CRAINSDETROIT.COM I FEBRUARY 12, 2024
Apartments at Joe Louis site aim to set bar
Water Square rent starts at $2,300 per month By Nick Manes
Property values in Detroit’s New Center neighborhood are rising faster than in any other area of the city. | NICK MANES
Where home prices are rising quickly Neighborhoods with the highest increases all are seeing investment By Nick Manes
Property values are on the upswing in every Detroit neighborhood, but three of them stand out above all others. Detroit Mayor Mike Duggan last month announced the uptick in values all over the city, which averaged 23% when factoring in all of the city’s neighborhoods, and homeowners in the city gained a total of $1.7 billion in overall wealth from 2022 to 2023. Such numbers highlight “the resurgence that Detroit specifically — and the region in some generality — is growing,” said Antoine Bryant, director of planning and development, for the city of Detroit. But not all growth is equal.
“So the primary thing that ties (all the neighborhoods) together is you had investment.” — Antoine Bryant, city of Detroit Two neighborhoods — the Riverfront Towers area on the west riverfront and Victoria Gardens on the east side near Jefferson Chalmers — saw the lowest increases in value, rising less than 1% year-over-year. By contrast, three neighborhoods around the city saw property value growth in excess of 50%, according to data from the
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Detroit City Assessor’s office. ◗ New Center, about 3.5 miles north of downtown and home to the Henry Ford Health campus and the historic Fisher Building, saw property values increase by more than 59%; ◗ The Delray neighborhood in Southwest Detroit near the under-construction Gordie Howe Bridge connecting Detroit with Windsor, Ontario, saw an increase in values of nearly 58%; ◗ Banglatown, on the east side of Detroit and on the northern border of Hamtramck, saw property values increase about 55%. While each area is unique, there is a common thread, according to Bryant. See PRICES on Page 15
As the developers of Detroit’s newest high-end apartment building prepare to welcome residents, the high cost of the units appears to be serving as little deterrent for tenants. With 496 luxury units in a gleaming, new glass tower on the Detroit River, developers behind The Residences at Water Square say leasing of the project — where rents for available units start at nearly $2,300 per month — shows positive momentum. “We’re heading in a good direction,” Danny Samson, chief development officer for Detroitbased real estate firm Sterling Group, said of the lease-up for the building that will begin allowing residents to move in this month. “We’re really in a good vein with the amount of momentum that we’ve seen and the pipeline (of residents) continues to fill up.” Speaking with reporters Feb. 6 following a ceremonial ribbon cutting for the building, Samson declined to address specifics
The Residences at Water Square tower was built on the former site of Joe Louis Arena, which was demolished in 2019-20. | THE RESIDENCES AT WATER SQUARE
around overall lease velocity or an anticipated lease-up for the project. But it makes for a topic many real estate observers in the city are paying attention to, as the development aims to set a new bar in the city in terms of the rent charged and the amenities offered. See APARTMENTS on Page 16
Production pain point Auto suppliers call in the robots as labor woes persist — but they go only so far. Page 8
CONVERSATION DSO CEO wants to ‘get out of the hall more.’
SPORTS Three former Red Wings bring Zmash Padel to state.
REAL ESTATE 2 RenCen towers sold for one of the lowest prices per square foot in years.
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Proposal to double tourism funding falls short By Rachel Watson
Gov. Gretchen Whitmer on Feb. 7 proposed to include a total of $35 million for Pure Michigan and related marketing initiatives, falling short of a $50 million ask from the state’s hospitality and tourism leaders. If approved by legislators, the state’s 2024-25 budget would include a $15 million general fund allocation for Pure Michigan’s tourism promotion efforts. It also includes $20 million for unspecified “Michigan marketing initiatives” that would “build off” Pure Michigan and focus on “talent attraction, labor retention and relocating to Michigan, as well as broader population growth goals,” according to a statement Feb. 7 from the State Budget Office. The proposed additional $20 million would include $5 million in ongoing and $15 million in onetime funding. “Growing the state’s population is a key factor in boosting the economy and building shared prosperity across the state,” according to the statement, which noted the proposed allocations would help “to promote the state as a place to live, learn, build, work, play and succeed.” Crain’s sought further comment from the State Budget Office and
2 | CRAIN’S DETROIT BUSINESS | FEBRUARY 12, 2024
Downtown Mackinac Island at sunrise. | MACKINAC ISLAND TOURISM BUREAU
Whitmer’s office but did not immediately receive responses. The $35 million allocation is part of Whitmer’s overall $80.7 billion spending blueprint she presented Feb. 7 to the Democraticled state Legislature, which will consider it in coming months. The budget included big allocations for education, business attraction and support, and other initiatives designed to reverse Michigan’s population decline while also curbing costs. The budget presentation included little detail about Pure Michigan, but the issue is expected to come up as lawmakers pass their own versions of the budget and enter into negotiations in the
coming month. The proposed $35 million to support tourism and related marketing initiatives represents an increase over the current fiscal year allocation of just $15 million for Pure Michigan. The allocation came after the state’s tourism promotion office Travel Michigan received $40.3 million between state and federal funding in the prior year. The budget falls short of the $50 million hospitality and tourism officials pushed for last week ahead of the governor’s presentation. The Michigan Restaurant and Lodging Association, with an assist from the Michigan Travel Commission, on Feb. 6 launched
the Michigan Hospitality and Tourism Alliance, a collaboration with 10 other statewide and regional organizations representing hospitality and tourism-related industries. The group’s initial focus is to advocate for $50 million for the Pure Michigan advertising campaign in the 2024-25 budget. In future, the alliance will put forth additional policy recommendations. The Hospitality and Tourism Alliance on Feb. 6 also launched a bicameral, bipartisan legislative caucus co-chaired by Sen. John Damoose, R-Harbor Springs, and Rep. Will Snyder, D-Muskegon, which will work with the alliance to advocate for industry-friendly policies. Justin Winslow, president and CEO of the MRLA, did not immediately return calls for comment on Whitmer’s proposed Pure Michigan budget allocation. Previously, he told Crain’s that Michigan’s level of funding for the industry is “lacking” compared to other Midwestern states like Minnesota and Wisconsin, which allocated about $41 million and $67.4 million, respectively, for their 2023-25 tourism promotion budgets. “These are competing states, and we’re dramatically larger than them as a state, in terms of popu-
lation and total revenue, but we are lacking in our investment with $15 million being the existing Pure Michigan budget right now,” Winslow said. “The hope and the goal here is to unify with one clear message, at least out of the gate, the one thing that brings all these groups together — the desire to see Pure Michigan invested in a way that I think the data justifies, in a way that we are not being funded right now, for reasons that remain unclear.” After legislation enacted in 2010 allowed the state to include a separate budget line item specifically for tourism promotion, the Pure Michigan budget steadily grew from $25 million in 2011-12 to $35 million in 2018-19. Whitmer used a line-item veto in 2019 to nix that year’s planned $37.5 million allocation. The state allocated $15 million from the general fund during the pandemic years of 2020 and 2021. For the 2022-23 budget, Pure Michigan got a $15 million allocation from the general fund, $15 million in federal American Rescue Plan Act funds and a $10.3 million grant from the U.S. Economic Development Administration, for an all-time high budget of $40.3 million. David Eggert of Crain’s Detroit Business contributed to this report.
Players battle in a padel match at Zmash Padel in Sterling Heights. | JAY DAVIS
Ex-Red Wings bring padel to Michigan Zmash Padel combines tennis, racquetball and squash with pickelball By Jay Davis
A group of former Detroit Red Wings stars and a trio of partners have brought a new sport to metro Detroit to rival another that has exploded in popularity in the U.S. in recent years. Zmash Padel, which opened last month at 6635 Sterling Drive South in Sterling Heights, comes from former Wings players and Sweden natives Henrik Zetterberg, Niklas Kronwall and Gustav Nyquist along with Swedes and
padel enthusiasts Robert Kjellberg, Mikael Sjödahl and Johan Lindfors. The business operates under the umbrella of Kjellberg’s 4-year-old company First Class Padel International. The game of padel is a combination of tennis, racquetball and squash with some elements of pickleball mixed in. Like pickleball, padel is a decades-old game, first played in 1969 in Acapulco, Mexico. And just like pickleball, padel saw a major boost in play and popularity during the coro-
navirus pandemic. There are more than 65 public, private and residential padel courts in the U.S. and more than 25 million padel players in 110 countries, according to data from the International Federation of Padel and others compiled by padel.fyi. The global padel market size is expected to grow from $191 million in 2021 to $447 million by 2031, according to Business Research Insights. “When I retired from Detroit, I stayed in the area for a year be-
Bank seeks receiver for Troy Tech Park By Kirk Pinho
The bank that provided purchase financing for a Troy office portfolio is seeking a receiver on the properties after its buyer allegedly defaulted on its loan and admitted to a federal charge of conspiracy to commit wire fraud against a financial institution. Wells Fargo N.A. says in a federal court filing from last month that it provided at least $45 million in financing for Boruch “Barry” Drillman’s purchase of the Troy Technology Park properties at 1835-1975 Technology Drive and 1960 Ring Drive in 2020. The bank, headquartered in
San Francisco, says in the U.S. District Court for the Eastern District of Michigan filing that an entity called Mich Troy Technology LLC, the Troy Technology Park owner, is in default because not only has it missed its December loan payment and subsequent payments but its owner was charged with and pleaded guilty to the fraud charge. In December, Drillman pleaded guilty to what the U.S. Department of Justice has said was a $165 million scheme in which he and others took out loans to buy commercial properties using falsified documents inflating the purchase prices.
Former Detroit Red Wings Niklas Kronwall (from left), Henrik Zetterberg and Gustav Nyquist are now teammates in a new venture called Zmash Padel. | GETTY IMAGES
fore moving back to Sweden just before the pandemic. That’s when I was introduced to padel for the first time in Sweden,” Zetterberg told Crain’s. “Pickleball exploded in the U.S. during the pandemic. Padel did the same in Sweden. That’s when I
started to play a lot. That’s when the idea for (Zmash Padel) started because I thought it would work well in the U.S. and Michigan. It’s been a long road to where we are now.” See PADEL on Page 16
College enrollment in Michigan ticks up By Sherri Welch
This building at 1960 Technology Drive is part of the five-building Troy Technology Park complex. The park’s owner has pleaded guilty to a $165 million fraud involving its purchase in 2020, as well as an apartment building purchase in Cincinnati in 2019. | COSTAR GROUP
Among them was the 426,000square-foot, five-building Troy Technology Park east of I-75 and north of 14 Mile Road. Drillman faces up to five years in prison. See TROY on Page 17
Enrollment at Michigan’s colleges and universities increased slightly last fall after more than 10 years of declines for four-year universities and ups and downs at community colleges. The gains come after COVID19 pandemic-spurred losses, as well as a shrinking high school pipeline and economic factors. The upticks coincided with the rollout of the Michigan Achievement Scholarship last fall, but leaders also credit the increases to the retreat of the pandemic and other factors. Grant funding is growing at the state level with the achieve-
ment scholarships and federal level with increased Pell grants, providing more financial incentive for students to enroll, said Colby Spencer Cesaro, vice president at Michigan Independent Colleges & Universities, an association representing two dozen private colleges and universities. Institutions in Michigan are also expanding their outreach to student populations that are typically underserved and getting creative with direct-admissions programs, increased transfer agreements and expansion of dual-enrollment programs for high school students, she said. See COLLEGE on Page 17 FEBRUARY 12, 2024 | CRAIN’S DETROIT BUSINESS | 3
REAL ESTATE INSIDER
RenCen towers purchase price revealed
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he new owner of a pair of Renaissance Center towers paid one of the lowest prices per square foot for prime downtown office buildings in years. The buyer, Farmington Hillsbased Friedman Real Estate, dropped $15 million just for the real estate itself in the multi-property purchase that closed in December. Included in the sale were the 500 Tower and 600 Tower, both 336,000 square feet and 21 stories for a total of 672,000 square Kirk Pinho feet, plus the land in front of the two towers along East Jefferson Avenue. Jared Friedman, executive managing director of acquisitions and business development for Friedman Real Estate, told me recently that the purchase price listed in public records did not reflect the perhaps $10 million to $15 million being spent retaining Blue Cross Blue Shield of Michigan in the 500 Tower, as well as relocate some BCBSM employees into that building from the 600 Tower and building out space. Whether you factor those additional costs in or not, the RenCen sale still clocks in at one of the lower per-square-foot purchases of large downtown office buildings since 2010. If you factor that in for $30 million between the $15 million for the real estate and $15 million for BCBSM retention, that puts the rate at $44.64 per square foot. And if not, it comes in at $22.32 per square foot. The low purchase price on a prominent office property gives Friedman the flexibility, if it chooses, to undercut other competing landlords on rental rates for desirable waterfront space, said Steve Morris, a longtime broker focused on tenant representation with his Farmington Hillsbased Axis Advisors LLC firm. According to data from CoStar Group Inc., a Washington, D.C.based real estate information ser-
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based The Herrick Company Inc. paid $150 million for the new 20-story Huntington Bank tower on Woodward Avenue downtown. That sale price amounts to $355.08 per square foot. That one, however, is a bit of a different animal as it is a brandnew, build-to-suit single-tenant office headquarters completed in the last couple years rather than an early 1980s multi-tenant building like, for example, the 600 Tower.
