in the household.

Joseph McCabe, vice president of development for Woda Cooper, said in an interview that the project will benefit workers in downtown hotels, restaurants and bars, and other businesses who want to live near work, especially if they do not own a car. “We originally looked at doing it as a market-rate project, but decided to stick to our core mission of providing low-income and affordable housing,�

McCabe said. “We looked at it differently because we’ve seen the values of downtown buildings escalate since we bought this building. We saw this as a unique opportunity to do something in affordable housing downtown as people move to the cities from the suburbs. This is a chance to attack the barrier to affordable housing in more densely populated areas where it’s needed most.�

An affiliate of Woda Cooper in 2014 shelled out $775,000 for the 54,000-square-foot building, which has been unused for more than a decade. It bought the building at the end of the year that real estate developers made a run on underused downtown office buildings for conversion to apartments. Most are on the market now, or soon will be, from the Standard at 99 W. St. Clair Ave. to the Halle Building at 1228 Euclid Ave. McCabe said additional time went into designing the building so it could accommodate as many suites as possible — two more suites were added than originally planned — and could secure additional sources of financing.

While multiple sources of capital are typical for such projects, Prospect Yard has seven. Those sources range from a $6 million mortgage from KeyBank to $2.2 million from two loan programs administered by the Ohio Housing Finance Agency, a state agency focused on developing, financing and rehabilitating low and moderate-income housing. It also will benefit from U.S. and Ohio State Historic Preservation Tax Credits.

The project also received $325,000 from the city of Cleveland, as well as the 15-year abatement of non-school property taxes provided to all residential projects.

The building, originally an auto dealership and repair center for the

Correction J A June 11, Page 21 story on Coby Socher, CEO of the Socher Team at Keller Williams Greater Cleveland, incorrectly reported his team’s revenue. The team sold $26 million in residential real estate in 2017 and project sales of $38 million in 2018.

Windows that were covered over years ago will be restored as the building at 1937 Prospect Ave. is renovated for apartments.

(Contributed rendering)

Stuyvesant Motor Car Co., will differ from other residential conversions in town because the industrial structure’s floors are generally wide open, according to Elizabeth Murphy, an architect on the project from the Chambers, Murphy & Burge studio of Perspectus Architecture.

However, she said that columns in the building will be exposed and used as a design element as often as possible. An elevator originally used to move cars in the structure could not be restored, she said, and will provide space for new elevators.

Such renovation projects usually call for cleaning the building’s exterior, but Prospect Yard will skip that step. Murphy said that will ensure that dated, painted signs on the building will remain visible. The

structure originally sat between two other buildings that have since been razed for parking lots. Light wells that once looked out on abutting buildings now will look out on city views.

But the most dramatic change in the building’s exterior may be the simplest. Windows will be put back into the Prospect side of the structure that have been covered for years.

Although Prospect Yard is near Cleveland State, full-time students will not be able to live there. McCabe said that is because federal law only allows part-time students to live in properties developed with low-income housing tax credits. “However, think of all the post-college jobs that require starting in an internship with low entry-level wages, or a single parent who is working

full-time and attending college parttime,� McCabe said. “But it’s really targeted to people in the service industries who need (affordable housing) most.�

The one- and two-bedroom lofts will be 700 to 900 square feet, and suitable for singles, couples and singles or couples with one child. Construction should be completed no later than June 1, 2019, McCabe said.

Mark Lammon, executive director of the Campus District nonprofit, which serves the eastern edge of downtown Cleveland, said in an interview that the project will be a welcome addition to the area.

Woda Cooper is the successor company to Woda Group of Columbus, which has developed 330 properties in 18 states.

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CRAIN’S CLEVELAND BUSINESS

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TOA founder surfaces with promising fintech venture

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Yuval Brisker, the entrepreneur who founded, grew and eventually sold TOA Technologies to Oracle Corp. in what’s believed to be one of the largest venture-backed exits an Ohio company has ever drawn, has just launched a fintech startup he bills as a third-generation payment system.

Brisker and co-founder Pedro Silva officially launched Mezu, whose name is derived from part of the Hebrew word for money, from its Cleveland headquarters on June 13. It's backed by $10 million from investors.

The app is designed to foster peerto-peer financial transactions without sharing any personal information. The inspiration for the platform came to Brisker while he was traveling the world.

“I realized there is no solution for the problem of cash,” Brisker said.

“There are payment apps to pay people I know, but it’s a different setup than going to London or San Francisco and wanting to pay my valet or leave a tip on the table at the hotel.”

The app could allow someone to tip a bartender, pay a vendor at a local farmers market or even donate to a nonprofit without sharing the kind of information a service like Venmo requires, which creates what amounts to a virtual check.

There’s also a social component to Venmo that effectively identifies people — something that has led to

“I realized there is no solution for the problem of cash.”

— Yuval Brisker, co-founder of Mezu

what’s known as digital stalking, which Mezu vice president of marketing Amy Martin once experienced personally after using Venmo to buy a pizza and getting friended on social media by the delivery person.

Mezu emphasizes its focus on privacy and how that promotes safety in a world of digital stalking.

But it also touts its ability to serve the underbanked. Mezu — citing numbers from the Federal Deposit Insurance Corp. indicating that more than 9 million Americans don’t currently have a bank account — says it will allow users to get paid and securely store money in an FDIC-insured account.

A free download on iOS and Android devices, the system creates a one-time transaction code a recipient then enters to get their money.

The Mezu account links to a person’s bank account or credit card and collects a fee on each transaction. It’s 3%

for one involving a credit card.

Brisker describes Mezu as the next evolution in peer-to-peer payments, following PayPal and Venmo and flaunts its ability to work internationally.

“Because we both had international careers and built businesses internationally, our goal was always to make this global payment app,” he said. “No current app you travel with is truly international in the sense that I could cross the border into Canada.

That’s a gap that has yet to be solved.”

Mezu’s core team is in Ohio, but only about a quarter of its 27 employees are based here. The rest of the team is working in New York, Portugal and Lisbon. All the business functions are in Ohio, though, which is similar to how TOA was operated.

TOA is the success story that precedes Brisker’s latest journey in starting Mezu.

Brisker, a native of Israel, came to the United States as a child. He eventually studied architecture in New York. He worked at a firm there and became enamored with technology as be worked with their AutoCAD software.

He went on to start a subsidiary in Israel where he worked with a business partner, Irad Carmi, who was married to someone born in Cleveland. They left that firm with plans to create a the startup that would eventually become TOA, which was billed as a service to “solve the cable guy problem.” Its acronym stood for “time of arrival” and the app was used to track arrival times for everything from cable technicians to furniture delivery.

SEE MEZU, PAGE 28

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Cuyahoga County Executive Armond Budish is asking county council to adopt an updated, five-year economic development plan that puts greater emphasis on improving the quality of the labor force, although it continues to support providing financial incentives to businesses to relocate or expand.

The plan, a broad statement of policy adopted earlier this year by a nine-person, county economic development commission, is the annual update in a process created when the new county government took over in 2011, expanding the county’s role in economic development.

The original plan highlighted issuing bonds over a period of years that would support a $100 million economic development fund, the Western Reserve Fund, to assist in the attraction to the county of new business and the expansion and retention of existing businesses. That fund was never fully funded, though. Some money was bonded.

Under Budish, who took office in 2015, the plan focuses on building a workforce that is a competitive advantage for Northeast Ohio and on supporting the growth of key business sectors — in particular manufacturing, health care innovation and research, aerospace, and other high-

tech business sectors.

“The goal is to lift people up and get people on career paths, to make sure there are plenty of jobs available and we are training people for those jobs and that they are throughout the county,” Budish said in an interview before the plan was submitted to county council. “We’ve been focusing first and foremost on education.

Long term, we’re trying to do the right things, even if it doesn’t result in a thousand new jobs during my first term in office.” (Budish is up for re-election in November and is running unopposed.)

A key piece of the effort, he said, is SkillUp, a program that reimburses employers for a portion of the cost of training and advancing workers into higher-skilled jobs. A new Cuyahoga County program will help employers train and advance workers into higher-skilled jobs.

Under the new SkillUp service, employers can be reimbursed for a portion of their out-of-pocket costs spent on training and in-training wage differentials.

“Our SkillUp program is working. It has received national notoriety,” Budish said. Last November, in a report on the challenges facing middle-market companies, the Brookings Institution, a Washington, D.C., think tank, recognized SkillUp as a best practice in employee training.

At the other end of the education spectrum, Budish said the county is building its pre-kindergarten program.

In his State of the County address in April, Budish said the plan is to increase the number of children in high-quality pre-K education from 2,000 to 4,000.

Budish said he sees the five-year plan not just as a guide to county government’s economic development programs, but as a broader plan for other players in the economic development field.

He mentioned, for example, an effort to better coordinate worker training programs.

“We’ve had an ongoing effort for the last year-and-a-half to two years bringing together workforce funders,” Budish said. “We’ve brought all of them together, because they are all funding workforce, but there has not been any coordination.”

He said the group has put together focused programs to train in key areas where they see job openings — manufacturing, health care, information technology, customer service and truck driving.

While the economic development focus is shifting to workforce programs, Budish said the county will continue offering financial support to new, expanding and relocating businesses. In 2017, it made $8.7 million in low-interest loans to businesses, including $2 million to Charter Steel Co. in Cuyahoga Heights and $2.5 million to the Link 59 project in Cleveland’s Midtown. That figure was down from 14 loans totaling $14.1 million in 2016.

SEE COUNTY, PAGE 28

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Pinney was highlighting the need to pay more attention on a regular basis to those and other measurements of the region’s performance and to compare that performance to other regions. He closed his comments by making a “grand challenge” to business and civic leaders to face up to the region’s poor showing when compared to the rest of the country and find solutions to the region’s economic sluggishness.

Before that can happen, however, the region needs better data — data that have not been as readily available in Northeast Ohio as they are in some other areas.

In Columbus, for example, Columbus 2020, the region’s economic development agency, posts on its website updated monthly data on the size and composition of the regional workforce, including a graph which shows if the employed workforce is growing or declining and a pie chart of which industries employ the most people.

It’s a barebones example of what economists call an “economic dashboard.”

Greater MSP, an economic development agency in the Minneapolis-St. Paul region, goes further. Its “Regional Indicators Dashboard” tracks changes in more than 50 economic, environmental and social outcomes and how the region ranks with a peer group of regional economies. It includes everything from average weekly wages to percentage of the population with a college degree to the cost of electricity.

Don Iannone, a Highland Heightsbased economic development consultant, produced a dashboard for Ashtabula County after becoming CEO of the Growth Partnership for Ashtabula County in 2014. It provided a wide variety of regularly updated information for several years covering data on employment and busi-

ness formation in the county.

But because the economy was struggling, business and civic leaders weren’t always happy to see their economic difficulties on display on the internet.

“People didn’t like the bad news.

They just didn’t,” he said. But to him, it was a necessary regular assessment. “I said, it’s actually like going in for a physical and the doctor gives you all the news, good and bad,” Iannone said.

In 2005, the Federal Reserve Bank of Cleveland produced an economic dashboard proposal for the Fund for Our Economic Future, a collaboration of foundations and other philanthropies that focuses on regional economic development. The goal was “to encourage and advance a common and highly focused regional economic development agenda that can lead to a long-term economic transformation of the Northeast Ohio (NEO) economy.”

The work, said one economist who worked on the project, was noble, but was overwhelmed by other priorities at the time.

“The great recession had a major influence on how we could approach this activity,” said Jack Kleinhenz, an economist now running Kleinhenz & Associates in Cleveland Heights. “In 2005, the economy started to go in the tank and everybody was preoccupied, I hate to say it, more by survival.”

That effort is being revived.

Earlier this year, the Fund for Our Economic Future released “2 Tomorrows,” a report on the challenges facing the 18-county Northeast Ohio economy. “We are not innovating and investing to the level needed to drive and sustain global competitiveness,” the report stated. “We need to change what we consider success.”

Beyond basic economic concerns, the report focused on the concentration of poverty in the region and on racial inequalities in economic outcomes and challenges to create good jobs and rising incomes across the region.

It also offers a set of measurements

to track how well the region is succeeding at meeting those challenges.

“What gets measured gets done,” the study argued.

“In ‘2 Tomorrows,’ we put forth what we think is an effective way to measure the economy that looks like the right things,” fund president Brad Whitehead said. “We’ll be doing it quarterly, and it’s an open question whether anyone else will salute it.”

Its measurements look beyond the basic economic metrics and create a “Growth & Opportunity Scorecard” that creates measurements for metrics such as the growth of young businesses, the effort to improve prosperity and how well economic growth is shared across all people in the region.

“We began by thinking, blank slate, what would a successful regional economy look like?” said Peter Truog, director of civic innovation and insight at the fund. He called it an effort to “look at a group of peer cities and see how we stack up.”

Team Northeast Ohio, the regional economic development nonprofit, does gather information on the region’s economy and workforce. While it issues quarterly data to news media, it uses the data primarily to encourage businesses and site selectors considering expanding in the region.

Its president, Bill Koehler, does see the need for greater sharing of the information its researchers gather and would like to see some organization, not his, take a lead role in gathering and sharing that information.

“We need a common place where (this) data resides,” Koehler said.

“But even if there is a centralized place where all the data is, we still have to have a common understanding of what the right performance drivers and metrics are, and all of us have to align our strategies around that. It’s not happening enough and people are starting to recognize and challenging those of us in the economic development community to take on the responsibility of doing a better job.”

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PA G E 7

NEO tech startups need stronger backing

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

A proper plan for economic viability today simply can’t exclude the role played by technology-driven startups and a surrounding system that creates and supports them.

So as business leaders in Northeast Ohio lament the region’s sluggish growth, what can be done to foster a stronger startup culture here may need to lead that discussion — or at least be a part of it.

“The underlying observation, having been here 20 years, is things look incredibly different than they did in 1995. We should take note of that progress and also think about what we can do to accelerate the rate of progress of the region,” said Remsen Harris, an 11-year veteran of JumpStart Inc. and its lead investor. “The fly wheel is turning, and now is the time to accelerate that rate of progress. That means collaboration, bringing resource capital and smart people together to grow companies that will only benefit the entire region.”

Why should tech startups, specifically, draw a heightened focus in venture development that should spur economic growth?

According to a November analysis by the Information Technology and Innovation Foundation (ITIF), a Washington, D.C., science and tech policy think tank, the number of technology-based startups in the United States grew 47% in the last decade, while employment in that sector grew 20%.

Those businesses make “outsized contributions to employment, innovation, exports and productivity growth,” according to ITIF. The report notes that compared with more traditional and historically common startups like restaurants, tech startups typically have greater employment and revenue growth; draw more skilled workers; create more indirect jobs; and pay more than twice the national median wage.

So there’s a compelling case to foster that sector’s growth when it comes to creating a stronger local economy in today’s world.

But in this part of the country, several headwinds are preventing that startup culture from developing to its full potential.

NEO: Conservative to a fault?

While there are always exceptions, there’s a sense in the investing and startup communities here that those with capital and influence by and large prefer to invest in what they know and avoid what they don’t. In a Rust Belt region where old money was born of plants and factories, the greatest familiarity is, naturally, with manufacturing.

There may not be as much investor capital floating around in Northeast Ohio as there is on the coasts, but there definitely is capital here. The struggle, Harris says, is getting the individuals and groups who have it to invest it in more innovative, techbased businesses.

Some entities do focus squarely on pooling money together and channeling it toward those enterprises, such as JumpStart and the North Coast Angel Fund.

But they, and others like them, are more of an exception in this market than a standard.

“While we haven’t benchmarked it, we don’t see a lot of wealthy inves-

tors that seem to have an interest in this asset class, for whatever reasons,” Harris said.

Harris speculated that could be due to an awareness issue. Maybe investors don’t know enough about the startups that are building themselves here or focus enough on successful enterprises to feed excitement in starting new ones.

Maybe accredited investors and wealthy people don’t contemplate dabbling in what’s considered a higher-risk asset class. And those here who do support startups may not be allocating enough of their resources toward those businesses to garner the returns they seek.

Harris suggests that anyone considering investing in tech startups do so by allocating a small percentage of their portfolios to a dozen different companies, as some are bound to fail.

But a fear of failure may inhibit potential founders from creating companies in the first place and overly worry prospective investors.

Pete Martin, founder and CEO of Cleveland’s Votem Corp., a startup developing a blockchain-based voting platform, said the fear of failure is less present in areas with stronger startup cultures. And while no one thinks Northeast Ohio will be the next Silicon Valley, a mentality persists there that failure is an inherent part of a startup sector.

“People there have this notion that it’s perfectly fine to fail, and if you do, they assume you learned something and can do it better next time,” Martin said. “That just doesn’t exist in Northeast Ohio. The sense is if you fail, you’re a failure.”

