Crain's Detroit Business July 26, 2021, issue by Crain's Detroit Business

STARTUP: Midwest Fund seeks to further localize venture capital in Michigan. PAGE 3

PEOPLE: Texas urban development veteran appointed as Detroit city planning director. PAGE 14

Vacant schools a heavy lift in Detroit

CRAINSDETROIT.COM I JULY 26, 2021

SMALL BUSINESS SPOTLIGHT

How can dozens of properties be reused? Detroit could spend all of its federal pandemic relief funding on redeveloping vacant schools in the city and have just $3 million left over. That’s what the city of Detroit found as it surveyed dozens of vacant former public school buildings it received in 2014 in lieu of payment on $12 million in what was then Detroit Public Schools debt to the Public Lighting Department ($11.6 million) and Buildings, Safety Engineering and Environmental Department ($400,000). In all, the city and its contractors spent a year and $828,000 analyzing Detroit’s new batch of real estate scattered around the city’s 100-plus neighborhoods. The scope is daunting. In all, there are 63 buildings totaling 3.7 million square feet on 288 acres of land. The base estimate to redevelop them all: $823.7 million. To put that in perspective, that’s just a shade under the $826.7 million the city received from the federal government earlier this year as part See SCHOOLS on Page 18

OUTSIDE THE BOX

How tough times sparked ingenuity

NIC ANTAYA FOR CRAIN’S DETROIT BUSINESS

BY KIRK PINHO

Small business owners like toy store owner Rick Claggett, above, have learned to adapt during the pandemic. Many small businesses have folded or come close to it during the pandemic. But others found new ways to grow over the past 16 months through new ways of doing business, clever marketing, and new products that created new revenue streams that are here to stay. PAGE 8

Vaccine drive hits diminishing returns but plows on BY BY DUSTIN WALSH

Only a mile and a half from the nearest CVS Pharmacy, Deborah Hurst received the first dose of a Pfizer vaccine last week sitting at a computer desk at her home in Lincoln Park, the midsummer sun peeking through the rear sliding door.

The 68-year-old retired school teacher finally received the vaccine nearly seven months after she became eligible under state guidelines. The widowed Hurst lives alone and suffered a stroke late last year. She was unable to receive the vaccine as an inpatient but hoped a 14day stint at a local rehabilitation facility would get her a dose. Instead

NEWSPAPER

she spent the two weeks quarantined in a room. The program, run by CVS, visited the site once every 21 days to administer doses and her visit fell in the middle. Hurst, who is able to walk slowly with the assistance of a walker, has no regular caregiver and her eyesight is failing. Incapable of navigating the tricky online vaccine ap-

pointment sites, she called her local CVS to schedule an appointment. They couldn’t help. Finally, after of months of trying, Hurst was able to schedule an athome inoculation with Henry Ford Health System’s mobile unit, which came directly to her house. See VACCINE on Page 18

Jeremiah Rooker gives a shot to Deborah Hurst. | NIC ANTAYA, SPECIAL TO CRAIN’S DETROIT

REAL ESTATE Lots of unknowns about Stephen Ross’ plans with The District Detroit as negotiations continue behind closed doors. PAGE 4

NEED TO KNOW

VENTURE BEAT

THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT

` PROPOSAL TO REPEAL EMERGENCY LAW PASSES THE NEWS: Lawmakers on Wednesday killed a law that underpinned coronavirus restrictions issued by Democratic Gov. Gretchen Whitmer in 2020, wiping it from the books after Michigan’s Supreme Court declared the measure unconstitutional. Their vote made into law a proposal that had been initiated by a petition drive. All Republicans and four Democrats voted to make the proposal law, which Whitmer does not have the power to veto. WHY IT MATTERS: Whitmer had used the law to indefinitely issue COVID-19 rules until the court ruled against her last October. A separate emergency powers law, from 1976, remains in place. It lets a governor declare an emergency but it and related orders cannot last for longer than 28 days without legislative approval.

` MDOT SEEKS FEDS’ HELP FOR FREEWAY PUMP GENERATORS

freeway floods in the event the electricity goes out, Ajegba said.

THE NEWS: The Michigan Department of Transportation is seeking $50 million in federal disaster relief funding to install backup generators in metro Detroit freeway pump stations after more than two dozen pumps lost electricity during a torrential rainstorm last month, resulting in widespread flooding. DTE Energy Co.’s power failure led to widespread flooding on depressed freeways in Detroit and the suburbs that sit below the grade of surface streets, causing those highways to fill up like a basement with a broken sump pump, MDOT Director Paul Ajegba said.

` ZF NETS $6 BILLION AXLE CONTRACT FOR MARYSVILLE THE NEWS: German auto supplier ZF Friedrichshafen AG is hiring for 250 jobs at its plant in Marysville after landing a nearly $6 billion contract to make axles for an automaker. The supplier, which has its North American headquarters in Livonia, will produce solid beam axles for pick-up trucks, SUVs and performance sedans until 2027, the company said. It declined to identify the customer. WHY IT MATTERS: The contract will secure the jobs of 800 employees until 2027, ZF said. Around 550 of the positions are filled.

` MICHIGAN TO GET NEARLY $800M IN OPIOID SETTLEMENT

WHY IT MATTERS: Among the 140 stormwater pump stations in Wayne, Oakland and Macomb counties, MDOT has just one permanent backup generator along westbound I-696 between Telegraph and Lahser that keeps pumps running to prevent

THE NEWS: Michigan will receive up to nearly $800 million under a $26 billion national opioid settlement with Johnson & Johnson and three other pharmaceutical distributors, Attorney General Dana Nessel announced Wednesday. WHY IT MATTERS: Only the 1998 national tobacco settlement has involved more dollars than this proposed settlement. At that time, when Michigan signed onto that settlement, it was set to receive $8.2 billion over 25 years.

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Shareholder loyalty fintech nets $2 million round ` A financial technology startup founded by veteran investor relations executive Jeff Lambert has closed on a $2 million pre-seed round of capital, according to a news release. Detroit-based Tiicker, which went live last year, aims to serve as a portal for granting perks to retail stock investors. The $2 million funding round had participation from Red Cedar Ventures, the venture capital arm of the Michigan State University Foundation, and other unLambert named venture capital and high net-worth investors, according to the release. The funding will go toward software development, bringing on talent and adding new AI features. “TiiCKER is the modern answer to McDonald’s gift certificates, Wrigley gum and Hush Puppies discounts in your annual report mailing, but with intelligent and predictive software so brands like these and thousands of others can find and verify their owners and reward them for their loyalty,” Lambert said in the release. The company counts Richmond, Va.-based CarLotz (NASDAQ: LOTZ), an online vehicle marketplace, and Novi-based automotive firm Shyft Group (NASDAQ: SHYF) as clients.

` US EXTENDS BORDER RESTRICTIONS TO AUG. 21 THE NEWS: The United States is extending its ban on nonessential travel from Canada and Mexico through Aug. 21, according to a federal document published Wednesday. The U.S. Customs and Border Protection order continues the temporary limit on travel of people from Canada into the United States at land ports of en-

try along the border. WHY IT MATTERS: That move came days after Canada’s decision to allow fully vaccinated Americans and permanent residents to travel there starting Aug. 9. The border has been closed to all but “essential travel” — commercial traffic and health care workers crossing for work, for example — since March 2020.

FINANCE

REAL ESTATE

Midwest Fund seeks to further localize VC in state BY NICK MANES

In June, single-family real estate sales continued to shatter records with median sales prices at their highest levels ever. | LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS

FORECAST: HOT, HEAVY Home market expected to remain steamy through fall BY KAREN DYBIS | SPECIAL TO CRAIN’S DETROIT BUSINESS

Despite what agents are calling a “slight uptick” in single-family house listings locally and across the United States, Metro Detroit home prices are going to remain steamy well through fall, Realtors and brokers predict, keeping one of the busiest periods in residential real estate going strong into the holidays. For metro Detroit real estate brokers and agents, the pandemic year is one marked with heavy workloads and rare sales techniques that proved necessary during one

of the most rapid-fire buying sprees in decades. While some of these changes will remain common practice going forward, Realtors say, other things like doing home inspections via FaceTime or buying a house entirely online are likely to fade in favor of in-person showings, open houses and a slower-paced sales cycle. “The frenzy allowed us to get creative with the way we negotiated our deals at all levels, not just the entry-level market but at homes above $500,000 to $1 million,” said Dan Gutfreund, a residential real estate specialist and Realtor at Signature Sotheby’s International Re-

alty in Birmingham. “In this unique market, the buyer walked into a highly desired home and had to make their largest financial decision inside of 30 minutes.” In June, single-family real estate sales continued to shatter records with median sales prices at their highest levels ever, according to Realcomp II, which tracks Michigan’s real estate data. The two issues that set the industry ablaze in 2020 — low interest rates and even lower home inventory — continued for the first six months of 2021. See FORECAST on Page 20

“REAL ESTATE HAS ALWAYS BEEN SOLD AS UNLIMITED INCOME, CONTROL YOUR SCHEDULE, AND, IN REALITY, THE UNLIMITED INCOME CAN BE ZERO AND THE SCHEDULE CAN CONTROL YOU.” — Frank Tarala Jr., broker and owner, SIRE Realty Services

An emerging venture capital fund, headed up by a longtime figure in Southeast Michigan’s startup community, seeks to be the “first check” for a host of early-stage companies in Detroit and the broader Midwest region. The Midwest Fund — which serves as an offshoot of New York City-based VC firm The Fund — is being headed by Ted Serbinski, who previously ran the TechStars Detroit accelerator Serbinski for mobility-focused startups, but which shut down in early 2020 after funding dried up. Now with other TechStars veterans, Serbinski is seeking to ramp up venture investment for early-stage companies in core Midwest cities including Chicago, Detroit and Pittsburgh, and he’s tapped some heavy hitters — including billionaire Dan Gilbert’s venture capital firm — as limited partners in the fund. The Midwest Fund, similar to the global Fund network of which it’s part, seeks to employ a high-volume model of deploying capital, writing one or two checks per month of about $50,000 each to early-stage companies. Formed earlier this year, the Midwest Fund expects to be actively investing at that rate by next month and will likely close between 30-40 deals over the life of the fund, according to Serbinski. This first fund will be the first of many, he added. The goal, according to Serbinski, is to show “very high conviction” toward investing just after meeting a company. See MIDWEST on Page 21

TECHNOLOGY

Cybersecurity training aims to catch up amid major breaches BY NICK MANES

Amid increasing cyber breaches with costs into the billions of dollars, there’s also a shortage of workers to play both offense and defense in preventing and mitigating against those attacks. In Michigan alone, there are more than 7,100 unfilled cybersecurity jobs, with about 4,400 of those in metro Detroit, according to CyberSeek. Nationwide, there are more than 464,000 cybersecurity job openings. The cybersecurity sector has a roughly zero percent unemployment rate, by some estimates. Driven primarily by the sheer expanding need for cybersecurity amid

Jim Marquardson and Northern Michigan University graduate Meredith Miller take the U.P. Cybersecurity Institute’s Auto Hacking Station for a test drive. | U.P. CYBERSECURITY INSTITUTE VIA FACEBOOK

increasing threats and attacks, academics and executives are exploring any and all options to fill some of the gap. To what extent that can be done remains an open question, according to Doug Miller, director of the Upper Peninsula Cybersecurity Institute at Northern Michigan University in Marquette. “I don’t want to sound like an alarmist, but I personally think we’re playing catch-up,” Miller told Crain’s. “It’s going to take a lot of people being really interested and coming into this career field before we really start putting a dent in those numbers.” To a large extent, Miller and others say a key goal to create a pipeline for a cybersecurity workforce means hooking would-be workers when

they’re young. Laura Clark, chief security officer for Michigan’s Department of Technology Management and Budget, said state government is heavily invested, along with industry stakeholders, on working within the K-12 system to highlight cybersecurity as a possible career path for students. “I spend a lot of time ... having conversations about what are creative pipelines for getting individuals to focus on cybersecurity as a career,” Clark said. “We do a lot of assessment on our current toolsets and if there’s places we can automate ... to really pinpoint where we need to focus our resources.” See JOBS on Page 21 JULY 26, 2021 | CRAIN’S DETROIT BUSINESS | 3

REAL ESTATE INSIDER A F e e - O n l y We a l t h M a n a g e m e n t G r o u p

Michigan’s #1 Financial Advisor by both Barron’s* and Forbes** Charles C. Zhang CFP®, MBA, MSFS, ChFC, CLU CEO and Founder

Charles is the highest ranked Fee-Only Advisor on Forbes’ list of America’s Top Wealth Advisors**

www.zhangfinancial.com 101 West Big Beaver Road, 14th Floor Troy, MI 48084 (248) 687-1258 Minimum Investment Requirement: $1,000,000 in Michigan $2,000,000 outside of Michigan. Assets under custody of LPL Financial, TD Ameritrade, and Charles Schwab *As reported in Barron’s March 12, 2021. Rankings based on assets under management, revenue generated for the advisors’ firms, quality of practices, and other factors. **As reported in Forbes February 11, 2021 and August 25, 2020. The rankings, developed by Shook Research, are based on in-person and telephone due diligence meetings and a ranking algorithm for advisors who have a minimum of seven years of experience. Other factors include client retention, industry experience, compliance records, firm nominations, assets under management, revenue generated for their firms, and other factors. See zhangfinancial.com/disclosure for full ranking criteria.

