THE CONVERSATION: Bonnie Richter on why real estate agents need more training. PAGE 26
Wages and benefits: Small businesses find ways to thrive. PAGE 8
CRAINSDETROIT.COM I NOVEMBER 29, 2021
FORUM BUSINESS STARTUPS
MINTING THE NEXT UNICORN FIND THE COMPLETE SERIES ONLINE CrainsDetroit.com/crains-forum
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In the startup world, a billion-dollar company is called a ‘unicorn.’ Two of them just drove a record-breaking year in Michigan for startup capital. How can the state foster more like StockX and OneStream? | PAGE 16
Will COVID-19 vaccine mandate be death knell for rural hospitals? Labor shortages, wage increases put strain on smaller operations BY DUSTIN WALSH
“There have been several waves of extinction for community hospitals and we’re facing another one,” Memorial Healthcare COO Jim Nemeth said of being overwhelmed by COVID-19, labor shortages and lower reimbursements. | NIC ANTAYA FOR CRAIN’S DETROIT BUSINESS
Wave after wave of ill patients are landing at the emergency room of Memorial Healthcare in Owosso. The century-old critical-care community hospital 25 miles due west of Flint treated 92 inpatients on Nov. 15, nearly a third of which were COVID-19 positive. The hospital and its 1,500 employees are equipped to handle 85
inpatients — but operating above that threshold is standard now. The lasting labor shortage and hospitals’ need to raise wages is straining operations for rural hospitals that don’t have large medical networks on which to fall back. The final straw may be the Centers for Medicare and Medicaid Services’ new rule forcing health care organizations to mandate the COVID-19 vaccine for all employees by Jan. 4.
Last week, stretched staffing even caused the Michigan Department of Health and Human Services to request military aid for hospitals in some regions of the state. Memorial is paying roughly 300 percent above its projected annual market costs for labor and just 70.9 percent of Memorial’s staff is vaccinated — bad vital signs. See HOSPITALS on Page 24
VOL. 37, NO. 44 l COPYRIGHT 2021 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED
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NEED TO KNOW
STATE FAIRGROUNDS
THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT ` TESTING COMPANY SUES OVER CANNABIS RECALL
` REPS TOUT BENEFITS OF DOWNTOWN GRAND PRIX
THE NEWS: Viridis Laboratories is suing Michigan’s cannabis regulatory agency for ordering a recall of nearly all of the cannabis products it tested over a three-month period. The cannabis testing company in Lansing and Bay City filed a complaint in the Michigan Court of Claims against the Michigan Marijuana Regulatory Agency and its director, Andrew Brisbo, according to a news release and copy of the complaint.
THE NEWS: Detroit Grand Prix representatives and city officials said the race’s return to downtown streets in 2023 will benefit businesses and residents in a way the Belle Isle setup does not. Race chairman Bud Denker joined Mayor Mike Duggan and City Council President Brenda Jones at a news conference to lay out more plans for the downtown race.
WHY IT MATTERS: The MRA on Nov. 17 halted the sale of cannabis tested by Viridis due to “inaccurate and/or unreliable” testing results, the agency said in an informational bulletin. It is believed to be the largest cannabis recall since legalization of the plant.
` MOROUN COMPANY FINISHES $20M MCLOUTH CLEANUP THE NEWS: A company tied to the Moroun family has completed a $20 million cleanup at the former McLouth Steel plant, a toxic superfund site that sat abandoned for decades in Trenton. The work on the southern portion of the 183-acre site along the Detroit River was supervised by the U.S. Environmental Protection Agency and included demolition of 45 buildings, removal of asbestos and other hazardous chemicals and other cleanup work.
WHY IT MATTERS: “The cleanup of this contaminated site is cause for celebration by the residents of Trenton,” Debra Shore, EPA Region 5 administrator, said in the release. “The work by EPA and other partners demonstrates what government can accomplish to spur redevelopment and economic growth for the benefit of the community.”
` DUGGAN: COVID SPIKE COULD TOP PEAK THE NEWS: Hospitalizations in Detroit due to COVID-19 are rising, as the city and the rest of Michigan struggle to cope with one of the country’s highest infection rates. Mayor Mike Duggan told reporters that 256 Detroit residents were hospitalized with the coronavirus as of Tuesday, which is more than twice as many as two to three weeks before. WHY IT MATTERS: “It if doubles again in the next three weeks, we’re going to see the most serious problem we’ve had since the spring of 2020,” when the coronavirus crisis began, he said. The spike isn’t a surprise, however, because people are spending more time indoors.
WHY IT MATTERS: The race is scheduled to take place on Belle Isle next year June 3-5 before moving downtown June 2-4, 2023, under a three-year deal through 2025.
` KELLOGG TO REPLACE SOME STRIKING WORKERS
Historic building to be saved in $18.6M transit center plan ` Detroit City Council last week approved spending $18.6 million for a new transit center at the former Michigan State Fairgrounds, a plan that includes adapting one historic building and mostly tearing down the other. When the city announced in August its design for the transit campus near Eight Mile Road and Woodward Avenue, there was no dollar figure attached — other than the previously anticipated $7 million to be paid by developers as part of their deal to buy the fairgrounds land for a $400 million Amazon.com Inc. development. The price hike is largely a result of incorporating the historic buildings — the State Fair Riding Coliseum and Dairy Cattle Building, built in 1924 and 1926, respectively, and listed on the National Register of Historic Places — into the design. The Dairy Cattle Building is set to be converted into a partially open, partially climatized bus station that buses would drive through, while the coliseum would be demolished other than a portico structure that would serve as a centerpiece for an outdoor venue.
THE NEWS: Kellogg Co. plans to start hiring permanent replacements for some of its 1,400 striking cereal plant workers after negotiations broke down again. The Battle Creek company said it failed to reach an agreement with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, so it is moving forward with its plan to keep its plants operating with salaried employees and outside workers. WHY IT MATTERS: The Kellogg’s workers have been on strike since Oct. 5. Negotiations aren’t scheduled to resume until the week of Dec. 6.
A rendering of the interior of the proposed new transit center at the former Michigan State Fairgrounds. It’s planned in a rehabilitated historic building called the Dairy Cattle Building. | CITY OF DETROIT PRESENTATION BY NORR ARCHITECTS
PREMIUM LOCATION CENTRALLY LOCATED IN TROY, MICHIGAN
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INSURANCE
FOOD
Judge boots lawyers in hardball insurance case BY CHAD LIVENGOOD
A recent move by a federal judge in Detroit could be a blow against a strongarm legal tactic by which auto insurance companies use a law created to battle organized crime to push medical providers to settle bills for pennies on the dollar. U.S. Magistrate Judge Elizabeth Stafford has disqualified a prominent suburban Boston law firm and two of its partners from representing Allstate Insurance Co. in a medical billing lawsuit after finding the lawyers engaged in unethical conduct and used “scorched-earth tactics” to try to cover their tracks. Stafford ruled that Smith & Brink P.C. attorney and shareholder Jacquelyn McEttrick lied on an affidavit and under penalty of perjury during a court hearing about her improper conversations with Jalal Zawaideh, owner of ZMC Pharmacy LLC in Royal Oak and defendant in a lawsuit brought by Allstate. Stafford said she was referring McEttrick for possible sanctions to U.S. District Court Chief Judge Denise Page Hood and Michigan’s Attorney Grievance Commission. In a separate lawsuit, a different magistrate judge in Detroit last week ordered Allstate to pay some legal fees for a defendant after finding that McEttrick’s law firm committed “substantive and egregious” violations of court rules governing discovery of records. Taken together, the two rulings shed light on how Allstate and other out-of-state no-fault auto insurance companies have been using the federal Racketeer Influenced and Corrupt Organizations or RICO Act to leverage lower payouts for medical treatment of injured motorists under a Michigan auto insurance system that’s been awash in litigation in recent years.
ON A ROLL Metropolitan Baking Co. Production Manager Sam Militello (from left), COO Michael Zrimec and President George Kordas are poised to grow the family business in Hamtramck. | JOHN SOBCZAK FOR CRAIN’S DETROIT BUSINESS
Hamtramck bakery known for Coney Island buns poised for expansion BY JAY DAVIS
A family-owned Hamtramck business whose history is linked to one of the area’s most iconic foods is branching out and building on its reputation. Kordas’ Metropolitan Baking Co., a wholesale producer of breads, buns and rolls that was opened in 1945 by George Kordas, has entered into new contracts with the Michigan locations of three national top 20 fastfood chains, according to third-generation President George Kordas, grandson of the founder. The move adds to the company’s portfolio, which for decades has included supplying the original Coney Island Steamers hot dog buns for Lafayette, American, Leo’s and National Coney Island restaurant locations, along with Kerby’s Koney Island. Kordas, 39, would not disclose the
“IF YOU’RE EATING A (HOT) DOG ANYWHERE IN METRO DETROIT OR MICHIGAN, CHANCES ARE IT’S ON OUR BUN.” —George Kordas, president, Kordas’ Metropolitan Baking Co.
names of the new customers but said they build on what has been a 10year push to deepen the company’s footprint in the food service industry. Metropolitan Baking has experienced major growth over the last decade. It has a 100,000-square-foot facility on 20 acres in Hamtramck owned by the Kordas family and in the last 10 years has built on its food service distribution to cover the United States. The company has close to 100 route trucks, driven by indepen-
dent contractors, that leave the Hamtramck facility for daily deliveries to locations throughout Michigan. Kordas declined to disclose financials, saying only that the company’s revenue has doubled from 2011 to today. “We’re doing some fun things,” said Kordas, who joined the family business shortly after graduating from the University of Colorado in 2005. “If you’re eating a (hot) dog anywhere in metro Detroit or Michigan, chances are it’s on our bun. In general, there’s a pretty strong chance that if you’re eating at a fast-casual restaurant, club or institution, you’re eating one of our products.” Metropolitan Baking has worked with the University of Michigan for seven years as the school’s sole bread supplier. See BAKERY on Page 25
By the numbers Metropolitan Baking Co. in Hamtramck produces bread, buns and rolls for restaurants, grocers, stadiums and large food service companies. Here's what it takes to produce their products: ` About 500,000 pounds of flour per week ` Close to 26 million pounds of flour a year ` The company packages 140 packs of buns per minute on its bun/roll line ` It packages 130 loaves of bread per minute on its bread line SOURCE: METROPOLITAN BAKING CO.