Martin, a Kent native, surmised that could be due to the region’s manufacturing roots. In a past generation, someone who ran a plant that went under would see jobs and money lost, but a physical reminder of their failures in a dormant factory — something much more visible than a portion of a floor in an office building going empty if a startup crumbles.

Martin said he believes if someone fails at a business in Cleveland, there’s a chance they could feel like they’re branded as a failure, which could inhibit their chances of getting support or capital if they return to the drawing board.

Part of creating a true startup culture is reversing that mentality, he said.

“It’s necessary to incubate a much bigger entrepreneurial pool with the notion that it’s OK to fail,” he said.

“And if you do, you should get another chance and another few bites at the apple.”

additive know-how and experience more than he wanted capital, which could potentially come from anywhere.

With just a couple exceptions, Clark said “no one investing in tech in Northeast Ohio I’d take a dollar from on any terms, ever.”

“Northeast Ohio money, it’s awful

“People (in Silicon Valley) have this notion that it’s perfectly fine to fail, and if you do, they assume you learned something and can do it better next time. That just doesn’t exist in Northeast Ohio.

The sense is if you fail, you’re a failure.”

— Pete Martin, founder and CEO of Cleveland’s Votem Corp.

to say, but it’s dumb money,” he said.

“No one who knows what they’re doing will take money from here. Old money around here doesn’t understand tech valuation. And even if someone is successful that takes old

That’s all in addition to better supporting startups already working here, like Votem (which plans to double its 20 employees today in the next month) and RVshare (which has a staff of 70, about 50 of whom are in Akron), whose founders say the driving reason they’re currently in Northeast Ohio is because they want to build successful companies in the regions in which they grew up.

If those with money and influence don’t want to risk their money in a startup or put effort into creating one themselves, Clark said those people should put their weight behind regulatory changes enabling startups to grow — such as lobbying lawmakers to eliminate or significantly reduce the state income tax.

But it will take time and patience for any transformative, economy-spurring change to occur.

“There’s no silver bullet fix,” said Mike Stubler, co-founder of Pittsburgh’s Draper Triangle Ventures, which once had an office in JumpStart and first invested in a Cleveland startup with TOA Technologies in 2005.

“Compared to 10 years ago, we’ve come a long way. But I think the evolution from all these industrial manufacturing-based companies into a more technology-based economy is going to be a long, arduous process.”

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Creating a tech economy Joel Clark, president and co-founder of Akron-based RVshare, a startup offering an online platform for peerto-peer RV rentals, said he feels the direct availability of capital isn’t as significant as the ability for an investor to offer something additive to a new tech business.

The actual money isn’t as important as who you take it from, he said, emphasizing that the quality of the potential investors in this region isn’t stellar.

Clark’s company drew a $50 million investment from Austin, Texas-based Tritium Partners in February. Tritium’s managing partners led the first investment in vacation rental giant HomeAway and then sold that to Expedia for $3.9 billion in 2015.

The group said it aims to grow RVshare to the same level.

Clark said he wanted that kind of

money from around here, there’s little chance they would see eye-to-eye from a valuation standpoint.”

Clark prefers to take money from a group that “brings more than money to the table,” he said. And there isn’t a deep pool of those people in this market. And a less-than-supportive startup culture has already left markets like Northeast Ohio’s behind in the tech startup curve in terms of talent and expertise compared to what other regions may draw.

“We talk about startup culture, which we think is sexy,” he said.

“People like to talk about startups, but no one wants to actually go out and build one.”

Clark also scoffed at what he describes as an unnecessarily heightened emphasis on tech summits and other networking and brainstorming events where talk takes center stage.

“You can’t talk a thriving tech industry into existence,” Clark said.

So a stronger tech culture could develop by local stakeholders injecting more capital into local startups, fostering both a mentality and ecosystem of support for them — which could also mean favorable regulations, like lower income tax rates — and increasingly highlighting successful companies to encourage more founders to step up.

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CRAIN’S CLEVELAND BUSINESS

Opinion From the Editor

Coming together on common ground

Editorial

A sorry state With a lame duck governor and election season in full swing, it’s expected that the machinations of state government — particularly big-ticket items — would slow to an absolute crawl.

But with a governor with presidential aspirations who acts more like a syndicated columnist than the state’s chief executive, and a Legislature whose dysfunction gives Congress a run for its money, the business of the Buckeye State quite simply isn’t getting done.

Earlier this month, Ohio’s House of Representatives at last showed signs of life following a seven-week impasse where business grinded to a halt after the resignation of Cliff Rosenberger as speaker amid an intensifying FBI probe. It took 11 rounds of floor voting for lawmakers to elect a speaker — Ryan Smith — a Gallia County Republican —and business resumed shortly thereafter.

In that stretch, the Ohio House moved forward a number of critical bills before taking another week-long breather to, as Smith characterized it, to “get some inventory on where we are at,” according to a report from the Ohio public radio and television news bureau.

Still, shouldn’t we expect more action — more urgency — from our elected leaders following a seven-week lull?

Speaking of statewide bungling, take Ohio’s lackadaisical handling of the voter-mandated medical marijuana program. Despite months of our reporting indicating such, the state this month finally admitted that little — if any — medical cannabis will be available for patients to buy come the mandated start of Sept. 8.

In turn, that delay is hampering the growth of a highly anticipated cannabis industry here — one that many project could generate hundreds of millions of dollars in sales per year and, as our reporting has shown, is sprouting ancillary, marijuana-related businesses.

It’s true that Washington’s insanity is crowding most of the news cycle, leaving many Ohioans with little appetite for what is (or isn't) happening at the state level. However, our elected and hired leaders are there to do a job. So get working.

Fix it

The Legislature does have a chance to make a difference on an issue that it has struggled with for years: regulation of the payday lending industry.

The House on June 7 voted 69-14 for a bill that would crack down on the industry and close a loophole from a 2008 law, upheld by voters, that limited payday loans to a 28% annual rate. Among the provisions of House Bill 123: loans could not exceed $500 and a 28% APR; lenders could charge a monthly maintenance fee of $20 or 5% of the first $400 borrowed, whichever is less; the total monthly payment including fees and interest could not exceed 5% of a borrower's gross monthly income or 6% of monthly net income; and the total amount of fees and charges could not exceed 50%.

The bill is reasonable and provides the infrastructure for a healthy and fair payday lending industry, marked by affordable installment payments, lower prices and quick access to credit.

It took a long time to even get to the House vote. State Rep. Kyle Koehler, R-Springfield, introduced the bill in March 2017, and since then it has been the subject of intense lobbying by payday lenders. Nonetheless, with passage secured in the Republican-controlled House, the bill now heads to the Senate for tweaks and, we hope, becomes law.

The 2008 effort to reform the industry failed as lenders exploited a legal loophole by issuing loans under the Mortgage Loan Act, which doesn't cap interest rates and demands that loans be repaid in a single installment. The more than 600 payday lending stores in Ohio have continued to charge interest rates topping 500%, exploiting vulnerable consumers who typically have poor credit scores and lower incomes. Those consumers need access to the loans, but they don't deserve to be taken advantage of. The bill that has moved to the Senate restores fairness in the industry and introduces regulations that ensure the public is protected.

Payday lenders have had a long, lucrative run in Ohio. It's time for a fix that brings balance to the lender/borrower relationship.

Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com)

CLEVELAND BUSINESS

CLEVELAND BUSINESS

Managing Editor:

Scott Suttell (ssuttell@crain.com)

Sections Editor:

Timothy Magaw (tmagaw@crain.com)

Contact Crain’s :

216-522-1383

A simple conversation these days can feel like venturing into a minefield. Politics is certainly off limits. Probably best to avoid gun rights discussions, too. Even talking about weather is fraught with peril — the topic changes every five minutes around here.

When simple civil discourse seems to have lost its civility, what are we to do?

“Just joining a conversation is a brave act in this day and age,” said Stephanie Hicks Thompson, a marketing and communications officer with the Cleveland Foundation.

“We spend a lot of time in our own bubble.”

Getting folks to break out of their bubbles and engage with one other — with people you know and those you’ve never met — is a goal of the Cleveland Foundation’s second Common Ground communiElizabeth ty-wide discussion on Sunday, June 24.

McIntyre Over the course of the day, nearly 100 individuals and organizations will host Common Ground conversations across Northeast Ohio to break bread together at breakfasts, lunches or dinners and to discuss this year’s theme: “Why does place matter?”

Hosts have gotten creative interpreting the theme, Thompson said, with some focusing on actual physical spaces and others on intangible concepts of place. At Laurel School in Shaker Heights, the conversation will center on what it means to be a good neighbor. At the Bedford Heights Jail, the discussion will be about employing ex-offenders. There’s a conversation for virtually every interest.

Some are large-scale affairs, such as the dinner for 100 from 5 to 7 p.m. at the Jerry Sue Thornton Center, hosted by the United Black Fund of Greater Cleveland, the Jewish Federation of Cleveland, the Hispanic Alliance, Cleveland Public Library and Esperanza. It will explore how traveling beyond our community changes us. And some are more intimate, such as at the East End Neighborhood House on Woodlawn Ave., where participants from 3:30 to 5:30 p.m. will discuss the importance of fathers in our communities.

After having a positive experience last year, Western Reserve Land Conservancy, like many organizations and community members, signed up to host another conversation this year.

“The conversations last year really reminded staff members what our mission is,” said Emily Bacha, Western Reserve Land Conservancy’s director of communications and marketing. The most striking moment last year came during a conversation about what helps a community thrive. A young boy of about 4 or 5 told those gathered: I want to live in a safe community.

“There wasn’t a dry eye,” Bacha said. “That young boy and his family want a safe community, and they really want to help their community thrive. It was a good reminder that people come from different places and perspectives.”

This year, Western Reserve Land Conservancy and the city of South Euclid will explore the concept of place as it relates to a study on housing market trends in inner-ring suburbs. That conversation is set for 1:30 to 3:30 p.m. at the South Euclid-Lyndhurst branch of the Cuyahoga County Public Library.

These yearly gatherings, Bacha hopes, are just the beginning.

“We need to have these conversations, and more than once a year,” she said. “There’s real power in this, just in seeing the actions that have taken place. There’s been a groundswell of positive change in the community.”

The first step is popping the bubble, having civil conversation, confronting the issues as neighbors with one goal in mind: making our place better.

The next step is taking action. There are plenty of examples from last year where ideas turned into concrete steps to improve the community. This year, the Cleveland Foundation has partnered with two nonprofits, Neighborhood Connections and ioby (In Our Backyard) to help turn ideas into action.

That’s worth being a part of.

To see a list of conversation sites, go to clevelandfoundation. org/commonground.

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.

Sound off: Send a Personal View for the opinion page to emcintyre@crain.com.

Please include a telephone number for verification purposes.

CRAIN’S CLEVELAND BUSINESS

Web Talk Re: Supreme Court ruling on Ohio’s voter purges Ohio’s purge is ... a reasonable compromise between unrestricted citizen voting rights and the rights of others not to have their votes effectively invalidated by fraudulent actions.

My understanding of the Ohio system is that if the voter has not cast a ballot of any kind within two years, the election board sends out a prepaid card asking for verification that the voter still lives there. If the card is not received back AND the voter does not vote for an additional four years, then their name is removed from the voter rolls. At what point do we, as citizens, accept responsibility for our actions (or lack thereof) and understand there are consequences? ... I think Ohio has done a reasonable job of straddling the fence and coming up with something that’s workable and fair for the vast majority of citizens.

— Todd Courtney How is not voting a threat to the integrity of the electoral process. If I move, why would I return to my former polling place? To affect the outcome of local elections? I still have to produce an ID thanks to other voter suppression laws passed by the GOP. Members of the GOP have admitted behind closed doors that ID laws are passed to suppress the vote, not protect the integrity of the voting process. ... These laws aren’t just solutions to a problem that doesn’t exist; they’re deliberate measures to suppress the vote.

— Financephil

RE: Jon Pinney’s ‘We’re getting our butts kicked’ City Club talk Cleveland’s leaders need to seriously look at and emulate what comparable regions with similar challenges have been doing to turn themselves around.

For example, Pittsburgh is a better model for us than Columbus, since the former has largely been making headway by shoring up its existing legacy assets, while the latter has been able to largely position itself through annexation and the rapid growth this has induced. Why can’t CWRU become for us what Carnegie Mellon has become for Pittsburgh — a producer/magnet for tech and innovation?

— Earl James Happy to see the pressure being applied to “get off these lists.” Hope the civic leaders can put egos aside and begin the process of turning the regional economy around.

— JP LOCOCO

Letters to the Editor

Millennials must have voice in Cleveland’s economic destiny I was born and raised in Cleveland’s Mount Pleasant neighborhood and have lived and worked in Washington, D.C., London, and New York City. Cleveland is my home and nowhere else compares.

When I returned to Cleveland in 2014, I felt a new sense of energy. The Cavaliers’ resurgence, securing a major national convention and a revitalization of downtown all brought about a new origin story with economic promise.

Bibb There are discussions among leaders questioning if Cleveland’s economic renaissance is real. Others asked, can we sustain this moment of renewal? The answer is yes, but only if we include everyone.

Too often, we narrowly focus on brick and mortar development as a panacea for economic growth. A “build it and they will come” mentality is short-sighted. We have an economy that is not working today for the average Clevelander. It does not have to be that way tomorrow.

Economic injustice is our challenge, and we need a strategy that is bottom-up, not top-down. The disenfranchised are too numerous, and we can and must do more.

First, we must embrace innovative policies to foster a more inclusive and competitive economy. For example, Chicago, through its Chicago Anchors for a Strong Economy (CASE) initiative, brought together 16 public, private and nonprofit institutions to re-examine its hiring, procurement and investment policies within underserved neighborhoods. This effort assisted 443 businesses, spurring the creation of 180 new jobs and $51.8 million in revenue.

Second, dynamic cities create an ecosystem where all residents have a seat at the table. Minneapolis requires its boards and commissions to reflect the community they serve. Millennials must have a role in boards and commissions as well. We are the incubators of ideas that will guide our city in the future. Failure to enact these types of actions will result in us losing even more talent to cities where new ideas and new people are embraced.

Finally, we must face the truth. Difficult conversations are never easy, but Cleveland is at a critical juncture and we must think boldly about our economic future. The people cannot afford to wait.

Justin M. Bibb Cleveland

A city that works and one that just says it does When I lived in Chicago, residents were encouraged to dial “311” with community issues. I took advantage of this service from time-to-time reporting service issues at the airport, the need for a stop sign for people to cross safely, a car horn at 8 a.m. on a Sunday morning and possible drug interactions on the street. The city responded with immediate department response and sharing of an officer’s direct dial cell number.

Fast forward to Cleveland. Recently I asked about support for our building’s sustainability drive. In the past, the city would send out a shredder, that while on its last leg, would work once a city employee banged on it. Now I am told that despite our 2016 tax increase, the city cannot support these community efforts. Three years ago, I asked for a “No Trucks” sign to be posted along Lake Avenue to protect what was then newly laid asphalt. Signs were never added, and the street is now in desperate need of repaving.

The June 4 issue of Crain’s Cleveland Business and the subsequent City Club presentation by Jon Pinney called for resolving the vacuum of city leadership. It is our call as residents to take the lead.

Unfortunately, Clevelanders have long been treated to the city’s poor process attitude, do-it-yourself response and lack of action that we have become apathetic. Clevelanders need vision to future jobs, roads that are professionally paved and sustainable support that moves monies from self-help brochures and newsletters into collaborative action.

My suggestion for the city is to drop its pipe dream mission claim of “superior service.” and set a realistic horizon for its action center to “at least getting back to people.”

Greg Coloian Cleveland

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CRAIN’S CLEVELAND BUSINESS

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Focus PREP AND PAROCHIAL SCHOOLS

SCHOOL OF THOUGHT Elite private schools are trying to stay ahead when angling for potential students

By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty

One of the biggest challenges facing schools today is difficult to get around. With birth rates dropping in the United States, the recruitment pool is shrinking.

“There’s not as many kids as there used to be,” said Susan Haas, director of marketing and communications at Lake Ridge Academy in North Ridgeville, which has about 430 students from kindergarten through 12th grade.

Add financial challenges to the demographic shift, and elite high schools — institutions where the annual sticker price can cost tens of thousands of dollars — find themselves in the same position as many small, liberal arts colleges across the country. The burden is on them to boost fundraising, improve their marketing and sell their value to potential students and their families.

At Lake Ridge Academy, knowing there’s a smaller pool of students from which to recruit has challenged the school to have a stronger

Illustration by khalus via Getty Images

marketing presence, Haas Fundraising 101: said. In the last year, the How Western Reserve academy has been working Academy prepared for its on a rebranding, which is $80 million capital expected to launch for the campaign Page 18 next academic year. It’s a question of what makes the school unique, or what differentiates it from its peers.