INDUSTRY ACHIEVERS ADVANCING THEIR CAREERS Recognize them in Crain’s

Listing opportunities: Debora Stein at dstein@crain.com 4 | CRAIN’S DETROIT BUSINESS | JULY 26, 2021

This area of The District Detroit behind the Fox Theatre was planned to be a neighborhood called Columbia Park. | KIRK PINHO/CRAIN’S DETROIT BUSINESS

Lots of unknowns about Ross’ plans with District Detroit After more than two months of behind-the-scenes chatter about some sort of Stephen Ross-Christopher Ilitch joint effort, news finally came out last week Kirk — first on WednesPINHO day and then on Thursday — about discussions between Ross’ New York City-based developer Related Cos. and Detroit-based Olympia Development of Michigan, the Ilitch family’s real estate company. We know that there have been talks about putting the Detroit Center for Innovation in The District Detroit, but precious little more than that. What may have seemed like a rather abrupt Ross decision to scotch a plan to build the proposed University of Michigan Detroit Center for Innovation on Dan Gilbert’s 14-acre “fail jail” site on Gratiot Avenue and move it into the Ilitch family’s District Detroit area “behind the Fox Theatre” instead was much more of a slow burn. Wednesday’s announcement by Gilbert’s Bedrock LLC real estate company was more of a coup de grâce than anything else. Ross, as I noted Thursday, had been looking at possible alternative sites for the 7-acre graduate studies project for no less than eight months when the announcement was made. He took a tour of the UAW-GM Center for Human Resources on the Detroit riverfront as a potential replacement site before it sold in November for $34 million. Ross and Gilbert and their respective deputies had butted heads over fundamental development issues like building orientation, sight lines, site entrances, interconnectivity and accessibility and other issues — and how all of those impacted the remaining 7 acres of Gilbert land, a source told me. Oh, to be a fly on the wall in those meetings. Those disputes, I’m told, were the main culprit in the downfall of the Gilbert-Ross effort at the jail site, which is now being branded as a future “innovation district,” although few other details were made available. It should be noted that the relationship between Ross and the Bedrock team was not the coziest. In addition to the jail site, Ross and Gilbert have also disagreed about the

direction of the latter’s other Detroit development efforts, including the Hudson’s site project and the Monroe Blocks project, I’ve been told. Ross, who was born in Detroit and made his commercial real estate fortune in New York, told Gilbert, who was born in Detroit and made his residential real estate fortune (in mortgages) here, that he was being too ambitious with those projects, according to a source familiar with the discussions. In addition to the crucial quandary about land assemblage, other questions remain in this Venn diagram in Detroit billionaire Monopoly. 01) “Behind the Fox Theatre” is not only a nebulous description of a location but, if you’re trying to build an architecturally iconic building as Ross has promised in previous interviews with Crain’s, why would you put it behind the Fox Theatre? Would you not want frontage on a main artery — like

IN ADDITION TO THE JAIL SITE, ROSS AND GILBERT HAVE ALSO DISAGREED ABOUT THE DIRECTION OF THE LATTER’S OTHER DETROIT DEVELOPMENT EFFORTS, INCLUDING THE HUDSON’S SITE PROJECT AND THE MONROE BLOCKS PROJECT. Gratiot or Woodward or Michigan, for example — so people can see it unobstructed? Freeway access to that area is a plus, but having what Ross has described as “a very iconic building” in that spot doesn’t make much sense from a visibility standpoint. There are also other chunks of land available — think, for example, along the Detroit riverfront or in Corktown — that could also serve the DCI’s acreage needs. In a lengthy emailed statement sent in response to a request I made Tuesday morning for a comment or interview, Olympia said The District Detroit is “home to some of the city’s most recognized and visited venues, including the historic Fox Theatre, Little Caesars Arena and Comerica Park, which attract millions of visitors to the area each year.” 02) How will Ross’ organization, which is used to calling the shots, be able to work with the Ilitches? In spite

of what Mayor Mike Duggan told reporters Monday, the Ilitches have a less-than-stellar reputation in Detroit real estate circles for a variety of reasons, but most importantly because they don’t have a track record of delivering on their promises. Yes, they built Little Caesars Arena, the Wayne State University Mike Ilitch School of Business, a new Little Caesars headquarters and a new office building. But for those Certainly Nothing to Sneeze at Developments, their sphere of influence is mostly concentrated to an area dominated by parking lots and vacant buildings, many of which deteriorated under Ilitch ownership (a strategy sometimes referred to as “dereliction by design”). I’ve talked with a few people in recent days who said that Ross putting his political and financial chips in the Ilitch basket could be seen as a risk. Olympia said in its statement that it “has remained focused on steady and balanced development in the city and we’re proud of what is being accomplished,” noting the new office building at 2715 Woodward, which is home to the Warner Norcross + Judd law firm and Boston Consulting Group (although the Detroit Medical Center backed out of a deal to have a Sports Medicine Institute in the building last year); a new Google office attached to Little Caesars Arena; and the relocation of the Detroit Pistons back to the city, among other things. 03) Ross specifically mentions historic preservation, but that’s a phrase we have yet to see pay off in what we know so far. There are no known historic buildings Ross plans to restore as part of the project, so that’s an aspect I am waiting to hear more on. And in spite of some positive forward momentum on the historic preservation side of things — the Hotel Eddystone (which was a forced redevelopment), the Detroit Life Building and Women’s City Club buildings come to mind — Olympia Development of Michigan isn’t exactly known for saving historic buildings. Olympia also noted in its statement a planned redevelopment of the United Artists Building, which was announced more than four years ago but hasn’t started construction, as well as a redevelopment of several buildings on Henry Street and Cass Avenue that Olympia originally wanted to raze because they became too dilapidated under their ownership. See INSIDER on Page 5

INSIDER

From Page 4

04) How, if at all, would the DCI in The District Detroit area work in conjunction with Related’s planned 75-unit apartment development with Detroit-based The Platform LLC at Charlotte and Third streets? 05) The Ilitches are known as being difficult to work with as joint-venture partners in real estate, so how precisely would this project work? Would the Ilitches acquire more of the land west of the Fox Theatre from the disparate owners, do a long-term ground lease to Related or UM and have one of those groups own the building, paying rent on the land to Olympia? Whatever happens moving forward, there remain plenty of unknowns. Getting the building built should be the ultimate goal, some said. “They need a shot in the arm and a good, uplifting story,” said Mike Ferlito, a Detroit developer. “They don’t need another fumble and I think Chris (Ilitch) is aware of that. Everyone sees what’s going on. You have a machine like Stephen Ross going to put a major stake in Detroit. They can’t f@&k it up and I don’t think they will. I am optimistic about it because somebody needs to be optimistic about it. We need to keep pushing the ball forward down here. The city needs to support this every which way it can.” Related, through a spokesperson, declined comment. Bedrock CEO Kofi Bonner said in a statement: “From time to time, Bedrock has sought perspectives on our plans and projects. Over that time, one thing has remained constant: our commitment to the city of Detroit. The Hudson’s Site project in particular is not intended to be a traditional commercial development. Rather, Dan Gilbert and Bedrock have always been committed to delivering a truly special project that will be a source of civic pride for Detroiters and an economic catalyst for our city. We are thrilled to see this landmark project continue to rise higher from the ground every day, and we are excited to follow it with a transformational development on the Monroe Blocks as conditions stabilize coming out of the pandemic.”

Mystery buyer spending millions in District Detroit

The Film Exchange Building is almost 84,000 square feet at 2310 Cass Ave.| COSTAR GROUP INC.

I’m also seeing another mystery buyer of some less sexy real estate: Montcalm Elizabeth LLC, which paid entities registered to George Martin of Brighton an estimated $1.25 million for properties at 135 W. Montcalm St. and 231 W. Elizabeth St. in June, according to property records. The 135 W. Montcalm property is sandwiched between a pair of Ilitch-owned parcels, while the 231 W. Elizabeth parcel is immediately east of an Ilitch-family owned property. Neither is anything splashy, just small slivers of land. The deeds for those properties list a Troy address that is also for a UPS store. Conveniently, though, all those properties are right in the footprint that billionaire real estate developer and Detroit native Stephen Ross is believed to now target for his planned Detroit Center for Innovation project with the

University of Michigan. One of the issues with putting the Detroit Center for Innovation to the west of the Fox Theatre is the potpourri of ownership interests. If those purchasing entities are in fact tied to the Ilitches, that puts more of that property in their portfolio — and I would anticipate more sales to come. I texted a spokesperson for the Ilitch family’s Olympia Development of Michigan real estate company asking if they are the buyer of the properties. “As a matter of policy, we do not, in the media, discuss or disclose these types of matters, which involve actual or speculative business activities,” a spokesperson for Olympia said in an email. A Related spokesperson did not respond to an inquiry. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

WE WERE ALL BORN TO

SUCCEED We’ve said it before, but it bears repeating: Sometimes, all we have is the strength inside. Wayne State Warriors prove that it’s this kind of strength that keeps you moving forward when you’d rather turn back. In good times and in challenging times, we never seem to lose our sense of focus and hope. That’s what fuels us to accomplish what we never thought possible. It’s also what creates the perseverance that makes our achievements all the more fulfilling — and turns the term “Warrior Strong” into something we don’t just say in an ad, but something we live every day.

wayne.edu

Let me just put this out there: I don’t know with certainty who has spent more than $14 million in the last month or two on some pretty well known Detroit properties. But I have an idea. Whoever is behind (what I estimate is) the $8.75 million purchase of the Film Exchange Building at 2310 Cass Ave. and its parking lot as well as the Bookie’s Bar & Grille building at 2208 Cass Ave. for (also what I estimate is) $4.2 million has done a very good job at concealing their identity — or identities. The Film Exchange Building sold to 2310 Cass LLC, which lists a UPS Store on Mound Road in Sterling Heights as its address, in May while the Bookie’s building sold in June to 2208 Cass LLC, which lists an address that’s also a UPS Store in Brownstown Township. I’m told that tactic — registering LLCs at PO boxes in random Detroit suburbs — has been used by the Ilitches before. JULY 26, 2021 | CRAIN’S DETROIT BUSINESS | 5

COMMENTARY

This company laid off 560 — and hardly anybody noticed DANIEL SAAD FOR CRAIN’S DETROIT BUSINESS

EDITORIAL

Beaumont-Spectrum deal rates scrutiny

n mergers, somebody benefits. And in the case of a proposed merger like that of Michigan health care titans Beaumont Health and Spectrum Health, who benefits needs to go under the microscope. The two companies, which operate 22 hospitals in Michigan between them throughout the Lower Peninsula, say that they will deliver cost savings that can benefit everyone. As nonprofit health systems, these organizations are social trusts that are intended to deliver benefits to their communities in return for tax exemptions, so the public is perfectly justified in demanding to know “what’s in it for us?” There are legitimate worries that the merger would increase health care costs in Southeast Michigan borne by patients, employers and taxpayers. One study, cited by the Economic Alliance of Michigan, showed that Beaumont’s prices were significantly lower than prices at Spectrum, which operates without large-scale competition in West Michigan. A study published by the Rand Corp. in September showed that both systems charge more than the Medicare average, but that Spectrum is 250 percent of that average and Beaumont is 177 percent. The study specifically considers the difference between what the federal Medicare program pays for services and what private payers like insurance companies pay —.a good proxy for costs that come out of employers’ pockets. Spectrum has disputed the Rand study, saying its sample size was too small. But another study of in-state cross-market hospital mergers showed they increase costs by an average of 7 percent to 9 percent, unlike mergers with outof-state partners, which didn’t raise costs. It gets even wilder looking at prices for individual services; data reported by Turquoise Health, a national website comparing hospital prices, showed a colonoscopy that costs $638 at Beaumont Royal Oak is $2,263 at Spectrum Zeeland. Spectrum and Beaumont’s hospitals don’t

overlap much in geographic area, but the combined company would also operate the insurer Priority Health, a big advantage in gaining power within the health care market. One potential solution to avoiding spiraling costs can be found in Spectrum Health’s own history. It was created out of the merger of two competing Grand Rapids hospitals, Butterworth and Blodgett. As part of that deal, the new system agreed to specific controls on costs, to make up for the decline in competition in the area. This deal should include similar stipulations. The best way to make those happen is for Attorney General Dana Nessel’s office to get actively involved in negotiations with players to make such a cost-savings agreement that has specific targets. Nessel’s office has to sign off on the deal, but she needs specific reasons in law not to do so. Her invitation to take a more critical look at the Beaumont-Spectrum tie-up has been issued just this month by President Joe Biden, who signed an executive order calling for more regulatory scrutiny of major U.S. mergers and acquisitions. It’s the ideal time for Nessel to flex a little consumer-protection muscle. There is another side to the merger cost question: quality. Beaumont has been criticized for a perceived decline in the quality of the health care it delivers. We’re not weighing in on Beaumont’s medical performance, but it’s undeniable that there’s a feeling in the community that it has declined. A “Beaumont doctor” no longer has the cachet it once did. But a merger could offer promise for improving that situation. These systems have almost $10 billion in cash and investments between them, even disregarding their massive borrowing capability. Any deal should include specific commitments to invest some of that money into facilities and programs that would increase quality. There are potential benefits from this merger, but it’s imperative we know what they are before it’s allowed to go through.

t 7 p.m. June 30, one of Michigan’s largest home health care companies had its 560 employees clock out for the last time. The next day, Bingham Farms-based Health Partners Inc. laid off its entire workforce of nurses, nursing assistants, therapists and direct care workers. The company filed no WARN notice with the state labor department about the mass layoff because the employees all worked under different roofs every day — the roofs of some of Michigan’s most vulnerable disabled residents who have been badly injured in auto accidents. Health Partners Inc.’s entire business was wrapped up around Michigan’s multibillion-dollar medical care industry that treats and cares for catastrophically injured motorists — paraplegics, quadriplegics, people who require a ventilator to continue breathing and individuals with traumatic brain injuries. The law the Republican-controlled Michigan Legislature passed and Democratic Gov. Gretchen Whitmer signed in May 2019 put Health Partners out of business. And hardly anybody not directly affected noticed. In any other industry, especially automotive, 560 layoffs from the same company would be front-page news. TV news reporters would be camped outside of the business, waiting to interview employees walking out of the building with pink slips in their hands. Instead, this massive job loss got almost no attention. That’s because it wasn’t caused by market forces, trade policy or a tax incentive bidding war with another state. These job losses were caused directly by the Legislature capping Health Partners’ provider rates at 55 percent of what it charged insurers to care for injured motorists in 2019, a payment scheme the family-owned company could not absorb. Make no mistake, that’s what this new

LIVENGOOD

law is: A scheme by the insurance industry to reduce its financial burden by so much that the medical providers it spent decades fighting in court over payments will just disappear. Health Partners Inc. owner John G. Prosser Prosser II’s is one of the auto insurance industry’s sworn enemies. Prosser literally co-authored a book with his son, John Prosser III, called “Accident: Michigan’s Insurance Model for America” and had been on a mission to replicate Michigan’s unique no-fault system in other states until the insurance industry finally got its way in Lansing. Auto insurance companies have, rather brilliantly, convinced Republicans who control the Legislature — and ran for office on the principles of free enterprise — to decimate an entire sector and put people like the Prossers out of business. And the $23 billion that still sits in the Michigan Catastrophic Claims Association’s bank accounts? All bets are that the insurers will find a way to capture a big slice of that pie after they have reduced their exposure to paying companies like Health Partners to care for injured drivers. “They did this to steal that $23 billion,” John G. Prosser II said in an interview. It’s not a possibility any insurance industry executive has stepped forward to dispute until Wednesday after this column was initially published. See LIVENGOOD on Page 17

There weren’t any TV crews camped outside the Bingham Farms offices of Health Partners Inc. when the home health care company laid off 560 employees July 1 due to the Legislature’s 45 percent cut in what the company gets paid to care for catastrophically injured motorists. | CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

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 | JULY 26, 2021

Chad

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.