Twelve Oaks, Great Lakes Crossing sign on to DTE green power effort
The Renaissance Center’s 500 and 600 office towers changed hands recently. | COSTAR GROUP
vice, the last time a downtown office building with more than 100,000 square feet sold for less than $45 per square foot was in 2021, when New York City-based Reign Capital LLC paid $15.5 million for AT&T Inc.'s 20-story addition to its central business district campus complex, a rate of $28.11 for its 551,500 square feet. But prior to that, you have to go back to 2015, when Joe Barbat paid $3.2 million for the 105,400-square-foot former Gabriel Richard Building on Michigan Avenue. That's a rate of about $30.38 per square foot. Regardless, the low purchase price can be attributed to the side effects of the COVID-19 pandemic, which has plunged office values across the country as hybrid work arrangements remain com-
The low purchase price can be attributed to the side effects of the COVID-19 pandemic, which has plunged office values across the country as hybrid work arrangements remain common. mon and landlords continue to look for ways to use office space that has gone dark. Friedman is fluent in repositioning real estate that has seen better days, I noted in this space last month. Here are the other large office buildings downtown that have sold at less than $45 per square foot since 2010, arranged by order of price per square foot, according to CoStar. ◗ David Stott Building, 1150 Griswold St. October 2013. Buyer: Bedrock LLC. Purchase price: $9.4 million. Price per square foot: $44.98. ◗ Marquette Building, 243 W. Congress St. December 2014. Buyer: Carlos Slim Helu. Purchase price: $5.775 million. Price per square foot: $33.97. ◗ Grand Park Centre, 28 W. Adams St. July 2013. Buyer: Princeton Management. Purchase price: $4.25 million. Price per square foot: $32.17. ◗ Former Chase Building, 611
Woodward Ave. April 2011. Buyer: Bedrock LLC. Purchase price: $16 million. Price per square foot: $29.24. ◗ One Woodward Avenue. November 2012. Buyer: Bedrock LLC. Purchase price: $8.35 million. Price per square foot: $22.55. ◗ Former Detroit Free Press building, 321 W. Lafayette Ave. October 2013. Buyer: Bedrock LLC. Purchase price: $4.23 million. Price per square foot: $13.98. ◗ David Whitney Building, 1 Park Ave. February 2011. Buyer: Roxbury Group. Purchase price: $3.3 million. Price per square foot: $13.20. ◗ First National Building, 660 Woodward Ave. August 2011. Buyer: Bedrock LLC. Purchase price: $8.1 million. Price per square foot: $9.52. ◗ Federal Reserve Building, 160 W. Fort St. January 2012. Buyer: Bedrock LLC. Purchase price: $959,000. Price per square foot: $6.63. ◗ Penobscot Building, 645 Griswold St. May 2012. Buyer: Triple Properties LLC. Purchase price: $4.8 million. Price per square foot: $4.82. ◗ 500 E. Lafayette Blvd. August 2013. Buyer: Blue Cross Blue Shield of Michigan. Purchase price: $1.4 million. Price per square foot: $4. At the higher end of the spectrum, for example, Southfield-based Redico LLC paid $81.5 million — $141.83 per square foot — for the 150 West Jefferson highrise in July 2016. Last year, Boca Raton, Fla.-
Twelve Oaks Mall in Novi and Great Lakes Crossing Outlets in Auburn Hills have become the first Michigan shopping malls to take part in Detroit-based DTE Energy Co.'s MIGreenPower program. The program, introduced in 2017, allows customers to pick how much of their monthly energy usage, in 5% increments beyond DTE's minimum of 15%, is powered by sources like wind and solar farms, said Steven Moore, senior director of central operations for Taubman Realty Group LLC, which owns the two malls and is a joint venture formed in late 2020 between Indianapolis-based Simon Property Group (NYSE: SPG) and the Taubman family. Taubman Realty has opted for 100% of the two mall's energy usage to come from wind and solar, and the company will pay a premium for that, which DTE then invests in the creation of more wind and solar farms. The decision results in the equivalent of offsetting greenhouse gas emissions of more than 5,600 gas-powered cars per year, Taubman says in a press release. The two malls use about 3.7 million kilowatt hours of electricity per month. “Our partnership with DTE further underscores our aggressive sustainability goals and our commitment to Michigan’s sustainable future,” Moore said in a press release. “MIGreenPower offers a meaningful way to reduce the environmental impact of our shopping centers without incurring the cost of installing and maintaining solar panels, which is an added benefit of the program that we hope more companies will explore.” Taubman Realty owns the real estate, and The Taubman Company LLC is responsible for management and leasing of the Taubman malls in the U.S., while Taubman Asia, headquartered in Hong Kong, is responsible for management and leasing of its malls there. Other real estate companies involved in the program include Dan Gilbert's Detroit-based Bedrock LLC and Southfield-based Farbman Group, among others, Crain's has previously reported.
Brokerage poised for statewide expansion By Nick Manes
Less than three years after its entrance into the metro Detroit market, @properties Christie’s International Real Estate continues to expand to new areas in Michigan and is pushing $1 billion in annual sales. The residential brokerage, an affiliate of a Chicago-based firm with its main local office in Birmingham, emerged in Southeast Michigan in early 2021 with a partnership deal with Alexander Real Estate, and right as the overall market was heating up amid record-low mortgage interest rates. Flash forward three years and the brokerage has grown from one office to eight. Now it’s putting boots on the ground in Ann Arbor and Petoskey and executives see opportunity to do the same in other parts of the state. To some extent, entering right as the residential market was on its way toward overheating and the downturn seen last year played to the brokerage’s benefit by relying on a “more traditional model,” coCEO Eric Walstrom said. “We rely more on quality over quantity, (the) quality of agent,” Walstrom said. “We tend to (lean) a little bit more towards more experienced agents who provide a higher level of service. And with the market slowdown — the customer, the client and consumer — they’re looking for a higher level of service. So in 2021 and 2022 … you know, my dog could have sold a house in 2022.”
Alex Irrer (left) and Eric Walstrom are co-owners of @properties Christie’s International Real Estate, based in Birmingham. | @PROPERTIES CHRISTIE’S INTERNATIONAL REAL ESTATE
But as interest rates have climbed — and fallen a bit recently — and inventory remains thin, that’s not so much the case. Yearto-date home sales statewide last year through November were down nearly 18% from the previous year, according to data from the Michigan Realtors association, which pulls figures from Realtor boards around the state. Home prices statewide increased 4% during that period. The decision to enter the Ann Arbor area, as well as the vacation home-heavy region of Petoskey in northern Michigan was done via organic opportunities as well as acquisition, but both allow @ properties to grow in two high-
Maple Theater closes after nearly 50 years By Jay Davis
An independent movie theater in Bloomfield Township that catered to small and mainstream films for nearly 50 years has closed its curtains. Owners Jon and Lauren Goldstein announced the immediate closure of The Maple Theater in social media posts and an email sent to theater members. The owners said they decided not to renew their lease at 4135 W. Maple Road that recently expired. The Goldsteins, under Cloud Nine Theater Partners LLC, operated the movie theater for 12 years. The 720-seat theater has been open since 1977 and underwent $1.5 million in renovations in 2012. “... after months of difficult deliberations, we have decided that it is time to end our run as operators of this wonderful institution,” the owners’ message reads. “We have been honored to be stewards of The Maple Theater and appreciate all the support and patronage from the community these past 12 years. With sincere gratitude and love, we thank everyone who bought a ticket, ate a meal, or
worked a shift. We will savor the memories from opening night, Secret Cinema, and the many celebrations and special events that will live forever in our memories. Being able to operate a theater in our own community was one of the great privileges of our lives.” The Goldsteins cited the effect the coronavirus pandemic has had on independent art house theaters. The Main Art Theater in Royal Oak closed in 2021 after 80 years in business and was demolished. Cinema Detroit closed its Midtown theater space in June after 10 years in business, but has since resumed operations as a pop-up. The Goldsteins said they entered into an agreement with Emagine Entertainment Inc. for its Maple Club Elite members to get complimentary one-year Emagine Extras memberships. Those holding Maple Theater gift cards can exchange them for an Emagine gift card at the Birmingham 8 movie theater. All pre-purchased tickets to The Maple Theater shows will be refunded. Ownership could not be reached for comment.
end parts of the state. The addition of offices in Ann Arbor, Petoskey and growth around metro Detroit stems largely from the firm’s executives seeking to create a network between agents and their clients, according to Walstrom. “As a real estate broker, that kind of is your job,” he said. “Other than the properties on the market, you’re putting deals together, putting buyers and sellers together. So creating this network of all these great agents in these key markets where we’re already doing transactions, that’s kind of the reasoning behind it.” The metro Detroit brokerage did about $900 million in sales vol-
ume last year with 175 agents. Walstrom said he expects to exceed $2 billion this year. The brokerage was already seeing many of its agents doing deals in Ann Arbor, so opening an office there made for a natural decision, according to Walstrom. Sales of homes in the college town priced at more than $1.5 million grew by more than five times from 2018 to 2022, as Crain’s has reported. With a new office at 912 N. Main St., the brokerage has tapped veteran agents Sheila Hoeft and Giselle Gaitan, both from Reinhart Realtors, and more agent announcements are expected. “With market-leading affiliates in other prominent university
towns, as well major U.S. cities, global financial centers and luxury vacation destinations, Christie’s International Real Estate is a great fit for Ann Arbor,” Natalie Hamrick, president of affiliate services and growth with @properties affiliate Christie’s International Real Estate, said in a statement. “We can service local clients’ real estate needs all over the world, and the ability to partner with Christie’s on the sale of art and luxury collections will be appreciated here, as well.” Meanwhile, in Petoskey, about 70 miles north of Traverse City, the local @properties franchise has acquired another Christie’s office, boutique brokerage North Harbor, and veteran broker Jeff Wellman will remain as a sales agent with the rebranded firm, according to a news release. Financial terms of the deal in Petoskey were not disclosed. The release notes that roughly three-quarters of buyers in the Petoskey area, settled around Little Traverse Bay, come from the Detroit and Chicago metro areas. “Northern Michigan has a really strong pull even for people who have relocated out of state for work or retirement. They might sell the homestead in Detroit or Grand Rapids, but they still want to keep a place up here,” Alex Irrer, co-owner with Walstrom of @ properties, said in a statement. “This is a magical place for so many of us, and we’re beyond excited to represent it while being able to really improve upon the product the market receives.”