Those could include the academy’s centers of excellence around the fine arts, the humanities and science and engineering, and the concentrated study upper-school students can pursue in those areas, Haas said.

At Western Reserve Academy in Hudson, a revamped curriculum, implemented this past academic year, is a differentiator.

Marketing what makes the boarding and day school special is important, said director of communications and marketing Meg Colafella. The school has a lot of competition. There are great public and independent schools in Northeast Ohio, and a host of boarding schools nationally, and Western Reserve Academy is competing against all of them, she said.

SEE ELITE, PAGE 16

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Q&A: Douglas Hamilton

Incoming head of school, Lawrence School Douglas Hamilton will become the new head of Lawrence School this summer, replacing Lou Salza, who has been in the job for 11 years.

Hamilton has worked for 28 years, including the past 18 years as director of admissions, for the private school, which is known for specializing in working with students with language-based learning differences and attending difficulties, which most commonly manifest as dyslexia and attention-deficit/hyperactivity disorder (ADHD). Lawrence has about 250 students on its upper-school campus (grades 7 to 12) in Sagamore Hills and another 100 at its lower-school campus (grades K to 6) in Broadview Heights. Hamilton recently talked with Crain’s about how Lawrence School uses evidence-based learning practices to help its students succeed and how he plans to approach his new role. — Beth Thomas Hertz What is Lawrence’s approach to helping its unique student population learn and excel?

It really is about getting students into the right environment with people who understand how they learn. I often offer the analogy that schools are much like a five-gallon aquarium. You can use a five-gallon aquarium as a terrarium, you can use it to house hermit crabs, you can use it for goldfish. For each of those environments, some of the living things you put in there are going to thrive while others are going to struggle. What we have done at Lawrence is put an environment together that allows students who learn differently to thrive and succeed.

Can you give me a few specifics of what you do differently than traditional schools?

It starts with the staff. We consider each one of them to be educational specialists. Even if you are a content teacher who specializes in science, for example, you are given professional development that helps you understand issues such as how a student with dyslexia processes the language of science and how a

student with ADHD processes the organization that is required for science. The same applies for Spanish, for English language arts and so on. It all starts with the teachers. Also, we use the Orton-Gillingham approach very prominently. It is very multisensory, very structured, very sequentially based. We do not move at a certain pace just because it is time to turn the page. Students don’t move on until they have mastered certain things, then we go back and review what they learned so we know it is in their long-term memory and they can retrieve it relatively easily.

What can you tell me about the results you get, such as rates of students going on to college?

In any given graduating class, 85%-90% of our kids go off to post-secondary education, but we celebrate just as much with the kids who have decided to join the military or start a career or take a gap year. We want to make sure our kids are prepared and have all options available to them when they graduate.

Students who have learning differences or learning challenges often are not given all of their options.

Do you think learning challenges like ADHD and dyslexia are more prevalent today than in the past?

I think the way that schools today ask kids to move through curriculum so quickly has made it more difficult.

With that increased pacing, we are seeing more kids start to struggle in the upper-elementary and middle-school years. I think many schools do a fine job in the early-elementary years. They might see and recognize kids who struggle with their reading and they put together a good Title I reading program or some other intervention. But when it comes time for students to really read independently, demonstrate the structured organizational skills needed to be independent in school, those skills haven’t been worked on and so those kids tend to suffer.

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D E R H AV E N

THE BEST HOLIDAY demonstrating their knowledge base is not working for them. It’s very frustrating for them.

The school has chosen a 28-year staff member as the new head of school. Do you think continuity is an important trait to have in leading a school like Lawrence?

Yes, the continuity from our previous head of school to myself is going to be relatively seamless. I’ve had the fortune of working under one of the most dynamic leaders in the educational field, Mr. Lou Salza, and I’ve been able to glean many of my leadership skills from him. I also have been able to see how his influence of his 40-plus years in education has stabilized our school, and has brought comfort to our families and students. I look forward to continuing with that.

The Hamilton file JJTakes

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a master’s in education and a bachelor’s in physical education from West Virgina University That is why we see a lot of kids come to us in the upper primary years, 4th or 5th grade, and in middle school. Too often, pacing today is a one-size-fits-all. Our kids are, unfortunately, the square pegs in the round hole. They are fabulous students and they are extremely intelligent, but a traditional way of

What changes can students and parents expect to see when school resumes in the fall?

I have always been present with our student body because, as the admissions director, I was usually the first person they met. I still want to be that presence, not necessarily as the first person that they meet, but I will be walking around and sitting in classrooms and I will be going to all of the activities. I think what they should be ready for is a cloned Mr. Hamilton — everywhere.

Are you planning any major programming changes?

Any new leader, even an established person who has been working there for as long as I have, shouldn’t come in right away and make big changes. I haven’t been the head of school

before and I am sure I will see programs from a different perspective in this role. There may have been things that I thought needed to be changed or upgraded, but the new perspective might totally influence me to see that maybe it doesn’t need to change or that I really should be taking a look at other things.

I understand you often work with families to help them find the best educational setting for their children, even if it’s not Lawrence.

Can you tell me a little bit about that process?

We know that about 20% of all kids in the state of Ohio participate on an IEP (individualized education program). IEPs cover a multitude of diagnoses and program requirements. Lawrence School specializes in kids with language-based learning differences and attending difficulties, such as dyslexia and ADHD. There are many families for whom their children may have more social-emotional or behavioral concerns, or possibly developmental delays. We still want those families to give us a call because we have a huge resource opportunity for them that they might not be able to access without doing lots of investigation, which can get overwhelming. We spend as much time with those families, to try to get them to the right place that they need to be, as we do for families who would be enrolling in this school. It is one of our strategic imperatives to serve as a regional resource, even a national resource. We want people to call us with questions and we are going to do everything we possibly can to help.

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Saint Martin blends history, technology with $21M upgrade

The new wing of Saint Martin de Porres High School wraps around the facade of the old Kausek Brothers Department Store as the school’s $21 million expansion incorporated the store’s landmark copper domes.

(Photographs by Peggy Turbett for Crain’s)

W

alking through the $21 million expansion of Saint Martin de Porres High School in Cleveland’s St. Clair-Superior neighborhood is a bit of a surreal experience for Ricardo Henry, a 2009 graduate of the Catholic high school that serves students from low-income families from 30 different zip codes in the region.

For one, the crisp academic compound tastefully wrapping the former Kausek Brothers Department Store is a far cry from the aging facilities where Henry came of age. What’s more, though, is that Henry served as an engineer on the project for Albert M. Higley Co. “This one had an emotional tug on me,” Henry told Crain’s during a re-

The chemistry lab on the top floor of the new facility looks out to a copper dome of the old Kausek store.

cent this one espe sona Th now

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Students relax between classes in the sunlit commons area furnished with lockers and bright casual furniture.

cent tour of the facility, which opened this spring. “You always want to do one better and not let anyone down, especially people who know you personally.”

The 44,000-square-foot facility, now used by juniors and seniors, is

Ricardo Henry, class of 2009 and project engineer with the Albert M. Higley Co., helped oversee the expansion of his alma mater.

the first phase of what is expected to be a $30 million investment in the Saint Martin property. Each floor of the facility features five classrooms and a surrounding learning commons — all bathed in natural light. The flexible floorplans allow for individual classrooms to be reorganized into larger gathering spaces. Each floor also boasts a "Da Vinci Studio" — a makerspace of sorts that includes 3D printers and other technology. Peerto-peer learning is at the heart of what the facility is designed to do.

“It’s not so much what it represents to me, but rather what it represents to our neighbors, students and families,” said Rich Clark, Saint Martin’s founding president, when asked about what the new facility represented to him. “There is hope. We are here to stay. There should be no question about how education is valued and central to our neighbor-

For boys, grades Junior K - 12

hood. It might be best summed up when an eighth-grader came to the new building to register as a freshman next school year. I don’t think he knew my position at the school, just that I was somehow connected to the school and said to me, ‘Boy, you guys really went all out for us.’”

Saint Martin, which enrolls about 400 students through grades 9-12, is part of the Cristo Rey Network of schools, and the mission is to provide a quality college prep education to urban kids with low economic resources. One of the central components of the school is its work-study program that involves all students.

They work five days a month — full days — at various jobs throughout the region. Saint Martin now boasts more than 130 corporate partners — a group that includes companies such as Cleveland Clinic, Cleveland Indians, Eaton, Jones Day, KeyBank and The Sherwin-Williams Co. As for the second phase, the speed at which shovels will turn earth is largely dependent on fundraising, according to school officials.

The school was founded in 2003 in the former St. Vitas school in the St. Clair-Superior neighborhood. Once the full facility is complete, freshmen and sophomores will move from the old facilities. That second phase will also allow the school to increase its enrollment to 475, meaning that “75 more students each year will be able to enter into our community and we can accompany them on their journey to becoming men and women of faith, purpose and service in order to make Cleveland a city where all its citizens can pursue their dreams,” according to Clark.

“Finally, our neighborhood will have a place to come and meet that befits their dignity and worth,” Clark said. “We can truly become a neighborhood school.” — Timothy Magaw

CONGRATULATIONS US CLASS OF 2018 We can’t wait to see what you do next!

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ELITE

CONTINUED FROM PAGE 11

“You want to be good at everything but you also have to prove that you can specialize in ways that are sort of market-responsive,” Colafella said.

As part of the curriculum update, Western Reserve Academy moved away from AP offerings to what it calls college-level courses. Class periods were extended to give students more time to explore subjects and “literacies” were embedded into the curriculum to help students develop life skills, Colafella said.

The school aims to give students foundational academic skills, but it also wants to give students the chance to experience hands-on learning. Enter the new “literacies” program. For example, a public speaking course will give students the chance to practice that skill, but also to build up resilience, associate head of school Kate Mueller said.

“We know that it’s hard to do that,” Mueller said. “We know it could be embarrassing. And we want to make sure that they’re moving on in developing those skills, as well.”

Mueller said the program is being built out year by year. The project-based “literacies” programs that were introduced this past year for

Daly

Kenny

Burner

Arnold

Colafella

Mueller

freshmen were called “learning to code” and “learning to make.” The next set of programs will focus on

Grad_Ad_2018_Crains.qxp_Layout 1 6/4/18 10:54 AM Page 1

Lake Ridge Academy — founded in 1963 — is located in North Ridgeville. (Contributed photo)

“learning to communicate,” which will include skills like public speaking, and “learning to live well.” Overall,

communicating these programmatic offerings to potential families and students has been “huge,” Mueller said.

Getting out there

Forever green and white.

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est . 1896

Congratulations to the Laurel School Class of 2018.

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Western Reserve Academy in Hudson was founded in the 1800s and has continued to evolve.

Western Reserve Academy today enrolls about 400 students in grades 9 to 12. About two-thirds of those students are residential, drawing from two dozen states and almost as many countries. Chris Burner, Western Reserve’s head of school, said the institution has become more national and international in the past 20 or 30 years, as it has aimed to cast a broader net when recruiting. Many of the academy’s traditional markets — the small towns of the Midwest — have struggled economically in recent years. Burner said that means the school has to consider affordability and access so it can continue to serve families in those areas, but it also challenges the school to look in new markets.

Though Hawken School in Gates Mills has seen applications to its high school double in recent years, it doesn’t take enrollment for granted, said Heather Daly, assistant head of school for enrollment management.

Enrollment in the upper school last year was about 490, with total enrollment of about 1,300.

Schools really need to be “vocal,” right now, Daly said. Hawken does a lot of online, print and social media advertising, but families sharing information through word of mouth is valuable. Families need to know that Hawken is accessible and offers flexible tuition, she said.

Marketing also has been increasingly important at Gilmour Academy in Gates Mills in recent years. Head of school Kathy Kenny said the academy saw its largest enrollment in high school this year, but Kenny, who has been at Gilmour for about 40 years, said she knows the school is recruiting from a shrinking pool of students.

It has to be more aggressive in its marketing.

Gilmour Academy has about 660 students total, with about 68 of those students living on campus. About a third of those residential spots are reserved for international students.

Gilmour Academy takes a

Hawken’s lower school is located in Lyndhurst. (Contributed photo)

multi-platform approach to marketing and maintains a strong social media and digital presence.

“The website is your curb,” Kenny said. “It’s so important.”

Much of Gilmour’s focus in that messaging is on the 8th grade student. It’s important to make the campus accessible for prospective stu-

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Western Reserve Academy in Hudson serves about 400 high school students. (Contributed photo)

Gilmour Academy in Gates Mills is a private Catholic school. This year, the high school saw its largest enrollment ever. (Contributed photo)

dents to visit and shadow current students. The school also works to open its campus up for events, like piano recitals or CYO basketball games, that could get prospective students on campus.

The student voice Students today play a much larger role in selecting the high school they’re going to attend, said Tom Ar-

nold, chief financial officer at Western Reserve Academy. That decision used to rest much more heavily in the hands of parents.

“So it’s a testament to just a generation that is more engaged, is more interactive,” Arnold said.

That generational shift has changed the way Western Reserve Academy markets to potential students and families. The school educates parents on the safety of its campus and the rigor of its academics, but it also tells students about what life is like outside of the classroom, Arnold said. He said the market is also more “consumer-driven” than it was 10 or 20 years ago. The onus is on Western Reserve Academy to demonstrate what students will get for the tuition families will be paying.

Ultimately, that means financial aid is more of a consideration for today’s families, Haas said. Many of the parents of Lake Ridge Academy’s students, for example, are paying off their own student loans, saving for college or helping to care for their own parents, all while they’re trying to pay tuition for K-12 education. The school has to help families pay for tuition, and that requires strong development plans, Haas said. That’s why the school has tried to ingrain in the students a philanthropic spirit right

when they graduate rather than wait to reach out years later.

Like liberal arts colleges, elite high schools have seen their expenses rise.

After all, it’s more expensive to run

a school with small class sizes and residential campus. As such, tuition rates have climbed along with them, which is why schools like Western Reserve have put a premium on their financial aid programs. For Western

Reserve, Arnold said that’s because the school values its model. Rather than change the way it delivers education, the school would rather find ways to fund the education it provides.

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At a glance: Western Reserve’s $80 million ca

By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty

As costs rise and affordability becomes more of a concern for pro-

spective families, fundraising has taken on a stronger role at private high schools.

At Western Reserve Academy in Hudson, for example, the school is in the final months of a massive $80 million campaign.

“Any campaign is really sort of pretense for making your school better,” said Mark LaFontaine, assistant head of school for advancement for Western Reserve Academy.

“And this campaign was no different.”

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The main goals of the campaign were capital improvements for portions of the aging campus, as well as financial support for faculty in the form of endowed chairs and for students in the form of scholarships.

The campaign launched July 1, 2012, and will conclude on Oct. 5.

The public phase of the campaign began on Oct. 15, 2015. At that time, the academy had already raised $53 million, LaFontaine said. As of May 23, the campaign had already surpassed its original goal of $65 million and its updated goal of $80 million. The majority of that — about $55.5 million — has come from alumni.

With that funding, the school has added five endowed chairs and 25 endowed scholarship funds. The $14 million restoration of Seymour Hall, an academic building first opened in 1916, was fully funded, LaFontaine said. The hall will reopen in time for the 2018-2019 school year.

Head of school Chris Burner said renovating and maintaining a historic campus from the 1800s can be a challenge, and those renovations were a priority in this campaign.

The academy also received a $5 million gift to create its new innovation center during the campaign.

Schools like Western Reserve Academy have to build a culture of philanthropy, LaFontaine said. That doesn’t just mean talking to alumni about the school’s needs, but also, talking to current students about how renovations and scholarships are being funded. Students are asked to help by writing thank yous to donors during an annual philanthropy week. LaFontaine joked that the penmanship in the letters sometimes leaves something to be desired, but the students’ appreciation really comes through.

“It’s a lot of fun, but at the end of the day, it’s part of the kids appreciating this legacy of generosity that has created the experiences they have here,” LaFontaine said. “And I’m not going to say 100% of them, but by the time they’re seniors, these kids are joking with me: ‘Oh, Mr. LaFontaine, I know I get a hidden scholarship thanks to the gen-

“You know, they joke about this stuff, but when they’re out five years, or one of them goes and creates the next iPhone, they’re going to support this place.”

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Western Reserve Academy hunts for new head of school

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Western Reserve Academy in Hudson is searching for a new head of school as Christopher D. Burner plans to step down following the 2018-2019 school year.

Burner is a longtime administrator at the private prep school —an institution from where he graduated in 1980. His previous administrative posts include stints as dean of admission and financial aid and dean of the faculty and administration.