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David Fischer Sr. on juggling an ambassadorship and a life-changing deal The last year has been eventful for David Fischer Sr., to put it mildly. At the same time as he was working as U.S. ambassador to Morocco, he was dealing with an offer to buy large chunks of his family business, the Troy-based Suburban Collection, by the Lithia Motors dealership chain. Fischer, the chairman of Troy-based Suburban Collection Holdings, talked with Crain Communications CEO KC Crain about that deal to sell most of the company’s dealerships, his experience in Morocco and why diversification really mattered for a company that once sold Studebakers and Oldsmobiles — brands that no longer exist — that grew to encompass 33 automotive franchises. The interview has been edited for length and clarity. | BY KC CRAIN ` KC Crain: I’ve had the privilege of knowing you for quite some time ... We were walking down Woodward, maybe it was Dream Cruise. Maybe we were coming out of dinner. But I remember you told me your father had your family’s first dealership somewhere near where the restaurant Phoenicia is today. David Fischer: We opened on Maple Road for 10 months, (then) moved down to the Woodward Avenue corner — Woodward and Bowers — and built their first and only Oldsmobile dealership right there. Across the street. ... we sold Studebakers in what is now the Phoenicia restaurant, and it’s better served serving the Lebanese food. ` So, I mean, that’s 1948, we’ve got Oldsmobile, Studebaker. When did you go into the family business? I joined the family business in 1968. And we had the (store) on Woodward Avenue. In 1973, we moved to Troy. My father moved his Oldsmobile dealership; my uncle moved his Buick dealership. We were next to each other on Maplelawn. And we stayed there until I bought my father out in 1978, and he moved to Florida. `Did you always know you wanted to go into business with your dad? No. I thought I wanted to go in the advertising business. I wasn’t sure what I wanted to do ... it would have been great fun. ... And I decided that it was a great opportunity to work with my dad, and I’ve always loved cars. And you know, when you’re in the (dealership) business, your kids wash cars, they do parts, they collect debts. I had done all that. My first official job at the dealership was writing service orders. ... It’s a great way to learn the business and the customers. I have customers today that I dealt with back then I’m still dealing with their families. ` So you go to work with your dad, and you guys moved the store, you buy him out. How many brands did you have at that point? We had Oldsmobile. ` You seem to come off as quite the entrepreneur always finding new ways to do a deal or find a deal. Well, what was that first turning point with Suburban going from the Oldsmobile store? How did you go to two to three to four? What happened was twofold. We would train people, we would get them ready, and we had no place to promote them. And secondly, I was losing customers to other brands. Because we didn’t offer small cars. We didn’t offer minivans. We didn’t have what they wanted. So I had to either lease them a car through an independent company, or find that product myself. And we chose to grow the business. As it turns out, it’s a good thing that we did, because you can’t buy a Cutlass today. You can’t buy a Toronado today.

call that this world was changing. And we better be thinking about where we’re going. ` So just one day, somebody makes a decision and your world goes upside down. Well, there’s been a couple of big ones, but (Oldsmobile), and the day that some of the credit companies went broke, and all of a sudden you had floor planning in the morning, and at our height, we might have had 7,000 to 10,000 new cars in stock. We pretty much own the rest of the stuff, but you might have $300 million or $400 million in floor planning. And and they call and say hey, we’re not here anymore. David Fischer Sr. is the chairman of Troy-based Suburban Collection Holdings. | CONTRIBUTED PHOTO

` You were buying new franchises. What was that turning point in business where you said, “I’ve got this model, I figured it out, I’ve got a platform, and I can just keep adding points to this business”? You know, I think what happened is that you learned how to do it after the second or third store ... And you empower the people, you get the best people you can, and you work with them. You decide what you’re going to do, how you’re going to do it, how you will keep each other informed. And then it’s about what’s available, and how do I pay for it. And we tried to grow a little bit every year. So when we sold to Lithia, a few months ago, we had 51 facilities of some type, and 33 different independent franchises that we were selling.

` So how do you bounce back from that? You look around, and it’s not unlike when you lose somebody, the rest of the world goes on. And you have a choice to make. And the choice was, we have to go forward. And so how do we go forward? We go forward in the best way possible, with the right attitude. We know we have to fix this. And that is your goal. And, that’s what you work on full time till you get it fixed.

THIS IS THE LATEST IN A SERIES OF INTERVIEWS BY CRAIN COMMUNICATIONS CEO KC CRAIN WITH PROMINENT BUSINESSPEOPLE. TO WATCH THIS INTERVIEW, GO TO CRAINSDETROIT.COM/ ONEONONE.

` You just recently got home, back from Morocco, having served as an ambassador, a very important post at a very important time. Sounds like an amazing opportunity but an amazing responsibility as well. I can tell you, when I was asked if I would serve, I was given a couple of opportunities, and Morocco was my favorite. It’s America’s oldest ally and goes back to 1777 and the Barbary Coast pirates. We formalized (a peace and friendship) treaty in 1787, in perpetuity, and it is America’s oldest treaty client. It’s amazing. ` You’re over in Morocco, you’re serving your country. And at the same time, this massive deal is happening with your business, a business you spent decades building and it hits a certain point, and somebody knocked on your door and said, “We’re interested in acquiring your business.” We’ve had people come by and ask, you know, on and off for years, but there were two things happening. We had a discussion about the Abraham Accords (peace deal between Israel and the United Arab Emirates) ... So there was a significant diplomatic action going on.

And a discussion of what could happen in the business, what would happen with Suburban, would we accept their offer? And they both wound up going into December. ` I’m guessing you weren’t getting a lot of sleep? Well, no, because you have to decide, you know. I’ve done this all my life. And it was sometime last year, I realized at 74 I wasn’t going to live forever, which came as a shock (laughs). And, and so you’re thinking a lot about your future, your family’s future. And we have a couple of other things we do: We’re still a tier-one supplier to General Motors, Ford, Nissan, on the services side. And we’re in the accessory business with General Motors and Ford, in 14 or 15, states. So we have a good-sized ongoing business that we kept. But trying to decide the fate of the automobile business, we decided actually, right around Christmastime, and which was a couple of weeks after the Abraham Accords event in Morocco. And so when I came home, the end of January, we signed a document with Lithia. See FISCHER on Page 17

` When you look back at all the challenges you had, what were some of the biggest hardships you guys faced? Well, there’s a wonderful memory of a fellow by the name of John Rock, who was a General Motors vice president, who had become a dear friend. And I was with John at the General Motors building the day he made the comment, “I feel like a cowboy and someone’s trying to shoot my horse.” We have lost more franchises, everything that’s gone but Mercury, we had. Saturn, Hummer, Oldsmobile. Pontiac. ` When you have a franchise, you’ve got a dealership (and you learn it’s going to close), there are a couple of hundred people that you know who work there that are there supporting their families, a big ecosystem. People, land, building, investment. And, and all of a sudden, someone decides that for economic reasons for them, it’s going to go away. And it may have been a good decision. But it’s still painful for all of us there. I remember, you know, when Oldsmobile went away, at this point, we had, I don’t know, nine or 10 other franchises, but when Oldsmobile went away, it was it was truly a wake-up

Charting a path for a resilient world How can businesses thrive in today’s new normal? It begins with resilient leaders like you, who quickly connect today’s resources to meet tomorrow’s challenges. Learn more about the insights and services that can help you build greater organizational resilience—and help us all build a more resilient world. To start on your path to resilience, visit deloitte.com/us/covid-19 Copyright © 2021 Deloitte Development LLC. All rights reserved.

JULY 26, 2021 | CRAIN’S DETROIT BUSINESS | 7

SMALL BUSINESS SPOTLIGHT

Despite challenges, some small businesses see a boost during pandemic

LISTEN ONLINE Podcast: Whistle Stop Hobby & Toy co-owners and siblings Rick Claggett and Julie Everitt talk about how they juggled surging sales during the pandemic along with staffing issues and other limitations. “Our family is key.” at crainsdetroit.com/ small-business-spotlight

Katie Belemonti of Roseville and her son, Ethan Belemonti, 9, shop for a LEGO set at Whistle Stop Hobby & Toy in St. Clair Shores. | NIC ANTAYA FOR CRAIN’S DETROIT BUSINESS

STAYING AHEAD OF THE GAME

Jay

DAVIS

Whistle Stop Hobby & Toy co-owners and siblings Rick Claggett and Julie Everitt can find the silver lining in the COVID-19 pandemic. The hobby and toy shop, established in 1969 in Harrison Township by their parents Richard and Carol Claggett, has always done great business thanks to its strong local following. But it saw a major boost over the last year and a half. With scores of individuals and families confined to their homes, Whistle Stop Hobby & Toy became a go-to for model trains, puzzles, board games and other items that could keep a person busy.

“Our (revenue increase) has been considerable,” said Claggett, who declined to disclose specific financial figures. “Luckily, we specialize in things people do at home. People discovered hobbies they used to love. For a lot of people, the main concern was keeping kids busy. A lot of parents and grandparents kicked in to get things to do.” Many small businesses have folded or come close to it during the pandemic. Others have found new ways to bring in revenue over the past 16 months through clever marketing and new ways of doing business, as well as new product offerings and creating new revenue streams that are here to stay. That includes a new service of-

fered by the proprietors of Eastern Market Brewing Co. Eastern Market Brewing Co. has had a busy couple of years. The company acquired Axle Brewing Co. in 2019, and rebranded its taproom The Ferndale Project in 2020, opening shortly before the pandemic began. In an effort to remain viable, bring in revenue and keep its employees on the payroll, The Peddler was born. What started as a beer delivery service out of The Ferndale Project space grew to include other local food businesses and craft goods. It’s now run out of the 17,000-square-foot space that previously housed Roak Brewing Co. See BOOST on Page 10

READ ALL OF CRAIN’S SBS PROFILES AT CRAINSDETROIT.COM/SMALLBUSINESSSPOTLIGHT 8 | CRAIN’S DETROIT BUSINESS | JULY 26, 2021

PANDEMIC PUSH It hasn’t been all doom and gloom for small businesses during the pandemic. By offering additional services or products, some saw an increase in business — and loyalty. Following are some tips on how to get creative during a challenging time:

Detroit Sewn staffers work on manufacturing PPE during the pandemic. The company saw a huge boost in adding PPE production to its list of services. | DETROIT SEWN VIA INSTAGRAM

Be social and current: Use your social media presence and website to connect with customers and potential collaborators and let followers know what you’re doing and what you have available in real time. Collaborate: Competitors can also be collaborators, allowing your business to produce more for clients and keep employees working. More TIPS, PAGE 10

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SMALL BUSINESS SPOTLIGHT

BOOST

From Page 8

EMBC co-founder Dayne Bartscht, a 2019 Crain’s 40 under 40 honoree, said the establishment of The Peddler played a role in the business being able to keep all its employees on during the early stages of the pandemic, when nonessential businesses like breweries were forced to close. That helped the company immensely, as Eastern Market Brewing Co. increased its workforce from 15 to 45 when it opened The Ferndale Project. By the end of the year, the company employed nearly 100 people, Bartscht said. “We had no revenue in April or May while we were getting The Peddler up and running,” said Bartscht, whose venture offers delivery within a 15-mile radius of Eastern Market Brewing Co. and The Ferndale Project for $1. The Peddler also delivers to other counties once a week. Overhead is low, with the only cost to EMBC being the driver’s labor, vehicle maintenance and gas. “From a qualitative standpoint, it’s given us quite the boost. We went from wondering if we would have to close our businesses to doubling the size of our team. A lot of that is driven by the innovation of our team,” Bartscht said. EMBC already owned two trucks and four more trucks were purchased for a total cost of between $40,000 and $80,000. A nominal fee is paid annually for logistics software, which helps optimize delivery routes. The Eastern Market Brewing Co.

MORE TIPS Keep it going: You don’t have to go back to doing what you did before the pandemic. Keep doing what worked. You could attract new clientele and find the chance to offer products or services that could set you apart. Diversify: Adding to your offerings could mean hiring more staff. It also could signal the addition of a new division of your company. Plan: In order to permanently implement new offerings, invest in hiring more staff, new machinery and making other moves to properly handle your boost in business — for the short and long term. SOURCE: KAREN BUSCEMI, DETROIT SEWN

staff was busy at the outset of the pandemic. Bartscht challenged the team to come up with a new business idea each day for 10 days. All of them have been implemented in some way, including Dooped, a vegan doughtnut operation. EMBC also acquired coffee company Ashe Supply Co., which operates out of Ferndale. Earlier this year, EMBC signed a fiveyear lease to take over Roak’s brewing equipment and space near downtown Royal Oak, including pizza ovens. EMBC moved its new Detroit-style pizza business, Assembly Pizza, from Ferndale to the Roak space and The Peddler will offer delivery through online orders. “I’d say we had a pretty good year

thanks to our creativity,” said Bartscht, who declined to disclose 2020 revenue. Eastern Market Brewing Co. in 2019 topped $1 million in revenue. “(The Royal Oak space) has the potential to become a third brewery for us.”

Customer service is key At Whistle Stop Hobby & Toy, demand for its products forced Claggett and Everitt into work when most businesses were forced to close. The co-owners, who run the business with their sister Wendy Bacon, made their way to the 10,000-squarefoot space three days a week to fill online orders. “They were coming in like crazy,” said Claggett, a 54-year-old Royal Oak resident who has worked at the store in some capacity since he was 16. “Ninety-five percent of the online orders were from current customers. That was the only way they could get anything.” Shortly thereafter, the toy store began to offer curbside pickup. Everitt said staffers would take orders via phone and email with a 24-hour window to fill the orders. A personal shopper component has been implemented, too, which is available at no cost to customers. “I have worked one-on-one with a lot of customers,” said Everitt, a 48-year-old Clinton Township resident. “I’ve done some personal shopping. That’s an area that has increased (during the pandemic). We’re (customers’) eyes in the store. I love that. Being that we’re a small business, it’s

Former pro boxer Willie Fortune, owner of Jabs Gym locations in Detroit and Birmingham, shifted to offering online courses during the pandemic. The pivot allowed Fortune to keep all his employees on staff. | MARX LAYNE & COMPANY

nice to give our customers that added touch. That’s what small business is about: going the extra mile.” Growth has been evident for Whistle Stop Hobby & Toy. Its staff of 25 is the largest in its 50year history — built up to manage personal shopping orders and have coverage in the event someone is out sick. “Everything has been strategic,” Claggett said. What hasn’t been strategic is the makeup of the staff. Everitt said they had to bring on 15- and 16-year-olds due to struggles in finding help. Some college students were brought on, but they took other jobs this summer, she said. Whistle Stop also employs some retirees, according to Everitt.

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Collaboration is key, according to Detroit Sewn President and CEO Karen Buscemi. The Pontiac-based cutand-sew operation was focused on making clothing but during the pandemic, it began producing sustainable personal protection equipment, along with its apparel and home goods. Detroit Sewn at the outset of the pandemic booked a deal to produce 50,000 cotton masks for Livonia-based Trinity Health. That allowed the company to add jobs and additional shifts. Detroit Sewn partnered with other companies, allowing it to increase production. “One of the most important things

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10 | CRAIN’S DETROIT BUSINESS | JULY 26, 2021 BCB144280_MSG_Print_Crains_DBus_7-26-21_Insertion_F1.indd 1

SMALL BUSINESS SPOTLIGHT

Happy Howie’s all-natural dog treats, based in Detroit, got a major boost during the pandemic, as scores of people took in pets. The company’s e-commerce took off during the quarantine period, according to company co-owner David Collado. | ARCHETYPE

we learned was to not be afraid to collaborate with others in the same industry,” Buscemi said. “A lot of people see someone who does the same thing as competition. If you protect yourself with (nondisclosure agreements) and things like that, and you can come together, you can help everybody. A big thing was those collaborations allowed other businesses to keep their staff working when they would have otherwise been shut down.”

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To keep his staff working, Happy Howie’s all-natural dog treats President David Collado implemented several changes.

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Collado, whose Detroit-based business was featured in a Capital One ad late last year, changed his employees’ work schedules to reduce time spent together in the lunchroom. He also installed no-touch doors and air purification systems, and utilized COVID-19 safety kits. Happy Howie’s received a $15,000 grant from the state of Michigan aimed at assisting companies in the food and agricultural industry in adopting COVID safety measures. Those changes, and keeping employees paid for 40 hours despite them working just 30-hour weeks to keep with the safety measures, were major for Happy Howie’s, which did not lay off any employees during the pandemic. With people home for an extended

period of time, companionship became vital for some. That led to an increase in pet ownership. More than 11 million U.S. households got a new pet during the first eight months of the pandemic, according to a report published by Today’s Veterinary Business. That led to an influx of business for Happy Howie’s, which has its products in 4,000 stores nationwide, according to Collado. Revenue increased by 10 percent in 2020, Collado said. From June 2020 through June 2021, the business topped $2.6 million in revenue, according to Collado. To help meet an increase in demand, he purchased a new machine that allowed Happy Howie’s to automate one of its key production processes. Collado cashed out $20,000 in Capital One rewards to put down a deposit on the machine.