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FEBRUARY 12, 2024 | CRAIN’S DETROIT BUSINESS | 5
FROM THE EDITOR
Bounceback of downtowns vital to health of cities
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riving into Detroit in the morning glow, the tower taking shape at the former Hudson’s site downtown is reshaping the skyline alongside the Renaissance Center and other iconic structures. Heading into Grand Rapids from the south, the tower under construction at Studio Park is changing the view of downtown in its own way. Both are transformational projects that signal downtowns on the move. On opposite sides of the state, Michigan’s two largest cities, most would agree, are making important strides forward economically. Challenges remain, of course, but the momentum is headed in Mickey the right direction. Ciokajlo is Whether they’re big executive editor projects like the Hudof Crain’s Detroit Business son’s site or the Book Tower redevelopment or and Crain’s major events like the Grand Rapids NFL Draft in April, a lot Business. of energy is going into downtown Detroit. In Grand Rapids, the Studio Park project has put its stamp on the south end of downtown, while ground is expected to break this year on a 12,000-seat riverfront amphitheater and plans are in the works for a soccer stadium. Downtowns are much more than a few major projects or events, but these big
The Hudson’s tower, the building with the crane behind Ford Field in this photo, has risen to become part of downtown Detroit’s skyline. | MICKEY CIOKAJLO
efforts can help kickstart activity that all but ground to a halt during the pandemic. In a recent Crain’s Forum, which is our monthly deep dive into important public policy issues, senior reporter Kirk Pinho took a close look at Michigan’s downtowns to see how they’re doing in the wake of the pandemic. As you can imagine with a state as diverse as Michigan, the results vary from place to place. But Pinho and experts who shared their experiences and offered ideas and examples of success that all could learn from. One key takeaway was that while big projects and major events are certainly helpful, smaller, ongoing activities can be even more important to the lifeblood of a downtown. Pinho’s reporting cited things like yoga in the park, pottery demonstra-
tions and free trolley rides as less flashy efforts that nevertheless can be vital to a downtown’s health by circulating people throughout on a regular basis. Social districts and downtown gift cards are among other activities that can also make a difference at the street level. Downtowns are uniquely positioned to offer certain experiences. For example, in the summer I enjoy taking a strolling lunch break to Rosa Parks Circle in Grand Rapids where food trucks line up and musicians perform as part of the Relax at Rosa weekly series. Work from home has posed challenges to downtowns across the country as fewer workers come into the office. Just as working in the office, even on a hybrid schedule, has intrinsic value as co-workers have opportunity to interact
face to face, I feel the same way about walking around downtown. Whether it’s stepping away from the desk and taking a brief stroll or going to a downtown restaurant on a Friday night, the opportunity to see, hear and feel something new is heightened when you’re among a mix of people in an interesting place that is alive with energy, history and culture. Yes, we’ve all heard the criticism that we can’t focus on downtowns and ignore neighborhoods. That’s a given. But the health of a city, indeed a region, requires a vibrant, attractive and safe downtown at its core. There’s a lot of work to be done, yet from Detroit to Grand Rapids it seems the pieces are in place to keep the momentum going to reinvent our downtowns and, in some cases, their skylines.
COMMENTARY
Prevailing wage law will harm taxpayers — and our job providers
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ongoing commitment to provide eginning this month, all quality heating and cooling service contractors and subcontracto the commercial and industrial tors in Michigan will be remarkets in Michigan, we are a 100quired to pay their employees artipercent employee-owned compaficially established wages set by ny. That means Pleune has a fiduthe government on publicly fundciary responsibility to our employed state construction projects. ees. The simple truth is that we Restoring our state’s prevailing already pay premium wages to our wage law will raise costs for Michipeople because we value and gan taxpayers, increase construc- Ken greatly appreciate the work they tion costs on important projects Misiewicz is like road improvements, and hin- CEO for Pleune do, and in a competitive market, it’s critical to keep good people. der the growth of our economy. Service Co., So why is the new prevailing But for merit shop contractors like which is located wage law too risky? With any largeus, the new prevailing wage law in Grand scale construction project, there is also represents a clear and present Rapids and a general contractor and a numdanger to the health of our busi- Lansing. ber of subcontractors performing nesses. For our company, it isn’t just a cost issue; it’s about the inherent risk various duties. However, with a prevailing wage project, the contracting agent must to the livelihoods of our valued employees. That’s why Pleune Service Co. has made ensure every employee on the project is the difficult decision to no longer bid for compensated for the prevailing wage republicly funded state projects once the law spective to their specific job title and the goes into effect on Feb. 13. Although a sig- task they are performing at any given time. nificant percentage of our construction That includes every employee working for work has historically been on state-funded the many independently owned subconprojects, we are now looking for projects tracting firms on the project. And there’s not just one prevailing wage; elsewhere. It’s important to note that along with our there are a number of different wages based
on the level of experience and classification of each employee, which creates unnecessary complexity and adds administrative costs. The reality is that the contracting agent can be held responsible for any subcontractor underpayments and incur thousands of dollars in fines, even for innocent mistakes. Along with being jointly and severally responsible for potentially thousands of dollars in fines, the contractor’s right to proceed with the project may also be abruptly terminated under the law with the risk of having to pay for another contractor to finish the work. The state also has the power to enter any prevailing wage project site without provocation during normal hours of operation to inspect payroll records, interview employees, and conduct wage surveys of employees. In addition, the state has the right to interview employees, supervisors, and others, in private without third parties, to discuss wages, benefits, classification, or other information. This type of government overreach has no place in our free-market economy and will only discourage economic growth. We worked successfully under the state’s
Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited for length or clarity. Send letters to Crain’s Detroit Business, 1155 Gratiot Ave, Detroit, MI 48207, or email crainsdetroit@crain.com. Please include your complete name, city from which you are writing and a phone number for fact-checking purposes. 6 | CRAIN’S DETROIT BUSINESS | FEBRUARY 12, 2024
previous prevailing wage law before the Legislature voted to repeal the law in 2018. But every contractor in Michigan needs to realize the new prevailing wage law is vastly different from the previous law. And here is the cherry on top for Michigan union leaders — as written, the new law allows “third parties” who are not even on the job site to file complaints for violations of the new law for three years. So if a union boss hears that a worker was improperly paid, the boss can file a complaint against the contractor or subcontractor. Lastly, because costs will increase on publicly funded projects, entities like public schools may have to reduce the scope of building construction projects to help offset the cost hike. Simply put, taxpayers will pay more for less. So now, as the prevailing wage law takes effect, contracting agents and construction managers are scrambling to figure out how to proceed with bidding and issuing contracts because the rules to govern the law haven’t been written yet. Some contractors are in denial, others say they’ll just figure out how to do these projects “smart.” Frankly, we don’t know how to play Russian Roulette “smart.”
Sound off: Crain’s considers longer opinion pieces from guest writers on issues of interest to business readers. Email ideas to Managing Editor Michael Lee at malee@crain.com.
Lear hits record sales but EV backlog shrinks By Kurt Nagl
Lear Corp.’s income increased significantly on record sales of $23.5 billion in 2023, but the supplier’s backlog has shrunk amid a pullback on electric vehicles. The Southfield-based company, which makes seats and electrical components for cars, saw adjusted net income grow nearly 40% to $710 million on revenue that was up 12% year-over-year. Lear (NYSE: LEA) finished the fourth quarter with $177 million in adjusted net income, up 5% from the year prior, and $5.8 billion in revenue, a 12% increase. Adjusted earnings per share climbed by 8% to $3.03 in the quarter. On the year, earnings per share jumped 40% to $12.02, reflecting higher earnings and a benefit from a share repurchase. Executives pointed to two main issues the company faces: wage inflation and EV uncertainty. The latter they have only so much control over, but taming wage inflation is a key priority, and a big part of the answer is automation, CEO Ray Scott said. “Our focus this year is on accelerating automation to address wage inflation and improve efficiencies in our plants,” Scott said Feb. 6 on a call with investment analysts. CFO Jason Cardew said wages are increasing at twice the clip of the typical 3%-4% annual hike, which is having a substantial impact on the bottom line. As a result, officials are trying to automate the labor-intensive cutand-sew trim operations, which account for 30% of the seating business, as well as the wire and trim operations, which are 90% of the e-systems business. Labor costs are a big concern despite the company sourcing 85% of its more than 160,000 global workforce from low-cost countries. Wage inflation around the world, including in manufacturing-rich Mexico, has created headaches for many suppliers. The company’s goal is to offset half of the wage inflation through operational efficiencies, such as automation, while covering the rest through commercial negotiations with automakers, the executives said. On operational efficiencies, Scott took a victory lap on a big conquest win from last year when Lear took over the Wagoneer and Grand Wagoneer programs, which was bleeding Forvia of tens of millions of dollars before it brokered an exit with Stellantis. “Unprecedented. Never done before in the history of seating,” Scott said. “We had our capital. We wouldn’t even take the capital from our competitor because it was that bad from a throughput standpoint and how it was working within their facility. We produced more output than they could ever produce in their three years of trying to hit their daily volumes. Our quality — our customers said it was superior to our competitor that was producing those parts for years. That gives me excitement.”
Lear, which completed its acquisition of Germany-based I.G. Bauerhin, is in the validation stage of thermal comfort solutions with 11 customers, Scott said. Key launches this year include the just-in-time thermal comfort business on the Ram 1500 REV and 1500 Ramcharger and the just-intime trim business for the Chevrolet Equinox and GMC Terrain. Lear’s backlog for 2024 and 2025 had previously been pegged at $1.5 billion, but it shrank to $1.2 billion as automakers pulled back on EV launch plans. Dramatically lower EV volumes and projections have left suppliers fi-
nancially vulnerable. Lear executives said they are addressing the issue through negotiations with customers and by reining in spending. The company cut capital expenditures by $50 million last year, Cardew said. Lear’s planned $80 million battery parts plant in Independence Township, which was to supply General Motors Co.’s Orion Assembly, was put on hold, though the company has declined to comment on it. Build-out of that plant was to have started last spring, but the township hasn’t heard from the supplier in nearly a year, according to a township official.
Southfield-based Lear Corp. makes seats and electrical components for vehicles. | LEAR
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MANUFACTURING
The r man symb Finaz robo
Automakers seek to take the complexities out of the manufacturing process by standardizing platforms and streamlining assembly lines with automation. | SCREENSHOT
Auto suppliers call in the robots as labor woes persist — but they only go so far By Kurt Nagl
Manufacturers large and small are leaning on automation to address labor scarcity and wage inflation in the sector, but the robot rush has further exposed the underlying issue. There aren’t enough people to integrate them all, said Lou Finazzo, vice president of automotive at robot behemoth Fanuc Corp. Automakers, component suppliers and other manufacturers snatched up robots at record numbers a couple of years ago, but those robots couldn’t outrun the labor shortage, which remains the most stubborn pain point for manufacturers. When automakers dove headfirst into electric vehicles, the supply chain struggled to keep pace. “Last year, they all went so hard into this EV space that they took on all these new platforms, programs and technologies … trying to get ahead and get some market share,” Finazzo said. “People bought at a rapid rate, a lot of programs simultaneously, and because of that, there’s just not enough integrators to get it done.” Automation has become more important than ever, according to industry experts and executives. In addition to a persistent worker shortage, historic pay increases in the United Auto Workers-Detroit 3 contracts are trickling through the supply chain, saddling every man8 | CRAIN’S DETROIT BUSINESS | FEBRUARY 12, 2024
Robotics orders While steadily increasing overall, orders for robotics in North America plunged in 2023.