“Chris has developed friendships around the country and around the world through his years of tireless outreach on behalf of our school,” wrote board co-presidents Timothy Warner and Andrew Midler in a March letter reflecting on Burner’s

departure. “He is the ultimate Reserve citizen: a student, Latin teacher, coach, administrator, parent and Head. Chris might say tempus fugit, as he reflects on how his years here have run together. But the reality is his life as Head of School has been characterized by an around the clock and intense commitment to the community he loves.”

Western Reserve Academy, which has an enrollment of about 400 students, has retained the search firm Resource Group 175, which specializes in head of school searches. Applications for the position are due Aug. 22, according to a document posted on the school’s website.

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Maintaining Western Reserve’s campus from the 1800s was a top priority of this fundraising campaign. (Contributed photo)

erosity of alumni. Oh, Mr. LaFontaine, I know the difference between an annual gift and the endowment.’”

He added, “You know, they joke about this stuff, but when they’re

out five years, or one of them goes and creates the next iPhone, they’re going to support this place. And that’s a really important thing for us to strengthen that culture of philanthropy.”

LEARN ARN MORE TODAY ABOUT HOW CRAIN’S CAN HELP YOU AND YOUR CONTENT MARKETING PROGRAM. Contact Amy Stoessel at 216.771.5155 or astoessel@crain.com.

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IB’s global focus spreads in Northeast Ohio

By BETH THOMAS HERTZ clbfreelancer@crain.com

Offering International Baccalaureate programs is a way for schools to provide a top-notch, globally based education while allowing them to differentiate themselves in today’s competitive educational world.

Marking its 50th anniversary this year, IB’s programs are offered in more than 4,000 schools across more than 150 countries. They are known for offering a challenging, well-rounded experiential education. For example, testing typically involves responding to writing prompts instead of answering multiple choice questions.

Instead of presenting subjects as stand-alone topics, the curriculum weaves them all into interconnected ideas. Courses are filtered through an international lens, not one centric to the United States.

The program, available worldwide to public or private schools that are willing to go through a rigorous accreditation process, is clearly resonating with many educators and families — it grew 39% from 2012 and 2017.

Beaumont School in Cleveland Heights recently added an International Baccalauerate program. Pictured is an IB bio course. (Contributed photo)

In Northeast Ohio, the most recent private high school to incorporate IB into its offerings is Beaumont School in Cleveland Heights, which began offering students in 11th grade the option of participating in the two-year IB Diploma Programme this past school year. St. Edward High School in Lakewood has offered IB diplomas for the past six years. Montessori High School

at University Circle offered it, but is closing its doors this month due to financial difficulties.

A number of public schools offer IB as well, for the same reasons as private schools — to deliver a quality education in a way that attracts students to enroll in or remain in their district. In fact, many of them now offer IB beyond just the high school

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program, incorporating IB’s Primary Years Programme (for ages 3 to 12) and Middle Years Programme (ages 11 to 16) into their curriculum.

Beaumont just Hoke finished its first academic year with an IB option after completing a three-year accreditation process. The decision to move in that direction was spurred by a desire to attract high-achieving students whose goals go beyond good grades and high test scores, said Wendy Hoke, president of Beaumont.

“The students this attracts are really looking for that education that enables them to do good in the world.

For Beaumont, that really aligns quite nicely with our mission as an all-girls Catholic school in the Ursuline tradition that educates young women for life, leadership and service,” she said.

About 15% of this year’s junior class took advantage of the opportunity to enter the two-year program, she said, and another 35% chose to enroll in at least one IB course.

Hoke said that although it is too early in the program’s adoption to see a significant impact on enrollment, some families have already come to Beaumont specifically for it.

“It is definitely an attractor for that high-achieving student,” Hoke said.

“When an IB diploma student’s application comes across a college admissions counselor’s desk, they know what that means.”

At St. Edward High School, a private all-boys Catholic school in Lakewood, the fifth group of IB students graduated recently.

“The process took us two years to get authorized, so we’ve been in an IB mindset and building the program for seven years, and offering it to students for six years,” said Matthew Stepnowsky, director of the program.

He said that just over 20% of St. Edward’s juniors and seniors are pursing full IB diplomas, but, like Beaumont, students who want to take just a few IB classes are given that option.

“A student might really want to take an IB film class, for example, and so that’s the only class that he is taking from our IB course offerings,” he said.

He said that St. Edward’s adoption of IB was one of the several factors that led to a significant bump in enrollment several years ago. Some of the other reasons including winning a state football championship and getting a new president and a new principal.

“It was a perfect storm and IB was part of it,” he said.

This increase — about 130 students overall — has been sustained, Stepnowsky noted.

Public buy-in In the Akron Public Schools, enrollment has started to increase in recent years after quite a few years of declines.

Ellen McWilliams-Woods, the district’s deputy superintendent, said the turnaround is due to the many innovative programs the district has added — and IB is a big part of that.

While the diploma program has been offered at Firestone High School for about 25 years, IB has been integrat-

ed into the middle school and one of the elementary schools that feed into Firestone over the last few years, and the district is in the process of getting authorization at the other three elementary schools in the cluster. Unlike at the high school, where students must opt in to the program, younger schools adopt the curriculum for all students when they become IB Primary Years or Middle Years programs.

McWilliams-Woods said the move to get the pre-high school buildings involved began in the 2013-14 school year at the request of many teachers.

She said the district, and especially those teachers, were drawn by the IB’s whole child and whole world philosophy.

“It really aligns with what we are doing in the district, focusing on student-centered instruction and students having a voice, building their communication skills and critical thinking, and pushing risk taking,” she said. “It really lets students take control of their education.”

Other appealing factors for educators that she cited are the requirements for foreign language in the elementary years, for the arts to be employed throughout the curriculum and for students with disabilities to be fully integrated.

“It all resonates incredibly with the students and the families. It is a lot of work, but when you see the impact on the kids and the families, everybody is willing to do it,” she said.

She said the district expects the high school program will need to grow in future years as these younger kids move up.

“It’s a great problem to have,” she said.

The Shaker Heights City School District began its diploma program in 2010, and has since expanded to all of its schools. Three elementary schools were authorized in 2012 and the other two elementary schools and the middle school joined in 2015.

“We are one of eight all-IB districts across the country, which we are very excited about,” said John M. Moore, the district’s IB coordinator who himself is a Firestone High School IB graduate.

“One of the values of offering the primary and middle years programs is that we are equipping more students for the diploma program, which then equips them to be highly successful in whatever college or university they decide to go to,” he said.

The trickle-up effect of starting younger is being seen already — the high school will have 57 students entering the diploma program in the fall, an uptick from the 38 who graduated this school year.

“At 57, it is our highest number ever and I am particularly excited because it is also our most diverse class ever. That represents a 44% increase in enrollment and our students-of-color enrollment has increased 130%,” he said.

He said Shaker believes that IB is a way to guarantee that all students receive an excellent, equitable educational experience. He also noted that IB can also enrich students financially, as many Shaker IB graduates have received lucrative scholarship offers.

He noted that IB is promoting the tagline “It’s education for a better world” as part of its 50th anniversary this year.

“We are seeing that is true,” he said.

CRAIN’S CLEVELAND BUSINESS

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At the Table

Some of the best local food events bloom in summer Clevelanders manage to squeeze what seems like a year’s worth of events into our all-too-brief summer.

Some of the Joe best food events Crea of the year vie for attention while the weather is at its peak. Not only are they an opportunity to indulge in the smorgasbord of flavors and the mosaic of cultures Northeast Ohio has to offer, but they are a showcase of a variety of local independent businesses.

OK, so it’s impossible to chronicle every festival, conference and fundraiser around, but here’s a handful of some of the best in the coming months.

Guarnaschelli

Autism Speaks Chefs Gala One of Northeast Ohio’s foremost chef-driven fundraisers is right around the corner. The Cleveland Autism Speaks Chefs Gala is set for Saturday, July 28, at the Cleveland Museum of Art. Cleveland’s Iron Chef, Michael Symon, again will host and emcee the event. This year, he will be joined by author, Food Network host and fellow Iron Chef winner Alex Guarnaschelli and some of Northeast Ohio’s finest chefs.

The culinary lineup includes Tim Bando (Grove Hill); Britt-Marie Culey (Cleveland Convention Center); Brian Doyle (Cafe Avalaun); Brandt Evans (Blue Canyon Kitchen & Tavern, Pura Vida); Anna Harouvis (Anna In the Raw); Jeff Jarrett (US Foods); Douglas Katz (Fire Food and Drink, Provenance); Joseph Lang (Moxie the Restaurant, Red the Steakhouse); Matt Mytro and Paul Minnillo (Flour Restaurant); Vishwatej Nath (Urban Farmer); Brian Okin (Polpetta); Carl Quagliata and Zach Ladner (Giovanni’s Ristorante); Fabio Salerno (Lago); Jonathon Sawyer (Greenhouse Tavern, Trentina); John Selick (Sodexo, University Hospitals); Anthony Scolaro (111 Bistro, Trio); Mark Sherry (J. Pistone); Karen Small (Flying Fig); Jill Vedaa (Salt); Eric Wells (Skye LaRae’s Catering); Rocco Whalen (Fahrenheit); and Eric Williams (Momocho, El Carnicero).

Symon’s restaurants also will be represented by Derek Clayton and pastry chef Summer Genetti.

Tickets for the “small plates� tasting start at $250, with a variety of higher donor levels. For more information and to purchase tickets, go to tinyurl.com/2018autismspeaks.

Cleveland Eats Downtown Cleveland’s Mall B will be the setting for the second annual Cleveland Eats Tri-C Culinary Festival on Saturday, Sept. 15.

The event will feature locally owned chef-driven restaurants, craft beverages, cooking demonstrations, live music, a marketplace and fireworks.

Although a complete list of participating restaurants hasn’t been released yet, last year’s Culinary Village (which offered $5 small plate samples of specialty dishes) included more than 30 of the region’s best dining spots.

The 2018 Culinary Council includes Arnaud Berthelier (Union Club of Cleveland); Dante Boccuzzi (Dante Boccuzzi Restaurants); Zack Bruell

The Cleveland Garlic Festival has been making a national stink — in a good way. The two-day event is set for Aug. 25 and 26 in Shaker Square. (Getty Images/iStockphoto)

(Zack Bruell Restaurants); Nelly Buleje (The 9); Brandon Chrostowski (Edwins); Culey (Cleveland Convention Center); Evans (Blue Canyon, Pura Vida); Matt Fish (Melt Bar & Grilled); Heather Haviland (Lucky’s Cafe); Christopher Kafcsak (Deagan’s Kitchen and Bar); Katz (Fire Food & Drink, Provenance); Lang (Moxie, Red); Shuxin Liu (Xinji Noodle Bar); Chris Poplin (Hard Rock Rocksino); Regan Reik (Pier W); Small (Flying Fig); April Thompson (Wild Thymez Personal Chef Services); Vedaa (Salt); and Wells (Skye LaRae Catering). Karen Monath, Tri-C’s associate dean of hospitality management, also sits on the council.

Keep the date open. Ticket sales should be announced soon. To follow developments, go to tinyurl. com/2018clevelandeats.

cuss — and forecast — topics that will affect consumers and their overlapping industries today and for generations ahead.

direction and impact of the industry we love,� according to this year’s conference mission statement.

I’ve attended some of the past conferences and anticipate being on hand for this installment. It’s always been an intriguing mix of people, including Farmer Lee Jones and his family, who operate one of the nation’s foremost specialty farms and host the gathering. It’s an opportunity to learn, engage, hear different perspectives and indulge in some delicious dishes.

To learn more, go to chefs-garden. com.

Crea has been covering the Cleveland dining scene for more than 20 years.

Email him at clbfreelancer@crain. com. (Put “At the Table� in the subject line.)

Business Savings

Cleveland Garlic Festival This two-day bash has grown into a major event that’s gaining national attention.

The festival is set for Saturday-Sunday, Aug. 25-26, and promises a host of dishes seasoned and scented with “the stinking rose.� Cleveland’s Shaker Square, home to the North Union Farmers Market, is the venue.

Activities include a series of grilloffs, vendors offering an array of garlic products (including locally grown bulbs), kids activities, educational programs and a few samplings. To learn more, go to clevelandgarlicfestival.org.

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Roots Conference 2018 “To cultivate� has essential meaning in the realm of farming, but that term carries rich nuance beyond manipulating soil to produce healthy crops.

Those manifold meanings will be explored at this year’s Roots Conference, slated for Monday-Tuesday, Sept. 24-25, at the Culinary Vegetable Institute in Milan and Chef’s Garden in Huron.

Andrew Zimmern, host of Travel Channel’s “Bizarre Foods� and a four-time James Beard Award winner, will be the keynote speaker at the sixth annual event.

The Roots gathering draws food and agricultural leaders to northern Ohio’s farm country each year. Chefs, growers, artisan producers and retailers, academics, journalists, food scientists and others convene to dis-

Participants will “discuss the food we cultivate as it is grown and prepared, how we cultivate all the teams that support us, how we cultivate the

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THE PANEL TED LAPE

Partner Lazear Capital Partners

ROUNDTABLE DISCUSSION EMPLOYEE STOCK OWNERSHIP PLANS

Ted Lape is a partner with Lazear Capital Partners, a boutique investment bank with a focus on ESOPs, M&A and capital formation. Ted has 25-plus years of experience advising companies and business owners. He joined Lazear in 2009 after serving as a partner in the private equity firm Talisman Capital Partners and as a senior vice president at LaSalle Bank. Ted concentrated on helping clients transition ownership through an ESOP at both firms. He is a highly rated national speaker on ESOPs. Ted received a Bachelor of Science from Northwestern University and a Master of Business Administration from the University of Chicago, Booth School of Business. Ted is a member of the Washington, D.C.-based ESOP Association and the National Center for Employee Ownership. He also serves on the board of Association for Corporate Growth, Columbus.

SHAYLOR R. STEELE

Partner Executive Compensation & Employee Benefits Practice Group at Benesch

SPONSORED CONTENT Shaylor R. Steele is a partner in Benesch’s Executive Compensation & Employee Benefits Practice Group. Shaylor has extensive experience with structuring dozens of buy-side and sell-side ESOP transactions for privately held companies. In addition, Shaylor brings value to his ESOP clients because of his ESOP dispute resolution experience. He has successfully represented multiple clients through U.S. Department of Labor investigations focusing on the value of the company stock. The Ohio Employee Ownership Center awarded the 2018 ESOP Impact Award to a recent ESOP transaction in which Shaylor represented the seller. Shaylor also is a nationally recognized attorney in 401(k) plan fiduciary and operational compliance. He helps clients provide fully compliant, affordable and attractive benefit programs and 401(k) plans for their employees.

JULIE A. WILLIAMS

Managing Director, National ESOP Team Lead PNC Financial Services Co.

Explore whether this succession strategy is right for your company

B

aby boomers own nearly half of all privately held businesses with employees in the U.S. As such, the business landscape is poised for a dramatic shift as this generation of business owners retires. The trend highlights just one reason ESOPs, or Employee Stock Ownership Plans, are a popular and attractive business succession tool. Designated as a qualified retirement plan, an ESOP offers some unique advantages over a third-party sale since it is structured as a liquidity event that still enables the owner to retain some control and perpetuate his or her legacy, while also offering employees an ownership stake. Crain Content Studio–Cleveland turns to four industry professionals who offer additional perspective on exploring the benefits and other considerations associated with ESOPs.

Julie A. Williams has 15-plus years of experience advising companies and business owners on various aspects of ESOP transactions. As PNC’s managing director and national lead for ESOP Solutions, Julie helps PNC clients and prospects navigate the benefits and considerations of using an ESOP as an ownership transition and liquidity solution. Julie also serves as a resource for PNC clients as they execute their corporate strategy with the added complexity of ESOP ownership. She joined PNC in 2015 after serving as a senior vice president in JPMorgan Chase’s ESOP Advisory Group. She previously held senior positions with Duff & Phelps and Cognient Group in Chicago, where she served as a financial adviser for companies, an institutional ESOP trustees, and selling shareholders engaged in ESOP transactions. She also served as an institutional ESOP trustee at GreatBanc Trust Co., where she led negotiations for ESOP transactions involving the purchase or sale of stock or assets. Julie received a Bachelor of Business Administration from the University of Michigan and an MBA from the University of Chicago, Booth School of Business. She is licensed

by FINRA with a Series 79 and Series 63. Julie is a member of the ESOP Association and serves on its Valuation Advisory Committee. She is also an active member of the National Center for Employee Ownership, Association for Corporate Growth and Economics Club of West Michigan.

JOSEPH P. YONADI JR.