Changes that stick Even after gyms in Michigan were allowed to reopen, Jabs Gym owner and former professional boxer Willie Fortune continues to offer virtual courses, too. Jabs Gym, with locations in Eastern Market and Birmingham, began to offer outdoor training classes shortly after the start of the pandemic for groups of up to 10 people. Online courses came soon after, as Fortune could host a class for up to 200 participants through Zoom. The classes, which feature shadow boxing and boxing-inspired yoga, initially were offered for free. Fortune,

ensure they both succeed. On a lot of levels, the pandemic has helped small businesses facilitate a lot of growth.”

Ripe for opportunity

Bartscht

Buscemi

who also offers kickboxing, high-intensity interval training and cross-training courses, later would charge $15 for each online class. In offering the outdoor and online courses, Fortune was able to keep staff employed and last year pulled in $10,000 to $12,000 between the two offerings. “I wanted to keep everybody employed. We were able to maintain our monthly overhead and give some work to trainers and desk staff,” Fortune said. “I don’t think we would have made it through the pandemic without the online courses. “Going through the pandemic changed my mind frame. We’re now offering pay-as-you-go memberships, walk-in classes, things we didn’t offer previously. I’m happy we’ve been able to create another stream of income.” As Fortune is doing, Buscemi agrees that businesses that have implemented new offerings during the pandemic should make them permanent, if possible. “Now you can look at your business as having two separate divisions,” she said. “They have to be handled differently and you have to plan properly to

Working hard is a common thread for all of these business owners. They’ve put in long days and nights over the last year-plus and toiled to adapt to ensure their businesses remain viable. Eastern Market Brewing Co.’s Bartscht sees the pandemic as a blessing in disguise. “We all felt like, had we been around and in our roles for years, we may not have had and exhibited that natural creativity,” he said. “It wasn’t easy. We all worked seven days a week. We gave everyone the option to take time off to get their heads right, and only two of the 45 did, and they came back. It was pretty amazing to see everyone come together.” Claggett and Everitt said the will to keep their toy store alive played a major part in their business thriving despite the circumstances. Community support has been key, too, as customers made it clear they wanted to help keep the shop alive. “We had customers who didn’t want to buy from Amazon. They wanted to buy from us,” Claggett said. “I’ll always look back on this time and think how interesting it’s been. It’s been a learning experience.” Contact: jason.davis@crain.com (313) 446-1612; @JayDavis_1981

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JULY 26, 2021 | CRAIN’S DETROIT BUSINESS | 11 7/9/21 12:15 PM

SMALL BUSINESS OWNER? GET NEWS YOU CAN USE.

CRAIN’S

SMALL BUSINESS SPOTLIGHT If you’re a small business owner, odds are you’re working to

recover and reinvent in a reconfigured economic landscape— debating your next move, trying to anticipate future disasters and seizing new opportunities. Crain’s reporter Jay Davis is here to help, with his expert coverage of issues common to small, emerging and mid-stage businesses. Each month, his Small Business Spotlight feature takes an in-depth look at topics such as growing a small business, establishing a strong succession plan and even how to thrive as a gig worker. The feature also includes a podcast with a local business owner and tips to help solve problems small businesses face. Head to crainsdetroit.com/small-business-spotlight for the latest small business news and resources.

JAY DAVIS

SMALL AND EMERGING BUSINESS REPORTER

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DETROIT

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MANUFACTURING

Cadillac Products looks to diversify with medical gown unit Automotive plastics supplier obtains $100,000 state grant, looks to secure contracts BY KURT NAGL AND SARAH KOMINEK

Automotive plastics supplier Cadillac Products Inc. is investing millions of dollars into manufacturing hospital gowns in hopes of turning a charitable pandemic pivot into a fullfledged business unit. Its newly launched health care subsidiary, ProTEC-USA, has donated nearly 1.2 million gowns since the COVID-19 pandemic started in early 2020 but has yet to land a paying customer. Its executives, however, are banking on sustained demand for local personal protective equipment after the pandemic exposed the United States’ reliance on China for hospital supplies. At the auto supplier’s 62,000-square-foot plant in Troy, around two dozen of the company’s 225 employees have a hand in making gowns at any given time. Around 10 are devoted full time to running the new $1 million gown-making machine, which sits in a 5,000-square-foot area carved out for ProTEC. The machine was built inhouse and is capable of producing 2 million gowns each year, said Mike Williams, vice president of operations and purchasing. At a sale price of $1 apiece, which Williams said is competitive with offshore sourcing, that would create $2 million in new revenue for Cadillac Products, or around 5 percent of overall revenue for the company. “I’ve got a goal. I’d like to diversify our business outside of just automotive products,” Williams told Crain’s on a recent tour of the plant for dignitaries and media. “If I could get this to 25 to 30 percent (of overall revenue), that would be great.” The nation’s supply of PPE was quickly depleted when the pandemic hit. Then, supply from China, the world’s largest exporter of PPE, was

Workers at Cadillac Products in Troy fold medical gowns made by a machine built in-house during the COVID-19 pandemic. | KURT NAGL/ CRAIN’S DETROIT BUSINESS

shut off. The shortage led to horror stories of nurses and doctors reusing equipment and treating patients without adequate protection. While the frenSceli zied early days of the pandemic have passed, and hand sanitizer and masks now sit discounted on store shelves, many politicians are calling for PPE to be manufactured domestically to prepare for health crises in the future. “I came into the Legislature and met with so many people who said that our economy is risky because we are so dependent on the auto industry,” said state Sen. Mallory McMorrow, D-Royal Oak, who attended the company’s tour to laud its “made in

Michigan” PPE plan, alongside a few other Democratic lawmakers. “When the auto industry is hit hard, we’re hit hard.” That’s a big factor in Cadillac Products’ desire to diversify. The company is planning to invest an additional $1 million to build a new machine and double gown production capacity, underscoring its confidence that there is a market for locally made PPE. The company received a $100,000 grant from the state to help it build the first vertically integrated machine, which pulls plastic sheets made of resin pellets down a line and cuts them into gowns. Before the machine, gowns were cut by hand in a much more laborious process. Photographs of the machine are prohibited, and it is concealed by makeshift walls to keep proprietary secrets from Chinese competitors,

according to the company. Cadillac Products makes Level 1-3 surgical gowns and could also produce Level 4 gowns, though they are lower volume and face more rigorous regulatory standards, said Daniel Sceli, CEO of Cadillac Products Automotive. The company’s gowns meet U.S. Food and Drug Administration specifications, but it has yet to receive its 510(k) clearance, which would allow the gowns to be marketed as safe and effective. Sceli said the company is clearing necessary regulatory hurdles “While we await a long-term supply contract for this new line, we are entertaining requests for information and requests for quote,” spokesperson Don Lowe told Plastics News. “We have quoted some business but acknowledged the line was not capable of producing in quantity yet.” The company said it is in talks with

medical distributors and hospital systems but declined to name them. Detroit Medical Center spokesman Brian Taylor told Crain’s in an email that its Sinai-Grace hospital received 12,000 of the donated gowns, but the health system declined to discuss its PPE purchasing strategy or the possibility of procuring supplies from Cadillac Products in the future. “The U.S. government is [also] looking for gown manufacturers in the U.S.,” Lowe added, both for immediate use in hospitals still treating COVID-19 patients and for national stockpiles. “We have been involved in a couple ‘request for information’ inquiries,” from the U.S. government, Lowe said. “Because our product is 100 percent made in the U.S., we are optimistic that we’ll be chosen to quote when the time comes.” Cadillac Products developed its strategy to diversify two years ago in order to “protect the business,” Lowe said, when it received a forecast for medical gowns that projected “a steady increase in gowns about 7 percent year over year through 2027.” “That forecast was issued before the pandemic, due to additional cosmetic surgery and other procedures being done for more protection for those involved in those procedures,” Lowe said. Sceli said he thinks the health care business unit will be sustainable and has the potential to branch out. “We’re obviously focused on gowns right now, but five years from now, who knows,” he said. “We make plastic films. There’s a lot of things you can make out of that stuff.” — Sarah Kominek is a reporter for Plastics News, a Crain Communications Inc. publication. Contact: knagl@crain.com; (313) 446-0337; @kurt_nagl

FINANCE

Renaissance VC fund closes on $77.5 million 4th round Ann Arbor ‘fund of funds’ continues focus on bringing more outside dollars to Michigan BY NICK MANES

The landscape for Michigan’s startup economy is vastly different than when Renaissance Venture Capital launched its first fund 13 years ago. The Ann Arbor-based “fund of funds” recently closed its fourth round, about $77.5 million. The fund, headed by CEO Chris Rizik, primarily invests in other venture capital funds and aims to deploy its capital with the goal of furthering its work of bringing venture capital funds from around the country to invest in Michigan startup companies. The fund also works closely to connect those companies with corporate partners. “So the strategy continues to be: find the best funds, engage them here, connecting startup companies with venture funds, but then connecting them with customers from among the major companies (in

Michigan),” said Rizik, noting that Renaissance helped 15 companies in the state last year using that model. Citing a recent report by Crunchbase Rizik News showing that Michigan led the nation in terms of growth in venture capital investment, Rizik noted just how much things have changed since the launch of his fund, an early entrant in the state’s VC community. “I think the toughest work was doing this 10 years ago, when it may not have been clear to venture firms in other parts of the country that this was an attractive place,” Rizik said during an interview last week. “It’s (now) an easier sell. And there’s just more proof points.” Similar to earlier funds, investors

in the fourth Renaissance fund include a mix of corporate, foundation, institutional and family office partners. In total, Renaissance has raised more than $280 million since 2008. Health insurer Blue Cross Blue Shield is among the corporate investors in this latest round for Renaissance. The amount of its investment was not disclosed. “We are pleased to be an investor in a fund like Renaissance that has supported innovation in areas such as health, security and technology,” Anthony Stefani, a director in the CFO office of the Detroit-based insurer, said in a statement. “It also has enabled Michigan startups to play a bigger role in these economic sectors.” Rizik said the latest fund will have a likely lifespan of about three years. Data from the second quarter of this year, produced by research firm PitchBook and the National Venture Capital Association trade group, shows that venture capital activity in

general, from overall dealmaking in angel and early-stage investment through the later stages, is on track to break last year’s record, according to a report earlier this month. In the first half of 2021, 337 U.S. venture funds raised a total of $73.5 billion, according to the report. The record, set last year, was $80.5 billion. “U.S. venture investment levels continue to rise as mega-deals become more common and nontraditional investor participation in VC becomes standard. As the industry looks toward the second half of the year, investors are evaluating whether this level of dealmaking will persist and what its broader impact might be,” John Gabbert, founder and CEO of PitchBook, said in a statement. “The robust exit market of the last 24 months has returned record amounts of liquidity to LPs and more exits happening across the VC ecosystem is a broadly optimistic sign for the health of the venture market going forward.”

Rizik acknowledged that such numbers spell good times for VC funds like his, and by extension, the downstream startups that rely on the largesse to grow. It’s important to remember that the good times don’t always last, he said. “We still tend to think that founders have to plan for a world that isn’t quite as frothy as it is right now,” Rizik said. “So there’s always the risk of taking too much money. There’s the risk of maybe living a little too large as a startup. But I think that’s where having experienced leaders who’ve been through cycles ... know it’s about building a fundamentally sound business that is attractive when times are frothy, or when times are tough. And being able to do it so that it’s going to make financial sense for everyone.” Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes JULY 26, 2021 | CRAIN’S DETROIT BUSINESS | 13

PEOPLE

Texas urban development veteran appointed as Detroit planning director

FINANCE

Antoine Bryant comes from Houston architecture firm BY ANNALISE FRANK

Bryant’s past work stretches from private to public and nonprofit. It includes public engagement services while principal of a company called Bryant the Bryant Design Group LLC, leading a community development corporation in Houston and helping direct disaster relief after Hurricane Ike, according to his resume. Bryant attended Cornell University for a bachelor’s degree in urban and regional studies, and the University of Texas Graduate School of Architecture. He’s also on the Houston Planning Commission and board of directors for the National Organization of Minority Architects. According to the release, Bryant has a proven track record of landing funding from the U.S. Department of Housing and Urban Development, including Community Development Block Grants and HOME funds, as well as Low-Income Housing Tax Credits. “In his current position and throughout his career, Mr. Bryant has made attention to underserved urban neighborhoods and community engagement a driving force in his design work from Atlanta to California ...” Duggan said in a July 8 letter to council outlining the nomination. In the release, Bryant said: “I believe that the way people live their

Mayor Mike Duggan has brought on an urban development veteran from Texas to Detroit to lead the city’s planning department. Antoine Bryant started July 19 as an interim director of the Planning and Development Department, though Duggan’s office formally announced his nomination for the fulltime position on Wednesday. Bryant was selected following a nationwide search, a city release said. The appointment comes after former director Maurice Cox left in fall 2019 for the top planning job in Chicago. Deputy director Katy Trudeau had been leading the planning department on a temporary basis. If confirmed by City Council, Bryant will report to Donald Rencher, group executive of Planning, Housing and Development. Bryant, 47, has spent more than 25 years in city planning and architecture. He comes from a job as business development director and project manager for the Houston office of Ohio-based Moody Nolan, the largest Black-owned architecture firm in the United States. He is a nationally recognized thought leader in civic engagement, urban planning and community-led design, according to a city news release. “We are thrilled to have him join the team and get to work helping to revitalize our neighborhoods and our city,” spokesman Dan Austin told Crain’s in a message.

everyday lives now has a direct impact on their futures. Being able to make a difference in the lives of my future neighbors and to help those who have been unable to reach their full potential to get there, that’s what planners like me live for.” Duggan, who is running for a third term this year and has received criticism over a perceived lack of focus on the neighborhoods and community engagement efforts, added in the letter that he thinks Bryant would “be an enormous asset” on projects like the Strategic Neighborhood Fund and spending the city’s massive allotment of American Rescue Plan dollars. When Cox first left, Duggan appointed executive Arthur Jemison to take on planning duties in addition to his job as chief of services and infrastructure. His title became group executive for planning, housing and development. Jemison left for a role in President Joe Biden’s administration in January and was replaced by Rencher, who was promoted from director of the city’s Housing and Revitalization Department. Trudeau was announced as acting planning department director at that time. Julie Schneider, who had been in Rencher’s role on an acting basis, was approved by City Council to take over permanently. Schneider was previously deputy director of the department. Contact: afrank@crain.com; (313) 446-0416; @annalise_frank

GET A HEALTHIER OUTLOOK ON CHILDHOOD Tune in to WJR 760 AM for Caring for Kids, a monthly radio program highlighting issues and efforts locally, regionally and nationally, that impact the health and wellness of children.

LISTEN TO WJR AM LIVE Tuesday, July 27 at 7 p.m.