See INSURANCE on Page 23
REAL ESTATE
Gilbert buys Stroh site next to Valade park on Detroit riverfront BY KIRK PINHO
Billionaire Dan Gilbert’s real estate company has added 4.32 acres of Detroit riverfront land next to the Detroit Riverfront Conservancy’s Robert C. Valade Park to its portfolio. Deeds to the sale of the property, largely surface parking, at Atwater and Joseph Campau streets were recorded last month listing Gilbert affiliate Riverfront Acquisitions LLC as the buyer and members of the Stroh family as the seller. Crain’s estimates the purchase price at $7.15 million based on real estate transfer taxes paid, or roughly $1.66 million per acre.
An affiliate of Dan Gilbert’s Bedrock LLC paid an estimated $7.15 million for this 4.32-acre chunk of land next to Robert C. Valade Park on the east Detroit riverfront. | KIRK PINHO/CRAIN’S DETROIT BUSINESS
The deeds for the purchases were dated in September and October, although records of the sales were just published earlier this month. “We see significant growth opportunity along the Detroit riverfront, in part because of the tremendous work of the Detroit Riverfront Conservancy and the strategic location to the downtown,” Kofi Bonner, Bedrock’s CEO, said in a statement. “We believe in building on this success to enable and enhance greater access to the water for the city. A future riverfront should be more pedestrian and transit friendly with a low car-
bon footprint, with more parks, plazas, entertainment and mixed-income residential.” The sale comes several months after Gilbert’s Detroit-based Bedrock LLC real estate development, ownership, management and leasing company announced it had purchased the roughly 500,000-square-foot Stroh River Place office building, rights for 735 spaces in a parking deck and about 4.4 acres of developable land also previously owned by the Stroh family. Those properties had been on the market since November 2020. See STROH on Page 22
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New Center area buyer comes to town for key corner The southwest corner of Woodward Avenue and West Grand Boulevard has a new owner after an online auction. T h e 3 8 , 0 0 0 -s q u a re Kirk foot building, forPINHO merly the home of the F.W. Woolworth department store, sold to Nazar Properties, an entity tied to Atlanta-based investor Rajeev Kaila. Kaila has bought other Grand Boulevard-area properties in the last year. The sale was for $2.3 million earlier this month, according to CoStar Group Inc., a Washington, D.C.based real estate information service. It was that property at 6561-6565 Woodward Ave. that Philadelphia-based developer David Grasso had mulled over as a possible highrise, although obviously that grand vision on Grand Boulevard never came to be. Kaila said Nov. 16 that while the “vision is still being formed,” the plan currently is to make the main floor and the basement retail space while “going up two or three stories” for residential uses. The auction listing from last month says the property’s zoning allows for the development of a 46-story, 569,000-square-foot skyscraper at the site, which is 0.35 acres. Detroit-based O’Connor Real Estate represented both the buyer and seller in the auction, which had a minimum starting bid of $750,000. The building is currently vacant and was built in 1940, according to the online auction listing. Grasso told me at the time that he turned his attention to his hospitality business, Roost Apartment Hotels, which is opening a 118-unit location inside Dan Gilbert’s Book Tower redevelopment on Washington Boulevard downtown. (A Cleveland location in Gilbert’s The May building is also planned.) Earlier this year, Kaila, an attorney, also bought a series of properties at Lincoln and Holden streets across from the Henry Ford Health System campus for what he said in a text message earlier this month was 21 lofts with 5,000 square feet of retail. He said he is working with John Biggar of Detroit architecture and design firm Integrity (Building) Group on that first phase of a possible project, “then possibly more retail (thinking a food hall) and residential for phase two.” Biggar told me that construction drawings on a first phase “are almost done and ready to go in for (building) permits.” In addition, Kaila said that he has acquired a few other properties in the Midtown, New Center and Milwaukee Junction areas, including an apartment building at 640 W. Willis St. in Midtown and smaller properties on East Grand Boulevard and Philadelphia Street. “Three or four years ago I started acquiring smaller properties, residential properties and things like that and learned the city a lot better,” Kaila said. “Last year we started acquiring some larger properties. We like what’s happening up there, and we are spending more and more time up there.”
A 38,000-square-foot building, formerly the home of the F.W. Woolworth department store , has sold. | COSTAR GROUP INC.
square foot per year while Class B buildings are $18.84 per square foot per year, according to the Newmark report.
O’Connor picks up Platform listings
A Troy office building owned by Kelly Services has been put on the market for sale for $7.9 million, less than two years after announcing a consolidation of its office footprint in a sale-leaseback deal with A.F. Jonna Development LLC.| COSTAR GROUP INc.
Kelly Services lists building Less than two years after shuffling around its real estate holdings in Troy, Kelly Services is making another move. The publicly traded staffing agency (NASDAQ: KELYA, KELYB) has listed its building at 295 Kirts Blvd. for sale for $7.9 million through the Southfield office of Cushman & Wakefield. The property and all of its 100,000 square feet is also up for lease, the listing says. “Kelly conducts regular reviews of its real estate assets and has determined that the sale of the building at 295 Kirts Road is in the best interest of the company and its employees,” Vanessa Williams, Kelly Services general counsel, said in a statement Tuesday. “Over the course of the pandemic, we invested in our IT infrastructure and expanded our popular Kelly Anywhere program, which now allows most corporate employees to work remotely full time. As a result, our needs for physical office space have shifted significantly,” Williams said. “By pairing flexible, remote work options with modern workstations at our renovated headquarters building at 999 W. Big Beaver Road, we are able to accommodate the diverse workplace preferences of our employees.” In December 2019, just before the COVID-19 pandemic catapulted office markets in the region and around
4 | CRAIN’S DETROIT BUSINESS | NOVEMBER 29, 2021
the country into uncertainty, Kelly Services said it had reached an agreement to sell three of its owned properties, including its headquarters building, to Bloomfield Hills-based A.F. Jonna Development LLC. The properties in the sale were the headquarters at 999 W. Big Beaver Road, which is 180,500 square feet; the headquarters annex, a 50,000-square-foot property once known as the Kimberly Scott Building at 911 W. Big Beaver; and the Lindsey Centre, which is 88,000 square feet at 2690 Crooks Road. With the latter two buildings vacated, Kelly was able to move those employees into the 999 W. Big Beaver headquarters as well as the 295 Kirts building. The sale-leaseback deal finalized in March 2020 for $46.5 million, according to CoStar Group Inc., a Washington, D.C.-based real estate information service. A third-quarter office report from the local office of New York Citybased brokerage house Newmark says that the Troy submarket has a 19.7 percent vacancy rate, up 0.6 percentage points from the prior quarter. An additional 89,000 square feet of office space came on the market in the third quarter, with 66,000 square feet of that coming from the move of Dialog Direct Inc. from Troy to owned space in Highland Park. The average asking rent for Class A, Class B and Class C properties is $19.57 per square foot per year. Class A buildings are $22.23 per
Detroit-based O’Connor Realty has nabbed the retail and commercial listings for four properties developed or redeveloped by fellow Detroit-based real estate firm The Platform LLC. The listings are: ` Woodward West, 1,000 to 25,000 square feet of retail space in the 204unit mixed-use apartment development currently under construction and jointly developed by The Platform and Detroit-based Queen Lillian II LLC. Starting rate is $25 per square foot, triple net. ` The 6001 Cass Ave. building in the TechTown area, with about 1,800 square feet to about 21,800 square feet of retail space available at $25 per square foot, triple net. Office tenants are WeWork and Tata Technologies. ` The Boulevard, a 231-unit mixeduse apartment development at 2911 W. Grand Blvd., west of the Fisher Building, with 1,600 to 8,400 square feet of retail space available, also at $25 per square foot, triple net. Other retail tenants are Orangetheory Fitness, Beyond Juice and Comerica Bank. ` Chroma at 2937 E. Grand Blvd. in the Milwaukee Junction neighborhood, with 1,500 to 32,000 square feet of office available at $26 per square foot, gross.