Automotive components
Automotive OEM
Other orders
40,000
30,000
20,000
10,000
0
’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23
Source: Association for Advancing Automation
ufacturer with higher labor costs. “As labor costs go up, you want to be more efficient so you can absorb that,” said Tom Kelly, CEO of Automation Alley, a Troy-based manufacturing advocacy group. That’s where robots come to the rescue. Automakers are seeking to take the complexities out of the manufacturing process by standardizing platforms and streamlining assembly lines with automation. The problem is that they were
trying to do it as fast as possible and all at the same time, Finazzo said. General Motors Co. went public with an automation integration problem last summer when CEO Mary Barra told investment analysts that delays by an automation vendor were hurting GM’s EV rollout strategy. The relationship between automaker, robot manufacturer and integrator is more symbiotic than it ever has been, said Finazzo, whose
company is supplying GM with robots for its EV tool-up. Supply chain and labor issues, combined with product design changes have made launches more challenging. “The old style was to make systems very rigid and design to a product. Now it’s design to be flexible because by the time I finish the design, more than likely the product has changed,” Finazzo said. “So that’s what the integrator community was dealing with the last 18 months. It’s very, very difficult.” “The integrators have a bigger problem than the OEMs with the labor gap,” he added. “There’s just not a lot of people out there coming into this field.” As is the general rule in automotive, the further down the supply chain, the more damaging the impact of industry headwinds. The labor problems for automakers and integrators is more of a crisis for tier one suppliers on down. For Southfield-based Lear Corp., one of the largest auto suppliers in the world, automation is a key priority this year. “Our focus this year is on accelerating automation to address wage inflation and improve efficiencies in our plants,” CEO Ray Scott said on a call with investment analysts last week. CFO Jason Cardew said wages at the seating and electrical components supplier are increasing at twice the clip of the typical 3%-4%
annual hike, which is having a substantial impact on the bottom line. As a result, officials are trying to automate the labor-intensive cut-andsew and wire-and-trim operations. Labor costs are a concern despite the company sourcing 85% of its more than 160,000 global workforce from low-cost countries. Wage inflation around the world, including in manufacturing-rich Mexico, has created headaches for many suppliers. Among them is Troy-based Aptiv plc, which also has a heavy presence in Mexico, employing thousands of workers across 32 plants in the country. CEO Kevin Clark said on his earnings call Jan. 31 that the company recently launched its first highly automated production line, covering all aspects of system assembly. “With this new technology, we expect to increase current automation levels to approximately 30% by 2026, putting us on a path to over 50% automation by 2030, which will improve efficiency and product quality while also reducing labor dependency and the associate exposure to inflationary pressures,” Clark said. Aptiv competitor Continental is also deploying more automation from robots on the assembly line to artificial intelligence for data mining, said Aruna Anand, CEO of the supplier’s North America automotive sector based in Auburn Hills.
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Continental aims to think like a software company By Kurt Nagl The relationship between automaker, robot manufacturer and integrator is more symbiotic than it ever has been, said Lou Finazzo, vice president of automotive at robot behemoth Fanuc Corp. | FANUC
“If this work is intense work, similar pattern, I’m better off putting it to a machine so I can focus on bigger and better things, and then I can focus on other concepts, other functions, other features,” Anand told Crain’s in a recent interview. Robot orders dropped last summer to 7,697 units in North America, a 40% decline from its peak in the prior year, according to trade group Association for Advancing Automation. While that might signal an end to the automotive feeding frenzy, Finazzo said, sales are expected to return to more normal levels in parallel with more consistent product launches. “Companies are aggressively looking at how to automate, driven by labor shortages and the need to stay competitive,” said Jeff Burnstein, president of the automation trade group.
‘We’d be dead’ Not just automotive companies are relying on automation. Robots saved Drew Greenblatt’s small manufacturing business from going under. Madsen Steel Wire Products makes racks and shelves for displays at Walmart and other grocery stores. It’s the type of work normally found in Mexico or China, but the company announced last year a $7 million investment in Bronson, east of Three Rivers in Southwest Michigan, and plans to create 70 jobs. Production at the 100,000-squarefoot plant started last fall. “If we had not automated, we’d be dead and all of this job creation would not have occurred,” Greenblatt told Crain’s. In the past 10 years, the company has invested more than $6 million in automation, he said. Madsen has half a dozen robots at its Bronson plant, including Fanuc robot arms and a robotic welder made by Swiss manufacturer Schlatter — the fastest one in the Western hemisphere, Greenblatt said. It can weld 400 shelves in an hour, compared to the competitor’s 50-100. Only about eight per hour can be done by hand. The machine, Greenblatt said, will allow the company to win more business and employ more people. “The way to grow jobs is by using a lot of automation,” he said.
Continental, a 150-year-old company synonymous with car tires, wants you to know that it’s not your father’s automotive supplier. For Aruna Anand, CEO of the German supplier’s North America automotive sector, nextgeneration technology and business optimization are the core focus as the company goes through restructuring and electric vehicle growing pains on the global level. Continental hosted media and industry members recently at its Auburn Hills base for a post-CES showcasing of the supplier’s latest wares, from sleek, Swarovski crystal displays to 180-degree corner modules and its smart cockpit high-performance computer. On the sidelines of the exhibit, Anand, who took the helm a little more than a year ago, explained how the rulebook for suppliers has changed as the industry moves at an unprecedented pace. “The business models are evolving,” Anand told Crain’s. “We need all of us to reinvent ourselves. We need to be able to offer services, either selling software or selling a function or different kinds of integration services, as well as selling hardware and software the traditional business also holds.” The supplier’s pursuit to dominate the software-defined vehicle comes amid financial troubles. Parent company Continental AG said late last year that it would lay off thousands of workers globally to reduce costs as it explores strategic alternatives for its automotive business, including asset sales and carving out its user experience unit, Bloomberg reported in December. In North America, Anand said the company is constantly evaluating opportunities to optimize the business, from its footprint to manufacturing operations. The company declined to detail what impact the cost cutting and planned layoffs would have on
the region. “We are constantly looking at all of our footprint, especially now to see if there’s a need to optimize,” Anand said. “We’re trying to adapt as fast as we can to this environment.” Continental employs nearly 16,000 people in the U.S. across three business sectors: automotive, ContiTech and tire. In Michigan, it employs more than 1,500 people, around 75% of them in Auburn Hills. Its automotive sector includes four business areas: architecture and networking, autonomous mobility, safety and motion and user experience. The blazing speed of vehicle development today compared to just a couple of years ago has led to another new dynamic: supplier partnerships. In the cutthroat world of automotive supply, relationships have traditionally been one-to-one, but now automakers want the best of everything and Continental can capitalize on integrating it, Anand said. “There are other suppliers that are uniquely positioned to offer other features,” she said. “So then the question becomes, if more are able to collaborate on different aspects of the software, the better it gets overall. You don’t have to be stuck with a one-to-one relationship. It can be one-to-many in terms of everybody providing the best pieces of software.” As an example, she points to its first high-performance computer in Volkswagen’s ID.3, which Continental developed with nearly 40 different software providers. Partnerships were a key theme throughout the supplier’s tech exhibit, too. At the autonomous valet parking booth, a Continental representative detailed how the company can use sensors installed in infrastructure, such as a parking garage, airport or stadium, to communicate with cars to park themselves. The company is working with Bosch at the Detroit Smart Parking Lab and exploring opportunities for interoperability, the rep said.
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Continental employee Peter Olejnik shows off the auto supplier’s 180-degree corner module at the company’s Auburn Hills base. | KURT NAGL FEBRUARY 12, 2024 | CRAIN’S DETROIT BUSINESS | 9
FOCUS MANUFACTURING
UAW says it won affiliate vote at plant in Howell
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By Kaitlyn Luckoff, Automotive News
By J
The UAW said hourly employees at an Antolin Interiors USA plant in Howell voted to affiliate with union Local 163. In the election, announced Feb. 2, 238 workers voted in favor of affiliating and 42 voted no, said Ralph Morris, UAW Region 1A’s servicing representative. The bargaining group covers 388 workers, he said. The UAW began the organizing drive in October. The Antolin workers produce instrument and door panels for Ford Motor Co., General Motors, Stellantis and Paccar, the union said in a statement. Repeated attempts on Feb. 2 to reach a spokesperson for Spainbased parent company Antolin for a response were unsuccessful. Assuming there are no appeals, objections or legal delays, the UAW and Antolin would presumably proceed with contract negotiations. Union members “will elect their bargaining representatives, and they will put their demands in to work on the issues that they want to see corrected at Antolin Howell,” Morris said. “Then they’ll send notice that they want to bar-
BLOOMBERG
Gestamp is planning to weld steel assemblies at a new 460,000-square-foot plant in Macomb County. | FA STUDIO
gain with the company.” Last fall, the UAW solidified contract terms with the Detroit 3 automakers after several weeks of “stand-up” strikes, winning major wage increases and improved benefits. The union has since launched an unprecedented campaign to organize 13 nonunion automakers operating plants in the U.S., including Volkswagen Group, Toyota Motor Corp. and Tesla Inc., among others. Morris said the Detroit 3 agreements raised awareness for workers wanting to have input in their companies’ policies. He said the union drive with Antolin employees has been in the works for years, even before the COVID-19
pandemic. “I think with the strike, it reignited interest, and the workers said that with the stand-up strike ... they made the decision that they wanted to bargain collectively with their employer, so they all came together and organized a union.” Antolin has been aggressively building its interiors unit in Michigan and in the region following a $525 million acquisition of the business from Canada’s Magna International Inc. in 2015. Antolin, in Burgos, Spain, ranks No. 55 on the Automotive News list of the top 100 global suppliers, with worldwide parts sales to automakers of $4.7 billion in 2022.
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GM supplier plans new factory, 390 jobs in Macomb County By Kurt Nagl
Spanish automotive supplier Gestamp is planning to build a 460,000-square-foot plant in Macomb County that would employ 390 workers and feed parts to General Motors Co.’s Orion Assembly factory. The company, whose North American headquarters is in Troy, would occupy the build-tosuit development on a 42-acre plot at 52153 Sierra Drive in Chesterfield Township, according to a site plan submitted to the township. The plan allows for a 300,000-square-foot future expansion. Site pre-development work is underway for the project, which received planning commission approval late last summer. It still must pass an engineering review and receive a building permit, said Jonathon Palin, director of planning and zoning for the township. The building will be made up of 450,000 square feet of manufacturing and warehouse space, plus 10,000 square feet of office space. Construction is expected to be complete by the beginning of next year. Workers at the factory will weld steel blanks to make assemblies for vehicles. The assemblies will be warehoused and shipped to GM’s Orion Assembly, according to sources familiar with the deal. The automaker delayed production of the Chevrolet Silverado EV and GMC Sierra EV at the assembly plant to late 2025, due in part to softer than anticipated demand. Its crosstown competitor Ford Motor Co. is grappling with the same issue, cutting planned production of its F-150 Lightning electric pickups by half this year. Dramatically lower EV volumes and projections have left suppliers in the lurch and financially vulnerable. EV uncertainty has also imperiled supplier projects around town, such as Lear Corp.’s
planned $80 million battery parts plant in Independence Township, which also was to supply Orion Assembly. Build-out of that plant was to have started last spring, but the township hasn’t heard from the supplier in nearly a year, according to a township official. Work continues on Magna Seating’s planned 300,000square-foot manufacturing plant in Auburn Hills, where the supplier said it will invest $100 million and create 500 jobs to supply Orion Assembly. The construction cost is $42.5 million for the Gestamp building, which is being developed by Farmington Hills-based JB Donaldson Co., according to the township. Southfield-based FA Studio LLC is listed as the architect. Total planned investment for build-out is unclear. Gestamp and GM declined to comment. If completed according to plan, the project would be a major economic development win for Macomb County. Alro Steel Corp. is plotting another big project in the east-side suburbs — a 250,000-square-foot metals distribution plant next to the former Gibraltar Trade Center site in Mount Clemens. The Michigan Economic Development Corp. declined to comment on the Gestamp project or whether it is seeking state incentives. In addition to its Troy administrative base, Gestamp operates a research and development lab in Auburn Hills, which it opened in 2017. At the time, the company’s total headcount in Michigan stood at 850. It also has manufacturing plants in Chelsea and Mason, where it invested $158 million in 2016. Those plants produce chassis parts and steel stampings for doors, bumpers and other assemblies. Gestamp had $10.3 billion in revenue in 2022 and nearly 43,000 employees worldwide.