Partner Executive Compensation & Employee Benefits Practice Group at Benesch

As a partner in Benesch’s Executive Compensation & Employee Benefits Practice Group, Joe Yonadi counsels for-profit and nonprofit clients on a variety of employee benefit matters. Joe provides a unique perspective and counsel to his ESOP-owned company clients because of his former experience as in-house benefits counsel at a Fortune 500 public company that maintained a leveraged ESOP-component to its 401(k) plan. Joe has built on that experience to advise ESOP trustees, lenders and sellers on their ongoing ESOP compliance and fiduciary governance matters.

In addition, he assists business owners with assessing the benefits of utilizing an ESOP as a succession planning tool. His benefits practice also includes providing counsel on the Affordable Care Act and health and welfare compliance considerations. Joe maintains a robust executive compensation practice that includes assisting employers with designing and implementing various nonqualified deferred compensation plans and short-term and long-term incentive plans.

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

SPONSORED CONTENT

ROUNDTABLE DISCUSSION

ESOPs

June 18, 2018 S2

Q&A What is an Employee Stock Ownership Plan (ESOP)?

SHAYLOR STEELE: First and foremost, an ESOP is a qualified retirement plan governed by the Employee Retirement Income Security Act. However, unlike most qualified retirement plans, an ESOP is designed by law to be invested primarily in the employer’s stock. So essentially, an ESOP provides a company’s employees with the opportunity to have an ownership stake by having their retirement contributions invested in employer stock.

ESOPs really took off in the early 1980s with Tax Reform Acts of 1984 and 1986, which created significant tax advantages and planning opportunities. Then, in 1996, the Small Business Protection Act was passed, which provided a window of opportunity for shareholders of S corporations to utilize the benefits of an ESOP.

Why are ESOPs so popular now?

TED LAPE: There are a few key reasons owners sell to an ESOP. They want to maintain operational control, and often they want to maintain a tenant for the real estate they own.

The process is easier, more certain and more confidential. Owners receive a competitive purchase price plus additional proceeds. The company usually becomes tax free, and the owners can potentially sell it tax free.

The employees are much better off, and the key employees are even better off.

JOE YONADI: With the influx of baby boomers retiring today, we are seeing many business owners coming to us and asking for our advice on using an ESOP as a form of succession planning. Generally, business owners have a few different options with respect to how they will proceed with selling their business: (1) They can sell to a strategic buyer — a buyer who is in the same industry or a buyer looking to diversify their business. (2) They can sell to a financial buyer — a private equity company that is looking to add the business to its applicable investment portfolio. (3) They can sell into an ESOP. ESOPs are generally chosen over the other two options because the owner wants to sell the company to its employees and maintain some type of control moving forward. With the other two succession planning options, the owner generally will lose control of his or her business at the time the sale closes. Essentially, an ESOP is a trifecta for all parties involved: The transaction provides a business owner with a liquidity

event, employees are provided with an ownership opportunity, and the business owner can maintain his or her legacy because there is no thirdparty sale.

How are ESOPs generally established?

SHAYLOR STEELE: There are many parties involved in setting up an ESOP, including attorneys, accountants, trustees, investment bankers, lenders and consultants. ESOPs are first established by drafting a retirement plan document setting forth the tax code’s qualification requirements for the plan and identifying the plan administrator, fiduciary, contribution, distribution and overall governance requirements. The company’s board of directors will appoint an ESOP trustee, who will be responsible for hiring an independent appraisal to annually monitor the stock valuation.

In addition to the annual appraisal, there are ongoing audit and tax reporting requirements with which an ESOP must comply.

If the ESOP is leveraged, the company will retain a lending institution, which must become comfortable with the ESOP transaction and the company financials.

TED LAPE: Usually a seller will start by wanting to understand how an ESOP works. The seller will want to know what the economics look like for himself or herself, the company, and the employees, especially the key employees. An ESOP investment banker can answer all of those questions. In our case, we can show them a presentation with the

economics from a similar company.

We can also examine the company’s financials, and ask a lot of questions, to provide a full feasibility analysis showing a proposed structure and all of the economics for their company.

We then work with the company to customize the design to fit what they are looking for. If they decide to move forward, a team is established, including the attorney, accountant and other professionals to execute the transaction and make sure it works within all applicable guidelines.

What are the benefits of an ESOP to the selling shareholder? To employees?

JULIE WILLIAMS: ESOPs are often described and explored by business owners. They address ownership transition goals, provide flexibility and offer attractive tax benefits for both the selling shareholder and the company. They also appeal to an owner’s desire to protect and provide opportunities for employees

‘‘

to participate in the financial rewards of ownership. The benefits to owners and to employees are often inextricably linked.

For example, an ESOP structure allows the company to continue to operate the business independently consistent with the current strategy.

This is a benefit to both the owner, who wants to perpetuate legacy and culture, but also to the employees whose jobs depend on it. And ultimately, the company and future shareholders benefit from this very decision because employee ownership can yield positive outcomes for the company and benefits that employees can readily recognize. ESOPs often perform better in economic downturns and frequently experience less turnover and fewer layoffs.

SHAYLOR STEELE: A selling shareholder benefits by selling his or her company into an ESOP and maintaining the company’s legacy without selling and losing such legacy to a third-party buyer. In addition, the selling shareholder will still be

With the influx of baby boomers retiring today, we are seeing many business owners coming to us and asking for our advice on using an ESOP as a form of succession planning.”

— JOE YONADI, Partner, Executive Compensation & Employee Benefits Practice Group at Benesch

able to have a liquidity event and gain some additional upside compensation through the receipt of warrants or stock appreciation rights. Most selling shareholders receive a position on the board of directors and will maintain some control over the sold company.

Employees receive an ownership stake in the company and in turn become vested in the company’s performance. Statistics have shown that ESOP-owned companies outperform non-ESOP companies because of the commitment shown by ESOP employees. In addition, the ownership stake represents the employees’ retirement account, which creates a more secure path to retirement for all of the ESOP employees.

Are there any associated tax advantages if you sell to an ESOP, and if so, what are they?

JOE YONADI: As with all qualified retirement plans, contributions to ESOPs are tax-deductible to the company. However, if an ESOP is structured in which it takes out a loan from a lender and pays the company in exchange for employer securities, it is referred to as a “leveraged” ESOP. This type of ESOP is very taxefficient. The company can deduct any contributions made to the ESOP, plus any principal and interest on the loan.

There is a contribution limit on the deductibility of up to 25% of payroll.

One of the biggest tax benefits is where a selling shareholder of a subchapter C corporation sells stock to the ESOP. In this scenario, such shareholder may be in line to defer all federal income tax on the gain of the sale under Code Section 1042. This rule applies if the ESOP owns at least 30% of the corporation’s stock after the sale, and the ESOP doesn’t sell the stock acquired for three years.

It is also important to note that if a 100%-owned ESOP company is structured as an S corporation, then it effectively becomes a tax-free company because an S corporation is not taxed at the entity level, and the ESOP is a tax-exempt entity.

What are the compliance considerations for establishing an ESOP? SHAYLOR STEELE: There are a whole host of compliance considerations with forming an ESOP that we could dedicate an entire roundtable to discussing. For now though, the key compliance consideration is that the ESOP-owned company board of directors must appoint a trustee to act as the ESOP’s fiduciary and to protect CONTINUED ON NEXT PAGE

S3 June 18, 2018

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employees. This is compliance burden unlike any other in the corporate context. A trustee is required to check in at least once a year to assess the value of the company ESOP-owned stock and may weigh-in on other business transactions. So, dealing with an additional governance body is something to think about when contemplating an ESOP. A second compliance consideration is that an ESOP is a qualified defined contribution retirement plan that is designed to invest primarily in employer securities. Because of the retirement plan aspect, it must have a plan document and comply with a multitude of plan qualification requirements under Internal Revenue Code Section 401(a). This includes filing a Form 5500 and performing discrimination testing to ensure highly compensated employees are not benefiting any more than a non-highly compensated employee.

The final major compliance hurdle is that once employees vest in their employer securities, they have a right to require the employer to repurchase their securities. This obligation requires employers to monitor their repurchase obligation, particularly when the ESOP begins to mature, to ensure they are able to pay for such obligations.

Where does the money come from that the ESOP uses to pay for the stock, and what sources of capital are available to finance an ESOP transaction?

JULIE WILLIAMS: The money needed to facilitate an ESOP transaction may come from numerous sources, including thirdparty debt or private equity. Because senior bank financing is the least expensive and most accessible form of capital, it is commonly the primary ESOP funding source.

While senior debt capital comes with a lower cost, senior lenders will require more restrictive loan covenants and conditions compared to junior/subordinated debt or equity.

Once the company has maximized the amount of senior debt it can, it could potentially utilize other sources of capital, including junior subordinated debt, loans from non-traditional institutional lenders or private equity. A company’s size and credit profile will be a significant factor in determining how much and which type of capital are appropriate for a given ESOP transaction.

When third-party capital is not enough to cover the purchase price, seller financing is commonly used to bridge the shortfall. Sellers can obtain a return for this investment that is similar to the return a third-party investor would require of the same

ROUNDTABLE DISCUSSION

‘‘

The seller will want to know what the economics look like for himself or herself, the company, and the employees, especially the key employees. An ESOP investment banker can answer all of those questions.”

— TED LAPE, Partner, Lazear Capital Partners

ESOPs

Depending on the nature and the size of the business, senior lenders may require loans to be substantially secured. Non-senior lenders will often require less collateral, but in return will need a much higher rate of return for their investment.

Companies with a strong credit profile are characterized by a nice history of stable and growing profits and a strong management team.

Other important considerations in determining debt capacity include the condition of the industry and the company’s competitive position, ongoing capital spending requirements of the business and customer or vendor concentrations.

The ESOP’s tax benefits can have a positive impact on debt capacity since these benefits can meaningfully impact the cash flow available to repay debt.

While ESOPs do offer an attractive financing structure, it is important to make sure that the ultimate debt structure considers your company’s strategic goals, allowing for flexibility to invest in growth initiatives.

What governing bodies manage an ESOP-owned company? investment. Because the seller is below the senior lender in priority and in security, this rate of return is often similar to that of a junior lender.

How does the sale price for an ESOP compare to selling to a strategic buyer?

TED LAPE: Historically, we have seen values that are very close to what a company would receive in a thirdparty sale. The exception is companies like contractors that typically sell for low multiples and high-tech growth companies that sell for high multiples in third-party sales. We generally see contractors go for a higher multiple and high-tech growth companies a lower multiple to ESOPs. However, the recent federal tax law change had a big effect on ESOP valuations. Without going into the details, all existing and future ESOPs increased about 15% in value. In addition to the sale price, sellers also receive additional proceeds that can often make total proceeds to the seller more attractive than a thirdparty sale.

What factors are important in determining how much a company can borrow to facilitate an ESOP transaction?

JULIE WILLIAMS: The amount of funds that a company can borrow for an ESOP transaction is directly linked to the overall condition and creditworthiness of the business as

well as the amount of debt already on the company’s balance sheet. An ESOP loan will be incremental debt of the company — over and above the current debt outstanding. So to the extent a company already has debt, its ability to borrow additional money for an ESOP may be constrained.

The determination of debt capacity is dynamic and can vary widely from one company to the next.

Collateral and cash flows available to repay debt are primary drivers.

‘‘

JOE YONADI: An ESOP-owned company is governed by a board of directors, similar to that of a publicly or privately owned company. For privately held companies that are ESOPs, the board is composed of a mix of owners and independent directors. The trend is to have the board’s majority composed of independent directors, or members who have a certain type of business expertise and who have no connection to the business.

The trustee’s role is a unique aspect of an ESOP. Because an ESOP is a qualified retirement plan, a trustee

A company’s size and credit profile will be a significant factor in determining how much and which type of capital are appropriate for a given ESOP transaction.”

— JULIE A. WILLIAMS, Managing Director, National ESOP Team Lead, PNC Financial Services Co.

SPONSORED CONTENT

is appointed and becomes the shareholder of record for the company stock held in trust by the ESOP. The board-appointed trustee is a fiduciary with the responsibility to safeguard the trust’s assets for the employeebeneficiaries. The trustee also plays the role of the buyer in an ESOP transaction to negotiate the stock price in good faith and for adequate consideration. Lastly, the trustee has annual responsibilities to appraise the corporate stock each year and does so by engaging an independent thirdparty appraiser.

What are the disadvantages or risks associated with establishing an ESOP? TED LAPE: The primary disadvantage of selling to an ESOP versus a thirdparty sale is that the seller receives less cash at close. They receive the rest of the proceeds over four to six years.

The seller finances a portion of the transaction. In exchange, the seller will receive interest of approximately 12% of the amount they finance.

The other disadvantage applies to situations in which the sellers do not want to stay and run the company post-closing or are not committed to bringing in new management.

ESOPs are designed to last, and you need good management to last. Other objections relating to the deal’s complexity, corporate governance, economics and cash flow tend to result from people not truly understanding ESOPs. SHAYLOR STEELE: ESOPs are heavily regulated because by operation of law they exist as a qualified retirement plan. As such, they are subject to ERISA’s fiduciary protections because company stock is going into employee-beneficiaries’ retirement accounts. They are also regulated because of Internal Revenue Code provisions that relate to favorable tax deductions to the company and possibly the selling shareholder.

Hiring a good ESOP adviser with the relevant experience can mitigate most regulatory risk associated with designing and planning for an ESOP. The outlying risk that sometimes can’t be mitigated nor predicted is to what degree the U.S. Department of Labor will scrutinize the transaction.

Over the past decade, the DOL has audited hundreds of ESOP transactions to enforce whether the stock price negotiated was an adequately considered purchase. As a result of these audits, a few large trustees, including GreatBanc, have been required to enter into DOL Process Agreements that are binding on the applicable trustee and serve as required guidelines for the trustee to follow on all future transactions.

JULIE WILLIAMS: It’s really important to keep in mind that ESOPs

ESOPs

ROUNDTABLE DISCUSSION

SPONSORED CONTENT

are not appropriate nor attractive for every situation. Understanding risks while evaluating an ESOP transaction will help an owner avoid negative outcomes years later.

ESOPs are often, but not always, a leveraging event for the business. They are best suited for businesses with consistent and predictable earnings so they are well-positioned to service the transaction debt, even in the event of an unforeseen business disruption.

Further, if the company’s operations require significant growth capital or have other demands on capital, a leveraging event for an ESOP may not be in the best interest of the company.

In the long term, ESOP companies are required to repurchase the ESOP shares when participants become eligible for a distribution of their account. The cash that leaves the company for share repurchases can become a meaningful use of cash that

would otherwise be available to invest in the business.

ESOPs can pay no more than fairmarket value for the stock, and fairmarket value may not be the highest value you can achieve with alternative buyers. When selling to an ESOP, the cash proceeds available to the selling shareholder at closing are limited by the company’s debt capacity or capital provided from all third-party sources.

This means that a meaningful portion of the total sale proceeds may be deferred and paid to the seller over a period of time.

A lifetime is a long investment horizon.

How do you select companies to invest in given that challenge?

JOE YONADI: That’s true. If you look

‘‘

Employees receive an ownership stake in the company and in turn become vested in the company’s performance. Statistics have shown that ESOP-owned companies outperform non-ESOP companies because of the commitment shown by ESOP employees.”

— SHAYLOR R. STEELE, Partner, Executive Compensation & Employee Benefits Practice Group at Benesch

at the history of the Dow Jones Index, for example, many of the companies that were part of it 30 years ago are no longer in business. In addition to the investment horizon issue, purchasing Qualified Replacement Property presents a liquidity challenge. Most business owners have plans for the liquidity they gain from selling their business and that generally doesn’t

include buying stocks and bonds and holding them for the rest of their life.

The solution that was developed to mitigate these challenges, and the most commonly employed QRP strategy is to purchase a type of bond called a floating rate note. FRNs are 40- to 60-year non-callable bonds with a floating interest rate tied to a common

June 18, 2018 S4

interest benchmark such as LIBOR. Unlike fixed bonds, which decrease in market value as interest rates rise, FRNs pay interest that adjusts with prevailing interest rates. That means the value of the bonds stay at or near par in rising and falling interest rate environments. Due to the stability in the value of FRNs, they are viewed as ideal collateral for margin loans.

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PA G E 2 6

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J U N E 18 - 2 4 , 2 018 |

LEBRON

CONTINUED FROM PAGE 1

During the week in which Games 3 and 4 of the Finals were played at The Q, NBA commissioner Adam Silver and his family dined at Chinato. Cavs games, Bruell said, are “a huge draw” for Chinato, because of the restaurant’s proximity to The Q. The overall impact of a packed Q on Bruell’s six Cleveland restaurants is much less significant, however.

“For my other restaurants, when the playoffs hit, it doesn’t help us at all because mine aren’t sports bars,” Bruell said. “If someone wants to sit there and watch, the game will be on in the bar. But it doesn’t necessarily help business.