Feds: OZ fraudster claims Detroit properties purchased that never were Some Detroit real estate got wrapped up in a federal indictment announced Nov. 15. The U.S. Attorney for the Southern District of New York and the U.S. Postal Inspection Service said that a 38-year-old New York City fund manager lied about purported Detroit real estate purchases to an investment bank whose investment he sought. The feds say Scott Burrell fabricat-
ed documents to make it appear as though two of his companies — Activated Tax Advantaged Opportunity Fund LLC and Activated Capital Opportunity Zone Fund II LLC — bought nine Detroit properties through an affiliate. None of those deals had taken place. I’ve asked U.S. Department of Justice spokespeople for the addresses of the properties in question but have not heard back. Burrell allegedly tried to raise up to $75 million in Opportunity Zone funding through Activated Capital funds but they did not generate the promised “consistent and stable” 8 percent annual distributions to investors, so he made up the difference using investor money “in a manner akin to a Ponzi scheme,” feds allege. As part of the investment bank’s due diligence, Burrell allegedly provided fabricated documents showing monthly account balances of between approximately $2.09 million and $2.46 million between July 2019 and October 2019 when, in fact, they were only about $116,400 and $154,400. In all, the feds say that Burrell paid about $470,000 in distributions between 2019 through February 2021, far more than the real estate investment income received during that time and more than the cash available from operations. “Burrell used investor funds to make up some of the difference, which was contrary to guidance that he received from accounting and tax professionals, as well as Burrell’s own representations to investors,” the indictment reads. “This made it falsely appear to current and prospective investors that the Activated OZ funds were generating sufficient income to pay their targeted 8 percent annual distributions, which in fact was false.” Burrell is charged with securities fraud, wire fraud and aggravated identity theft.
Birmingham office building hits the market It’s not often that a downtown Birmingham office property hits the market, but one did a couple weeks ago. The building at 380 N. Old Woodward Ave. has been listed by Southfield-based Signature Associates Inc. for an undisclosed price. The building is 42,000 square feet and nearly 100 percent leased, according to the listing. The parking garage is also included in the offering, the listing says. Birmingham-based Williams, Williams, Rattner and Plunkett PC is the building’s main tenant, according to CoStar Group Inc., a Washington, D.C.-based real estate information service. According to Birmingham property records, it is owned by an entity called 380 Old Woodward LLC, which is registered to Richard Broder, the head of Detroit-based developer and landlord Broder & Sachse Real Estate Services Inc. Broder said his company has owned the property for more than a decade and that it has gotten to the point in its “life cycle” where it makes the most sense to sell it. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB
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COMMENTARY
$1.7B boost for Michigan roads won’t fix them all BY LANCE BINONIEMI
T
DETROIT BUSINESS
COMMENTARY
Advice, inspiration from Crain’s Most Influential Women
S
tand up. Speak out. Don’t wait to be invited. That was the consensus of a panel of powerful women who shared some hardfought career advice with me Nov. 18 during Crain’s 100 Most Influential Women event at the Fillmore Detroit theater. When I asked what guidance they would give their 20-year-old selves, our four panelists kept circling back to the same theme: the need for women to push through self-doubt to claim a seat at the table. That held true regardless of the industries they represented — law, higher education, startup investment and economic development. The key is letting go of the need for perfection, said Monica Wheat, founder and executive director of Venture Catalysts, which provides funding and support for entrepreneurs. In pitch competitions, for example, “a lot of the men will come up with almost nothing on a napkin and pitch it,” she said. “But my PANELISTS who are in the AGREED ON THE women mix, they will have NEED TO CREATE Ph.D.’s, they’ll have led organizations — A BETTER they’ll have had 10-person staffs and PIPELINE FOR way more traction, but WOMEN TO they still won’t just go because they want ASCEND TO (their idea) to be perEXECUTIVE fect,” she said. Her antidote to that ROLES. hesitation? “Risk it all.” Barb McQuade, a former U.S. attorney for the Eastern District of Michigan, was emphatic on one point: “Never eliminate yourself.” “Let the decision-maker decide you’re not qualified,” said McQuade, now a law professor at the University of Michigan. “If you think you can do the job and you want to do the job, don’t hold yourself back just because you think they won’t pick you. You never know.” Oakland University President Ora Hirsch Pescovitz, whose career arc has included roles as CEO of the University of Michigan Health System and a top executive at Eli Lilly and Co.,
Kelley
ROOT
Executive Editor encouraged the art of failing with grace and humor. “I always say shoot for the stars,” she said. “And when you fail, you land on the moon, but tell people you were aiming for a moon landing.” Anika Goss, CEO of Detroit Future City, a nonprofit think tank and advocacy organization, drew applause with her straightforward, no-nonsense advice: “I would tell my 20-yearold self not to wait for permission. Right? Like, you know the answer, you know what it is that you need to do.” Panelists agreed on the need to create a better pipeline for women to ascend to executive roles — and more flexible workplace policies to keep them there. “We need to work on developing people who are underrepresented in leadership in organizations,” McQuade said. “That includes women. It also includes people of color, people from the LGBTQ community. And I think we need to be intentional about how we do that.” Inspiring thoughts, all, on a night intended to honor some of the most accomplished women in metro Detroit. Nearly 450 people turned out for the vaccine-mandatory, masked-up celebration, proving the need for connection is still powerful. In the meantime, we’ll be on the lookout for our next Most Influential Women class five years from now — whose members are, hopefully, already raising their hands.
MORE ON WJR ` Crain’s Executive Editor Kelley Root and Managing Editor Michael Lee talk about the week’s stories every Monday morning at 6:15 a.m. Mondays on WJR 760 AM’s Paul W. Smith Show.
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.
DANIEL SAAD FOR CRAIN’S DETROIT BUSINESS
The Crain’s 2021 Most Influential Women event Thursday at the Fillmore Detroit theater featured a panel discussion with, from left, honorees Barbara McQuade, Ora Hirsch Pescovitz, Anika Goss and Monica Wheat moderated by Crain’s Detroit Business Executive Editor Kelley Root. | ARMON BABRIDGE FOR CRAIN’S
he bipartisan Infrastructure Investment and Jobs Act has finally been signed by President Joe Biden following months of debate. While this is welcome news for Michigan, this is only the beginning of adLance Binoniemi is the dressing needed repairs vice president of for Michigan roads, bridges and undergovernment affairs of the ground infrastructure. Michigan Michiganders have Infrastructure & been waiting for this Transportation plan to pass for some Association. time. We all know how bad our roads are. We’re all sick of potholes, failing dams and bridges and underground water infrastructure that’s in desperate need of repairs. The plan that just passed in Washington, D.C., will begin to address many of those needs. Michigan will see a short-term boost of funding in the not-too-distant future. The plan would invest nearly $7.3 billion in Michigan road construction, $563 million for bridge replacement or repairs, and $1.3 billion to improve underground water infrastructure like drains and pipes. This funding will be realized over the next five years. But keep in mind, this is an increase of just more than $1.7 billion coming to Michigan for road repairs over the next five years as compared to what the state has received in federal funds over the previous five years.
This is not a long-term solution, and it will not fix all of the road problems that frustrate us. This is also not permanent funding, and it will not fund the repairs needed down the road to maintain current levels of infrastructure usefulness. As we learned in a report from the state of Michigan in 2016, we need an additional $4 billion annually to address our infrastructure repair and replacement issues. While this one-time federal funding increase will help tackle difficult problems we’re dealing with on our roads, bridges and underground infrastructure, much more is needed. And as we’ve all been reminded about this summer with the flooding in Southeast Michigan, underground infrastructure such as sewers and drains are a critical piece of Michigan’s infrastructure network that is in dire need of repair. When those underground systems fail, basements and highways flood, bringing cities to a standstill and wreaking havoc in our homes. Making the needed investment in repairing critical underground infrastructure systems should be a top priority for Michigan’s policymakers. While this new federal funding will help address the problem, it will not go all the way to fixing it long term. We are excited that our leaders in Washington stepped up to work on infrastructure issues and made a good start on getting the ball rolling. Unfortunately, we’re still far off from meeting the necessary funding levels to address our infrastructure needs. We hope to see continued investments made at the state and federal level over the coming years. As we all know, Michigan’s infrastructure needs are great, and this is a welcome step toward addressing them.