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KEVIN O’NEAL Board Member Boys & Girls Clubs of Toledo

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14 | CRAIN’S DETROIT BUSINESS | JULY 26, 2021

HOST

CHUCK BULLOCK Board Member The Children’s Foundation and First Tee Greater Detroit

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For more information and to listen to past shows visit:

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Shinola has a retail store on Woodward Avenue in downtown Detroit, at the Dan Gilbert-backed Shinola Hotel. | NICK MANES/CRAIN’S DETROIT BUSINESS

Shinola seeks a new CFO, and public company experience is ‘a plus’ BY NICK MANES

The parent firm of Shinola, the Detroit-based luxury goods manufacturer and retailer, is in the market for a new CFO, and it wants someone with lots of experience at a public company. A job posting for the CFO job at Bedrock Manufacturing Co. in Texas, makes multiple mentions alluding to plans to go public. Executives at the company, however, downplayed that any such plans are imminent. Shinola and the affiliated C.C. Filson & Co. are owned by private equity firm Bedrock Manufacturing, backed by Shinola brand founder Tom Kartsotis. Kartsotis reportedly said in 2016 that his goal was to take Bedrock Manufacturing public within five years, according to an Inc. report at the time. The job posting seeks an experienced chief financial officer candidate in Detroit, where Shinola is headquartered, to oversee financial operations for all the companies. Filson is headquartered in Seattle, but previously had a retail store on Canfield Street next to the Shinola flagship shop in Detroit’s Midtown neighborhood. The candidate would report to Bedrock Manufacturing Chairman Mark Light, according to the job posting. Shinola makes watches, leather goods, apparel and various lifestyle products and has heavily marketed its Detroit connections, although those roots have been challenged. Filson, meanwhile, makes high-end outdoor goods. The specific entity that may seek to go public is unclear, but the two separate job postings — shared on the job boards for both companies — indicate that the company’s backers are exploring both a traditional initial public offering as well a merger with a special purpose acquisition company, or SPAC, as possible mechanisms toward becoming a public company. Specifically, the job postings note that preference would be given “to candidates with CFO experience or Controller in Public organizations with revenues of $250 (million) or more.” Experience leading a company through the IPO process would be

considered “a plus.” Additionally, the posting notes that the company would like someone with “Prior experience as a CFO in a fast-growing, pre-SPAC/IPO company that has experienced rapid growth.” The posting also calls for someone to “Review and approve all pre/post IPO filings required by the Securities and Exchange Commission.” Shinola CEO Shannon Washburn, in a statement to Crain’s on Wednesday, downplayed that any route to the public markets is in the immediate future. “We expect our new CFO to be with us for many years,” Washburn said in the statement. “As we are searching for qualified candidates, we included a wide range of experience and skill set to fill this role.” A spokesperson for the company declined to provide a revenue figure or say whether any of the companies are profitable. The sale of “luxury goods,” however, took a big hit in 2020 as the global economy recoiled due to the COVID-19 pandemic, according to a report late last year from consulting firm Bain & Co. All told, “the core personal luxury goods market contracted for the first time since 2009, falling by 23 percent at current exchange rates,” hitting about $255.3 billion, according to the report. Shinola in July 2019 laid off about 5 percent of its staff, bringing the total number of employees to fewer than 600 at the time, as Crain’s reported then. Shinola currently employs 400 people around the country, including 280 in Detroit — 120 of whom work in manufacturing, according to a spokesperson. Bedrock Manufacturing and the Shinola brand have previously been called out by federal regulators over claims about products being made or built in the United States. In 2015, Troy-based Kresge Foundation and Rock Ventures LLC, an entity tied to Detroit billionaire Dan Gilbert, were among the investors in a $125 million capital raise to help grow the Shinola brand, as Crain’s reported. Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes

HEALTH CARE

Three top Beaumont leaders to depart ahead of merger Carolyn Wilson, David Wood, Sam Flanders leaving as system prepares to combine with Spectrum BY DUSTIN WALSH

Three of Beaumont Health’s top leaders are resigning from the health system as it works to merge with Spectrum Health. Carolyn Wilson, who has served as Beaumont’s chief operating officer since 2016, is leaving the system on Sept. 1. David Wood, Beaumont’s chief medical officer, is departing on Sept. 30. Sam Flanders, chief quality officer, is leaving Aug. 6, according to an internal memo CEO John Fox sent to employees on Wednesday. Flanders is leaving to become the chief quality officer for St. Luke’s Hospital in Chesterfield, Mo. It’s unclear if Wilson or Wood have other positions lined up. It’s also unclear if the executives resigned or were terminated. Beaumont declined to clarify their departure, citing the departures as a per-

Wilson

Wood

sonnel matter. Wilson and Wood, along with Fox who will remain with Beaumont, have been subject to calls for termination since last year when the health system attempted to merge with Illinois’ Advocate Aurora Health. Physicians, board members and some donors expressed displeasure with the proposed merger. A former board member called for their termination, while donors called for a

meeting with the board to address the growing “crisis” at the e i g h t- h o s p i t a l system. Physicians also penned a letter to the board critical of management. Flanders Beaumont and Advocate terminated the merger plan in October, blaming COVID-19 financial constraints, not internal unrest. Wilson’s duties will be split between Nancy Susick, president of Beaumont’s Royal Oak hospital, and David Claeys, president of Beaumont’s Dearborn and Farmington Hills operations. They will serve as co-COOs, Fox said in the memo. A search to replace Wood will occur, Fox said in the memo. Flanders

will be replaced by Jeff Ditkoff, the current chief safety officer at the Royal Oak hospital. The executive moves come only a month after Beaumont announced its intent to merge with Grand Rapids’ Spectrum Health. Fox indicated in the memo that Wood is leaving as the system “finalizes” its new partnership with Spectrum, indicating the deal may close at the end of the third quarter of this year. Beaumont and Spectrum formally say the deal with close in the fall of this year. The pair inked the letter of intent to explore a merger in June. The merger would create the state’s largest health system with $12 billion in revenue and operating 22 hospitals and 305 outpatient locations. It would also create the largest employer in the state with 64,000 employees. The merged company would be run by a 16-member board of direc-

tors that would include seven seats appointed by Beaumont, seven seats appointed by Spectrum, Spectrum CEO Tina Freese Decker and a member to be named later. The board would include at least three physicians, the companies said in June. The Beaumont departures may indicate early consolidation of the new health system’s management. “We are deeply grateful to Carolyn, Dave and Sam for their many contributions to Beaumont Health,” Fox said in a Wednesday press release. “As we continue to recover from the pandemic and begin our journey with Spectrum Health, I am confident about the future of Beaumont Health and our mission to provide compassionate, extraordinary care every day.” Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh

HEALTH CARE

No complaints filed so far under surprise medical billing law Rules went into full effect in Michigan earlier this month BY JAY GREENE

A surprise billing law in Michigan that went into full effect earlier this month hasn’t yet produced any consumer complaints since it became effective Jan. 1, said Anita Fox, director of the state Department of Insurance and Financial Services. Surprise billing occurs when a patient inadvertently receives out-ofnetwork medical care at an in-network facility. Unexpected bills, also called balanced billing by providers, can be financially devastating as twothirds of all bankruptcies are tied to medical expenses. The changes in the law are designed to inform patients of medical treatment costs, limit payments for out-of-network providers and offer an insurance reimbursement appeal process. Research has found that among large-group health plan enrollees, one in five emergency room visits and one in six admissions to an in-network hospital led to a surprise medical bill. “We know people were coming to us with these surprise billing complaints when they go in for a surgery” and the hope is the disclosure requirement will reduce out-of-network charges, Fox said. “The fact that we haven’t gotten complaints yet, I hope, is a sign that the disclosure process is underway and beginning to work,” said Fox, adding that DIFS will do more consumer education of the law’s protections. “If they don’t get a resolution, we encourage them to contact our office.” Enacted last October, the four-bill package has two main components that protect consumers and also gives nonparticipating health providers an avenue for review and appeal. Effective Jan. 1, doctors or other providers not participating in a patient’s insurance plan must disclose within 72 hours of the nonemergen-

Pallone

Fox

cy medical procedure that the patient’s health insurance may not cover all services. Providers also must offer an estimated cost of services and allow the patient to ask the services be performed by an in-network provider. “If there is no disclosure (to the patient, providers) default to the negotiated median rate” for in-network providers or 150 percent of the Medicare regional average, whichever is higher, Fox said. Sanctions for nondisclosure could include $1,500 fines or educational training programs. Dominick Pallone, executive director with the Michigan Association of Health Plans, said nonparticipating providers appear to be informing patients about out-of-network costs. “We are getting pretty good compliance, so far,” Pallone said. “Consumers need to be aware” of the disclosure and that they can file complaints if they get a surprise bill. On July 1, the second major part of the law went into effect. First, nonparticipating providers can also dispute the insurer’s median in-network price to DIFS. Second, nonparticipating providers can appeal fixed prices set by health insurers for services they rendered using a binding arbitration process. Joe Rivet, a health attorney with Norton Shores-based Rivet Health Law PLC, is one of 20 registered arbitrators so far approved by DIFS. Rivet began his career working for insurance companies as a fraud, abuse and waste manager, and also is a claims adjudication and audit expert.

He earned his law degree in 2017 from Western Michigan University Thomas M. Cooley Law School. “Michigan is serving as a leader in this national Rivet model for the surprise billing law,” Rivet said. “Providers need to understand the specific timely filing requirements, which will be much shorter for nonparticipating providers in order to bill correctly.” If a claim for additional payment for an emergency service is rejected by an insurer, an out-of-network provider may ask DIFS for arbitration. Rivet said the benefit of using arbitration is you can select the arbitrator who has expertise in the new law and insurance billing issues. Both parties must agree. “I can analyze the facts, look at the numbers, the calculations. I can look at the medical record because I’ve done numerous audits over my career,” Rivet said. Patients with narrow provider networks, employer-sponsored coverage with gaps in inpatient care coverage and selective contracting can lead to a surprise medical bill. For example, surprise bills can come from an anesthesiologist in an ER assisting with a surgery, a pathologist examining a biopsy, a radiologist reading an X-ray or an ambulance transport. “There are unscrupulous providers or health systems that don’t follow the rules very closely,” Rivet said. Patients should carefully review their insurance claims and any provider bills, Rivet said. Nonparticipating providers also need to check to see if the median price they are reimbursed for is correct, he said. “I am skeptical, frankly, (on how well providers and insurers will comply because) of how many bills pa-

tients get that are never correct,” Rivet said. “There are errors and now we have this layered on.”

What is a negotiated median price?

ministering emergency services from balance billing a patient in excess of the applicable in-network cost. All surprise medical bills must be covered by insurers at in-network rates. Effective Jan. 1, nonparticipating health care providers also cannot charge patients for an amount that is more than the in-network cost for those services. Fox said the federal bill will complement Michigan’s law once regulations are in effect. Pallone said he expects legal challenges by some nonparticipating providers, but over time the state law will generate positives for patients and insurers. “My worries is the bill fell short on (surprise bills from) air ambulances. It’s a national issue. Air ambulances say the law doesn’t apply to them,” Pallone said. “Our hope is the state law is applicable. We may need followup (laws) on this.” Pallone said he hopes the law reduces problems for patients, reduces overall medical costs and cuts administrative burdens for payers. “The greater value is to the con-

Under the law, payers set prices based on regional averages for in-network providers on the specific billing code, or services rendered. Insurers must pay nonparticipating providers the highest reimbursement of either the regional median price of 150 percent of the Medicare rate. DIFS is responsible for reviewing a carrier’s calculation of its negotiated median amount upon a nonparticipating provider’s request. Each year it must prepare an annual report. “We see this as an opportunity, first and foremost, to get the patient out of the middle of the process and allow it to be between commercial entities, a provider and an insurer, and not the unsuspecting patient policyholder,” Fox said. DIFS has not yet received an appeal from a nonparticipating provider wishing to disagree on the “MICHIGAN IS SERVING AS A LEADER IN median price set by health in- THIS NATIONAL MODEL FOR THE SURPRISE surers, said Fox, BILLING LAW.” adding that arbitration can — Joe Rivet, health attorney, Rivet Health Law PLC sumer. These are our customers. If only be used for emergency claims. Fox gave the unusual example of a they are unhappy, they turn to us as patient going in for a routine birth well as the provider.” Pallone said. and the provider finding the babies “Our hope, downstream, is adminisare conjoined twins. If the insurer re- trative efficiencies and a lessening of jects the claim for the more compli- the number of appeals with arbitracated procedure, the nonparticipat- tion.” Rivet said he believes the law will ing provider may ask for arbitration to receive an additional reimburse- benefit patients “that are saddled with bills that are exorbitantly high.” ment. Patients under employer-spon- However, patients need to accept resored plans under ERISA, or the 1974 sponsibility to look carefully at all Employee Retirement Income Secu- medical bills. “If you get mail from insurance rity Act, also will soon have some protections against balanced medi- provider, you need to open and read it,” he said. cal billing at the federal level. In December 2020, Congress enacted the No Surprises Act that pro- Contact: jgreene@crain.com; hibits out-of-network providers ad- (313) 446-0325; @jaybgreene JULY 26, 2021 | CRAIN’S DETROIT BUSINESS | 15

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

CONSULTING

NONPROFIT

Rehmann

Capitol Fundraising Associates

The Children’s Foundation

The Michigan Association of CPAs (MICPA) has elected Rehmann senior manager Victoria Mundinger to its board of directors. A seasoned public accountant, Mundinger will join the board on September 1, 2021, for a three-year tenure. Mundinger assists in leading Rehmann’s interest charge domestic international sales corporation practice group (IC-DISC). She serves as a firm-wide resource on international matters, supporting clients in navigating the complexities involved with conducting business globally.

Capitol Fundraising Associates announces the promotion of Caitlin O’Rourke to Vice President. As a senior associate, O’Rourke managed a sizable client portfolio. In her new role, O’Rourke will focus on intern and associate management and development, as well as strategic growth and client relationships. O’Rourke began her career at CFA in 2016 as an associate. She has a B.A degree from Grand Valley State University. O’Rourke also completed Crain’s Leadership Academy in 2017.

The Children’s Foundation announced that Robert Davies, president of Central Michigan University, joined the organization as a member of the Board of Trustees. Davies is leading a new strategic envisioning process focused on rigor, relevance, and excellence to position Central Michigan University for success in 2030 and beyond. Davies brought more than 25 years of higher education experience to CMU and will be vital in expanding the Foundation’s partnerships across the state.

HEALTHCARE

Hegira Health, Inc. CONSULTING

Centric Consulting Centric Consulting welcomes Alex Horvath as co-lead for the newly launched Detroit Practice. As a Practice Leader, he’ll have the responsibility of growing Centric’s footprint in the metro Detroit area, connecting with business leaders and onboarding consultants. As a Michigan native, Alex has spent nearly all his 20+ year consulting career helping local clients solve their most pressing digital, IT and business challenges. Alex earned a BS in Chemical Engineering from Michigan State University.

Top behavioral health provider Hegira Health announced the board’s promotion of Executive Director Carol Zuniga to CEO, effective Oct. 1. Carol has devoted three decades of healthcare leadership experience to ensure accessible and innovative community behavioral health services to all. She stays ahead of everchanging healthcare industry trends by engaging her management team in forward-thinking strategic planning, building community relationships, and making quality of care her top priority.

LAW

Centric Consulting

Young & Associates

Centric Consulting is pleased to welcome Cheryl Strait as Centric Detroit’s new Enterprise Portfolio & Program Management National Lead. Cheryl is a transformational leader who brings over 25+ years of Portfolio, Program, Project and Agile Management consulting, design and delivery experience. Cheryl holds an MBA from Wayne State University, a Master’s Certificate in Project Management from the University of Wisconsin, and a Bachelor of Science in Management from Cardinal Stritch University.

On July 7, the Michigan Supreme Court ruled in favor of Bloomfield Township in a case on appeal from the Michigan Court of Appeals. Bloomfield Township had won earlier in the Court of Appeals and the Supreme Court declined to disturb that decision. The decision means that a lower court judgment in the amount of $9 million against Bloomfield Township is reversed. Farmington Hills attorney Rodger Young and his team from Young & Associates successfully represented Bloomfield Township.