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Better days could be ahead for auto suppliers By John Irwin, Automotive News
This year could prove to be a bit brighter for auto suppliers than the past five as vehicle production levels stabilize, interest rate hikes stop and parts makers get more pricing relief from automakers. However, significant challenges remain for suppliers, whose profit levels have generally remained well below what they were before the COVID-19 pandemic and subsequent supply chain challenges and parts shortages. Dan Hearsch, Americas co-leader of the automotive and industrial practice at AlixPartners, said 2024 is looking to be a “bit better” for suppliers, saying companies are “optimistic but fragile” at the moment. Forecasters expect steadier vehicle assembly volumes this year, he said, although debt levels at the world’s 300 largest suppliers remain elevated compared with preCOVID levels. “Net debt is still really high in the supply base, so you’ll have
companies that have restructured that will have to continue restructuring,” he said. “But credit ratings have been improving. And suppliers have been getting some financial relief from OEMs.” Quarterly earnings reported by suppliers in recent weeks will provide a glimpse into how some of the world’s largest parts makers are faring, especially coming off of last year’s UAW strike, which brought vehicle assembly at many Detroit 3 plants and the factories that supply them to a halt. Suppliers that reported quarterly earnings in late January generally appeared to have higher profits than a year earlier, a good sign for a supply base that feared worst-case scenarios heading into the UAW strike. Autoliv said fourth-quarter adjusted operating profit rose 43% from a year earlier to $334 million, a boost driven in part by higher production levels and by automakers covering some of the supplier’s higher energy and freight costs, Au-
tomotive News Europe reported. Meanwhile, fourth-quarter net income at tech supplier Aptiv soared nearly fourfold to $905 million due to strong demand, offsetting the impacts of the UAW strike and other headwinds on the quarter. “Our global reach and ability to execute highly complex programs perfectly positioned Aptiv to win new business and gives us a [forecast of ] $35 billion of business awards in 2024,” Aptiv CEO Kevin Clark said on a Jan. 31 call with investors. Hearsch said the expectation of interest rates falling over the course of the year will be good news for suppliers. According to AlixPartners data, net debt at the world’s 300 largest suppliers surged 27% from 2021 to 2022 and remained elevated in the first half of 2023, whereas debt levels fell among automakers during that time. Meanwhile, as debt rose for suppliers, profit margins remained depressed compared with
Quarterly earnings reported by auto suppliers in recent weeks provide a glimpse into how some of the world’s largest parts makers are faring. | ADIENT
the previous decade. According to a Bain analysis, suppliers averaged profit margins of around 4.7% in the third quarter of 2023, compared with 8.1% five years earlier. Those figures could improve in 2024 if vehicle production volume remains steady, Hearsch said. “If volumes fall off, even for a period, that creates a cash crunch,” he said. “So you’ll still have companies failing. We’ve seen some of the OEMs are taking additional steps to get ready to shore up their troubled supplier capacity.”
EV transition Improved profit levels could also help suppliers make their
transition to electric vehicle parts production smoother, especially as companies make long-term investments while remaining nimble enough to produce traditional components in the short term. That balancing act has been trickier in recent months as U.S. EV sales growth slowed and some automakers paused their plans. This year and next will reveal a lot about how the EV transition might go for suppliers as automakers roll out new electric models, said Michael Robinet, executive director of automotive advisory services at S&P Global Mobility. “There’s still a good number of launches going on in 2024 and 2025,” he noted. “So it’s going to be a critical year.”
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Penthouse in Westin Book Cadillac again hits the market By Nick Manes
The owners of a penthouse condo unit at the Westin Book Cadillac in downtown Detroit hope this time will be the charm for selling the 2,900-square-foot, two-story unit. On and off the market since around the onset of the COVID-19 pandemic in 2020 — and once priced as high as $2.6 million — owners Brian and Sam Ferrilla hope that the work they’ve put into their “urban cottage” in Detroit’s central business district will prove fruitful as they seek a buyer with a price of $1.8 million. The relisting of the three-bed, three-bath unit with broker Matt O’Laughlin of Max Broock Realtors in Detroit comes as the high-end condo market in and around downtown Detroit continues to struggle amid a limited buyer pool and a glut of inventory, though that situation seems to be improving. Having put roughly $750,000 into renovations in the unit —
here. . . .In the next year or two years, things may get back to what they were.” Sam Ferrilla pointed to the nearby Capitol Park district of Detroit’s central business district, calling it the “best part of the city,” and noted that it serves as a “backyard” for downtown residents. The 33-story hotel building, commissioned by the Book brothers and designed by Louis Kamper in 1924, was once the tallest hotel in the world. Cleveland-based The Ferchill Group bought the Neo-Renaissance building in 2006, which had been vacant for more than two decades, and invested $200 million to renovate it and reopen the hotel in 2008. The more than 450-room hotel building now contains a total of 64 condo units on the top floors, including six penthouse units. Two of those units remain unfinished since the redevelopment of the historic building in 2008. In late 2020, one of the units sold for more than $3.5 million, which at the time was thought to be the most expensive single-family home sale in decades, as Crain’s reported in 2021. The hotel rooms, common areas and a residential lounge recently went through a $23 million renovation after coming under new ownership.
The 33-story Westin Book Cadillac hotel building in downtown Detroit, commissioned by the Book brothers and designed by Louis Kamper in 1924, was once the tallest hotel in the world. | COSTAR GROUP INC.
“In the next year or two years, things may get back to what they were.” — Brian Ferrilla, penthouse condo owner largely a “down-to-the-studs” rehab of the second floor that involved creating a way to move furniture in and out, as well as installing brick walls and a Detroit-centric design scheme — the couple remains optimistic that the unit and its 29th-floor views as well as the building amenities will prove desirable. Some external factors could also help, said Brian Ferrilla, a technology entrepreneur. “I’m an optimist, Sam is an optimist,” he said. “You see Detroit this last year. The Lions and what they’re doing. The (NFL) Draft is coming up. So much is happening
Improving condo market? As major league fans of the Detroit Lions and the host of other entertainment options popping up in the downtown area over the last decade, the Ferrillas opted to purchase the unit in the summer of 2015 for $650,000, according to public records. However, over the last several years, they’ve wanted to spend more time at their home in northern Michigan and no longer have a need for as large a space
The renovated kitchen in the Westin Book Cadillac penthouse condo offers sweeping views of downtown Detroit and beyond. | INTERIOR PHOTOS BY NATHAN TAIB/ONDEMAND PIX
downstate. But the onset of the COVID-19 pandemic led to a stalling of the then-booming condo market, and a sale has proved elusive. Some indicators, however, show the situation is improving. A condo market report released Feb. 2 by Detroit-based brokerage The Loft Warehouse shows that condo sales by dollar volume increased last year compared with 2022 by 14%, with total sales activ-
ity of $107 million. Total transactions declined 6% year-over-year to 322. Less than a mile to the west, in the Corktown neighborhood, a 5,600-square-foot condo owned by the family of Michigan Lt. Gov. Garlin Gilchrist has sat on the market since last summer. Gilchrist has since dropped the asking price 10% to $1.7 million. What sets the Ferrilla unit apart, according to O’Laughlin, is the lo-
The owners put roughly $750,000 into renovations of the unit, including brick walls in a cozy second-floor space (top).
cation on the hot block of Washington Boulevard, just down the street from the newly renovated and historic Book Tower. “As far as for-sale penthouses go in the central business district, there’s only a handful of them,” O’Laughlin said. “This one has arguably the best views in the city. And fully remodeled. . . .So I think pricing will drive the buyer to it now that it’s priced correctly for today’s market conditions.”
MSU’s Woodruff to serve as special adviser in short term By Sherri Welch
When Teresa Woodruff hands over the reins to Michigan State University’s new president next month, she’ll move into a new short-term administrative role before rejoining the faculty. Woodruff will become special adviser to the president and provost in March when incoming president Kevin Guskiewicz takes on oversight of the university. In the new role, Woodruff will focus on developing honorifics, which in the higher education world is a way of elevating, recognizing and promoting highly prestigious awards of faculty and research projects, said Emily 12 | CRAIN’S DETROIT BUSINESS | FEBRUARY 12, 2024
Thomas Jeitschko, inGuerrant, vice president terim provost and execuand university spokespertive vice president for son. academic affairs, created Those efforts tie into the position and asked Michigan State’s 2030 for the advisory role beMSU Strategic Plan and fore Woodruff transitions are a key component of into other duties, Guerbeing part of the Associarant said. tion of American Univer- Teresa Woodruff “It’s a transitioning pesities, Guerrant said, noting that in her earlier role Woodruff riod for her to help in this area, increased the effort that the Office also, as we transition closer to the of the Provost put into identifying start of the new academic year that and promoting honorifics for fac- really gets off the ground in August,” she said. ulty members. Honorifics “is something Woodruff has led MSU since October 2022 following the resig- (Woodruff ) is passionate about,” nation of President Samuel Stan- Guerrant said. “The advisory role she will take ley Jr., who cited a lack of confion requires a good understanding dence in the board.
and practical experience in the nomination processes in order to identify good prospects and support the nomination processes. She will also work on strengthening our internal processes for identifying potential nominees and developing nominations in the future.” Woodruff will serve as special adviser until July 14, earning the same annual salary she did as provost — $562,069. She is set to return to the faculty in the Departments of Obstetrics, Gynecology and Reproductive Biology and Biomedical Engineering around fall 2025 and may take faculty and research sabbaticals to which she is entitled before then, Guerrant said.
During sabbatical and research leaves, Woodruff would receive the higher salary of her former provost role rather than the $395,505 salary she will receive as faculty, Guerrant said. As a faculty member, Woodruff, a Crain’s 2023 Newsmaker, will focus on women’s health research on fertility management for young cancer patients and a joint discovery made with her husband, Tom O’Halloran, a professor of chemistry, microbiology and molecular genetics at MSU, and a Northwestern University graduate student on the “zinc spark” that’s released from an egg at the time of fertilization and must be present for fertilization.
Sports Illustrated hotel developer throws in towel By Kirk Pinho
The team behind a proposed Sports Illustrated-branded hotel and conference center on a downtown Ann Arbor parking lot owned by the city has scrapped that effort following public pushback. The developer says that doesn't mean it's pulling the plug entirely on efforts in Ann Arbor and Southeast Michigan. During a two-hour public meeting on Jan. 29, residents raised concerns with the city and developer about everything ranging from the process for exploring putting the proposed $250 million, 218-room hotel on the former Kline’s department store lot to why earlier plans for muchneeded affordable housing on the site were no longer on the table. "The project is so strong for Ann Arbor but there are a group of citizens that, from what I’m told, seem to be the regulars at community meetings, that think the building is too big and there should be affordable housing there at that site and are really being quite nasty about it," Chris Schroeder, the Ann Arbor-based CEO of Clearwater, Fla.-based Sports Illustrated Resorts LLC, said in an email to Crain's. “We decided we aren’t going to submit ourselves, the city administrator and the brand to people who are so committed to disinformation. We have positive things going across the country and it is just best to find another site in Ann Arbor,” Schroeder continued. The decision may be just cutting losses. The Ann Arbor News reported the day after the Jan. 29 meeting that it appeared the project was dead-on-arrival with the City Council, as a four-member bloc needed to kill the effort came for-
ward publicly saying they weren't in favor of it. Lisa Wondrash, communications director for Ann Arbor, confirmed in an email to Crain's that "the developer has officially notified our City Administrator, Milton Dohoney Jr., that they are withdrawing their interest for the site." As it was envisioned at Ashley Street and William Street, the development would have included 218 rooms, plus 80 condominiums and 50,000 square feet of dedicated conference center space. Other space in the proposal could have been configured on a temporary basis to create another 25,000 square feet of conference center space. The development team is called SHV A2 Development LLC, which is a joint venture between an affiliate of Schroeder's company and Sugar Land, Texas-based Cobblestone Development & Consulting LLC. The project was seeking Ann Arbor Economic Development Corp. approval of issuance of approximately $150 million in revenue bonds to pay for the hotel, conference center and a 350-space above-ground parking deck, while the condos would be privately funded, Schroeder told Crain's in a January interview. Schroeder said last month that over the 40-year life of the bond, the city would receive $240 million in tax revenue from the project in addition to millions in ground-lease payments. The project would also allow the city to hold more conferences and events, bringing in visitors and associated revenue.