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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OTHER VOICES
Why Michigan needs DTE’s ‘smart-grid’ investment Imagine a future for Michigan when we’re no longer burning coal, and more than half of our electricity is powered by the sun, wind and other clean energy Jerry Norcia is sources; when president and most MichiganCEO of DTE ders are fastEnergy. charging their cars at home; when our houses are wired with state-of-theart electric appliances that we operate from our phones and other smart devices; when every parking space at work comes with a charging station; and when energy costs are more affordable because your electricity is delivered efficiently by a smart electric distribution system integrating renewables, battery storage and clean sources of energy to produce power 24/7. In the next decade or two, this future could be our reality — if we transform Southeast Michigan’s century-old electric infrastructure into a 21st century “smart grid.” You can see how that vision takes shape by reading DTE Energy’s blueprint for a $7 billion, five-year investment in our grid, that will begin to prepare Michigan for the challenges posed by automobility, smart homes, severe weather, and the fast-evolving needs of consumers and businesses. DTE’s “Distribution Grid Plan” was filed recently with the Michigan Public Service Commission and includes our five-year investment plan to create a more resilient and reliable electric grid. It also looks further into the future to start laying the blueprint for how we need to change and grow with our customers’ demands. This plan recognizes that our customers’ homes and businesses now interact with the electric grid in ways that we couldn’t imagine 20 years ago. Our dependence on an affordable, reliable and smart grid will only grow, which means the electric distribution system we share must be radically adapted for the next century. One example of this global transformation can be found here in Detroit, where General Motors’ Chairman and CEO Mary Barra is building an “all-electric future” for the automobile industry that is “zero emissions, zero accidents and zero congestion.” Her bold and exciting vision requires a smart electric grid that can deliver power to smart cars and smart roads and keep pace with the ingenuity of American entrepreneurs. The electrification revolution is relevant to consumers, too, as everyday people seek ways to wean themselves from fossil fuels and help create a cleaner, less expensive energy system. DTE is working with the communities we serve to generate more clean energy through the development of local, community solar installations and voluntary renewable energy programs. At the same time, we see private home solar installations growing. All of this can’t grow faster without more grid technology. Power provided by private solar and battery storage flows back to the grid. Information from smart applications customers use must be shared to sell excess energy and draw it from the grid when it’s needed. The grid is changing from a one-way distribution system to a twoway flow. Yet it must always deliver a stable flow of electrons for any of our
electronic equipment to operate properly. This two-way system requires even more grid technology and integration to ensure the electric reliability that our customers require and deserve. The $7 billion blueprint for Michigan’s technology-driven future includes a multibillion-dollar investment to combat power outages due to a global increase in storm frequency and severity. These include increased automation, self-healing circuits, pole maintenance, equipment replacement programs, tree trimming, and investments in projects that update the grid’s oldest infrastructure throughout our service territory, including low-income areas. In addition, we plan to
GETTY IMAGES/ISTOCKPHOTO
BY JERRY NORCIA
conduct pilot projects in areas hit hardest by the storms to study the cost and benefits of burying power lines. Our blueprint for DTE’s electric distribution system calls for new substations with high levels of automation and other tech-driven infrastructure to increase electric capacity in Southeast Michigan to give your homes, businesses and cars the “juice” they need for Michigan’s bright tomorrows. A smart grid, no coal, and more wind and solar electric generation are not the far-off dreams of an energy company CEO. With the proper investments in people, technology and a smart grid, they will be in DTE’s and Michigan’s near future.
t r u e s t o ry
We managed the family trust. They managed the family values. Talk about a happy reunion. In the fullness of three generations of marriages, births, deaths and naturally diverging interests, the heirs to a family fortune were concerned. Their once simple, single pot of money had grown so complex, so time consuming and so expensive to manage, that it was becoming a source of anguish rather than comfort for the family. The large bank that had long-served as trustee had churned through so many employees over the years, it knew little about the family, and cared even less. A trusted friend offered advice: call Greenleaf Trust. Meeting with the family, we listened carefully to their wishes that any new trusts should be structured in a manner that provided for current needs, while limiting withdrawals to ensure long-term capital. We took on their administrative headaches, and oversaw the intricate account transfers from numerous banks and holding firms. We reapportioned inappropriate investments so as to align risk and safety. And, over time, by creating educational trusts, generation-skipping trusts and related sub-trusts, we simplified and clarified “the rules of the road” so that the family’s intrinsic values would be upheld for generations to come. Family trust—in every good sense—was restored. We’re the first to say not every family portrait is all smiles. But with client satisfaction rates approaching 100%, and our unwavering focus on integrity and trust, it is safe to say that our clients appear to live happily, and harmoniously, ever after. To learn how Greenleaf Trust might help you to achieve financial security from generation to generation, call us. Good things are possible.
34977 Woodward Avenue, Birmingham, MI 48009 248.530.6200 greenleaftrust.com
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SMALL BUSINESS SPOTLIGHT
Offering competitive wages, benefits key for small businesses to thrive
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Rose’s Fine Food and Wine owner Molly Mitchell opened the restaurant in 2014. A former restaurant worker herself, Mitchell wanted to run a business that would offer staff financial security. JAY DAVIS/CRAIN’S DETROIT BUSINESS
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DAVIS
Molly Mitchell went into the restaurant business with an interesting perspective. The owner and co-founder of Rose’s Fine Food and Wine in Detroit’s East Jefferson area, worked as a “back of the house” employee at restaurants in her native Howell, Detroit and other spots. She watched as front of the house staff — waitstaff, bartenders — collected all of the tips on top of their hourly wage, while those behind the scenes got no extra pay. Mitchell vowed to run her business differently when she opened it in 2014. “I’ve just worked in the industry for a long time,” said Mitchell, who opened the restaurant with her cousin, now a real estate agent. “I wasn’t coming into the industry looking at it as a business owner. I just wanted to build a strong team and have a place where everybody is working hard to produce good food.
“I just didn’t want to start a business based on inequities, where there would be a larger income gap between myself and the staff, and the staff and the managers, as the business became more successful. It takes so much time and skill to learn to do this well, and I wanted long-term employees.” Small businesses often do not offer competitive wages and benefits due to a lack of resources and information. However, those that do see major benefits, such as higher employee retention rates, increased productivity and a boost in morale. For all of those reasons, Mitchell has always offered competitive wages at her restaurant, which specializes in sandwiches, salads, house-made desserts, plus to-go beer and wine. Hourly pay has risen from $10 when the restaurant opened to $15 currently. A tip-share program, in which staffers evenly split gratuities, has each of Mitch-
ell’s six employees earning around $20 an hour. Employees sign a document that essentially frees Mitchell from any issues related to possible inequity. Initially, Rose’s Fine Food and Wine operated as a tipless business, but Mitchell decided she didn’t want to deny customers the opportunity to reward the diner’s employees for their hard work and attentiveness. Rose’s employees get paid holidays off and a week of paid vacation each year, but Mitchell said she doesn’t offer a benefits package because the cost to employees would be too high. What Rose’s is doing significantly improves a small business owner’s ability to attract and retain talent, according to Carla McKelvey, Professional and Industrial vice president and North Market lead at Troy-based Kelly Services. See COMPETITIVE on Page 9
HOW TO BETTER COMPETE Following are tips for small business owners who may not believe they can offer employees a competitive wage and benefits.
“AN ENGAGED AND HAPPY WORKFORCE WILL ALSO BE MORE PRODUCTIVE.” — Carla McKelvey, Professional and Industrial vice president and North Market lead, Kelly Services
Consider hidden costs: Employee turnover is a hidden cost; training new staff can cost time that could be spent in other areas. Overtime pay, while offering some short-term benefits, could have negative long-term effects. Productivity could fall for some workers until overtime pay goes into effect. If staff works overtime consistently, it could lead to burnout. Seek help: In an effort to control and manage expenses, small business
owners should consider working with a staffing partner, such as Dearborn-based G-Tech Services Inc., that can assist with balancing full-time and contingent staff. Offer options: Employees are placing more of an emphasis on their values. Along with competitive wage and benefits, workers are looking for perks. A work-from-home or hybrid model could be a determining factor for current employees and new hires. Benefits, such as permissive paid time off or a four-day work week, could help in offsetting higher wages for some employees. SOURCE: KELLY SERVICES
` Listen to the podcast online: Rose’s Fine Food and Wine owner Molly Mitchell dishes on why and how she offers her staff a competitive wage and paid time off. Visit crainsdetroit.com
READ ALL OF CRAIN’S SBS PROFILES AT CRAINSDETROIT.COM/SMALLBUSINESSSPOTLIGHT 8 | CRAIN’S DETROIT BUSINESS | NOVEMBER 29, 2021
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FOCUS | SMALL BUSINESS SPOTLIGHT
COMPETITIVE
From Page 8
Employees who feel they’re compensated fairly are more likely to become brand ambassadors for the business and stewards for employee referrals, said McKelvey, who oversees Kelly’s commercial staffing operations in the northern United States and Canada. “An engaged and happy workforce will also be more productive,” she said. “It’s important to point out, though, that wages and benefits are only part of what make your employer value proposition — your company’s set of benefits and core beliefs that define your brand as an employer.”