ADVERTISING SECTION

To place your listing, visit www.detroitbusiness.com/companymoves or contact Debora Stein at 917.226.5470 / dstein@crain.com MERGERS & ACQUISITIONS

WF Whelan Company Canton, MI 734-386-7970 www.wfwhelanco.com WF Whelan Co., a third-party logistics provider in Canton Mi., is pleased to announce the acquisition of DR Storage Systems LLC. Established in 1966, DR Storage has been a provider of material handling and racking systems for the automotive and retail industries. Since 1974, WF Whelan Co. has provided services that include warehouse and distribution, customs brokerage, and logistics for automotive and non-automotive customers. President and CEO Brian Whelan commented, “Everyone at WF Whelan is excited to welcome and work with the DR Storage team. We see a lot of synergies between our two companies and cultures. We have already begun to experience the benefits of working together”. The acquisition was completed November of 2020.

NEW FUNDING

LightGuide Wixom, MI 248-374-8000 www.lightguidesys.com LightGuide, Inc., the leading projected augmented reality (AR) software platform that transforms manual assembly and manufacturing processes for companies worldwide, today announced that it has raised a $15M Series B financing led by G2 Venture Partners, with continued participation from Capital Midwest Fund and Michigan Capital Advisors. LightGuide’s patented Industry 4.0 technology dramatically standardizes and improves any manual process by projecting virtual step-by-step instructions onto an employee’s work surface. This visual and intuitive light guidance provides immersive, “No Faults Forward” process control through defect prevention and traceable analytics. Full press release: https://bit. ly/2Vm5ZFX

SHARE YOUR COMPANY’S JOURNEY

Feature your latest milestones, launches, partnerships, awards and more in Crain’s

CONSULTING

16 | CRAIN’S DETROIT BUSINESS | JULY 26, 2021

COMPANIES ON THE MOVE

For more information, contact Debora Stein at dstein@crain.com or submit directly to

CRAINSDETROIT.COM/COMPANYMOVES

FISCHER

From Page 7

And it was thought-provoking: It’s truly, “What are you going to do the rest of your life? What’s best for your family?” ` Your son is running the business while you’re gone ... Those are big conversations and family visits. There’s a lot about how do you best serve your employees and what’s next and best for them as well. ` Now that you’re home, sold the business, what does Ambassador Fischer do now? Well, we’re taking a breath, really. Jennifer and I always seem to have a couple of construction projects going on. And (former) Ambassador (John) Rakolta, and his wife, Terry, Jennifer and I actually just returned from the Middle East. We joined Jared Kushner and Rob Greenway, who had worked for the government, he’s our very capable executive director of the Abraham Accords Peace Institute. And so we were back in the Middle East, Abu Dhabi, Dubai, Bahrain and Morocco, building relationships on an economic level, to go forward and put some meat on the bones of the Abraham Accords. ... We’re finding talk works. Even during the difficulty between Palestine and Israel, there were day-to-day conversations among these nations. ... We didn’t have that before.

LIVENGOOD

From Page 6

MCCA Executive Director Kevin Clinton points to a section of state law that says in the event the $23 billion fund’s assets exceed 120 percent of its liabilities, then insurers that are members of the MCCA “shall distribute any refund it receives (from the MCCA) ... to the persons that it insures.” Prosser, who has been in the home health care business for 29 years, said winding down a sprawling company like his takes time, even after giving all of their clients 45 days’ notice to find new caregivers or move into nursing homes. Some other home health care companies in Michigan that were more diversified with clients on Medicaid, workers’ compensation insurance or private payers have been able to hold on — for now — and absorb the losses from the new auto no-fault fee schedule. In the spring, Prosser said his bankers yanked the company’s line of credit as it became increasingly clear the Legislature wasn’t going to reconsider its 45 percent cut in Health Partners’ rates. “The bank said, ‘Listen, we know what this story is, and we’re not going to let you experiment,’” Prosser said. Health Partners has offices in Bingham Farms, Flint, Grand Rapids and Kalamazoo that he’s talking with real estate brokers about subleasing to take over multiyear leases. “If I can get sublets, that’d be great,” he said. “I’m fairly optimistic in two places, but not so much in the other two.” Among his other wind-down expenses, Prosser said he owes $129,000 in photocopier leases he must pay off. He apparently made

FOOD & DRINK

Buddy’s Pizza expanding with 2 new locations Company to open in Clarkston, Okemos, plans to hire 500 employees BY JAY DAVIS

Detroit-style pizza maker Buddy’s Pizza will open two new locations and is planning to hire hundreds of staffers as it continues to expand. Buddy’s plans to open a carryout-only Clarkston location at 5510 Sashabaw Road by late fall and a full-service restaurant in Okemos at 2010 W. Grand River Ave., early next year, it said in a news release. The 7,700-square-foot Okemos location features seating for 275 guests, along with a patio and full bar. The Okemos spot will also feature a mural that pays homage to the original Buddy’s location at McNichols Road and Conant Street in Detroit, which opened in 1946. Buddy’s plans a job fair July 28 to fill close to 500 positions at the two new locations and existing restaurants. Each Buddy’s will host prospective applicants 11 a.m.-6 p.m. for open interviews. Interested applicants who are unable to attend in-person interviews can apply online. Applicants interested in working at the new Clarkston location can visit the Auburn Hills Buddy’s at 2612

the mistake of taking out a fiveyear lease in 2019 after the Legislature’s vote. Before the implementation of the fee schedule on July 1, a big part of this industry revolved around litigation between medical providers and auto insurance companies over what the insurers should have to pay for. In Oakland County, the epicenter of no-fault litigation, the number of new auto insurance lawsuits on the dockets of Oakland judges rose 295 percent between 2016 and 2018, Crain’s reported in March 2019. These lawsuits typically centered on what is reasonable and customary care for a driver based on how badly they were injured. Some lawsuits helped insurers sniff out legitimate fraud in a system where there were no limits on medical care. Other suits simply exposed the insurance industry’s practices of sitting on unpaid bills until a medical provider with way less liquidity threw in the towel and settled a disputed bill at well below their original charges. Prosser said he’s still in court fighting insurers for $2 million in payments from $5 million in outstanding invoices that the carriers are sitting on. “We still have to repetitively remind the insurance companies, you’re over 90 days, you’re over 120 days (past due), you’ve got to pay us,” said Prosser, president of the NeuroTrauma Association and a longtime board member of the Coalition to Protect Auto No-Fault lobbying organization in Lansing. “Unfortunately, the lawyers say, ‘Listen John, if they owe you over a hundred grand, they’re not going to negotiate. They know they can make you wait because the courts

Squirrel Road. People looking for employment at the Okemos location can visit the Lansing Buddy’s at 5924 W. Saginaw Highway. Buddy’s is offering a $300 signing bonus, health insurance and competitive wages. It has also launched a “Refer a Buddy” program that allows customers to go online and refer a friend or family member for an open position. If the referred individual is hired and stays on for 90 days, the customer will receive a $200 Buddy’s Pizza gift card. Buddy’s was founded in 1946 in Detroit and is widely recognized as the originator of Detroit-style rectangular pizza pies. In recent years it has strategically expanded outside its home base of Detroit with the help of a restaurant investment solutions firm. Buddy’s has 19 locations, including three carry-out-only shops, according to its website. Plans to expand outside Michigan were put on the back burner during the pandemic, but Buddy’s is actively exploring locations outside of Michigan again, the company said. Buddy’s Pizza was founded in 1946 in Detroit and is widely recognized as the originator of Detroit-style rectangular pizza pies. | BUDDY’S PIZZA

are backed up.’” The new fee schedule set caps for most hospitals, physicians and other specialists at 200 percent of what Medicare pays them. The problem for companies like Health Partners is their in-home services of attending to the roundthe-clock needs of someone who can’t physically turn themselves in bed, bathe themselves or operate a ventilator in their living room are services Medicare doesn’t pay for. Since there was no Medicare billing code to anchor the cost to, the insurance industry successfully convinced lawmakers to set an arbitrary cap of 55 percent of what these companies charged on Jan. 1, 2019 — regardless of whether they were the lowest-cost provider or a price gouger. No member of the Legislature can honestly explain why the cap is set at 55 percent and how any business is supposed to sustain a 45 percent cut. The 55 percent cap was added to the bill after it passed the Senate and a House committee as the Legislature rushed this major change through the Capitol on the Friday before Memorial Day so that Whitmer could sign the bill the following week at the Mackinac Policy Conference. On that fateful day at the Straits of Mackinac, there was a lot of talk on the porch of the Grand Hotel by proponents like Whitmer and Detroit Mayor Mike Duggan about all the money drivers would save under the new law. Nobody was talking about the hangover of 560 lost jobs at a single company in Oakland County with employees scattered across the state.

Contact: jason.davis@crain.com (313) 446-1612; @JayDavis_1981

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VACCINE

SCHOOLS

From Page 1

“I believe in the science of the vaccines,” Hurst said as a nurse prepared her right arm for the injection. “I’ve wanted this for a long time. This is a blessing.” Hurst represents a fraction of the population waiting and wanting a COVID-19 vaccine. Hospitals and health departments have long run through the low-hanging fruit. Now each dose administered is a slog. They are hitting the point where it’s no longer financially viable to go out into homes or pop-up public clinics. And with only 63 percent of Michigan’s 16 years and older population vaccinated — or 48.3 percent of the total population vaccinated — the sun may be setting on eradicating the deadly virus through immunization.

of the $1.9 trillion American Rescue Plan Act, or ARPA, which gave Detroit the fifth-highest amount of funding of any city in the country. In all, there are 39 city-owned buildings totaling nearly 2.1 million square feet sitting on 147 acres, with buildings as small as 16,750 square feet (Healy) and as large as 108,450 square feet (Crockett) sitting on sites ranging from 1.62 acres (three schools) to 7.4 acres (Sherrill). The price tag to redevelop those 39? A cool $481.7 million. The remaining 24 owned by DPSCD total 1.6 million square feet on 141 acres, ranging from the 16,700-square-foot former Hancock elementary school to behemoth former Cooley High School (302,600 square feet). Sites are as small as 1.07 acres (Robeson) and as large as 18.12 acres (Cooley). Want to turn those buildings into something different? It’ll cost $342 million. “The analysis will inform the district’s 20 year facility plan, which will be presented to the school board in January,” Nikolai Vitti, the superintendent of DPSCD, said in a statement. “This plan will make recommendations for the current use of all school buildings, those being used and those vacant.” Without question, some of the schools will come down. They are too deteriorated to salvage and the real estate economics don’t work. How many will be razed? It’s unknown. “For community members, for residents, I think seeing these buildings as assets in their mind is very important, but in reality, these properties aren’t assets — they are liabilities,” said Derric Scott, CEO of East Jefferson Development Corp., which works in the neighborhood where the former Guyton school sits at 355 Philip St. in the Jefferson-Chalmers neighborhood. That school along with several others is one recommended to be a city priority to redevelop as it is in a Strategic Neighborhood Fund area and remains in fair condition. “Because they are liabilities, they have negative value,” Scott said. “There is going to be a propensity for folks who want it to sell for a few million dollars. In reality, you should be paying a developer to take the asset because they are taking the liability away ... The reality is those buildings should probably be offloaded and the activation of them is the incentive.” Another example is the former Ruddiman Middle School on Southfield Road. Katy Trudeau, the city’s acting planning director, said members of the surrounding community have voiced concern over the property. “We’ve heard a lot from residents about that one, too,” Trudeau said. “That one’s been fire damaged a number of times over, so we’ve been looking at ways in which we can address the blight that structure is presenting.” Others are in far better shape and can be turned into things like apartments, senior housing, retail, office space and industrial uses, New York City-based contractor Interboro Partners LLC concluded — although others had differing opinions. “When the mayor has his community meetings at each City Council district, almost without exception somebody asks a question about the

Cost to save a life About an hour before reaching Hurst’s home, five registered nurses and medical assistants from Henry Ford prepared a Ford Transit 350 cargo van for a day of in-home vaccinations. The crew would vaccinate two individuals that day during at-home visits and another handful at a behavioral health clinic in the afternoon. Michael Garcia, a registered nurse and leader of the group that day, said dwindling numbers of willing arms to vaccinate shifted Henry Ford’s strategy to in-home program and small clinics across the region. “We’ve gotten to the apprehensive crowd now,” Garcia said. “But the homebound patients are thankful. They’ve been asking for doses for months. So here we can be effective.” But it’s not cheap. One-day clinics that were vaccinating 200 people or more per day at sites like the Islamic Center of America in Dearborn or Second Ebenezer Church in Detroit broke even with the help of insurance reimbursement, said John Zervos, executive director of Henry Ford’s global health initiative and its testing and vaccine sites during the pandemic. The cost to run one of those events was about $6,000. The overhead of a smaller clinic, where maybe only 25 people are vaccinated, costs only roughly 50 percent less for an eighth of the outcome with no reimbursement. Henry Ford doesn’t break even on these events or performing at-home inoculations. “You can break even on the large events,” Zervos said. “We weren’t scrambling for the financial resources like we are now. The van is expensive. They cost $100,000. We have to gas the vans up. We have back-end staff required for the appointments and I’m paying four clinical staff for eight to 10 hours just to get a small handful of people vaccinated. There is no way we’ll even come close to breaking even on a home visit.” Henry Ford’s mobile vaccination efforts are funded through foundation dollars, Zervos said: $250,000 from Kellogg Foundation and the United Way for Southeastern Michigan. But, at least for now, most health systems keep plunging dollars into the cause. Southfield-based Beaumont continues to offer vaccinations at its Dearborn, Southfield and Troy clinics and now allows inpatients to 18 | CRAIN’S DETROIT BUSINESS | JULY 26, 2021

Registered nurse Michael Garcia prepares a COVID-19 vaccine while working in the Henry Ford Health System mobile vaccine unit in Lincoln Park. | NIC ANTAYA PHOTOS, SPECIAL TO CRAIN’S DETROIT

Stephanie Yang and Jeremiah Rooker work as part of the mobile vaccine unit.

get a dose before they are discharged. Michigan Medicine has largely transitioned to moving doses to its physicians’ offices as well as continued drive-up and walk-up clinics with faith-based organizations, the Washtenaw County Health Department and other local health systems, Mary Masson, director of public relations at Michigan Medicine, told Crain’s in an email. Those clinics run through August. Michigan Medicine will maintain clinics for 12- to 21-year-olds year-round in Washtenaw and Genesee counties. Zervos said Henry Ford’s mobile clinics are expected to continue through the end of the year, unless they run out of willing arms. “If the numbers dwindle, we’ll have to make a tough decision,” Zervos said. “We’re facing a wall of lack of demand, but we’ve been pivoting through the entire pandemic. We’re trying what we can to save lives.”