Variety of concerns During the Jan. 29 meeting, the vast majority of those who spoke during public comment raised
A rendering of a proposed Sports Illustrated-branded hotel in downtown Ann Arbor that would include a convention center, condos and a parking deck. After public backlash, the developer has backed away from putting the project on the old Kline’s department store site. | LAMAR JOHNSON COLLABORATIVE
concerns about a variety of issues related to the project, even if they supported the idea of adding conference center space in general or developing the site overall. Some said they felt the land, currently a 1.22-acre, 143-space surface parking lot, was best used for address the city's long-standing affordable housing crisis. Others expressed dismay that there wasn't a public request for proposals for the site, and some questioned whether the city should allow a project associated with a brand commonly known, in addition to its sports journalism, for its annual swimsuit edition that has long sparked controversy for, among other issues, its depiction of women. Other residents were concerned about the development's proposed size and design.
Other sites Schroeder said it's too soon to tell how a revamped proposal for the project might look and whether any components would be reconfigured, but he did say the idea of a large EDC-backed bond to support the project is now off the table. "Ideally we could take as much as we’ve done so far and configure
on a different site," Schroeder wrote. "It truly is a unique building with incredible spaces. It depends on the site, we may have to reconfigure altogether." Other sites he is turning his attention to are primarily privately owned, but Schroeder did say there was a University of Michigan-owned site in the mix. He declined to say which properties were under consideration. An email was sent to the university on Jan. 31. In addition, Schroeder said another city is on his radar: Detroit, where the Lions, Pistons, Tigers and Red Wings all play within a few blocks from one another downtown. Under the Kline lot proposal, the city would have continued to own the land. Ann Arbor would lease the property to the developer and collect rent payments; and would own the hotel, conference center space and parking space. The condos would be privately owned and financed. Sports Hospitality Ventures is part-owned by Authentic Brands Group, which is the parent company of Sports Illustrated, paying $110 million for it in 2018. Authentic Brands also owns the branding of Marilyn Monroe, Shaquille O’Neal, Muhammad Ali,
Greg Norman and David Beckham. Authentic entered into a 10year licensing agreement in 2019 with Arena Group for the Sports Illustrated media brand. Arena Group is now controlled by Simplify Inventions, majority-owned by Farmington Hills-based billionaire Manoj Bhargava, who owns 5-Hour Energy. Arena Group had no involvement in the resort project. Sports Hospitality Ventures is majority owned by Experiential Ventures Hospitality, also based in Clearwater, Fla., and Cherokee, N.C.-based Kituwah LLC, the economic development arm of the Eastern Band of Cherokee Indians. Additional questions arose after the fate of Sports Illustrated itself became murky last month, when Arena Group laid off all of the magazine's staff after Authentic Brand Group scrapped Arena's licensing agreement after a missed nearly $3 million interest payment late last year, Crain's reported last month. Schroeder has said that the drama that unfolded at Sports Illustrated last month had no relation to his project as it is affiliated with Authentic Brands Group, not with Arena Group.
Ralph C. Wilson Agency acquired by East Coast firm By Anna Fifelski
The Ralph C. Wilson Agency, the Southfield-based insurance agency once owned by the late philanthropist and owner of the Buffalo Bills, has been acquired by Boston-headquartered specialty insurance brokerage and risk management firm Risk Strategies. Ralph C. Wilson Agency was the 18th-largest business insurance agency in Michigan with revenue of $9.4 million in 2023. The late founder of the same name was best known as the founder and owner of the national Football League’s Buffalo Bills. The acquisition of the South-
The Ralph C. Wilson agency is headquartered in Southfield. | COSTAR GROUP
field-based agency is Risk Strategies’ first step into Michigan. “In seeking a way to perpetuate this business that would best serve
our people, clients, and the Wilson family’s values, we saw Risk Strategies as an ideal match,” Bob Farris, president and CEO of Ralph C.
Wilson Agency, said in a news release. “Its specialist approach adds resources and expertise for clients, its flat national structure and collaborative approach opens new possibilities for our people, and its commitment to supporting communities where they do business is right in line with our culture.” In 2023, Risk Strategies grew its Midwest footprint by acquiring Illinois-based Izale Financial Group, Ohio-based First Insurance Group and the insurance business of Johnson Financial Group in Wisconsin. Ohio-headquartered consulting insurance consulting agency Marsh, Berry & Company was the exclusive
financial advisor to Ralph C. Wilson Agency, according to the release. Risk Strategies has over 100 offices, including New York City, Chicago, Toronto, Montreal, Los Angeles and San Francisco. Risk Strategies did not respond to requests for information on the transaction. Wilson, who lived in Grosse Pointe Shores and whose Ralph C. Wilson Foundation has been a major philanthropic force in metro Detroit, died in 2014. He was a co-founder of the American Football League and founded the Buffalo Bills with $25,000 in 1959. The AFL merged with the National Football League in 1970. FEBRUARY 12, 2024 | CRAIN’S DETROIT BUSINESS | 13
PEOPLE ON THE MOVE
Advertising Section To place your listing, visit crainsdetroit.com/people-on-the-move or, for more information, contact Debora Stein at 917.226.5470 / dstein@crain.com
ACCOUNTING
ACCOUNTING
ARCHITECTURE
ARCHITECTURE / ENGINEERING
ARCHITECTURE / ENGINEERING
UHY
UHY
OHM Advisors
OHM Advisors
UHY, one of the largest accounting firms in the U.S., has promoted Michael Antovski to Managing Director and Chief Operating Officer. Antovski oversees the firm’s national shared services, including finance, information technology, marketing, corporate compliance, and human resources. He has been active in all facets of the firm’s acquisition initiatives and is instrumental in executing the strategic vision of the Board of Directors.
UHY, one of the largest accounting firms in the U.S., has promoted Kevin Burns to Managing Director. Burns performs audits of SEC registrants, advises on reporting requirements, and provides all levels of attestation services for small to mid-sized companies, including reviews, compilations, and agreed-upon procedures.
Grissim Metz Andriese Associates, Inc.
ACCOUNTING
ACCOUNTING
Regional architecture, engineering, planning powerhouse OHM Advisors names Eric Sieczka as Chairperson of its Board of Directors. Sieczka has provided leadership, governance, and strategic direction since joining the award-winning community advancement firm’s Board in 2017. A Kettering University and University of Michigan graduate, he also serves as Chairman, President and CEO of Epsilon Imaging, and has spent 20+ years commercializing technologies and building Michigan‐based enterprises.
Award-winning community advancement firm OHM Advisors elected Rhett Gronevelt, PE to its Board of Directors. Gronevelt leads the firm’s multi-disciplinary work in Detroit and heads the architecture, engineering, planning firm’s downtown Detroit office. Also, a partner in the firm, his engineering expertise and innate understanding of the functions of local governments and their unique needs have made him an influential advisor to an impressive roster of clients over his 20-plus-year career.
UHY
UHY
UHY, one of the largest accounting firms in the U.S., has promoted Kyle Percin to Managing Director. Percin has extensive experience conducting audits and reviews. He works closely with a variety of clients, including privately owned businesses, publicly traded corporations, and high-net-worth individuals.
UHY, one of the largest accounting firms in the U.S., has promoted Bart Reddy to Managing Director. Reddy leads the national Client Accounting and Advisory Services Practice and specializes in financial statement preparation, accounts receivable and accounts payable automation, advisory services, and technology solutions deployment.
ACCOUNTING
ACCOUNTING
UHY
UHY
UHY, one of the largest accounting firms in the U.S., has promoted Larry Stoklosa to Managing Director. Stoklosa leads the National Aerospace and Defense Practice. He is a leader in the Audit and Assurance Practice and specializes in developing cost models, overhead cost evaluations, and transaction support.
UHY, one of the largest accounting firms in the U.S., has promoted Amber Sutter to Managing Director. Sutter specializes in performing audits and preparing financial statements for a wide range of national clients in the middle market and has worked on SEC audit engagements.
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14 | CRAIN’S DETROIT BUSINESS | FEBRUARY 12, 2024
Grissim Metz Andriese is proud to announce the promotion of Rich Houdek, ASLA, PLA, LEED AP BD+C, to President, making him the firm’s 3rd President in its 59-year history. His expertise in design, management, best practices, and sustainability has been instrumental in building successful projects and client relationships while providing mentorship and guidance to his associates and peers. We look forward to his contributions, insights, perspective, and continued commitment to the firm’s future.
FINANCIAL SERVICES
Community Financial Credit Union Danielle Frawley has been promoted to Community Financial Credit Union’s chief growth officer. In her Frawley role, Danielle will oversee 15 retail branches and the care center, which offers member services support, to enhance member experience, business services, and member value. She will also manage investments and insurance, commercial, and mortgage sales to drive growth and market presence. Justin Haun has been Haun promoted to vice president of member engagement. Justin will lead the credit union’s branch network and care center, working with their leadership to improve member experience and financial well-being through personalized guidance and support. He will also focus on driving membership growth to strengthen the organization as a whole.
FINANCIAL SERVICES
Spartan Wealth Management Spartan Wealth Management is thrilled to announce the addition of Jeff Osaer, MBA, CRPC® and Zak Thompson to our Osaer team. Jeff Osaer has nearly 15 years of experience in financial services. Prior to joining SWM, he led practices at Merrill and Charles Schwab, where he successfully managed assets exceeding $1 billion. Jeff specializes in retirement income planning, tax and estate planning, and adept options strategies. Thompson Zak Thompson has almost a decade of experience, driven by a profound passion for helping individuals and businesses achieve their financial objectives. Having previously practiced at Northern Trust and Sawchuk Wealth, Zak’s background spans both business growth and client relationship management.Welcome aboard!
PROFESSIONAL SERVICES
Crewe Capital Crewe Capital, one of the nation’s leading boutique investment banks, is pleased to announce it has brought on Brian Basil to lead its investment banking efforts in Michigan. For more than 25 years, Basil has provided strategic M&A advisory services across a broad range of industries. He joins a curated team of bankers who have advised on hundreds of transactions aggregating more than $250 billion in total value. Investment banking services offered through Crewe Capital, LLC, member FINRA / SIPC
DTE CEO says new natural gas plant is likely on the horizon
PRICES From Page 1
“So the primary thing that ties (all the neighborhoods) together is you had investment,” he said. “You had very specific, very dedicated investment.” And the investment, Bryant said looks different in each neighborhood. In New Center, much of the work is being driven by the large institutional force of Henry Ford Health, while in Delray, a largescale public works project is fueling the fire. By contrast, the Banglatown neighborhood investment is more small-scale and being done at the resident level, Bryant told Crain’s. To determine 2024 property values and tax bills, the city assessor’s office uses a 24-month sales study process starting in April 2021 to avoid valuing property based on short-term trends in the market.
New Center Buoyed by nearly $5 billion in planned investment by Henry Ford Health and various partners, the New Center neighborhood north of downtown Detroit has seen some of the fastest growth in the city. The location of the neighborhood near the city’s cultural district, home to the Detroit Institute of Arts and the Charles H. Wright Museum of African American History, also adds to the desirability, notes Bryant. “And you have, to some extent, an intact neighborhood base. Those residents, many of them have been here for a couple of generations,” Bryant said. “And so when you have stability, that really does lend itself well to growth over all.” Data from the city assessor’s office provided to Crain’s shows just five residential sales in 2021 and 2022, but the average price of those sales was more than $340,000. The average sale price citywide stands at about $86,000, according to Realtor.com. Austin Black, a Detroit Realtor with @Properties Christie’s International Real BENEFITS Estate, said the minHEALTH imal sales in the area represents the fact that few homes hit the market, and when they do they sell fast and at a premium. Other directly adjacent neighborhoods to New Center, such as in NW Goldberg to the south and west of Henry Ford Health’s campus, have also been seeing an uptick in investment.