‘Long-term plans’ Storch Magnetics President Matt Carr agrees with McKelvey that money can’t be the end-all, be-all. The company offers competitive wages and a Carr benefits packages that includes life insurance, shortterm disability pay and an employer-matching 401(k) plan. Soon it will add a profit-sharing plan. Carr, whose Livonia-based company engineers, designs and supplies permanent and electromagnetic technologies to manufacturing and processing industries, believes small business owners who get caught up on dollar figures are short-sighted. “Some business owners don’t have a choice. If you’re running a burger joint, you have to put that dollar figure first,” he said. “If you’re a company that can alter its product line and make a difference, you can hire people who have a passion for what you’re doing. The salary might not be as competitive in the beginning, but that person sees the long-term vision and plans, and knows they’ll make more money down the road.” Carr said that outlook has helped Storch, which has been in business since 1952, during the pandemic. For example, Storch created a vision board to gather feedback on employees’ goals. When it launched a new brand of filter products, it tapped into workers’ desire to have a positive impact on the environment. “Every time the filters are installed at a business, the testimonials that come back are incredible,” Carr said. “Our staff made that product with their own two hands. They saw something in the product and helped us produce it. It’s going to pay dividends for all of us. “We know everybody is having issues right now with hiring. It’s hard to find good help. But if you hire somebody at $18 an hour who took the job because of a $2,000 sign-on bonus, when they get that bonus, they might leave because they didn’t take the job for anything other than the money.” McKelvey agrees with Carr, saying the pandemic has pushed employees to rethink work. “... many more people want their work to better align with their personal lives and values,” the Kelly executive said. “Today, more than ever, workers care about fulfilling work, a company’s vision or product, how business owners treat their employ-
ees, and a business’s commitment to diversity, equity and inclusion.” Offering competitive pay and core benefits like health insurance and paid time off are a given, McKelvey said. Other perks such as product discounts, flex time, mental health days and opportunities for growth can make a business stand out more, she said. Opportunities for growth are what make Detroit jeweler Rebel Nell attractive for prospective hires. Rebel Nell, established by Amy Peterson in 2013, serves as a social enterprise dedicated to providing equitable opportunity and support for women with barriers to employment, such as previous incarceration or homelessness. Rebel Nell’s goal, Peterson said, is for the business — which repurposes materials like graffiti into wearable pieces — to serve as a transitional employer, offering work to people as they prepare to move into jobs and careers more in line with their interests, and leading them on a path of self-sufficiency. In addition to starting wages of $12-$15 an hour, Rebel Nell offers pay increases every six months. The jewelry maker also offers support that includes financial education, housing assistance, legal aid, child care assistance, interest-free microloans, a flexible work environment and career support. “Our focus has always been on people,” said Peterson, who has 12 fulltime employees. “If you don’t focus on the people who support you, then you have no business. The people are way more important than the bottom line of a capitalistic marketplace.” Since 2013, Peterson has hired 34 women from shelters and graduated 22 into the traditional workforce. Most employees stay with Rebel Nell for two years before moving on. Even with what amounts to temporary employment, Peterson has no problem sacrificing revenue if it means she sees a return on investment in the people Rebel Nell serves. “We know we could have everything produced overseas and have little impact on our community but our margins would be very high,” said Peterson, whose items are priced $3-$205. “That’s not why we started Rebel Nell. We’re a social enterprise investing in our people and the community. To me, there is a value to that. We like to think we have two types of customers: the women we serve and the people who purchase our products.” Mitchell feels the same about her employees. Rose’s staff has dropped from 12 to six since the start of the pandemic, which Mitchell said has allowed her to pay her employees better. It’s also helped create a stronger culture in which everyone on staff wants to produce the highest-quality dishes and service. Rose’s also cut its indoor tables from eight to two to go along with counter seating. “Running a place where I feel I’m an equal with the people who work here is important to me,” Mitchell said. “I listen to the people who are actually doing the work. If someone says a part of the job is hard, I try to make it easier. I’m trying to make this a nice place to work. Yeah, it’s a job, but I want people to feel they have autonomy and a voice. And I pay them well.” See COMPETITIVE on Page 10
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$5 million grant to help modernize Michigan Opera Theatre’s home BY SHERRI WELCH
A new $15 million capital campaign launched by Michigan Opera Theatre has gotten a significant bump with a $5 million grant, its largest ever, from the William Davidson Foundation. The bulk of the grant will support capital projects that are underway to modernize and increase accessibility to the nearly 100-year-old Detroit Opera House. Another $2 million will provide programming support over the next two seasons as Gary L. Wasserman Artistic Director Yuval Sharon brings his innovative approach to new productions at the Detroit Opera House. The William Davidson Foundation grant “is an investment in the next 50 years of MOT, and importantly, an investment in the performing arts sector for the Metro Detroit Region,” MOT President and CEO Wayne Brown said in a news release. “The upgrades and repairs will enhance the Opera House’s reputation as the ‘venue of choice’ in downtown Detroit for a myriad of events, from opera and dance performances to civic meetings and weddings.” As part of first-phase renovations, an elevator tower is now visible on the outside of the opera house and accessible restrooms are going in on the main floor of the opera house. Also planned for completion between now and early 2024 are improvements to the sky deck and heating ventilation and cooling system and new seating. “It’s not the most glamorous thing when you talk about bathrooms and elevators, but it makes a big difference to a lot of people, right?” Ethan
An elevator tower addition is among capital improvements underway at the Detroit Opera House. | KIRK PINHO/CRAIN’S DETROIT BUSINESS
Brown
Sharon
Davidson, chairman of the MOT board and of the William Davidson Foundation’s grants committee, said Wednesday during a Zoom meeting discussing the foundation’s grant. MOT launched the current $15 million capital campaign in June, right after exceeding the goal in a $50 million campaign. Launched in 2015, before the death of MOT founder David DiChi-
era, the earlier effort provided five years of operating funds, programs and endowment and helped pay down MOT’s $4.5 million mortgage to its current level of $3 million, the organization said. Within the last year, Brown said five other opera companies have participated and invested in an MOT production that will subsequently be available for rental by other opera companies. “So that’s about repositioning the company with new production, with new work, advancing the art form itself broadly,” he said. “And with that comes ... some very tangible resources to help new productions come about.” Contact: swelch@crain.com; (313) 446-1694; @SherriWelch
COMPETITIVE
From Page 8
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In December, Storch will for the first time implement a profit-sharing program for the company’s 30 fulltime staffers, which is used as a catalyst for new hires and employee retention. The multi-tiered system will be based on employee contributions and impact on the company, Carr said, such as someone working late or on weekends. “I think it’s a game changer,” said Carr, whose company is targeting $7 million in sales this year. “The people we hire come in at a higher wage and they’re super intelligent. We’re going to make their roles more autonomous. We’ve built a foundation, and we believe we have the potential to expand our market share. And that doesn’t happen without good people.” Morale can be a game changer, too. Mitchell said competitive wages, along with other perks, can ensure staffers feel good about going to work. “We’ve all had our fair share of jobs,” the restaurant owner said. “It feels good to get a raise. In food service, especially, it feels good to know you can live on one job. “Imagine working and not knowing if you can pay bills. Everybody needs a stable base. People in a lot of industries, especially the restaurant industry, are good at looking at their num-
Rebel Nell jewelry founder Amy Peterson, center, offers her employees benefits such as financial education, housing assistance, legal aid, child care assistance, interest-free microloans, a flexible work environment and career support for employees. “If you’re able to invest in your pe ople, you will have greater support for the long run,” Peterson says. | JUAN CARLOS DUEWEKE PEREZ
bers because they have to be. So many people have left this industry. Going forward, restaurant owners are going to have to place a higher value on staff.” Rebel Nell’s Peterson understands the climate, with supply chain issues and the pandemic continuing to rage on. It can be costly for a small business to offer competitive wages and benefits, but many find it’s worth it. “Support is dwindling and it’s even tougher to be a small business owner,” Peterson said. “If you’re able to invest in your people, you will have greater
support for the long run. “Even if it’s slowly adding one additional benefit a year or giving more time off. Listen to your staff and ask them what’s important to them, then work on a plan to implement those things. It’s also important to be open and honest with (staff ) about whatever situation the business is in. Earning trust in your employer is important in today’s workforce.” Contact: jason.davis@crain.com (313) 446-1612; @JayDavis_1981
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OUTLOOK 2022
NAVIGATING
TALENT, TECH, TURMOIL
Insight and advice from some of Michigan’s fastestgrowing middle market companies Powered by Crain’s Content Studio
T
hough often overlooked by investors and policymakers, middle market companies are in fact one of the most powerful engines of Michigan’s economy. Their leaders are thinkers, doers and innovators. These companies quietly drive economic opportunity in our local communities. They know what it means to dig in — and dig out. According to Brightstar Capital Partners, there are approximately 200,000 U.S. companies with revenues of $10 million to $1 billion. These businesses produce roughly one-third of the country’s GDP. Even during the financial crisis, from 2007 to 2010, middle market companies added some 2 million jobs.
But with great opportunity for growth comes great concerns: ■ These companies are under significant pressure to attract and retain top talent. ■ They are looking at how to harness technology to improve operational efficiency, drive better decisions, innovate products and services and protect their companies against cyber threats. ■ And they require a strategy to navigate uncertainty and disruption in the economy. We asked the leaders of some of the fastest-growing middle market companies in Michigan to share their perspectives on navigating growth amid challenges to talent, tech and turmoil.
ABOUT THE COMPANIES Altimetrik 2020 revenue: $142.5 million Southfield-based software company. National Food Group 2020 revenue: $180.6 million Novi-based food distributor. Plante Moran 2020 revenue: $747.7 million Southfield-based consulting firm.
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TALENT
As the global robot population continues to grow, the net increase of new jobs is still expected to outpace the elimination of the jobs that will ultimately be replaced by these advanced technologies. Finding and retaining these workers will continue to challenge middle market companies, as flexible workfrom-home benefits born of the pandemic will force Midwest firms to compete with east and west coast companies for talent. With fast growth comes opportunity – and challenges – in acquiring talent. How many employees have you hired/ will you have hired in 2021, and how many do you plan to hire in 2022? National Food Group: We will end at about 25 hires in 2021 and plan another 22-25 new team members in 2022. Plante Moran: In 2021 we hired 181 experienced staff and 589 campus entry-level staff. (Our 2021 entry-level new hire numbers were higher than normal due to the start date change of a large hiring group.) In 2022, we expect our hiring to be similar to previous years, with a goal of hiring approximately 250 experienced staff and 385 campus entry-level staff. Altimetrik: By the end of this year we will have hired more than 1,600 globally. In 2022 we will easily hire more than 3,500 globally. We are diversifying our workforce across the globe. About 70 to 75 percent of these jobs are for software engineers and data engineers. The rest of the roles we are hiring for are roles that complement these hires – from product managers, product designers, architects and quality assurance. What are you finding to be the most successful source of finding talent?