“The one thing that it does,” he added, “is it helps the psyche of the city, and that might get people to come out.”

CRAIN’S CLEVELAND BUSINESS

Plenty do.

Since James came back, the Cavs have sold out 203 consecutive games — a run that includes 39 postseason contests. Ten NBA Finals games have been played in Cleveland in that time, and each brings an estimated economic impact of $3.7 million, according to research by Conventions, Sports & Leisure International.

It starts with downtown Joe Roman, while making it clear that the Greater Cleveland Partnership has never done a study on the economic impact of James’ 11 seasons with the Cavs, believes the superstar’s value to the region could be $200 million or more. And the president and CEO of the region’s chamber of commerce bases quite a bit of that on the city’s development surge, along with the rise of the likes of Bruell, Michael Symon, Jonathon Sawyer

and Rocco Whalen.

“When you look at the growth of the hospitality industry in our town over the same period of time since LeBron turned 18, if you look at the changes in our downtown, he is a big part of the fuel that’s helped people have the confidence that downtown was a place to make big investments,” Roman said. “We had this base of an incredibly successful team in an incredibly successful building, the building of a much more competitive hospitality industry and the confidence that when he was here we were going to have lots and lots of people downtown during some of the worst months of the year for hospitality.”

It’s that area — downtown — that is one of the most obvious benefactors from James playing in his home region for an annual championship contender.

286

Consecutive sellouts at Quicken Loans Arena for Cavs games in which LeBron James is on the team. The last non-sellout during James’ two tenures in Cleveland was a crowd of 20,049 for a 114-94 win over Toronto on Dec. 9, 2008.

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Daniel Shoag, a visiting associate professor of economics at Case Western Reserve University’s Weatherhead School of Management, co-authored a study that examined James’ impact on restaurants and bars in Cleveland and Miami.

Shoag and Stan Veuger of the American Enterprise Institute found that James’ presence helped to increase the number of establishments within one mile of an arena by 13.7%, and the number of workers jumped 23.5%. When the radius was increased to 1 to 7 miles, the establishments increased 10.7%. Beyond 7 miles, “the superstar effect is no longer distinct from nil,” the study said.

That coincides with the view of many economists, who say that the impact of a star athlete and a successful team on a region’s economy is often overstated, because money that is spent in one area can mean fewer dollars are available for another form of entertainment.

“You have what (James’ presence) does to Cleveland bars, restaurants and entertainment spots. That’s a more nuanced argument,” said Jacob Duritsky, Team NEO’s vice president of strategy and research.

“There’s no doubt (James leaving) would impact downtown, the Gateway and the central business districts in many ways. But from a broader regional impact, it’s probably not that significant.”

Should James leave — and make no mistake, the Cavs are still among the leading contenders to sign him, though the Los Angeles Lakers are listed as the most likely choice by oddsmakers — the hit would still be felt beyond downtown.

“The secondary component is what does LeBron playing for a Cleveland team mean to the perception of Cleveland globally when there might not be one?” Duritsky said.

“There are people in China who have heard of Cleveland because LeBron plays here. Certainly that has some kind of impact.”

The Cavs and Golden State Warriors, who have played in the last four Finals, are the most popular NBA teams in China. And the Jamesled Cavs have one of the five largest social media followings in the four major U.S.-based sports leagues — millions ahead of the likes of the New York Yankees and Dallas Cowboys.

In the 2017-18 regular season — which was dramatic even by Cavs standards — the Cavs’ website paced the NBA in page views, unique visitors, time spent per visit and video views.

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CRAIN’S CLEVELAND BUSINESS

five-day span covers Games 3 and 4 of the Finals, and the per-day revenue average of $2,650,685 is more than $1 million ahead of the daily norm from a similar five-day span in June 2014, when the Cleveland hotel market had 21,551 rooms.

During the latter period, which occurred almost two months after the Cavs’ 33-49 season had concluded, the Cleveland hotel occupancy rates ranged from 66.2% to 80.6%. On June 5 and 6, 2018 (the day before and the day of Game 3 of the Finals), the respective hotel occupancy rates were 89.4% and 89.7% — for a market with 2,590 more rooms.

If the scope is narrowed to the 7,159-room Cleveland-Independence hotel market, which includes downtown, the difference in revenues between similar five-day periods in June 2014 and ’18 is $660,473 per day.

“There are measures around the

|

J U N E 18 - 2 4 , 2 018

PA G E 2 7

direct impact of a first-round playoff game, a second-round playoff game, a Finals game,” said David Gilbert, the president and CEO of Destination Cleveland and the Greater Cleveland Sports Commission. “I’m sure every hotel in town was hoping for a Game 6 (of the Finals) even if they weren’t a Cavs fan. That’s absolutely undeniable.”

Gilbert and other regional leaders with whom Crain’s spoke said, should James leave, they believe Cleveland — because of all the development, a record number of downtown residents, the city’s growing reputation as a big-event host and several other factors — is in a better position to bounce right back.

“As important as LeBron is to Cleveland, if he leaves, the sun will still come up the next day, the Terminal Tower will still be standing, and we’ll still be doing our work and be just as successful,” Gilbert said.

LeBron James celebrates after hitting the game-winning shot to beat the Toronto Raptors in Game 3 of the Eastern Conference semifinals on May 5.

(Gregory Shamus/Getty Images)

‘Undeniable’ impact on hotels Roman, the Greater Cleveland Partnership president and CEO, points to January and February — months in which the Cavs have hosted an average of 13.5 sold-out games the last four seasons — as one of the largest indicators of James’ economic value to the region.

“Those are the most difficult months in our climate to bring people anywhere, let alone downtown,” he said. “Having that 20,000-person crowd or people coming downtown to watch the Cavs play wherever they are is invaluable because of the calendar.”

And while measuring James’ overall effect on the region is as inexact a science as predicting the success of NBA draft prospects, there are plenty of numbers that, at the very least, can be significantly attributed to his presence.

The Cavs said that the most recent fiscal year, which concludes June 30, is expected to generate $13 million in admissions taxes (contributions that come from an 8% tax on every ticket that is sold for each event at The Q).

That would mark a raise of more than $3 million from the $9.9 million in admissions taxes that were collected in 2014-15, James’ return season, and would be $8.3 million ahead of the total from 2013-14, when James was a member of the Heat.

During James’ last three seasons in Miami, the Cavs’ average attendance at The Q ranged from a low of 15,926 in 2011-12 to a high of 17,329 in ’1314. In the last two seasons, the Cavs have capped their season-ticket base at 15,000 full-season equivalents — a number that should hold relatively steady next season, regardless of what James decides, because of commitments that are already in place.

If James does leave for a second time, though, it seems safe to assume the Cavs won’t be playing well into June, as they have each year since 2015.

The Cavs’ run to the 2018 Finals was worth $31 million to the Northeast Ohio economy, Conventions, Sports & Leisure International estimated. For local hotels, that’s meant a Zydrunas Ilgauskas-sized surge in demand, occupancy and revenue.

According to STR, a global data and analytics firm that has an office in Rocky River, the total revenue for the 24,141-room metropolitan Cleveland market from Monday, June 4, to Friday, June 8, was $13,253,423. That

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PA G E 2 8

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MEZU

CONTINUED FROM PAGE 4

CRAIN’S CLEVELAND BUSINESS

“Even though my first reaction was why Cleveland, I eventually fell in love with the place.”

Brisker and his team decided to start that company in Beachwood for a number of reasons besides his business partner’s connections to the region through his spouse.

— Yuval Brisker, co-founder of Mezu But Brisker was incredulous at first.

Today, Brisker hopes to build “I was living in Manhattan at the time and I thought to myself, Cleveland? Re- Mezu into an equally massive, indusally? But there’s a great community spir- try-changing business.

With its launch, Mezu announced it here, plus it’s relatively inexpensive to raising $10 million from investors led by do what you want to do here,” he said.

It was cheaper to operate here plus Pittsburgh’s Draper Triangle Ventures. “you don’t need to fight for head- JumpStart Inc., Draper Associates, the count” like a startup would need to Ohio Innovation Fund and North Coast Angel Fund were also involved. on the coasts.

Draper Triangle’s first early-stage Brisker said he also came to enjoy Cleveland investment was in TOA the cultural elements of the city.

“Even though my first reaction was back in 2005, which also led to it havwhy Cleveland, and I would say the ing an office in JumpStart for some first year or two wasn’t easy, I eventu- time. Draper Managing director and ally fell in love with the place,” he said. co-founder Mike Stubler, who sat on TOA was founded in 2003 — a time TOA’s board through 2014, said he when SaaS companies were a rarity — didn’t hesitate to support Brisker’s and sold to Oracle in 2014. The price latest venture.

“They1 were very8:42 global has never been disclosed, but some VNAO_Crains Healthcare Forum.v2.pdf 6/8/18 AM in their industry observers said the company thinking and had a really big idea,” could’ve easily fetched $500 million. said Draper of the approach to TOA The company had 750 global employ- and now Mezu. “That’s unusual in these parts, and not just Cleveland. ees at the time of the sale.

Serving the community since 1902

They were thinking globally right out of the box. Yuval is obviously a passionate entrepreneur and once again, with Mezu, he’s talking about another really big idea.”

JumpStart, naturally, was equally excited to get involved and noted that Brisker’s track record makes it easy to give him additional capital support.”

“It is unusual to see a very successful entrepreneur along the level of Yuval come back and start another company here,” said Remsen Harris, JumpStart’s lead investor. “When you see someone who’s created so much value as he did through TOA with his team there, you are immediately interested.”

From here, Mezu will be focused on getting its app in front of as many users as possible. The main use case for the platform is to send money between individual people, but Brisker said he aims to have the app used with businesses and nonprofits in particular.

“I want to get in as many as possible and make it huge and global and make it something that crosses both boundaries and socioeconomic strata,” Brisker said. “This is about changing how people exchange money and giving more people access to the economy while protecting people’s privacy.”

COUNTY

CONTINUED FROM PAGE 4

A significant piece of the financial support has been outsourced to organizations such as JumpStart, which helps entrepreneurs and startups build their businesses, and the Economic and Community Development Institute (ECDI), which helps small businesses. The county has invested $4.5 million in JumpStart since 2016 and supported more than $500,000 in loans through ECDI. The new plan has gotten warm reviews from several commission members.

Marc Byrnes, chairman of the Oswald Cos., was pleased with the breadth and depth of what he calls a “broad strategic roadmap.” He sees it as a plan that, while it is limited to Cuyahoga County, it mandates a role for co-operation “with other organizations in the region who are also committed to growing regional economic growth, equity and diversity.”

Harriet Applegate, executive secretary of the North Shore Federation of Labor, AFL-CIO, likes the report's comprehensiveness and gave kudos to Budish and his chief economic and business officer, Theodore Car-

ter, for focusing on workforce issues.

“Everyone is increasing the focus on the workforce,” she said. “That’s Cleveland’s biggest failure. We have this enormously large poor population that is unskilled.”

Several council members who are members of the Economic Development and Planning Committee said they weren’t yet prepared to comment on the report since it hasn’t been discussed before the committee. Councilwoman Nan Baker, who represents western suburbs and is a member of the committee, said while she also supports a greater emphasis on workforce, she wants to see the county retain its financial support to growing businesses. The administration will present the plan to the committee on Monday, June 18.

Baker also wants to hear how the administration has improved how it tracks loan repayments. Last year, the county announced that it was not properly tracking loan repayments and that it lacked paperwork on 80 of the 270 loans it had made over the last decade.

By the end of the year, Carter was able to report to the county inspector general that his department had identified all borrowers, inventoried all loans and was properly invoicing borrowers.

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J U N E 18 - 2 4 , 2 018 |

CRAIN’S CLEVELAND BUSINESS

THE LIST

Highest-Paid Non-CEOs Ranked by 2017 Compensation

TOTAL COMPENSATION THIS YEAR EXECUTIVE

2017 2016

% CHANGE SALARY

BONUS

STOCK AWARDS

OPTION AWARDS

PENSION NONEQUITY VALUE INCENTIVE CHANGE (1) PLAN

COMPANY NET INCOME OTHER

2017 % CHANGE (MILLIONS) FROM 2016

1

Robert S. Henderson/TransDigm Group Inc. vice chairman

$17,719,539 (2) $2,773,400

538.9 (2)

$162,500

$0

$0

$4,147,189

$0

$0

$13,409,850 (2)

$596.9

1.79%

2

Bernt G. Iversen, II/TransDigm Group Inc. executive vice president of business development and M&A

$14,059,770 (2) $2,400,900

485.6 (2)

$492,500

$1,000

$0

$3,318,770

$424,000

$0

$9,823,500 (2)

$596.9

1.79%

3

Kevin M. Stein/TransDigm Group Inc. president, CEO; former COO (3)

$11,730,630 (2) $1,187,150

888.1 (2)

$680,000

$3,000

$0

$4,808,830

$742,000

$0

$5,496,800 (2)

$596.9

1.79%

4

Lee C. Banks/Parker Hannifin Corp. president, COO

$7,614,992 $7,049,754

8.0

$900,000

$0

$2,571,744

$1,422,993

$1,622,363

$931,306

$166,586

$983.4

21.88%

5

Eckard Heidloff/Diebold Nixdorf former president and executive officer (4)

$5,846,056 $1,760,660

232.0

$194,953

$0

$0

$0

$0

$207,576

$5,443,527

($233.1)

NM

6

Christopher M. Gorman/KeyCorp vice chairman; president of banking

$5,136,301 $5,398,519

(4.9)

$678,846

$0

$2,159,980

$239,996

$2,000,000

$22,079

$35,400

$1,296.0

63.84%

7

Leila L. Vespoli/FirstEnergy Corp. executive VP, corporate strategy, regulatory affairs; chief legal officer

$5,117,611 $4,868,785

5.1

$761,286

$0

$1,946,403

$0

$719,783

$1,681,039

$9,100

($1,724.0)

8

Revathi Advaithi/Eaton COO, Electrical Sector

$5,050,398 $5,979,142

(15.5)

$742,560

$0

$1,672,536

$546,982

$1,046,425

$1,016,226

$25,669

$2,985.0

55.79%

9

Uday Yadav/Eaton COO, Industrial Sector

$4,792,783 $4,785,041

0.2

$642,600

$0

$1,504,715

$492,586

$854,461

$1,276,569

$21,852

$2,985.0

55.79%

10

Richard K. Smucker/The J.M. Smucker Co. executive chairman

$4,529,676 $7,241,597

(37.4)

$767,308

$15,000

$1,500,000

$0

$825,000

$1,328,450

$93,918

$592.3

11

Matthew V. Crawford/Park-Ohio Holdings Corp. chairman, CEO; former president, COO (5)

$4,354,180 $3,913,139

11.3

$550,000

$600,000

$3,143,250

$0

$0

$8,108

$52,822

$28.6

-9.78%

12

P. Kelly Tompkins/Cleveland-Cliffs Inc. former COO, executive vice president

$4,316,009 $2,174,187

98.5

$565,000

$899,500

$1,535,479

$0

$1,093,682

$111,967

$110,381

$367.0

110.8%

13

Andrew J. Paine III/KeyCorp president, KeyBanc Capital Markets; co-head of Key Corporate Bank

$4,052,340 $4,279,625

(5.3)

$500,000

$0

$1,619,980

$179,998

$1,700,000

$16,962

$35,400

$1,296.0

63.84%

14

Kelly S. Cliff/Victory Capital Holdings Inc. president, Investment Franchises

$4,017,569 NA

NA

$425,000

$914,978

$1,850,000

$615,439

$0

$0

$212,152

$25.8

15

Sean P. Hennessy/Sherwin-Williams Co. former senior VP of corporate planning, development, administration (6)

$3,949,234 $3,486,882

13.3

$684,658

$0

$1,249,061

$804,565

$969,000

$0

$241,950

$1,772.3

16

Steven T. Oakland/The J.M. Smucker Co. former vice chair; president, U.S. Food & Beverage (7)

$3,882,056 $3,931,865

(1.3)

$691,875

$13,500

$1,350,000

$0

$742,500

$1,050,207

$33,974

$592.3

17

Michael D. Policarpo II/Victory Capital Holdings Inc. COO

$3,588,884 NA

NA

$375,000

$830,979

$1,700,000

$410,293

$0

$0

$272,612

$25.8

18

Christopher A. Coughlin/The Timken Co. executive vice president, group president

$3,397,229 $2,501,037

35.8

$515,041

$0

$911,535

$390,345

$528,510

$833,000

$218,798

$203.4

44.46%

19

Richard A. Zimmerman/Cedar Fair LP CEO; former president, COO (8)

$3,354,867 $2,772,329

21.0

$646,154

$0

$2,062,490

$0

$607,770

$0

$38,453

$215.5

21.27%

20

Robert J. Davisson/Sherwin-Williams Co. former president, Americas Group (9)