Variant made to fit The continued push for vaccination comes as the new, more deadly Delta variant of COVID-19 continues to spread across the U.S. The Delta variant — which is 40 percent to 60 percent more contagious — accounts for 83 percent of new infections across the country, according to U.S. Centers for Disease

Control and Prevention data from last week. The Delta variant is not yet the dominant strain in Michigan, but that’s expected to change, according to Michigan Department of Health and Human Services Director Elizabeth Hertel. “We anticipate that to happen just as it has everywhere else,” Hertel told WXYZ Detroit. As of July 21, health officials had identified 73 Delta variant COVID-19 cases. That’s worrisome because the variant is projected to steadily increase deaths and infections throughout the summer and fall before peaking in mid-October, according to estimates released last week by the COVID-19 Scenario Modeling Hub, a consortium of researchers working with the CDC to track the pandemic. If the U.S. reaches 70 percent vaccination among eligible Americans, the fall surge will peak at 60,000 new cases per day and 850 deaths. The seven-day rolling average of new cases in the U.S. as of July 22 was 45,343 cases and 248 deaths. As of July 18, Michigan reported a seven-day rolling average of 306 cases and five deaths. Currently, 68.3 percent of eligible adults have received at least one dose of the vaccine in the U.S. Under the researchers’ worst case scenario, cases rise to 240,000 and deaths to 4,000 per day.

Kerry Ebersole Singh, director of the Protect Michigan Commission overseeing vaccine rollout, is urging all eligible citizens get vaccinated ahead of the school year. Last school year, students were crippled by rolling closures and virtual schooling struggles. The same fate may lie ahead. “We have to do this to protect those who aren’t able to get vaccinated and our children,” Ebersole Singh said. “We know vaccines take a lull in the summer months because people would rather be doing a million things than getting a shot in their arm, but it’s critically important. There’s still this ‘wait and see’ population in our public research. Now is the time to get vaccinated. There is urgency.” The state’s research indicates roughly 20 percent of the population will refuse the vaccine at all costs, Ebersole Singh said. With 62.9 percent of those 16 years and older with at least one dose, that leaves 17 percent or about 1.37 million people in the state who haven’t been vaccinated who may do it in the future. “We’re not going to see large scale bumps in numbers,” Ebersole Singh said. “Now it’s eking out every day and celebrating every shot in the arm we get. The best thing we can do for kids or those unable to get the vaccine is have to every adult that can get it.” Arms like Hurst’s. While the Henry Ford nurses were chatting with Hurst after she received her dose, she asked to sign up her brother who lived across the street. The nurses registered the brother in their system and in three weeks when they return for Hurst’s second dose, only days before her 69th birthday, her brother will be vaccinated as well. “This is an early present,” Hurst said, smiling and chatting up the departing nurses about her mother, her siblings and the pandemic. “My brother and I have had everything you can get except COVID. You’ve got to stack the odds somehow.” Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh

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future of a school,” Trudeau said. “That kind of speaks to the magnitude of this. We still don’t have answers about what the ultimate future is for each of these structures, while we’re closer to being able to craft strategies for addressing them because, without having any of that information, we were really kind of operating in the dark about these really significant structures in pretty much every single neighborhood in the city of Detroit.”

READY FOR REDEVELOPMENT? A selection of the dozens of school buildings that are vacant and awaiting reuse in Detroit, with details from the city’s review of vacant school buildings and estimated redevelopment costs. These 9 schools are identified as high priority in the report.

Next steps Next, the city will have community level meetings to discuss the report’s findings and gather input, members of the Duggan administration said. Jennifer Ross, an architectural historian with the city, said the report compiled data objectively and made recommendations based on that. “Now that we have all this information, now that we have a good handle on what’s going on with these buildings, then it’s taking it to the community,” she said. Garrick Landsberg, director of historic preservation, also said the report is being disseminated to various city departments as well as developers to be sure the information gathered over the last year is available to those who may be interested in the results. The report, which is more than 800 pages, calls for some schools in Strategic Neighborhood Fund areas — Higginbotham, Holcomb, Kosciusko, Burbank, Guyton, Jemison, Burk, McKerrow and Washington — to be high priorities to either be redeveloped, marketed for sale, or mothballed. Higginbotham, Holcomb and Kosciusko are in the best condition and in strong neighborhoods and “the city should seek redevelopment proposals that will preserve the buildings,” the report says. “If no proposals emerge, the buildings should be stabilized and mothballed; demolition should be avoided.” Burbank, Guyton, Jemison and Burt are in “fair condition” in “stronger neighborhoods” and, while challenges to their redevelopment exist, “should not be left standing vacant for long.” “The city should be aggressive in marketing these schools for preservation and reuse; however, the city should remain open to development proposals that would demolish parts or all of the current buildings in order to make way for new development that can benefit the surrounding community.” For McKerrow and Washington, their “below-average condition” and location “in more distressed neighborhoods” makes “them the most difficult to rehabilitate.” Demolition could be an option for those properties if the building conditions worsen or if it becomes a nuisance or public safety hazard, the report says. Other priorities in the report are: protecting the schools that remain in good condition; near-term actions to beefing security and exterior maintenance; redeveloping the properties and sites that are in the strongest real estate markets; and preserving the schools with the greatest historical significance.

Extensive study The city released a request for proposals in June 2019 for firms to complete the extensive vacant schools study. In its RFP, it asked the chosen firms to produce site plans, maps, structural and mechanical systems assessments, neighborhood and historical

BURBANK

BURT

GUYTON

15600 East State Fair, Detroit

20710 Pilgrim, Detroit

355 Philip, Detroit

Square footage: 86,350

Square footage: 46,200

Square footage: 46,150

Acres: 3.8

Acres: 3.43

Acres: 4.46

Redevelopment cost: $18.2 million

Redevelopment cost: $12.1 million

Redevelopment cost: $11.3 million

Cost per square foot: $210.55

Cost per square foot: $261.00

Cost per square foot: $243.80

Reuse recommendation: Mixed-use residential

Reuse recommendation: Senior housing

National Register of Historic Places status: Pending

Owner: City of Detroit

documentations, market analysis, community engagement (with things like mailers, meetings, etc.) and disposition strategies and reuse scenarios. The RFP says the chosen contractors “will be led by an architect or engineer well-experienced in the rehabilitation of deteriorated historic properties which have been subject to trespass.” On the city’s northwest side, Sherita Smith, executive director of the Grandmont Rosedale Development Corp., said the closure of the former Vetal Elementary School at 14200 Westwood has caused problems for the neighborhood. “That school closing and sitting like that, going from a Blue Ribbon school, has greatly destabilized that area,” she said. “You can go one block over and see a full block of homes pretty well cared for and on the other side you see demolitions, a lot of blight, and land bank properties which need to be taken down and some that might be able to be saved or rehabbed. It’s a great example of how disinvesting in schools” harms the city’s neighborhoods. The school is recommended for a conversion into a mixed use residential project estimated at $12.1 million. “Blocks west of the school appeared somewhat distressed, with approximately half of properties vacant or empty lots,” the report reads. “Blocks east of the school are largely intact.”

Community engagement

HIGGINBOTHAM

HOLCOMB

JAMIESON

20119 Wisconsin, Detroit

18100 Bentler, Detroit

2900 West Philadelphia, Detroit

Square footage: 48,350

Square footage: 44,150

Square footage: 62,300

Acres: 5.01

Acres: 4.42

Acres: 3.97

Redevelopment cost: $10.8 million

Redevelopment cost: $10.0 million

Redevelopment cost: $16.8 million

Cost per square foot: $223.17

Cost per square foot: $227.58

Cost per square foot: $269.97

Reuse recommendation: Multifamily housing

Reuse recommendation: Senior housing

National Register of Historic Places status: Pending

National Register of Historic Places status: No

Owner: City of Detroit

KOSCIUSKO

MCKERROW

WASHINGTON

20390 Tireman, Detroit

4800 Collingwood, Detroit

13000 Dequindre, Detroit

Square footage: 35,100

Square footage: 49,850

Square footage: 86,950

Acres: 1.62

Acres: 3.14

Acres: 5.46

Redevelopment cost: $8.1 million

Redevelopment cost: $12.2 million

Redevelopment cost: $19.8 million

Cost per square foot: $230.59

Cost per square foot: $245.57

Cost per square foot: $227.90

Reuse recommendation: Mixed-used residential

Reuse recommendation: Mixed use with commercial or industrial

Reuse recommendation: Industrial

National Register of Historic Places status: Pending

Owner: City of Detroit

SOURCE: CITY OF DETROIT REPORT BY INTERBORO PARTNERS

National Register of Historic Places status: Pending Owner: City of Detroit

Not everyone is pleased with the report that Interboro Partners produced. Bob Kraemer, principal of Detroit-based Kraemer Design Group, which bid on the project but was not selected, was disappointed that a local firm such as his — or Quinn Evans, Neumann Smith Architecture, Hamilton Anderson Associates or others — wasn’t chosen. “It was a giant surprise to everybody that a firm from New York that has no experience in buildings in Detroit was selected,” Kraemer said. “Now a year later, this website shows up (www.afterschooldetroit. com) and I was disappointed. It didn’t have the information I was hoping would be there, that was represented in the RFP.” Kraemer also said suggestions in the report that the buildings could be converted into anything other than some form of residential housing is ludicrous. “Let’s be real,” he said. “They are not office buildings. They are not industrial. They want to be some type of residential, of one sort or the other. But how do you deal with the gymnasiums and theaters? You can’t really take those away. Those are what really matters.” Kraemer also was concerned with the lack of engagement with the communities surrounding the empty school buildings. The city said the COVID-19 pandemic prevented much of the in-person outreach that otherwise would have taken place, and that city representatives from the Department of Neighborhoods are now attending community meetings. “People are very sensitive about the conversion of a school,” Kraemer said. “The community needs to be involved. The repurposing of open land needs to be thought of.” Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB JULY 26, 2021 | CRAIN’S DETROIT BUSINESS | 19

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Buyers are enjoying full-price offers with the average percentage of the last list price being 102.7 percent, a June report showed.

FORECAST

From Page 3

Realcomp found new listings were down 1.7 percent from June of last year. Year over year, however, listings are up 5.2 percent compared to 2020. Nationally, the June 2021 Zillow Real Estate Market Report also found the number of homes available for sale rose for the second straight month, “an indicator the market may be beginning to find more balance after long tilting heavily toward sellers,” the report said. Zillow found listings year over year are up 8.5 percent in its Detroit market data. Locally, Realcomp said the median sales price rose 18.4 percent to $244,000 for single-family homes, the highest prices recorded for any month going back to 2003. Buyers also are enjoying full-price offers with the average percentage of the last list price being 102.7 percent, its June report showed. Home showings are up from 11.1 to 13 in June and the average days on market went from 60 days to 22, the lowest average over the past 18 years, Realcomp said. The months supply of inventory — which should be around six months typically — was down 51.9 percent from 2.7 to 1.3 in June. Realtors who made it to this point are likely feeling bruised, said Frank Tarala Jr., broker and owner of SIRE Realty Services in Rochester and a past president of Greater Metropolitan Association of Realtors, a Southfield-based industry association. “We don’t know yet who the survivors may be,” Tarala said. “Real estate has always been sold as unlimited income, control your schedule, and, in reality, the unlimited income can be zero and the schedule can control you. “The last few years we have experienced a steady decline in inventory along with a steady increase in agents 20 | CRAIN’S DETROIT BUSINESS | JULY 26, 2021

Gutfreund

Thomas

creating a situation where there are more agents than homes for sale,” Tarala added. “In this scenario, agents and consumers lose because experienced agents leave the business because it is not able to support a professional income.”

Buyer boot camp Buyers may feel like they’ve been through boot camp after the past year, and their collective patience with the process waned throughout 2020 and this year. If you wanted a shot at the few listings out there, you had to do everything from wait in line to see a home due to coronavirus restrictions with no overlapping appointments, bid way over list price or even offer to pay the sellers’ fees — and still lose out on the house of your dreams. Low inventory was the cause of these issues and then some, Gutfreund said. That lack of inventory fed into people’s decisions to hold off on listing their homes because they knew it would be hard to find a replacement when it came time for them to buy, he noted. “With mortgage rates low and buyer demand high, people could buy more expensive homes because they were affordable. But without homes on the market, there’s nothing for them to buy,” Gutfreund said. “That’s the crux of the situation where we can’t get people to put their homes on the market because they cannot find anything to buy. That’s where

contingencies are coming back, but those often aren’t seen as strong offers.” Another challenge was the cool-down period between when a buyer had an Dabaja offer accepted and through closing, Gutfreund said. That contingency period during inspections and the like allowed buyers who may have been feeling regret at the price they were going to pay and giving them space to walk away from a purchase. “Sometimes, a buyer wanted to go back after inspection and renegotiate to get that (purchase) number down,” Gutfreund said. “We want to insulate sellers from that kind of a situation, but buyers know that once a listing went pending, all of the competition was gone and they could make that ask.” That is where Realtors like Fadi Dabaja felt strongly that educating buyers was an essential part of his role over the past year. He said his role was to slow his buyers down and walk them carefully through the home-buying process to ensure everyone walked away without regret. “Some people were so desperate to own a home that they’re not thinking about the future consequences of their offer,” said Dabaja, of RE/MAX Leading Edge in Dearborn Heights. “Prior to March 2020, the relationship between buyer and seller was standard practice. Now, it’s a completely different ballgame. Buyers have to be better informed and understand this market.” That is why a home purchase is a long game and buyers should look at least five- to 10-year windows on their purchase, Dabaja said. Inventory is going to stay low for as long as people who were bitten by bank-

ruptcy or job loss in 2008 or beyond worry about coronavirus and its long-term impact. “In these times, a home has become a commodity. You can even call it a stock where it follows consumer behavior,” Dabaja said. “If you see sellers out there putting their homes on the market, you can tell they’re easing up on their cautiousness. If they’re not, then you know there’s still uncertainty.”

Unusual practices Sophie Smith feels like one of the survivors of this fast-paced market. She has been a Realtor at KW Metro in Royal Oak for more than three years, and “all I know is a seller’s market,” she said. “This year, though, I will say has been a different beast,” Smith said. “I had a couple of buyers take the summer off because they were so burned out. And that’s OK. I was happy to see them take that time off, get their head space right and come back in the fall.” Smith said she has seen an uptick in inventory and a different market emerging into the fall. For example, she recently listed a Berkley home in Oakland County, and she felt shocked when the home didn’t sell in the first week. “I wondered if something was wrong,” Smith said. “But it is July, and people like to go up north and do their thing in the summer, so things slow down. … Homes are getting two or three offers instead of 50, so I see things evening out a bit going into the fall. It also helps that kids will be going back to school and families won’t be relocating as much. Once you get into November, no one seems to move.” Simon Thomas feels the same way. In March 2020, two years after opening DOBI Real Estate, Thomas had to close his doors to 60 agents

and 12 full-time employees due to the COVID-19 stay-at-home order. Rather than panic, Thomas said his staff decided to use the pause in nonessential business to come up with new ways of training agents and getting everyone ready to grow when business opened again. The staff pivoted from day-to-day agent support to growing the brand’s digital presence, preparing for the reopen. When Thomas reopened the office in June 2020, Thomas and his agents brokered more than 800 deals from June to December 2020, or about 78 percent of their transactions for the entire year. To date, one year after the office reopened, Thomas is growing his staff and bringing on more agents, adding five full-time staff members to the team since 2020 to service more than 80 agents. He estimates he is adding another three to five agents a month since then. “We didn’t want to lay anyone off (in 2020), we wanted to get ahead,” Thomas said. “Every day, we brainstormed and put projects on the board virtually. … We were going to look at this as an opportunity to set ourselves apart. This could have shut us down and crushed us, but it’s made us 10 times more successful and now we’re ready for anything.” As the residential real estate market moves into fall, GMAR’s 2021 President and Realtor Katie Weaver said she expects to see Realtors boosting online marketing, getting back to posting fuller listings with photos and videos as well as stepping up their schedules to keep buyers shopping during the cooler months. “We want to put people into homes. That’s the joy of the job,” Weaver said. “In a very difficult market, we have to be our clients’ cheerleaders, coaches and counselors. We try to do what’s best for them.”