Altimetrik: What we have found is that no one methodology of hiring will be sufficient; this has to be a multi-source approach. One thing that we have done, realizing that everybody is working from home and understanding the cost of living in large metro areas, is that we have set up satellite centers for hiring. Rather than set up a center in a large metro area and expect the talent to move in, we are going to smaller places where the talent already lives. Also, one thing we rolled out is a hiring initiative specific to women in STEM. We also launched an initiative to target women who have left the workforce and want to re-enter; we will upskill them by bringing in people for training.
Plante Moran: After surveying staff about challenges caused by the pandemic, we saw common themes: a need for more flexibility, recharging, technology enhancements and childcare support. To help ease these challenges, we introduced “Work-from-Home remedies,” a benefits program, meant to support staff during the height of the pandemic, that included things like reimbursements to defray costs of childcare and virtual learning, funds and equipment to upgrade home offices, expansion of our athletic reimbursement policy to cover in-home athletic equipment, and recharge days. As our staff return to the office, we’re focused on flexibility. While we know working remotely isn’t always the right answer, the pandemic proved that certain tasks can be effectively completed remotely. So, we’ve
rolled out “Workplace for your Day,” a program that allows staff to make decisions about their workplace on any given day that are in the best interest of both the firm and our clients. Altimetrik: We gave our employees a one-time allowance so that they could buy comfortable home office equipment. We also guaranteed our employees that we would be paying for their network connectivity because historically that had been part of the infrastructure we provided while at work. We also are improving medical coverage and offering an employee stock option program in hopes of having better employee retention. We want our employees to feel like they are sharing in the success of the company.
How have you adjusted your benefits packages or other perks to stay competitive over the past year? National Food Group: While we feel we’ve always offered competitive, attractive benefits, in the current landscape, we’ve added even more flexibility in the forms of a generous work from home policy, health and wellness allowances, no-cost fitness facilities in the office, and an enhanced matching 401K plan.
National Food Group: Employee referrals have yielded a number of excellent new team members. We are proud that we have a culture where our employees feel enthusiastic about recommending us to their networks of talented people. Plante Moran: Our most successful source of new talent continues to be referrals from existing staff. In just the first quarter of our fiscal year, about 22% of all available experienced hire positions were filled via staff referrals. To help encourage those referrals, we developed a bonus program for staff who generate the initial lead on an experienced candidate who’s hired. We’ve all heard the phrase, “It takes one to know one,” and usually that has negative connotations. However, when our staff, who we consider the best of the best, refer a friend, colleague, or acquaintance from their personal networks, we’re pleased — because more times than not, their recommendations are spot-on, and they fit right in. In addition to our referral program, we’ve found great success in recruiting via social media, increasing our campus recruiting efforts, and reaching out to former staff who might be looking to “boomerang” back.
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OUTLOOK 2022
TECHNOLOGY
Technological innovation is already happening at a faster pace than at any time in human history, and those advances will continue to disrupt middle market firms. As they adopt automation, artificial intelligence, data analytics and other innovations, they will see continued ROI but be forced to adapt their internal and external policies and priorities. Have you adopted Industry 4.0 technologies (i.e. automation, AI, big data) or new digital practices over the past three years? If so, how did those contribute to your growth? Plante Moran: Our focus over the last few years has been around digitizing our firm; this has meant increasing our use of data analytics to enhance the insight we provide to clients, automating processes to improve efficiencies and transitioning to a cloudbased technical foundation. This focus, especially our commitment to cloud-based computing, proved to be invaluable during the pandemic. You can’t digitize your business overnight, and when the pandemic
buyer journey and client relationship. We approached our marketing with the same mindset, implementing cross-channel, digitally focused plans that could reach our target audiences during a time where we physically could not. The pandemic fasttracked our transformation into a digitally focused, modern marketing organization. Communications to both clients and prospects are more targeted, timely, and interactive.
Altimetrik: The pandemic has established new norms in the sales and service approach with more and more clients willing to adapt to the virtual interactions. Altimetrik was able to shift all of its employees around the world to working remotely in “Over the past few years, automation, AI, Big Data, just 18 days after coronavirus halted the MLOps, AIOps and more have gained traction due to world in early-March the benefits they can bring to digital enablement and 2020, and we’ve digital transformation.” helped our clients do Altimetrik the same. Since then, we have continued running the business consistently with hit, thankfully we didn’t have to. Because massive growth over the last 12 months, and we’re running on the cloud and not onit’s the result of the trust through premise servers, our staff, including our delivery consistency that we have technology team, had anytime/anywhere access to all the tools and technologies we needed. This was a huge benefit to our clients because, at a time when they needed us most, we never had to slow down our service. In fact, with the new challenges many clients were facing, we were able to help them in ways we never had before. Altimetrik: Over the past few years, automation, AI, Big Data, MLOps, AIOps and more have gained traction due to the benefits they can bring to digital enablement and digital transformation. The adoption of Industry 4.0 is an important ingredient of digital enablement and data practices, both of which are the pillars of Altimetrik’s philosophy. It enables our organization’s growth and helps our clients adopt industry best practices to improve maturity levels in agile, data, DevOps, cloud engineering, quality engineering, cybersecurity and site reliability engineering. Industry 4.0 not only focuses on the journey that we all have embarked on in terms of digital enablement, it also brings in the best engineer experience while adopting cutting edge technologies as part of the journey. Regardless of your end customer (consumer vs. business vs. both), the pandemic has forced changes in how we reach our customers. How have you changed your sales/outreach/service approach? Plante Moran: The pandemic cemented what was already a trend to a “digital-first”
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been able to provide to our customers. The approach has been simple: Keep the promises made and help clients to grow, regardless of the changing landscape.
our clients better information faster and uncover insights that will help them understand their business in ways they never could before.
National Food Group: There has obviously been a great emphasis on communicating from a distance. While this has been a challenge as it relates to trade shows and product demonstrations, we have pivoted into using an array of conferencing, video and social media platforms to inform our business partners of our value. We understand that people have a lot of choice in how they use their time, so we try to make interacting with us simple, safe and fun. Creating great relationships is what we’re about and we continue to do that using all of the technology that we’ve embraced.
Altimetrik: The leadership team at Altimetrik has created a great strategy in terms of digital enablement, not only within the organization, but also that can be adopted by the industry. Although the majority of business leaders say digitalization is the highest priority of the organization, very few have been successful in their efforts. At Altimetrik, we believe the best strategy is to grow revenue, profit, cash and market share through a single source of truth for decision making, and building a culture of continuous innovation, experimentation and learning, with minimal investment and minimal disruption to the business.
What is your company’s digital strategy going forward?
National Food Group: Moving forward, we will continue to use technology to create visual experiences on a variety of digital platforms to meet our customers where they are. People give a short amount of time to absorb a message, so we try to communicate in short but fun visual bursts with strong focus on video. We can accomplish that using all the major social media platforms and supporting our retail partners’ (as well as our own) e-commerce initiatives.
Plante Moran: Our digital strategy is centered around bringing together talented professionals and emerging technology to enhance the services we provide to our clients. From arming our people with bots that reduce repetitive processes, to machine learning that identifies anomalies, and AI that scans documents in ways human eyes can’t, we’re focused on creating new ways to bring
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The global supply chain continues to delay production, and the U.S. economy faces a broadening of price pressures. Meanwhile, workers are adjusting, still, to the new normal of work as return-to-office plans continue to be delayed. Middle market companies are responding to social, economic and environmental changes at a rapid pace. What has been your biggest obstacle in adapting to the current operating environment? How have you overcome it? Altimetrik: Our team was built on agile collaboration. For instance, we would have one monitor with two mice and two keyboards for two engineers to work together programming. All of a sudden, you can’t do that. Now they are each sitting in their own apartments. Not being in person and having that interaction turned their lives upside down, because that’s how we all did business for so long. Also, we are now competing in the Midwest with Silicon Valley or the Northeast corridor, because their budgets for acquiring talent have always been higher. It’s not sustainable. Everybody’s budgets for acquiring talent will have to change because we will all be competing for the same talent nationwide. National Food Group: The current environment is more of a storm of immediate change than simply an obstacle or two. We are in the food business and people continue to eat. However, the manner in which people consume their food — especially away from home — has changed and continues to evolve with the pandemic. We have had to adjust our product mix in order to accommodate the needs for safe consumption of food. We have had to listen astutely to what our customers are saying, empathize with their challenges and offer different solutions. The more recent supply chain constraints are an even bigger issue. Labor shortages, rising prices and increasing demand have all caused shortages, delays and budgetary burdens. We have had to get creative in diversifying our product mix in some cases, and sometimes rationalizing SKUs to take advantage of production efficiency. So, many manufacturers are turning their efforts to the retail market, leaving foodservice in a bind.