$3,342,883 $2,920,984

14.4

$630,296

$0

$971,492

$757,237

$789,000

$0

$194,858

$1,772.3

56.46%

21

Amy G. Brady/KeyCorp chief information officer

$3,331,719 NA

NA

$633,846

$0

$1,597,475

$64,998

$1,000,000

$0

$35,400

$1,296.0 $772.4

63.84%

22

Curtis J. Hutchins/Eaton president, Hydraulics Group

$3,322,199 NA

NA

$574,669

$0

$1,045,295

$342,242

$619,632

$715,741

$24,620

$2,985.0

55.79%

23

James H. Lash/FirstEnergy Corp. former executive vice president, president, FirstEnergy Generation (10)

$3,227,396 $2,876,218

12.2

$336,846

$0

$1,078,787

$0

$857,055

$856,061

$98,647

($1,724.0)

NM

24

Juergen Wunram/Diebold Nixdorf former senior vice president, COO (4)

$3,051,193 $1,272,043

139.9

$598,446

$0

$1,583,750

$342,116

$267,089

$105,588

$154,204

($233.1)

NM

25

Stephen R. McClellan/Goodyear Tire & Rubber Co. president, Americas

$2,995,940 $5,117,054

(41.5)

$623,333

$0

$448,532

$645,000

$260,672

$973,956

$44,447

$346.0

-72.63%

26

Ronald A. Rice/RPM International Inc. president, COO

$2,940,216 $6,572,165 (11)

(55.3) (11)

$730,000

$0

$223,795

$1,290,000

$550,000

$19,412

$127,009

$181.8

-48.74%

27

Colin Wilson Jr./Hyster-Yale Materials Handling Inc. president, CEO, Hyster-Yale Group

$2,895,646 $1,866,016

55.2

$701,500

$0

$999,989

$0

$921,725

$78,232

$194,200

$48.6

13.55%

28

Donald R. Schneider/FirstEnergy Corp. president, FirstEnergy Solutions

$2,841,822 $3,031,292

(6.3)

$536,470

$0

$0

$0

$1,214,304

$1,081,398

$9,650

($1,724.0)

NM

29

Richard N. Altice/PolyOne Corp. former senior VP, president of Designed Structures & Solutions (12)

$2,829,635 NA

NA

$244,615

$0

$614,436

$611,943

$0

$0

$1,358,641

($57.7)

NM

30

William T. Ross/DDR Corp. former COO (13)

$2,802,702 NA

NA

$187,500

$0

$1,027,014

$0

$0

$0

$1,588,188

($241.7)

NM

31

Barry C. Dunaway/The J.M. Smucker Co. president, Pet Food and Snacks

$2,718,832 NA

NA

$597,596

$11,000

$990,000

$0

$374,000

$518,781

$227,455

$592.3

32

William M. Cody/Progressive Corp. chief investment officer

$2,713,833 $2,603,778

4.2

$477,692

$0

$1,080,068

$0

$1,144,073

$0

$12,000

$1,592.2

54.43%

33

Robert W. Malone/Parker Hannifin Corp. vice president and president, Filtration Group

$2,712,416 NA

NA

$467,575

$0

$892,289

$275,696

$433,069

$0

$643,788

$983.4

21.88%

LISTS - Highest Paid Non CEOs

NM

-14%

NM 56.46% -14% NM

-14%

RESEARCHED BY CHUCK SODER (CSODER@CRAIN.COM)

Want the full Excel version of this list Ñ and every Crain's list? Become a Data Member: CrainsCleveland.com/data Data provided by S&P Global Market Intelligence (Marketintelligence.spglobal.com). The full digital list includes 62 public company executives. It excludes CFOs because we also publish a list of Highest-Paid CFOs. NM = not meaningful. Send all feedback to Chuck Soder: csoder@crain.com.

(1) Includes change in pension value and nonqualified deferred compensation (2) These TransDigm executives received stock options through a compensation plan that awards options to most executives every two years; they also received large "dividend equivalent payments" (in the "other" category) in conjunction with dividends issued in 2017. (3) Stein was promoted to CEO on May 1, 2018. (4) These Diebold executives joined the company when it merged with Wincor Nixdorf in August 2016. Wunram served as interim CEO for a three month period starting in December 2017 and retired in May 2018. Heidloff resigned in March 2017. (5) Crawford became chairman and CEO in May 2018. (6) Hennessy retired in March 2018. (7) Oakland resigned on March 9, 2018. (8) Zimmerman was promoted to CEO on Jan. 1, 2018. (9) Davisson retired in February 2018. (10) Lash retired on Aug. 1, 2017. (11) RPM granted performance-based stock awards to several top executives in 2016, but they won't receive the full award if they don't hit performance goals for the three-year period ending May 31, 2018. (12) Altice left PolyOne when it sold its Designed Structures & Solutions unit on July 19, 2017. (13) Ross worked for DDR from January 2017 to May 2017.

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LIST ANALYSIS

Retirees do well on executive pay lists

By CHUCK SODER csoder@crain.com @ChuckSoder

Take a good hard look at the executives on our Highest-Paid Non-CEOs list. Because many of them won’t be on the list next year.

Of the 33 local public company executives that made it onto the print version of the list, nine — nearly a third — left their companies in 2017 or 2018.

A similar trend showed up on our Highest-Paid CEOs list, which was published two weeks ago.

Why are these executives leaving?

The reasons vary, but here’s the most common one: retirement.

We’re not claiming there’s a wave of retirements going on in the corporate community; the executives on these two lists aren’t even all that old. The average age for the Highest-Paid NonCEOs list is just under 55, based on age estimates provided by S&P Global Market Intelligence, which provides the data for these lists. And the average for the CEOs list is 57, which is similar to the national average.

But there are still plenty of executives in their 60s (or, in a few cases, their 70s) on these lists. Plus, public company retirement plans often allow longtime executives to retire well before the age of 65.

And when they do hang it up, they often have years of experience under their belts — plenty of time to accumulate raises and climb to the top of our Highest-Paid lists. The act of retirement also can trigger one-time payments, giving executives another pay boost just as they head out the

door.

There’s another reason why next year’s Highest-Paid Non-CEOs list probably won’t look much like this year’s list.

When we published last year’s list, we noted that executive pay varies widely — often due to one-time payments and other irregular awards.

That variability can send an executive rocketing to the top of the list or diving off the list entirely. For instance, 10 of the 62 executives on the full digital version of this year’s list saw their total compensation double in 2017. But only one of them even showed up on last year’s list.

The top three executives on the list all saw their pay double in 2017. It’s no coincidence that they all work for TransDigm, a company that exemplifies the variable nature of executive pay. The Cleveland-based aerospace supplier awards most executives stock options every other year, and TransDigm executives get big payments in the “other” category during years like 2017, when the company makes dividend payments.

Other one-time payments can have a huge influence on the list as well. For instance, Eckard Heidloff of Diebold Nixdorf (No. 5 on the list) and William Ross of DDR (No. 30) wouldn’t have even made the full digital list if not for severance payments that show up in the “other” category.

On the whole, executives on the Highest-Paid Non-CEOs list got decent raises in 2017: The median total compensation increase was 11% when you look at the 33 executives who held the same title through 2016 and 2017 — up from roughly 9% the previous year.

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CRAIN’S CLEVELAND BUSINESS

AKRON

New apartments planned for Middlebury

By DAN SHINGLER dshingler@crain.com @DanShingler

Akron’s oldest neighborhood is getting a new apartment complex.

Local businessman Nick Pamboukis has purchased a former senior living facility at 797 E. Market St., in the heart of the Middlebury neighborhood, and said he’s working to turn it into high-end apartments.

“I have a knack for working with distressed things,” Pamboukis quipped.

He joked, because he said he’s already invested in other projects that needed a lot of work — including his main business, Heritage Industrial Finishing, an Akron-based industrial coating and finishing company he purchased in 2007, shepherded through the recession and has since turned around.

Now, he’s got 67,000 square feet of space, much of it in need of repair, to turn into apartments that will appeal to professionals.

Pamboukis said he’ll spend at least $1.5 million improving the building, which he purchased in February for $375,000. He got a deal, he said, because the former owner had let it sit for two years and last winter the pipes to the sprinkler system froze and caused some water damage.

That said, the rest of the building is actually in pretty decent shape.

“The great thing about this being a nursing home is that it was inspected every year,” Pamboukis said, so he only has two years of neglect to worry about.

He said it will take about a year to complete the project, which entails combining former residents’ suites into larger apartments and building out modern apartments with highend fixtures and finishings.

Pamboukis said he begun demolition and has so far filled 16, 40-yard dumpsters with debris.

Pamboukis has invested in other apartments before he said, but was

want,” Pamboukis said.

If Pamboukis is successful, he won’t be the only one happy about it.

While Kohl notes that his mission is different than an apartment developer’s, he said he also knows that the neighborhood needs good rental units to go along with owner-occupied housing.

Kohl also said he knows the value of bringing more people into the neighborhood generally. He’s constantly ducking a double-edged sword because the more efforts like his improve the com“When we first came in and turned munity, the more expensive it becomes to the power on, I turned the call purchase and rehabilibutton system on and then the tate houses to sell, button for one room lit up — room which is a chief activiThe Well.

116, which was my grandmother’s ty of But Kohl is also glad room. I’ve got goosebumps again that neighborhoods like his are again gainjust talking about it.” ing in popularity.

“A lot of the wave of — Nick Pamboukis energy we’re riding is because there’s exciteDeveloper Stu Lichter’s East End ment about neighborhood developdevelopment, which incorporates ment here — and that’s a good thing,” much of the former Goodyear corpo- Kohl said.

City officials were more than happy rate buildings on Middlebury’s west side, was quickly filled with tenants to hear about Pamboukis’ project, as eager to move into an urban environ- it’s exactly in line with what they say ment and willing to pay for it. Rents the city is working toward with prothere range from $840 to more than grams to rebuild Akron’s population $2,000, and Lichter said he’s had little by spurring residential development.

“I’m very glad to hear that this is to no trouble finding tenants, less than a mile down East Market Street happening, and that that building is in good hands,” said Akron planning from Pamboukis’ site.

Granted Lichter’s development — director Jason Segedy.

Segedy said the city’s recent enacta huge, 1.4 million-square-foot project that cost about $167 million — ment of a tax abatement on any value has its own built-in critical mass and added to a residential property via renits own amenities. It’s got restaurants, ovations was aimed at spurring exactly this type of investment. Pamboukis retail and even its own theater.

But Pamboukis said he’s taking a said he plans to avail himself of that abatement too, which, because most of similar, if scaled down approach.

“We’re going to have community his project’s costs are in renovations rooms, we’ll have a gym. And the real rather than the purchase price of the twist will be a restaurant and kitchen building, could be significant.

“He’s definitely eligible for it … this downstairs, so residents can order food. It will be all-inclusive living, is definitely in line with our goal of with a commercial laundry down- trying to grow the city’s population stairs … It’s the same lifestyle I would and the urban core,” Segedy said. residents renovate their homes and for new buyers to purchase, rehab and occupy others.

Pamboukis isn’t shooting for lowrent units either. He’s hoping to get about $975 a month for the building’s 54 one-bedroom apartments, about $1,200 a month for four two-bedroom units and something in between for six corner units.

Those are on the high end of rents in Middlebury, but he would not be the first developer to find demand for high-end rental units there.

Nick Pamboukis is converting a former senior living facility in the heart of the Middlebury neighborhood into high-end apartments. (Dan Shingler)

drawn to this building because he knew it so well.

“My dad used to take me here almost every day when I was 7 or 8,” Pamboukis said.

That’s because his grandmother used to live in the nursing home.

Pamboukis already has a great story related to that.

“When we first came in and turned the power on, I turned the call button system on and then the button for one room lit up — room 116, which

was my grandmother’s room,” Pamboukis said. “I’ve got goosebumps again just talking about it.”

But, that’s it — no poltergeist moments beyond that. He’ll have other challenges, though — Middlebury’s ghosts tend to be more economic than supernatural, unfortunately.

“About a quarter of the houses in this neighborhood are vacant,” noted Zac Kohl, executive director of The Well, a community development organization that works to help existing

Laser engraver making a mark for Seco Machine

By KYLE BROWN kdbrown@crain.com

An organic laser engraver unit has been saving time normally lost to processes like date-coding parts for Seco Machine, a division of A. Stucki Co. in North Canton, according to a product manager.

A. Stucki, a developer of rail car industry products since its beginning as a family business in 1911, acquired Seco in 2010. Also located in North Canton, Seco is a machined product and mold manufacturer that previously had supplied A. Stucki, said Jon Kaufman, product manager, urethanes and polymers, for A. Stucki.

Originally, when Seco began producing elastomer products for the rail industry, workers used rotary-dial tools to date-code parts. At first, it wasn’t too time-consuming, but as more jobs began to stack up with more molds, it meant taking more time for the date codes, Kaufman said.

“Each … date code changed at the beginning of every week … We were wasting almost a whole day on Mondays switching date codes and not

Seco Machine product manager Jon Kaufman stands near the company’s laser engraver. (Kyle Brown for Rubber & Plastics News)

pouring urethane,” he said.

After seeing a demonstration at a trade show, Seco added a carbon dioxide-based organic laser engraver to its equipment for about $30,000 in the summer of 2013, Kaufman said.

With the engraver, instead of switching through rotary dials, the company can track the lot of parts by date of

manufacturing, then mark them with a date code in quick succession.

“It’s just four digits. We can mark it in about a second, maybe a second and a half,” Kaufman said. “So really, you’re just tying up the labor of one person in a shift compared to an entire production staff for that day.”

In terms of time saved, the engrav-

er saved about 20% of production time for staff, Kaufman said. It allows for quick reproduction of the same text for a set of parts, but can also do logos or other images, which require more skill to manage contrast and resolution of the finished image.

“You’ll have different intensities that are needed for, say, leather, wood or urethane, or even the different durometers and families of urethane,” Kaufman said.

Though those types of materials are more common, the engraver can handle more unconventional organic materials as well. Kaufman has worked on cellphone cases, a set of antlers and, in one case, a tomato, he said.

“It actually burned away the top skin, and you could see the second layer of it, and it was detailed,” he said. “It was awesome.”

Another point where the engraver can save time and labor is by bypassing surface preparation, Kaufman said.

“The laser doesn’t care about the surface preparation,” Kaufman said. “That’s one thing that makes it a lot easier on the handling and labor for us.”

The addition of the engraver is part of Stucki’s strategy to diversify its of-

ferings, expanding its reach beyond rail, he said. The company now has some products involved in the construction, concrete, oil and gas, and wastewater treatment industries.

With the new engraving capabilities, the company is aiming for custom, low-volume jobs that are more customized.

The company also has created an industrial sales force to reach a wider variety of jobs.

“That’s one place where it takes a little time to get your foot in the door and build those relationships, but we definitely think we’re in a position to take advantage of our capabilities once those relationships are built,” he said.

A. Stucki is bringing on employees as part of the industrial sales team, and assigning overlapping duties to some current sales staff, Kaufman said, though he did not disclose a specific number. The company did not have to hire new employees for the laser engraver.

Brown is a reporter with Rubber & Plastics News, a sister publication to Crain’s Cleveland Business.

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AKRON

DRB hopes to clean up in car wash industry

By BETH THOMAS HERTZ clbfreelancer@crain.com

Akron’s DRB Systems has seen annual growth of 28% to 30% in each of the past three years as it brings turnkey technology to car wash owners and operators in the United States and beyond.

Bill Morgenstern, CEO of DRB Systems, said that in 2014, the longtime owners of the company, founded in 1984, saw the tremendous opportunities for growth as technology revolutionized the car wash industry and let the company be acquired by Prairie Capital, a private equity firm based in Chicago. At that time, Morgenstern started as a consultant then became a board member, and, ultimately, CEO. “We just went to work growing the company,” he said.

One of the newly capitalized company’s first big moves was to acquire UniTec, a Baltimore company that makes pay stations for car washes. The two companies had collaborated previously, so the 2016 deal made sense.

“We saw an opportunity to put the two businesses together and serve the whole car wash world. It was successful. We really started stealing market share across the country,” Morgenstern said.

As the company expanded, it became apparent that it needed more capital than Prairie was in a position to provide, he said.

“I think we grew a lot faster than

DRB Sytems has brought turnkey technology like express pay terminals to car washes around the nation. (Contributed photo)

Prairie had expected. They knew that we needed more capital to continue to go forward, because we have an appetite for more acquisitions, and we have other things we want to invest in to grow the business,” he said.

So in 2017, DRB worked to attract a larger private equity firm and moved from Prairie Capital to New Mountain Capital, a firm Morgenstern described as “technology-focused.”