MARKET PLACE
REAL Delray ESTATE
The Delray and Carbon Works COMMERCIAL PROPERTY neighborhoods sit in a long-industrial part Southwest Detroit near Zug Island and the new Gordie Howe Bridge international border crossing. But beyond the large investment from the new bridge — now set to open in September 2025 — the area is also benefiting from broader growth in Southwest Detroit, such as along West Vernor, according to Bryant. Data from the city assessor’s of-
JOB FRONT
of our next integrated resource plan that we’ll file no later than DTE Energy Co. will most likely three years from now. We’ll deneed to build a large natural gas tail how we’re going to replace plant to produce power, in or the Monroe Power Plant, which around Monroe County, as it is a very large coal plant at this point in time. Right closes down a coal-fired now, the best available facility there in coming technology would be reyears, CEO Jerry Norcia newables, batteries and said Jan. 6. natural gas with carbon Norcia, speaking at a capture.” Detroit Economic Club Under an agreement meeting, said the utility with regulators, the comcould utilize technology pany will close two units to capture carbon dioxat the coal-fired Monroe ide — a greenhouse gas CEO Jerry Norcia plant by the end of 2028 — from the plant and transport it to reservoirs to be and the other two by the close of stored 3,000 or 4,000 feet under- 2032. A law enacted in November will let electric providers count ground in liquid form. “That’s very doable and we’re natural gas toward new clean actually preparing for that as we power targets — 80% in 2035 and continue to retire coal plants. 100% in 2040 — only if there is Eventually, unless technology technology that is at least 90% efchanges, we’re going to need to fective in capturing and storing build another large natural gas the carbon dioxide. During a question-and-answer power plant in the state of Michigan, somewhere in Monroe session with Sandy Pierce, board County or around Monroe Coun- chair at the Detroit Economic Club, ty, because that’s where the ener- Norcia talked about DTE’s efforts to gy highway is stressed,” he said. transition away from burning coal “We’ll have to capture that carbon to make power, to replace gas pipethat comes out of that stack and lines used to heat homes and busistore it underground. That’s really nesses, to harden and upgrade the emerging technology that the grid to better withstand storms, federal government has provided and to rebuild the oldest parts of some incentives for companies the electric system. Natural gas and nuclear, he like ours to pursue, so we’re pretsaid, are backstops to renewable ty excited about that.” After his remarks, Norcia told sources “when the wind doesn’t Crain’s that the Detroit-based blow and the sun doesn’t shine.” utility has not made decisions yet The grid enhancements will make on seeking regulatory approval to it more reliable against severe weather and build capacity for construct the plant. “It’s very early in the process,” when electric vehicles become he said. “Likely it’ll be the topic more prevalent, he said. By David Eggert
From top: The New Center neighborhood’s proximity to the city’s cultural district, the Fisher Theatre and the Henry Ford Health campus adds to the desirability of the area. The Delray and Carbon Works neighborhoods are in an industrial part of Southwest Detroit. The Banglatown area has seen strong demand and stands as a “stepping stone” for many Bangladeshi and Yemeni immigrants. | PHOTOS BY NICK MANES
fice shows 11 residential sales in 2021 and 2022, with an average sale price of nearly $44,500.
Banglatown The immigrant-heavy Banglatown neighborhood on Detroit’s east side just north of the border with Hamtramck does tend to fly under the radar, according to Bryant. But the area has seen strong demand and stands as a “stepping stone” for many Bangladeshi and Yemeni immigrants moving from out-of-state, particularly from New York and California, said Zakir Hussain, a Realtor with EXP Realty in Troy who has done many deals in the neighborhood. Home prices in the neighborhood have ticked up considerably in recent years, said Hussain, noting that homes that may have sold for $100,000 a few years ago — particularly before the COVID-19 pandemic — are now selling for around $200,000. The city assessor’s data shows nearly 40 sales in 2021 and 2022, with an average sale price of nearly $38,000.
Growth for the long term? With property values in Detroit clearly on the upswing — and they have been for nearly a decade, according to the Duggan administration — the trend does beg the question of who benefits? Clearly, it’s good news for long-standing homeowners in the city. And while higher values also translate to higher tax assess-
ments, the state’s Proposal A law limits property tax increases to either the rate of inflation or 5%, whichever is lower. But Bryant, the city’s planning director, also acknowledged that he’s “very sensitive” to concerns about gentrification, and whether residents could be priced out. The city’s Housing and Revitalization Department, Bryant said, has rolled out several programs for homeowners and aims to also help renters to the extent it can, but said the city has “less tools in our bucket to ... mitigate increases in rents.” The increase in values around the city also begs another question: is it sustainable? To that point, Bryant says “we first have to acknowledge that there are several parts of the city that, quite frankly, have been undervalued for a number of years.” Areas such as Delray, he said, are going through something of a “right-sizing.” Still, several more years of average growth of around 25%, such as what occurred last year, would be “exponential growth” and is unlikely, Bryant said. But slower growth of around 10% or 12% is likely. “If for no other reason than because it’s getting back to where we probably should be,” Bryant said. “And so I feel very confident that you’re going to see growth easily for the next five-to-seven years. And it may not all be 23%. But I feel very, very confident that you will see property value increasing through the next five-to-seven years, if not more.”
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CLASSIFIEDS
To place your listing in Crain’s Detroit Classifieds, contact Suzanne Janik at 313-446-0455 or email sjanik@crain.com
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FEBRUARY 12, 2024 | CRAIN’S DETROIT BUSINESS | 15
APARTMENTS From Page 1
A website for the building showed 167 units available as the morning of Feb. 6, meaning approximately two-thirds of units have been spoken for since leasing began in August. In addition, the building has four two-bedroom penthouse units with "reservations" already in place and priced between $9,000 and $10,000 per month, Samson told Crain's in August. The leasing website shows that every unit beneath the ninth floor has been rented, and the lowest-cost available unit is a 10thfloor, 586-square-foot studio renting for $2,275 per month. An identical apartment on the 24th floor leases at $200 more per month, per the project’s website. The price of the units at Water Square have been a hot topic since lease rates were announced in the summer, as they’ve exceeded nearly every other luxury development that has come online in recent years and make for an “anomaly” in the marketplace, said Jerome Huez, a Realtor and owner of The Loft Warehouse, a Detroit-based residential real estate brokerage that works with myriad condo and apartment developers. While the figures extracted from the project’s website do indicate positive leasing momentum, Huez cautioned that they don’t tell the complete story as it's unclear if units are being leased at the full advertised rates or whether the owners might be providing concessions to new tenants. “We’re a bit in the dark,” said Huez, adding that he’s unsure of the number of potential renters in the city who can afford such rates. “If it’s truly leasing at those rates, that’s fantastic. But I don’t know who those renters are.” The Waters Square development joins other high-end apartment developments new to the market, including the Perennial Corktown. The latter project advertises rents more in line with traditional luxury
The apartments at The Residences at Water Square on the former Joe Louis Arena site offer views of the Detroit River and downtown from floor-to-ceiling windows. Residents in the 496 luxury units can enjoy an indoor pool and outdoor sun decks. | PHOTOS BY NICK MANES AND THE RESIDENCES AT WATER SQUARE
PADEL From Page 3
Where Zmash Padel is now is in a 40,000-square-foot industrial space east off Mound Road and north of 14 Mile Road, formerly home to a Dakkota Integrated Systems facility. The wide-open space includes eight glass-enclosed padel courts, made for doubles play. Two stationary bikes are available, too, to keep players warmed up in between games. Men’s and women’s locker rooms are just off the courts. A nearby spacious lounge area includes several earth-tone couches for relaxing or waiting for a court to open. Flat-screen TVs on a wall show pro padel matches on a loop. A pro shop sells padels for $100-$400, along with Zmash Padel-branded apparel. The courts are made for players 5 to 85 years old, according to 27-year-old head pro Oliwer Johnson. They are made with padded blue turf that’s easy on the joints. 16 | CRAIN’S DETROIT BUSINESS | FEBRUARY 12, 2024
A section of the 40,000-square-foot Zmash Padel facility includes a lounge area. | JAY DAVIS
“We want just about anyone to be able to come here and play,” said Johnson, who moved from Sweden to join the venture through a relationship with Kjellberg. “This is a game that’s made for everybody. We’ve seen that in the month we’ve been open. There have been people from all kinds of backgrounds and of various ages who have come to play. I think it’s going to catch on fast. “The way we’ve set it up, with the open space, the lounge area, we want people to come in and stay a while. It’s a great way to meet peo-
ple, stay active.” In padel, you can play the ball off the glass of the court. You can even try a shot if the ball goes outside of the enclosed area. There are some subtle differences from other paddle sports, though. A padel racket does not have strings like a tennis racket. There are specific shoes made for padel, but tennis shoes can be used. The ball is similar to a tennis ball, but softer and a bit smaller. A serve in padel must be hit underhand and the ball must be hit at or below an
opponent’s waist. Scoring in padel is just like tennis. Padel players compete in best of three- or five-set matches, with six games being needed to win a set. “It’s complex at first, but once you catch on it’s a lot of fun,” Johnson said. The game seems to be catching on. Johnson said about 60 people have signed up for memberships, which run $19.95 a month. Courts cost $20-$25 per person per hour, based on a foursome. Johnson estimated that about 300 players used the facility over the first month. He also offers private lessons, running $100 an hour for members and $125 an hour for non-members. Leagues will be offered for various ages and skill levels.
Big believers sport will grow The principals in the venture saw Sterling Heights as a great spot for the first facility. The group also looked at setting up shop in Novi, Troy, downriver and the Birming-
apartments in the city, Huez noted. By comparison, slightly smaller studio units at the Perennial and the recently opened Book Tower rent for about $1,750 per month. The asking rents at Water Square have also caught the attention of top elected officials in the area. “I wish I could afford to live here,” Wayne County Executive Warren Evans quipped during the ribbon cutting. “One day when I get paid, I will.” The developers for the project, the adult children of Detroit businessman Gary Torgow, chairman of Huntington Bank, tout that the Water Square building was entirely privately funded, and as such, a development cost is unknown. Officials in Detroit have put a strong emphasis on affordable housing policy matters in recent years, and projects that receive public incentives in the city are required to make some units affordable at various income levels. But high-end, market-rate developments are also important, Detroit Mayor Mike Duggan said. “This apartment building is a high-end development and it really is for people who are paying a very large amount of rent,” Duggan said Feb. 6 in remarks prior to the ribbon-cutting. “And the city that we want to build is a city where there's room for people of all incomes. There should be residences for people who are high income and there needs to be residences for those of lower income.” Units at the Water Square building include 10-foot-tall, floor-toceiling windows with Detroit River and downtown views, as well as high-end interior finishes and a host of amenities, including an indoor pool and outdoor sun deck, a rooftop terrace, dog wash, fitness center, indoor bicycle storage, valet parking and direct access to the Detroit Riverwalk. Retail options are set to open soon. Sterling Group is also developing a hotel on the same site — formerly home to Joe Louis Arena — and seeking $90 million in public incentives, as Crain’s recently reported. ham/Bloomfield area, according to Johnson. The team signed a fiveyear lease with an option to renew on the Sterling Heights space. The partners declined to disclose how much they invested in the business or revenue projections. Zetterberg said that if all goes well, a second facility will open in the western Oakland County suburbs. Zmash Padel is a self-funded venture, according to Zetterberg, and the second facility would likely be self-funded too. “Then after that we may need some backing,” Zetterberg said. “We’re not trying to grow really fast, though, and we want to do it the right way." The former hockey pro has high hopes for success. “Bringing in a new sport and having people learn and understand it can take a while," Zetterberg said. 'We’re big believers, though, that padel will grow as a sport. We’ve seen it in Sweden, Spain and other parts of Europe. You see padel facilities popping up all over the U.S. We want to be a part of that growth.”