situation was unique. Our approach to overcoming this was listening, sharing as much information as we could, and providing support however possible. Internally, this meant surveying our staff, frequent communication from leadership, creating more flexibility and introducing benefits that could support staff during unprecedented times. With clients, it meant fast-paced problem solving and more two-way communication, like virtual meetings, roundtable discussions, daily newsletters, webinars on major changes, and a COVID-19 Resource Center where clients and prospects could ask for help or information. In what has unfortunately become unending uncertainty, how are you keeping your teams motivated? National Food Group: Even before the pandemic, our team has always been proud of its agility. Our ability to be flexible, both in business process and attitude, has been the key to our success through tough times. We’ve always embraced change as an opportunity for growth, and our team is energized by that. Since we are not all in the office as consistently as we once were, it has become imperative that we communicate more intentionally about everything we do. Providing transparency through weekly video addresses from members of our leadership team has allowed everyone to feel connected to our common goals and vision. Plante Moran: We motivate staff by showing our appreciation. We do this through:
■ Transparency: There’s open and frequent
communication between staff and leadership, and we always try to eliminate uncertainty. For example, early in the pandemic when many businesses were laying people off, we quickly let staff know that was not in our plans. ■ Trust: From Flexible Time Off, which allows staff to take off time as needed rather than a Plante Moran: The biggest challenge we fixed number of days, to Workplace for your faced was helping both our staff and clients Day, which lets staff choose their daily manage the massive amounts of both working environment, staff know they’re “The biggest challenge we faced was helping both our trusted. staff and clients manage the massive amounts of both ■ Rewards: Because of personal and professional changes that were thrown at our teams’ extraordinary efforts them at once.” to serve clients during Plante Moran the beginning of the pandemic, in 2021, we rewarded our staff by providing “Thank you” personal and professional changes that were bonuses in addition to standard increases thrown at them at once. Practically overnight, and bonuses. We also recently announced an people were managing anything from an additional round of market-based increases unexpected business shut down, a spouse in 2022 to thank our team. being laid off to homeschooling their kids — and in many cases, all the above. And while What are the positives that the past 19 the pandemic impacted everyone, each
months of turmoil have brought to your businesses? Have you had a ‘shining moment’ that you can share? Altimetrik: We have become more empathetic. Prior to the pandemic, we would draw a vertical line between work and life outside of work. If we were working from home and our kids walked into the room, we would feel embarrassed about it. But now, we have all brought a more human element to our work. Also, we have become more productive as humans — just think about the productivity that is gained by not having to commute. National Food Group: Demand for food in the markets we serve has definitely been positive for us. We see a continued need for flexibility and convenience and that is where we thrive. The appreciation that our customers have shown us is reaffirming that what we do works. Maybe more than anything is how proud we are to be have been able to help so many people in need over the last 19 months. During this time, we have been a leading supplier of shelf stable and individually wrapped foods for community feeding programs. As kids have been out of schools, communities have been providing nutritious meals for families to take home with them. We have been able to allocate millions of servings to help feed those that need it most. During this time, we have also been dedicated to our Corporate Social Responsibility program to ensure that, in addition to helping people with food, we are doing things that improve the world around us. Whether it’s providing employment in a diverse and inclusive environment, participating as a team in community outreach, or sponsoring programs designed to educate and strengthen kids, we are taking advantage of the opportunity to help as many people as we can.
wanted a response and not just a reaction. What they came back with was incredible. They suggested a “Year of Understanding” campaign that offered a variety of internal events to increase inclusion and belonging within our “We care” culture. The Council shared that it was imperative that we create opportunities to improve our cultural awareness and responsiveness individually — and as a firm — to enrich our relationships with each other and clients. We couldn’t have agreed more, and our management team immediately approved the campaign. The Council took it from there and it’s just been incredible. Through each event, our staff has displayed great empathy, care and interest in advancing their own understanding. The way our “Year of Understanding” was embraced by our staff was truly a shining moment for the firm. “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdic¬tions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured · May Lose Value · Are Not Bank Guaranteed. | © 2021 Bank of America Corporation. All rights reserved. #3926212
Plante Moran: When an organization knows its mission, it can tackle just about anything. Thankfully, our firm has a solid mission: to take care of our people so they can pursue and respond to the needs of clients with an emphasis on quality and service, not profit. And the biggest positive we’ve seen over the last 19 months is our staff’s ability to live out our mission and tackle some really big challenges. We’ve made some big asks of our team since the beginning of the pandemic, from closing our offices overnight, figuring out how to deliver our services virtually, designing new services to address pandemic related business challenges, understanding and helping clients with new tax and other legislation, to making sure our staff felt supported. And regardless of how big the asks have been, we’ve been consistently impressed by the way members of our team have risen to the occasion. For example, after the death of George Floyd, it was clear that the firm needed to respond, but we weren’t exactly sure what that response should be. So, we went to our Inclusion and Diversity Council and asked for ideas; the only guidance we gave was we
NOVEMBER 29, 2021 | CRAIN’S DETROIT BUSINESS | 15
INSIDE: Michigan’s record venture capital funding isn’t reaching Black, Brown founders. PAGE 17 ONLINE: Why Michigan investors sometimes miss the opportunities in their own backyard. CRAINSDETROIT.COM/
BUSINESS STARTUPS
Justin Mupas demonstrates the authentication process for sneakers at the StockX authentication center in Detroit.
MINTING THE NEXT UNICORN ‘From Big 10 to NFL’: What Michigan needs to create its next StockX or OneStream `BY NICK MANES
A
CRAINSFORUM
| NIC ANTAYA/SPECIAL TO CRAIN’S DETROIT BUSINESS
s the Southeast Michigan technology sector grows as a whole, two so-called unicorns have risen above the rest. Detroit-based StockX LLC and OneStream Software in Rochester couldn’t be more different in terms of actual business. The former is a niche consumer-facing business reselling high-end sneakers and luxury goods, while the latter is a corporate software company. But the two companies have nearly $10 billion in combined valuations from investment funds that are rarely heard from in Michigan, and both have a true global reach. And both are seen as the likely next crop of Michigan-based public companies not tied to the automotive sector. With OneStream and StockX likely to make an exit to the public markets — although a timeline for such moves is unclear — the question becomes, how does Michigan grow its next crop of unicorns, or companies with a valuation of more than $1 billion? Venture capitalist Chris Rizik, the CEO and fund manager of Ann Arbor-based Renaissance Venture Capi-
tal, sees three core buckets that contribute to a healthy tech startup economy: technology, talent and capital. Rizik said the state has had no shortage of technology, and capital has become far more readily available in recent years. “Then the third piece is the talent. We’ve always had great technical talent here, but we haven’t necessarily had the kind of talent to run fast-growing businesses, and that comes with time,” Rizik said during a Sept. 10 panel discussion on small business at Eastern Michigan University hosted by Lt. Gov. Garlin Gilchrist. “We’re a couple decades behind Silicon Valley in doing that and there’s an organic way where people who work inside fast growing companies learn what it’s like to be in a fast-growing company.” Some evidence suggests that talent issue could be easing as companies increasingly look far beyond their headquarters’ locations and hire all manner of talent to work in locations around the globe. See UNICORNS on Page 20
Soaring VC invesment Michigan saw an 886 percent increase in venture capital investments from 2016 to 2020. No other state saw such a rapid rise during that five-year period. Michigan venture capital investments surge $4.0 billion $3.1 billion 3.0 2.0 1.0 0
‘16
‘17
‘18
‘19
‘20
Percentage increase in venture captial investments Michigan North Carolina Colorado Minnesota Washington
886% 410% 304% 208% 170%
SOURCE: CRUNCHBASE
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Partnering to help create opportunities Last year, Bank of America committed $1.25 billion over five years to advance racial equality and economic opportunity. To date, we’ve directly funded or invested one-third of this amount on top of long-standing efforts to make an impact in our communities and address society’s greatest challenges. Here are some of the ways we’re working to make a difference: • Investing $300 million in 100 minority-owned and minority-led equity funds, including Augment Ventures. This will help diverse entrepreneurs and small business owners create more jobs, financial stability and growth. • Investing $36 million in 21 Minority Depository Institutions (MDIs) and Community Development Financial Institution (CDFI) banks that support minority-owned businesses. This is in addition to approximately $100 million in deposits to MDIs and our existing CDFI portfolio of more than $2 billion, which helps build pathways to economic vitality in local markets. • Providing funding and support through innovative programs and partnerships with community colleges, universities and nonprofits that offer training and credentialing programs connecting more people to high-wage, in-demand careers. We’re doing this work in collaboration with community partners, business leaders, experts and academics across the public and private sectors to ensure that our investments are directed where they’re needed most. Together, we can help drive sustainable progress in Detroit. What would you like the power to do? ®
Matt Elliott President, Bank of America Detroit
Learn more at bankofamerica.com/detroit
Bank of America, N.A. Member FDIC. Equal Housing Lender
© 2021 Bank of America Corporation. All rights reserved.