“They have the firepower that we think we are going to need to continue to grow the company. They’ve done a marvelous job walking alongside the management team here, and continuing to make follow-on investments and being willing to fund acquisitions, new technology and new development,” he said.

The current plan is to invest more than $30 million in technology over the next five years, he said.

With that transition complete, DRB made another acquisition in April, buying the assets and property of NoPileups of Boise, Idaho. NoPileups is a software product that bolts on to DRB’s technology and helps prevent collisions in car wash tunnels, optimizing capacity as well as safety.

“It’s a product we were watching for quite some time. When we got an opportunity to jump on it, we did,” Morgenstern said.

He said each acquisition and transition the company has made is grounded in its commitment to strategically grow its capabilities. The main

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thing that differentiates DRB’s product lines from its competitors is that its technology delivers an integrated solution that enables the car wash operators of all types and sizes to make more money, Morgenstern added.

“We look at two different businesses.

One is the point of sale, and the database management. That’s the pay stations, the (radio frequency identification of cars that have prepaid for washes), the gates, and all the things that help a customer run the interface with their consumer,” he said. “Then on the other side is our tunnel control business. We have a tunnel control system that is the puppet master. It tells the devices inside the tunnel when to turn on and when to turn off.”

The company employs about 300 people, two-thirds of whom are in either the Akron headquarters or the company’s warehouse in North Canton, with the other third divided between the former UniTec plant and a shipping and receiving office in Fontana, Calif.

As pleased as Morgenstern is with DRB’s growth trajectory, he sees even bigger things in the future, noting that about half of the car wash industry has yet to migrate from full service (customers get out of the car and walk through a hallway while their car is cleaned inside and out) to either express wash operations (customers pay a monthly fee for unlimited washes) or a flex system (customers have the option of getting full service or just doing an express exterior-only cleaning).

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“We see a lot of people adopting (these newer systems), and I am not going to be surprised to see the company double its size again over the next few years,” he said.

According to figures from the International Carwash Association, North America is home to about 79,500 car wash locations, with more than 2 billion cars washed in those spots per year.

Another area in which DRB is seeing strong growth is convenience store car washes. The company has several significant customers in this space, the largest of which is Circle K. “In the last 18 months, we have deployed almost 700 pay stations and payment solutions for Circle K car washes, and there is a lot more in front of us with them well,” Morgenstern said.

Clayton Clark, president of WhiteWater Express Car Wash in the Houston area, has been a customer of DRB for more than 20 years and has seen the company’s growth firsthand.

“The sophistication, the level of where they have taken the company under Bill Morgenstern’s leadership has been mind-blowing,” he said.

His company buys many things from DRB but the point-of-sale technology is the thing he most appreciates because the express pay terminals are where customers interact with the business, and as such is not the place to cut corners or settle for inefficient technology, he said.

“The platform DRB provides has been key to our success,” Clark said.

Sales $465,000 Mike@empirebusinesses.com www.empirebusinesses.com 440-461-2202

MISCELLANEOUS Manager: Curation Architecture, IBM Corporation, Cleveland, OH Lead the development of solution architectures, roadmaps, and system transition plans to align business, applications, data, integration, and/or infrastructure architecture. Lead, develop and manage a team of 7-10 integration architects. Explore new technology trends and leverage them to simplify the data ecosystem. Drive innovation and lead teams to implement solutions. Demonstrates a full understanding of the architecture best practices for assigned domain(s). Educates others throughout the organization on the function of architecture methodologies, governance, and standards by serving as a subject matter expert across business and/or IT teams. Presents to internal and external audiences, including senior leadership. Works closely with Management and Data Scientist teams to define and refine the big data platform to achieve company product and business objectives. Utilize Big Data Technologies (Hadoop, Hbase, Hive, Pig, Impala, Avro, Spark, etc.), Relational Database Technologies (Oracle, Microsoft, MySQL, MariaDB, etc.), Healthcare data (EHR, HL7, CCDA), Management, Agile Software Development Methodology, and Scripting Languages (Ruby, Python, Scala, Java, etc). Required: Master’s degree or equivalent in Computer Science, Information Systems, Bioinformatics or related, (employer will accept a Bachelor’s degree plus five (5) years of progressive experience in lieu of a Master’s degree) and one (1) year of experience as a Data Scientist or related. One (1) year of experience must include utilizing Big Data Technologies (Hadoop, Hbase, Hive, Pig, Impala, Avro, Spark, etc.), Relational Database Technologies (Oracle, Microsoft, MySQL, MariaDB, etc.), Healthcare data (EHR, HL7, CCDA), Management, Agile Software Development Methodology, and Scripting Languages (Ruby, Python, Scala, Java, etc).

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CRAIN’S CLEVELAND BUSINESS

ADVERTISING SECTION

MBA

WEATHERHEAD SCHOOL OF MANAGEMENT

www.crainscleveland.com/onthemove

To place your listing or for more information, please call Debora Stein at (917) 226 - 5470 or email dstein@crain.com

weatherhead.case.edu

CONSTRUCTION

ADVERTISING & MARKETING

CONSULTING

EDUCATION

Peter Levy

Kyle Keegan

Robert (Bob) Teitenberg

Tom Tomczyk

Stephen Wilkins

Managing Director, Partnerships & Event Marketing

Preconstruction Manager

Project Executive

Senior Principal

Interim Superintendent

Welty Building Company

Welty Building Company

Mercer

K-12 School District

Welty Building Company recently named Kyle Keegan as Preconstruction Manager of the Cleveland office. Kyle brings with him 18 years of construction experience in every phase in a project’s life cycle - from preconstruction to closeout. His knowledge of the construction process has lead him to amass a portfolio of projects in Higher Education, Healthcare and Commercial market segments that have finished on-time and on-budget. He will be responsible for leading the overall project success.

Welty Building Company recently named Robert (Bob) Teitenberg as Project Executive of the Cleveland office, where he will be responsible for leading end-to-end service delivery using Lean construction principles and ensuring that projects are delivered on time to the cost targets and quality standards. Teitenberg has more than 35 years of experience in the construction industry with successful projects in Healthcare, Education and Commercial market segments.

Tom Tomczyk has returned to Mercer as a Senior Principal / Client Manager.

Tom previously held positions at Conduent as Director, Business Development; Buck Consultants as VP, Global Client Strategies and Director, Health & Productivity; and CVS Health as Strategic Account Executive. Tom began his career at Mercer as a Consultant from 1995 to 2005.

The Shaker Heights City Schools Board of Education has announced the appointment of Dr. Stephen M. Wilkins as interim superintendent for one year, starting in July. A West Point and Harvard graduate, Wilkins will return to his current position as assistant superintendent of business and operations which he has held for four years, pending the appointment of a permanent superintendent.

Dr. Wilkins brings more than 25 years of experience to the role both from the military and school sectors.

FINANCIAL SERVICES

FINANCIAL SERVICES

Kaulig Racing Kaulig Companies Limited, the single member family office for Mr. Matt Kaulig, announced today the hiring Peter Levy, Managing Director, Partnerships & Event Marketing. Levy has spent nearly two decades building a reputation as a leader in the sponsorship and entertainment marketing industries. Levy will be responsible for building partnerships with Kaulig Racing through sponsorship of the team and developing & innovating mutually beneficial ways to leverage the partnership.

ENGINEERING & CONSULTING

Wessam (Wess) N. Mekhael, PE Regional Office Manager

SME Wessam (Wess) N. Mekhael, PE has been named Regional Office Manager of SME’s Cleveland, Ohio office. With over 10 years of experience, he manages a diverse team of engineers and technicians who provide geotechnical engineering, building materials assessment, and construction materials testing services.

Wess has leveraged his technical and management expertise to tackle tough challenges on more than 2,000 projects in Northeast Ohio. He is a licensed engineer in Michigan and Ohio.

William (Bill) Caster Senior Vice President, Managing Director of the Private Bank

Fifth Third Bank, Northeast Ohio Fifth Third Bank has named William (Bill) Caster as Senior Vice President, Managing Director of the Private Bank in Northeast Ohio. Caster is responsible for leading the Private Banking, Wealth Planning, Trust, and Investment Management activities within Cleveland, Akron, and Canton. He has more than 35 years of experience leading teams in the areas of wealth management and trust.

FINANCIAL SERVICES

Christian Watson

Nina Muniza

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Ancora

Ancora

Ancora happily welcomes Mr. Christian Watson to the firm as an Assistant Vice President of Client Service and Support.

Previously, Chris has served as an operations specialist and client service professional in the healthcare and finance industries. He brings his experience servicing clients within regulated industries to Ancora, where he will service retirement plan clients and their participants while supporting the division operationally. We wish Chris success in his new role.

Ancora is pleased to announce that Ms. Nina Muniza has joined the firm as an Assistant Vice President of Accounting. Nina has previously worked as a bookkeeper and office manager for architectural and other professional service industry firms. She brings her experience with accounts payable and receivable, billing, reconciliation and other accounting duties to Ancora, where she will be providing support to the accounting department. We are happy to welcome Nina to the firm.

ARCHITECTURE Anne M. Hartman Associate Principal, Director of Cleveland Operations

Moody Nolan Ms. Hartman has more than 25 years of experience in architectural design, documentation and project management. Her professional experience includes building types ranging from recreational, educational, healthcare and corporate facilities. She has worked with non-profit, public and private entities and excels in client relations. Her organizational skills and leadership have been pivotal in meeting clients’ needs and budgets.

She is proficient in Microsoft Word, PowerPoint, MS Project, Excel.

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CRAIN’S CLEVELAND BUSINESS

Source Lunch Andrew R. Thomas

U of Akron associate professor and author Andrew R. Thomas might be the best-selling best-seller author you never heard of. ¶ He has written a slew of books, but unless you’re the smart and possibly wonky type who spends their spare time reading about aviation, the politics of energy or international trade, you may not have heard of him. ¶ He’s also associate professor of marketing and international business at the University of Akron. ¶ We caught up with the Broadview Heights resident shortly after the launch of his latest book, “American Shale Energy and the Global Economy: Business and Geopolitical Implications of the Fracking Revolution,” to talk about life, politics and, of course, issues of international business and energy. ¶ He also has the same name, including the middle initial, of another shale expert — Andrew Thomas at Cleveland State University. No relation, though. — Dan Shingler

Five things Favorite thing to do at home to relax Reading. I think anyone who writes should do a lot of reading.

Favorite night out Dancing with my wife.

Favorite travel destination Panama. My wife is from Panama, too.

Favorite outdoor activity Golf

Favorite thing on TV Tribe games

Lunch spot L.A. Pete’s 6080 Brecksville Road Independence 216-642-4341

The meal One had a waffle, iced tea and coffee, the other had eggs, potatoes and bacon with an iced tea.

The vibe If you want a great breakfast or food with a home-cooked feel in a chill atmosphere, L.A. Pete’s is probably where you eat in Independence. Most come for the first time because a savvy associate asked to meet there, but second trips are often for the bacon.

The bill $24.83 with tip

You live in Broadview Heights, but you teach in Akron. Where are you from?

I went to high school out in Lorain County. I went to Midview High School. I kind of bounced around as a kid. I was born in Texas and my dad was in the Army. … When I was 10, my dad got a job in Oberlin, and we moved to Ohio.

The biggest story lately is that the U.S. is bailing on the post-World War II deal that we set up. We don’t want to lead the world anymore. Even going back to George W. Bush. He got elected saying,‘I’m not going to get into foreign entanglements.” …

And Obama said the same thing.

Now Trump is saying it.

Now you’re writing about shale drilling. Why? It’s what gives us more flexibility with our foreign policy, and that’s changing the world. The other issue is what it Have you always taught means to our domestic economy, international which is a “If you can’t be business? wonderful thing.

I had a business For Americans, inspired to teach career before all they’re both good this. I was in things. For the rest international transportation. I of the world, the business in the was in geopolitical shift is motorcycles and current environment, not good. That’s aviation both. I why the world is you probably picked freaked out about was the principal in a firm that Trump, because the wrong built motorcycles he’s given a face in China and then profession.” and a name to we sold them in America Asia and Latin America. abandoning the commitments it made going back to 1944.

You've written how many books so far?

Are we reacting to this moment I think it’s 15 or 16 now, plus I’ve correctly? edited some more.

For me, I’m absolutely torn. I do international business. But some of How do you fare at selling books?

America First also makes a lot of (Laughs) I’ve sold over a million sense, so I’m absolutely torn. books, but that does not translate to a million dollars, I can assure you. It’s But you think fears of a trade war a lot less than that. A lot less. It’s a are overblown? terrible business.

They are, absolutely. ... Foreign trade is only 15% of GDP, and a lot of that Which is best known? is energy imports that are declining.

I did a book called “Air Rage: Crisis in the Skies.” It was published and What grade do you give the actually released on 9/11, that same president on foreign trade so far? day. That became a New York Times I give him an A-, because he’s right best seller. … But I didn’t predict that these trade deals need to be anything, I didn’t even write about renegotiated. Don’t throw them out. terrorism in it. I did another one in But NAFTA was negotiated before 2003 called “Aviation Insecurity,” and the commercialization of the that was a New York Times internet had really taken off. … bestseller, too. For about two years it Trade agreements need to be more was in the top couple hundred books. flexible, and they need to be consistently renegotiated.

You teach international business.

Is it fair to say you’re finding lots Do you like the way he’s doing it? of stuff to discuss as of late?

That would be the minus.

Absolutely. It’s all good. If you can’t be inspired to teach international How about your own political business in the current environment, leanings? you probably picked the wrong I’m not even a Republican. Ralph profession.

Nader is a good friend of mine. I know Ralph really well and I’ve given What’s the biggest change you him money. Ralph’s good people, see in world politics today? and I’ve voted for him three times.

But your family's roots are here?

Yep. My parents were from Akron, so I grew up an Indians fan.

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39th Annual Ronald McDonald House

PRO-AM GOLF TOURNAMENT The Mayfield Sand Ridge Club • Monday, June 18, 2018

Presented by Truline Industries and University Hospitals, the Ronald McDonald House Pro-Am Golf Tournament is the longest-running and most successful fundraising event in the history of the Ronald McDonald House of Cleveland. Over the past 38 years, the tournament has raised more than $4 million to support the Ronald McDonald House’s mission of keeping families close when they need it most. Led by committee chairman Andy McCartney, this tournament is made possible by the dedication of our committee members, sponsors, and golf professionals.

PRESENTING SPONSORS

SPECIAL PARTNER SPONSOR

UNDERWRITING SPONSORS ®

CORPORATE SPONSORS American Consolidated Industries, Inc.

The Crawford Group

BDO

Elk & Elk

Bowden Manufacturing Carnegie Investment Counsel Chemical Bank

Hilton Garden Inn, 700 Beta Banquet and Conference Center

Davey Tree Expert Company

HC Murray Group

First Energy Foundation

Interstate Diesel Company

First National Bank

Malish Corporation

Guardian Technologies

Monahan Filaments

NSK Industries Parker Rust-Proof PwC

The Sherwin-Williams Company ShurTech Brands LLC

Resource Strategies, Inc.

Suburban Press

Ronald McDonald House Charities of Northeastern Ohio

Wellspring Financial Advisors

Taylor Oswald

SPECIAL THANKS: Company Car, IMG and Suburban Press Our heartfelt thanks to the PGA and LPGA tour professionals and the NOPGA local resident professionals for their commitment to the Ronald House Pro-Am event:

TOUR PROFESSIONALS: Ryan Armour, Fred Funk, Retief Goosen, Jason Gore, James Hahn, Billy Hurley III, Jason Kokrak, Tom Lovelady, Curtis Luck, Peter Malnati, Larry Mize, Dicky Pride, Hal Sutton, Kyle Thompson, Harold Varner RESIDENT PROFESSIONALS: Dominic Antenucci, Mark Bixler, Jennifer Creech, Matthew Creech, Mark Evans, Mike Heisterkamp, Jim Logue, Eric Morgan, David Mottice, Drew Pierson, John Sico, Mark Sierak, Judd Stephenson, Tom Waitrovich, Charlie Wood

“The Ronald McDonald (House) is there because of people who have never even met you, probably never been through what you’re going through, but they give because they care. It’s amazing, truly amazing.”

– Bettyna Turner

Since 1979, the Ronald McDonald House of Cleveland (RMH), a not-for-profit organization, has offered a comfortable home-away-from-home for families of children receiving medical treatment at area hospitals. In addition to the 55-room House on Euclid Avenue, RMH offers families of pediatric patients a comfortable spaces to rest and recharge at Ronald McDonald Family Rooms at Cleveland Clinic Children’s, Fairview Hospital, MetroHealth Medical Center, and UH Rainbow Babies & Children’s. RMH relies on the generosity of the local community to provide support and services to the more than 100,000 individuals it serves annually.

www.rmhcleveland.org