COLLEGE
TROY
At the same time, “students’ lives are starting to normalize a bit post-pandemic,” Spencer Cesaro said. “In-person college visits, athletics and the activities/events that spur interest in college are on the rise, driving more students to enroll.” Fall is typically the largest enrollment semester for traditional students coming right out of high school, the demographic the Michigan Achievement Scholarship targets, Spencer Cesaro said. MAS grants provide up to $5,500 annually for up to five years for students enrolled at public universities, the equivalent of a third or more of tuition costs at those schools. Students attending private colleges in Michigan can get up to $4,000 per year for up to five years, while those enrolled at community colleges can get up to $2,750 annually for up to three years. Those in career training programs can earn up to $2,000 for up to two years. Students whose families are expected to contribute more than $25,000 weren’t eligible for the scholarship. Michigan launched another grant program, Michigan Reconnect, in early 2021 to provide a tuition-free path to an associate’s degree or career training for students 25 and older. The state’s current budget includes $70 million for the expansion of the program this year.
Wells Fargo is seeking to appoint Michael Kalil of Southfield-based Farbman Group as receiver. The bank says Troy Technology Park has been made “at risk” of things like disrepair and vacating tenants if a receiver is not assigned. The bank says in its filing that the unpaid principal balance is about $44.1 million, while the total due — including things like interest, default interest, late and legal fees — is about $48 million as of Jan. 25. The bank also suggests it expects to take a large loss as “the loan balance far exceeds the market value of the property,” the filing says. Through spokespeople, the bank and Farbman Group declined comment. An email was sent to Drillman’s attorney on Feb. 5 seeking comment. Crain’s reported around the time of the sale in October 2020 that the purchase price was $70 million. That was according to information from Washington D.C.-based real estate information service CoStar Group Inc. as well as Eli Puretz of Apex Equity Group, one of Drillman’s companies involved in the deal.
From Page 3
Fall 2023 enrollment At public four-year universities in Michigan, total fall 2023 enrollment, which includes graduate and part-time students, increased 0.53% year over year to 257,760, reversing 11 years of declining enrollment, said Dan Hurley, CEO, Michigan Association of State Universities. Within that total, first-time freshman enrollment increased 3.9%, reaching 41,222, the association said. And total undergraduate headcount for fall 2023 rose 0.9% to 197,675. Seven of the state’s 15 public universities accounted for the increases in total enrollment: Grand Valley State University, Lake Superior State University, Michigan State University, Michigan Technological University, Northern Michigan University, University of Michigan (Ann Arbor) and University of Michigan-Flint. The increase in freshman enrollment for the public schools was the largest in 11 years, Hurley said. “I definitely think the (Michigan Achievement Scholarship) had a positive impact and will have an even greater impact moving forward,” he said. In addition, the universities are continually refining their strategic enrollment outreach. “Credit them for getting the word out about the new programs they have, the financial aid … (and) the return on the investment for a college education,” Hurley said. Similarly, total fall enrollment of full-time, degree-seeking undergraduate students at 24 of Michigan’s private, four-year colleges
From Page 3
Enrollment at the University of Michigan in Ann Arbor was 52,065 for the fall 2023 semester — a record number, UM said. | UNIVERSITY OF MICHIGAN
The number of students at two-year public institutions in Michigan like Oakland Community College rose 3.7% last fall to 119,838, according to data from the National Student Clearinghouse Research Center. | GETTY IMAGES
College enrollment rises Fall enrollment at Michigan’s 15 public universities rose in 2023 for the first time in years, thanks to a variety of factors. First-time freshmen Other enrollment 2014 299,008 2015
297,441
2016
294,410
2017
290,738
2018
288,954
2019
280,490
2020
270,872
2021
262,985
2022
256,396
2023
257,760
Source: Michigan Association of State Universities
and universities represented by MICU rose 0.8% year over year to 31,995, Spencer Cesaro said. Thirteen schools saw increases, including Aquinas College in Grand Rapids, Hope College in Holland, Concordia University in Ann Arbor and Walsh College in Troy. MICU does not have current breakouts for graduate and parttime enrollment. The two dozen private colleges and universities represented by MICU reported that enrollment of first-time, degree-seeking freshman students rose 13.5% last fall to 8,993. Michigan’s community colleges also saw increases. According to data from the National Student Clearinghouse Research Center, the number of students at twoyear public institutions in Michigan rose 3.7% last fall to 119,838. The center does not break out freshman enrollment.
“Colleges have leveraged Michigan’s historic investments in financial aid programs like Michigan Reconnect and the Michigan Achievement Scholarship, while at the same time bolstered student success efforts, which resulted in increased enrollment,” said Erica Orians, vice president of the Michigan Community College Association. “While demographic challenges plague Michigan, community colleges will continue to put in the work to reach pre-pandemic enrollment levels, ensuring more Michiganders are on track to complete a certificate or degree.” Total undergraduate enrollment in Michigan — public, private and community colleges — last fall rose 0.7% to 382,710, according to the National Student Clearinghouse Research Center. The increase at MICU’s private college and university members
was driven by an uptick in firsttime, full-time freshmen from Michigan, Spencer Cesaro said. Seven schools reported record freshman enrollment: Adrian College, Calvin University in Grand Rapids, Concordia University Ann Arbor, Davenport University, Northwood University in Midland, University of Detroit Mercy and University of Olivet. The increases were higher than expected, MICU President Robert LeFevre said. “I don’t think we can credit MAS for all of the bounce, although it helped. But we are moving towards pre-pandemic levels of enrollment in our sector,” he said. The percentage of high school graduates going on to post-secondary at any level dropped from roughly 62% to 50% during the pandemic, LeFevre said. “Now we’re starting to hedge back up again,” turning around pipeline issues. If a student qualified for a Pell grant and the Michigan Achievement Scholarship, the schools packaged federal, state and institutional financial aid to cover the remaining costs, helping to drive enrollment, LeFevre said. Another, smaller factor in the collective enrollment increases at Michigan’s private institutions was the increased number of international students at Andrews University, a private Seventh-day Adventist university in Berrien Springs in Southwest Michigan; Cleary University in Howell; and Northwood University in Midland, Spencer Cesaro said, noting many students waiting for their visas to clear could not come into the U.S. during the pandemic. The increases in Michigan align with those seen nationally, as reported by the National Student Clearinghouse Research Center, though the larger number and type of universities included nationally impacted the percentage of change, Michigan education leaders said. In the U.S. undergraduate enrollment grew 1.2% in fall 2023, the first increase since the pandemic, according to NCS. Growth was highest at community colleges, with a 2.6% increase. Public and private nonprofit four-year institutions saw smaller, fall 2023 enrollment increases of 0.6%.
Wells Fargo suggests it expects to take a large loss as “the loan balance far exceeds the market value of the property,” a filing says. That price, however, was a fiction, according to the feds, one achieved by producing sham purchase and sale contracts for $70 million. The charging document from December says unnamed co-conspirators first purchased Troy Technology Park for $42.7 million using a related entity and then flipped the property to Drillman for $70 million. According to the December filing, they represented to the lender (who is not identified in the filing) that the sale was “arm’s length” — meaning that the seller and buyer were not connected — when in fact it was not. Federal officials say Drillman and others produced a fake letter of intent, or LOI, to buy Troy Technology Park from another buyer for $68.8 million, and also secured a $30 million short-term loan showing they had the funding needed to close the $70 million loan. As a result, there were two closings by Riverside Abstract, a New Jersey title company: One for the actual $42.7 million purchase price and one for the $70 million sales price represented to the lender, the DOJ says. FEBRUARY 12, 2024 | CRAIN’S DETROIT BUSINESS | 17
THE CONVERSATION
DSO CEO Erik Rönmark wants to ‘get out of the hall more’ When Erik Rönmark took a job working as a part-time assistant in the Detroit Symphony Orchestra’s music library in 2005, he had no idea the position would turn out to be a literal door into the arts administration world — and 16 years later, the DSO’s head office. The native of Sweden had grown up listening to the DSO and had many of the orchestra’s albums. An accomplished saxophonist, he came to the U.S. in 1996 to attend Northern State University in South Dakota before earning his master’s degree at Bowling Green State University in Ohio and a doctor of musical arts at the University of Michigan. He took the part-time job at the DSO, where his mother- and father-in-law were longtime musicians and his wife, Adrienne, is a violinist. In his role as president and CEO, the 47-year-old Rönmark is keeping busy. But he still finds time to play with a contemporary classical music group he founded, his wife and their three kids and add to the DSO memorabilia he began collecting before he even came to the U.S. The following conversation has been edited for length and clarity. | By Sherri Welch What did you do when you first started out with the orchestra? I was a part-time assistant in the music library. I prepared sheet music and helped put the parts together and made copies. I didn’t really know much about the field of artistic administration. (But) there was a position that opened up as artistic coordinator and I was just curious about it. You prepared contracts and picked up artists at the airport. And so here I’m going and picking up these pianists and violinists and conductors who I listened to (on) recordings when I was growing up. That was sort of the first foray into this whole world of artistic planning, which is then what I did for over 10 years here as I became artistic administrator and later, general manager. Putting together that big puzzle was really fun and interesting and sort of made me think about the world of classical music and orchestras in a whole different way. I had the opportunity, of course, a great privilege, of working very closely with (the late DSO president and CEO) Anne Parsons for my whole career here. You start getting some of those calls from other orchestras, and Anne and I talked a lot about that. And I don’t know if I ever saw myself in this role until, you know, more recently. I think it’s very particular to Detroit. I do like this particular symphony. What are you focused on right now at the DSO? We’re trying to figure out how we can be more innovative in connecting with Detroit as a city. I think we need to get out of the hall more and go to where people are. We started that with our neighborhood concerts some 12 years ago, but I want us to really think about how we can have more impact in the city as a whole. And that’s really where the Detroit Neighborhood Initiative comes from. And then we feel that, you know, music education is so core to what we do. That’s why Detroit Harmony
is such a great initiative of providing instruments to Detroit children. When you look farther down the road, we have an amazing music director in Jader Bignamini, and I’m very happy that we were able to extend his contract. We have Terence Blanchard as jazz chair, and we just hired a new principal pops conductor, Enrico Lopez-Yañez. (And) we’re actually going to announce a new principal guest conductor here in February. And so I think having these artistic leaders to really drive the artistic vision for the orchestra is really key, as well. You’re also getting ready to go on tour with the orchestra soon, right? It’s going to be great. You know, it’s going to be Jader’s first tour as music director. We can’t wait to show off what he can do and what this orchestra can do for all our friends down in Florida. Tours are really important for orchestras when you think about going and playing in different venues and sort of the camaraderie that’s built on these tours. I also think it’s showing off the city. We go as an ambassador for the city of Detroit and do things that we do when we’re at home. So we are going to go to New World Symphony in Miami and work with the students of that orchestra, the fellows. And we’re going to play concerts at assisted living facilities with musicians when we’re in West Palm (Beach). We try to sort of bring the whole DSO mentality when we go on tour. How has overall fundraising been pacing for the DSO? Fundraising is going well. We have a strong supporter base and strong support for arts and culture in general, I think in this area. When we first launched our 10-year financial plan in 2012, that was a guide for us to have, now, 11 years of balanced budget. The plan had a big endowment component. In 2018, we laid out the last five
Read all the conversations at CrainsDetroit.com/TheConversation 18 | CRAIN’S DETROIT BUSINESS | FEBRUARY 12, 2024
years of this plan, the $75 million DSO Impact endowment campaign. We’re about $9 million away from closing that. We celebrated at the 2023 annual meeting that over this 10-year period we have secured over $104 million in pledges. Some of these pledges will come in over the next five, 10 years. Our endowment right now stands a little bit over $75 million. I hear you have an interesting DSO memorabilia collection? I like history. Working for an organization like this, the fourtholdest orchestra in the United States, I find it fascinating how (it) has been supported and existed. I started with DSO recordings. Probably the first ones that I got were from the ‘50s. And I found the first recordings we made with our music director in 1926 here at Orchestra Hall. There was an old turntable here, one of those old Victrolas, that I got some spare parts for, and I found some needles. I play those (records), crank that up. It still sounds like the DSO; it’s amazing. And I found a few (historic) programs on eBay and these little curios, like a DSO cookbook. We think it’s from the 1930s with some very unusual recipes. It’s fun to go through that. It’s like reliving the past and fun to think about what they were doing back in the day.
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