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“And so I guess really disrupting the status quo around this region, in the Midwest,” Serbinski said. “Like angel investment groups that take forever to make a decision. We’re making a (investment) decision within a day or two.” The upshot for companies doing a deal with the Midwest Fund, Serbinski and others said, is the global network of about 130 companies that are part of the broader portfolio of The Fund. Jenny Fielding, managing partner for The Fund, said it’s about offering the combination of localized investors, such as Serbinski, and then being able to tap into the wide range of companies across the portfolio. “So we think that having local support at the early stage is fundamental,” Fielding told Crain’s. “Founders need more than capital, they need community and content sharing, (and they) need connectivity to a larger ecosystem.”

Filling a ‘gap’

CRAIN’S DETROIT BUSINESS

The $2 million Midwest Fund, headed by Serbinski in Detroit along with general partners in Pittsburgh,

Cincinnati and Chicago, has a total of about 50 limited partners. That includes Detroit Venture Partners — the venture firm headed by Gilbert, founder and Heintz chairman of newly public Rocket Companies Inc. (NYSE: RKT) — as well Jon Oberheide, the co-founder and CTO of Duo Security, the Ann Arbor-based cybersecurity firm that sold to Cisco for more than $2 billion in 2018. The focus on early-stage investing for startups is greatly needed, according to multiple sources. “There’s certainly a gap to get that first $25,000 or $50,000. It’s a huge need for companies,” said Jared Stasik, a partner with Detroit Venture Partners. “First checks are the hardest money (for early-stage startups) to get.” Serbinski and others acknowledged the risk associated with being first in with a company, but they note that’s a feature of the initiative, as opposed to a bug. The network that’s been organized by The Fund, which has offshoot funds in New York City, Los Angeles, Denver, London, Australia and now

the Midwest, brings together significant experience that helps to lower some of the overall risk, according to Serbinski. He added that all of the offshoot funds within The Fund are headed by former managing directors of the TechStars accelerator program, giving them a lengthy history in early-stage investing. “And so I think what glues all this together is we’re investing in startups at a similar stage that we did at TechStars,” said Serbinski, who noted that during his time running the Detroit program, he invested in a portfolio of companies that has achieved a total of more than $1 billion in valuation. “And so it’s not that we’re ignoring the risk (of early-stage investing). It’s just that we’re really fine-tuned to have a good sense, like, from a pattern recognition, where things are at and moving faster.” Moreover, because the checks are small, it doesn’t take much to produce returns, noted Fielding. She pointed to a New York Citybased startup, Headway, which was an early investment for Fielding’s fund. The company recently hauled a $70 million Series B round of fund raising led by famed VC firm Andreesen Horowitz at a valuation of $750 million. “Because we’re writing small checks, Headway can return the

fund,” Fielding said. “We just need a few bright spots to really make our economics work.”

nies that has congregated in the university town southwest of Detroit. Much of that began with Duo Security, the Ann Arbor-based company acFuller quired by software giant Cisco for $2.35 billion in 2018. Duo has helped spur the growth of several other companies in the area, which includes Blumira Inc., a company focused on the detection and response aspect of cybersecurity and which last year closed on a $2.6 million round of venture capital financing. Blumira CEO Steve Fuller, in an interview with Crain’s, declined to provide a revenue figure for the company, but said it’s experiencing triple-digit growth, working primarily with what he described as small

and midsize enterprise customers. Fuller said solutions like Blumira, which are heavily dependent on automation, will likely relieve a good deal of the pressure from the lack of people available to meet the demand. His company, with a headcount of nearly 40 employees, has focused on offering an “inclusive culture” as it seeks to grow. Providing a path for career growth is also part of the strategy, Fuller said. “One of our strategies is to hire people earlier in their career, help them grow and give them a path to advance within the organization,” he said. “Some of them will advance and take their skills elsewhere, which is perfectly fine and a normal part of a healthy ecosystem.” The automotive sector, as it becomes increasingly focused on connected vehicles, is heavily seeking cybersecurity professionals, and ac-

ademic institutions around the state are rushing to help fill those positions. Formed earlier this month, with a $1.12 million grant from the U.S. Department of Defense, the Metro-Detroit Regional Vehicle Cybersecurity Institute aims to be one part of the puzzle that can inject workers into the field. The Cybersecurity Institute initially includes the University of Detroit Mercy, pipeline institutions Washtenaw Community College, Oakland Community College and Macomb Community College, and the University of Arizona, which will provide research support to the consortium through its research institute that was established in 2014, according to a news release. The University of Michigan and Henry Ford College are expected to join the consortium in the coming years. The consortium of academic institutions seeks to “expand and en-

Addressing a disparity The emergence of the Midwest Fund, with a focus on localized investing at the early stages, speaks to an issue that Emily Heintz has encountered for the decade she’s spent studying venture capital in Michigan and around the broader region. Heintz, the founder and managing partner of Ann Arbor-based EntryPoint, a nonprofit entrepreneurial research organization, said that a decade ago, Michigan startups raised about $2.50 of out-of-state venture capital for each $1 they could raise in-state. That disparity has only gotten worse, according to Heintz, who said that in 2020 that gap stood at more than $11 of out-of-state investment for every $1 raised locally. “That’s incredibly difficult for local companies and local founders because they need to do so much traveling and out-of-state fundraising in order to raise capital outside of the state, when they could just be spending time working on their company and raising money locally,” Heintz said. “So I think access to capital across the capital continuum has

been a big issue, but at the earliest stages is the most difficult because you run up against Midwest conservatism where people ... see it as a safer investment if they’re investing later stage.” Oberheide, the Duo Security co-founder and investor in the Midwest Fund, echoed Heintz’s sentiment, saying that if a local company with local capital ends up successful, that serves to “enrich” the broader economy, “not just from a capital perspective, but from a talent perspective, mentorship, people starting new companies.” Moreover, he added that many of the fund managers tied to the Midwest Fund are themselves company founders. “You’re not taking anonymous capital from a professional venture partner,” Oberheide said. “You’re taking capital from an individual and a community working through the same problems that you’re working on a daily basis of your early-stage startup. It’s kind of a different value proposition that goes beyond just a pure lump sum of capital. The (general partners) are living the same world as the founders and the companies they’re making investments in.” Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes

JOBS

From Page 3

To put the issue into perspective, and as Crain’s has previously reported, risk management and risk mitigation makes for the optimal strategies with cybersecurity, as breaches vastly increase and some kind of loss becomes all but inevitable. In 2020, there were 791,790 complaints of suspected internet crime, an increase of more than 300,000 from 2019, according to the annual Internet Crime Report released by the FBI, which notes that financial losses were in excess of $4.2 billion. The top three crimes reported by victims in 2020 were phishing scams, nonpayment/nondelivery scams and extortion, according to the report. Victims lost the most money to business email compromise scams, romance and confidence schemes, and investment fraud. To that end, President Joe Biden and members of his national security team plan to meet next month with business executives about cybersecurity, an official said last week, according to an Associated Press report. The Aug. 25 meeting comes as the White House is scrambling to help companies protect against ransomware attacks from Russia-based criminal syndicates and as the administration confronts an aggressive cybersecurity threat from the Chinese government. The increasing threat level from computer crimes and breaches speaks to Miller’s point about the large shortage of workers for the cybersecurity sector having more to do with the sheer scale of the need, as opposed to a lack of attraction to the industry. In Michigan, the average pay for cybersecurity engineers in 2019 was $91,750, or $44.11 per hour, according to data from the U.S. Bureau of Labor Statistics, cited in a release from the University of Detroit Mercy. To see the growth of cybersecurity, one needs look no further than Ann Arbor and the cluster of compa-

BLOOMBERG

e to der. his e in up ents row

MIDWEST

hance” the number of cybersecurity engineers in the region, and will work alongside industry partners, according to the release. “The consortium also supports upskilling and reskilling for vehicle cybersecurity by prioritizing underrepresented populations, military personnel and veterans,” the release said. “Without an increase to the workforce now, the cybersecurity risk to DoD (Department of Defense) and commercial ground vehicles will keep falling further behind the increasing threats from actors in multi-domain contested environments,” Paul Spadafora, director of professional engineering programs for UDM’s College of Engineering and Science, said in the release. –The Associated Press contributed to this report. Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes JULY 26, 2021 | CRAIN’S DETROIT BUSINESS | 21

THE CONVERSATION

David Hall keeps the focus on customer service at Hall Financial HALL FINANCIAL: David Hall, a veteran of Southeast Michigan’s booming mortgage sector, is a familiar face and name on the region’s televisions. Hall, now the president and CEO of Troy-based mortgage brokerage firm Hall Financial, first gained prominence as a pitchman for Rock Financial, working alongside Dan Gilbert to grow the business that is now part of the public Rocket Companies Inc. Prior to starting his own shop in 2016, Hall also worked at United Shore, another booming mortgage lender that is now Pontiac-based United Wholesale Mortgage Corp. Hall said he’s focused on growing his business through being satisfied by nothing short of a five-star review from all clients. | BY NICK MANES `Given that no one really wants a mortgage, what goes into trying to get that much-desired five-star review? (Getting a mortgage), it’s sort of like getting a root canal. Well, I think the first thing is there has to be a feeling amongst the people that work at Hall Mortgage of excitement about what we’re doing, and why we’re doing it. Because I think that translates over to the client feeling in terms of them being at ease … We talked about communication ad nauseum (at Hall). And then, you know, obviously, you’ve got to have expertise internally. And we are very fortunate that because we’re a smaller company … We’re not trying to grow to be the biggest. Our view is we’re going to remain small-ish and really focus on the client, like laser focused. I’ve been at companies, you get to be 1,000 or 2,000 people, (it’s hard) to keep that focus on the team being fired up and on the client having a great experience. I don’t care who you are, that’s hard to do. `Are there operational elements of the business that you’ve chosen to focus on to differentiate yourself? In simple terms, we overstaff our operational team by design. So in other words, we could make a few extra bucks every month, but I’d rather have more people working on the loans that we’re doing, so that everybody’s in and out quicker. It’s a commitment to overstaffing by design, so that you’re not in a situation where people aren’t getting enough attention. That’s a big, big deal. And then I just think it’s the commonality of everybody on the same page. The only real report card that we have is if the client gave us a five-star review. Like if the client said, ‘yeah, it was good,’ or ‘Yeah, they took care of it.’ Like, that’s not good with us. That means it was bad. `So clearly you’re a known face and voice here in Southeast Michigan, having long been the TV pitchman for

Rock Financial, a previous iteration of Rocket Mortgage, and now your own company. Do you see yourself as kind of a natural marketing guy? I was hired into the mortgage business as an $8-an-hour assistant back in the mid-’90s. Through a lot of hard work … I became a guy that originated a lot of loans. I was a loan officer in my early days and I was pretty successful at that. And so then I sort of got involved with marketing, and I just kind of wanted to know everything about the business. So when it came time to do some marketing stuff, and I did some radio stuff, and it was working, and I ended up doing the TV. So I was like, writing loans, helping with the marketing, doing the commercials, writing the commercials. And it just kind of all stemmed from there. You know, it wasn’t like some grand plan. People kind of think that I just do the commercials. I’m proud of the fact that I know the ins and outs of the business. `So speaking of business, how would you characterize the growth of Hall Financial in recent years? We’re going to close probably $1 billion this year in loans, which is significant. We started out in 2016 and so to get to this point already, we think is pretty good. From 2016 to 2017, because that was our startup year, we said 300 percent growth. And then every year since 2017, we’ve got 100 percent more growth every year. But ... that’s not necessarily our focus. In fact, when I went to research those numbers to share them with you, I didn’t really even know that because it is not really my focus. My focus isn’t on 100 percent year-over-year growth, my focus is on the client. I really feel very passionately about two things: If our clients and the people that work at Hall Financial feel really good about what we’re doing, I think we’re gonna have a great business. And that’s kind of pie in the sky. But maybe I’m at a point in my career now where I’m kind of

into pie in the sky. When I was in my 30s and my 40s, I was all about, ‘we got to do more business and drive and drive.’ And then you turn 50, and you’re like, ‘Yeah, I’d like to do some pie in the sky stuff’ `So given your background in marketing within the mortgage sector, how have you seen the marketing messages changing over time? I think in our business it’s pretty important, and I think that’s because mortgage is a very unique thing. You know, most people will go through the mortgage process, let’s call it like maybe eight times in their life. So the first time they do it, they have no idea what they’re doing, and the second time is pretty close to the first time. And by the fourth time, they sort of know what to expect. Well, what I’ve always thought was interesting is there’s so many aspects to getting a mortgage that the consumer doesn’t necessarily think about. And I don’t think

that there’s a ton of brand affiliation in the mortgage business, because … traditionally it’s been highly local and fragmented. So I think letting people know who you are and what you stand for, and having that be consistent over time, is an important thing. I think if you’re buying toothbrushes or televisions from ABC Warehouse, or whatever it is, it’s a little more familiar. Your mortgage, there’s a lot of moving parts.

REPORTERS

David Hall, president and CEO, Hall Financial

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RUMBLINGS

Values plunge for Mall at Partridge Creek, Fairlane Town Center

22 | CRAIN’S DETROIT BUSINESS | JULY 26, 2021

The Mall at Partridge Creek in Clinton Township has plunged in value. |

LARRY PEPLIN FOR

CRAIN’S DETROIT BUSINESS

42.6 percent of its value, and 80.4 percent of its value in seven years. Three other malls, including Fairlane Town Center, are now valued at

Jason Davis, small and emerging businesses. (313) 446-1612 or Jason.davis@crain.com Annalise Frank, city of Detroit. (313) 446-0416 or afrank@crain.com Nick Manes, finance and technology. (313) 446-1626 or nmanes@crain.com Kurt Nagl, manufacturing. (313) 446-0337 or knagl@crain.com Kirk Pinho, senior reporter, real estate. (313) 446-0412 or kpinho@crain.com Dustin Walsh, senior reporter, health care. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter, nonprofits and philanthropy. (313) 446-1694 or swelch@crain.com MEMBERSHIPS

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THE VALUE OF SEVEN MALLS owned by Starwood Capital Group, including the Mall at Partridge Creek in Clinton Township and Fairlane Town Center in Dearborn, has taken a precipitous plunge. Fresh data provided by New York City-based Trepp LLC last week showed that Miami Beach, Fla.based Starwood has fallen even more underwater on its commercial mortgage-backed securities debt. Four of Starwood’s malls, including Partridge Creek, now have a combined value of just $210.6 million, compared with $1.074 billion when they were bought in 2014. The value of that portfolio at the end of 2019 was $366.7 million, meaning that in one year, the portfolio lost

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just $89 million, compared with $345.2 million when Starwood paid what was then Taubman Centers Inc. $1.4 billion for them. That’s a

plunge of 46.3 percent since a $165.8 million valuation for the portfolio that was updated in January and 74.2 percent since they were purchased. Starwood did not respond to a message requesting comment. The precise value of Partridge Creek and Fairlane individually is not known because that data was not provided to Trepp, a spokesperson for the company said. Trepp data does show, however, how much Partridge Creek mall suffered during the COVID-19 pandemic. Revenue was $75.4 million last year, compared to $95.8 million in 2019, according to Trepp data. In 2015, revenue was $115.2 million.

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