COMMENTARY
C
Record VC funding hasn't reached Black, Brown startups
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in the mouth. hile there’s an inZooming into our local credible risk/reecosystem, according to ward opportunity Ann Arbor-based Entryfor the bold, running a startPoint: “The Black populaup can be challenging. tion makes up 78 percent The degree of difficulty of the total population of rises when we factor in those Detroit. However, across companies that choose the Michigan, the startup venture capital/angel inand venture capital comvestment route to scale their Javier Evelyn is businesses. the founder and munities are approximately 65 percent white Even as we've recently CEO of Alerje, a men.” seen a boom in U.S. startup Detroit-based All this being said, I funding in just nine months health know so many amazing during 2021, this difficulty technology startups that are led by level is even higher if you're startup focused marginalized groups that a Black and/or Brown on allergy have made do with limitfounder. Unfortunately, this management. ed resources. While this recent record high in fundadds to the “grit” narraing hasn’t translated into many opportunities for these popu- tive that’s made the region so great, we won’t truly have a thriving startlations. Per a recent ZDNet article, Black up ecosystem until we modernize entrepreneurs in the U.S. raised the playbook. No, we don’t need to be the next nearly $1.8 billion this period. This sounds amazing at first Silicon Valley, but we could definiteglance. However, when you realize ly learn from the thriving diverse that this only accounts for 1.2 per- ecosystems being built in Atlanta cent of a record $137 billion invested and Miami. One of the items that stand out in in U.S. startups, it leaves a bad taste
these cities are the number of people of color that are writing checks. Michigan as a whole has an incredible legacy of entrepreneurship. There are so many examples of diverse founders that have been able to move mountains with limited resources. Here are a few that may have flown under your radar: ` Before Facebook’s recent identity crisis, RaxPlay was building the metaverse before the pandemic even started. It has built a virtual reality platform that enables music artists to perform live in the metaverse. Isaac Lymon is leading one of the best young developer teams in the industry, yet continues to be overlooked. ` LUCYPOP, led by Tonia Osby, is disrupting the beauty industry one clean manicure at a time with a new long-lasting, plant-based, nontoxic patented nail polish product that lasts 20 times longer than any average brand in the market. ` Another local startup looking to disrupt the nearly $480 billion-plus beauty industry is Lillian Augusta,
In
B Nana Britwum and Jannice Newson of Lillian Augusta. | LILLIAN AUGUSTA
revolutionizing Black hair care by offering hair care without harm. This team led by University of Michigan grad students develops synthetic hair made specifically for Black women that is plant-based and biodegradable. ` Darren Riley has had the unique experience of working on the VC side and recently transitioned back into startup life. He and his team at JustAir provide local air pollution monitoring solutions to cities to bring greater transparency into the disparities of air quality. Since its launch, it has secured a paid pilot, developed its initial product and established connections with other partners in the air quality space.
I’m grateful for all of our investors, including those from our recent $1 million seed round — Invest Detroit Ventures, StartUp Health, Detroit Demo Day, Google for Startups Black Founders Fund, Michigan Rise, Quantum Medical Concepts, Unseen Capital, and Jumpstart Health — for believing in me and our team, despite all of the aforementioned challenges that founders like myself have to overcome. To those investors who haven’t been able to find startups led by people that look like me, I could literally go on for days with the amount of sheer innovation and ingenuity that’s being created in our communities — but would you even listen?
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Innovative private sector led way integrating care – government should follow suit Most residents in Michigan receive their health care from their employer. The commercial market represents innovative partnerships between health plans, employers and providers that deliver healthcare to employees and their families. These valuable partnerships have brought about customized managed care plans that offer employee-driven health care benefits that help employers attract and retain their workforce. Dominick Pallone, Executive Director, Michigan Association of Health Plans
Even prior to the pandemic, more employees were seeking behavioral healthcare services and treatments than ever before. A recent National Health Interview Survey (NHIS) confirmed that the percentage of adults who received mental health services now exceed more than 20 percent of the population. With the demand for additional mental health services, it has become common for employers to now integrate mental and physical health care services under their employees’ health care coverage – this means you have one health plan that covers both physical and mental health care services and treatments. Employers have been at the forefront of customizing their insurance policies with the help of managed care plans to meet the health care needs and demands of their employees. Employers want to be one step ahead and employees want one-stop shopping for both their physical and mental wellness. Countless studies have recognized that employers
Clearly, government has taken a few pages from the innovative private sector playbook….except in Michigan, where its Medicaid program refuses to integrate care and provide customers with choices for mental health services.
integrating health care benefits for their employees leads to financial savings and creates stronger hiring and retention rates. These innovative approaches to health care from the private sector have forced government to rethink how it delivers healthcare. Learning from the private sector, governmentsponsored health care programs like Medicare and Medicaid are now finally offering customers managed care options that look a lot like commercial market plans. The days of government-run fee-for-service health care delivery models that lack integrated care, choice, value-based provider payment schedules and patient outcome metrics are now nearly antiquated. This was most evident in the last monumental healthcare reform under the Affordable Care Act where Congress structured its federal healthcare “exchange” to reflect the commercial market where managed care plans offer integrated health care coverage choices for customers. Customer can now shop freely and choose from a multitude of managed care plans covering both physical and mental health care services.
Unlike most of the private sector and 33 other states, innovative concepts like integration and customer choice for mental health services are pages from a playbook collecting dust in the basement of Michigan’s library. When any of the 2 million Michigan residents on Medicaid need treatment for severe mental health conditions, they’re forced to use a government-run system of state, county and private medical providers. These Medicaid customers must navigate two different systems for their health care: one for their physical care and the other for their mental health. This bifurcation in care has been in place for decades without reform. Lack of coverage, inability to cross county lines for services and lack of providers plague the Medicaid behavioral system today. It’s about time for Michigan to kick the dust off the playbook and respond to the demands and needs of Medicaid customers. By providing integrated care and offering choice of coverage plans, there is no doubt healthier patient outcomes and consumer satisfaction will result.
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ent reality than a famietween never-endly-owned dry-cleaning ing business pivots, company in Flint whose teacher and bus customer base now only driver shortages and conwears sweatpants, or a stantly calculating whethsuccessful toy company er activities are “safe,” life that teaches natural hair can feel a bit overwhelmcare in Detroit that just ing these days. started selling their prodAbout five years ago, I ucts at a large retail store. started EntryPoint, an Ann Emily Heintz is The success of all three Arbor-based research or- a data is a big win — placemakganization rooted in deep- storyteller, the ing, economic resilience, ly listening to founders founder of jobs, local culture, capital and business owners. EntryPoint in attraction, etc. After countless research Ann Arbor and Strategy around supreports, interviews, blog self-described posts and a global pan- entrepreneurship porting these businesses is incredibly nuanced, demic, I think founders fangirl. which is why listening to and business owners need founders and business to lead economic developowners and letting them lead is imment and business development portant. strategy for the startup and small State and local programs need to businesses community. be designed with a constant feedI’m more convinced than ever back loop from the people who are that people aren’t listening hard running their businesses every day enough to these voices. starting before the programs are Every business is different and even crafted. And measurement for business owners are leading the success needs to be specific — if I charge in navigating opportunities never hear “top 10 state” again, it’ll and challenges facing their sectors, be too soon. regions and stages. Founders and business owners An online addiction-treatment are doing the work and we need to company in Ann Arbor that’s exclear the obstacles and make it easy panding nationally is living a differ-
GETTY IMAGES
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COMMENTARY
to consistently give them what they need to be successful, not just show up with the camera equipment after they’ve made it. Listen, provide support and stay the course. Some of the most successful startup companies were born just after the 2008 recession and were part of Michigan’s recovery. Their success built some of the resilience we desperately needed during the last 18 months. The number of Michigan startups has more than doubled since 2008,
according to my research. An example of one of these startups is Duo Security, a cybersecurity company founded in 2009 by Dug Song, Jon Oberheide and an amazing team that grew the company until it was acquired by Cisco in 2018 for $2.35 billion. Founders like Dug and Jon need to be the leaders that we listen to and learn from. Not just the Dug and Jon of today but the Dug and Jon of 2009 as well. Last month, the Consumer Confi-
dence Index showed that nationally, consumers are having mixed feelings about the current and future state of the economy. When COVID vaccines were released, consumers were feeling great, but as we begin to understand the amount of mental, financial, business and relationship recovery that is needed, that confidence has dwindled. Recovery is going to be a heavy lift for everyone. It’s concerning that business owners' and founders' voices as we navigate through this are regularly stifled by the big opinions of economic developers, legislators and special interest groups that have economic interest in seeing the $2.1 billion in recovery funding allocated a certain way. If you’ve never started or run a business but find yourself leading economic recovery strategy for the startup and small business community, keep your opinions quieter and use your position to amplify the voices of people who have actually started and run businesses. As we look into 2022, the privileged voices of founders and business owners need to be front and center to lead the charge for our economy.
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Strengthening the community through quality services to children Orchard’s Children’s Services is one of the largest child welfare agencies in the State of Michigan. Founded in 1962 by the National Council of Jewish Women (NCJW) Greater Detroit Section. Orchards currently serves more than 8,000 children and families in 15 counties in the state of Michigan. 24901 Northwestern Hwy., Suite 500 Southfield, MI 48075 Phone: 248-258-0440 Fax: 248-258-0487
444 Church Street Flint, MI 48502 Phone: 810-239-3264 Fax: 810-239-3394
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1995 Highland Dr., Suite F Ann Arbor, MI 48108 Phone: 734-622-0217 Fax: 734-327-6425
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UNICORNS
From Page 16
Venture capital in general stands as the most common form of growth capital for early-stage companies and startup businesses that investors believe have long-term growth potential. While VC most often goes to businesses in the technology and health care sectors, it also flows to some consumer product-focused ventures. The increasingly popular route of financing is an alternative to traditional bank loans, personal loans and individual investments.
A new geography To be sure, StockX and OneStream are far from the only Michigan companies to be born as startups and soar to a far larger stage. Ann Arbor, for instance, has emerged as a hotbed for life sciences companies, many of which were spawned in the wake of pharma giant Pfizer shuttering its facility in the city. Software companies, also largely based and having grown up in Ann Arbor, such as Duo Security and Llamasoft, have found exits in recent years that reached into the low-single-digit billions of dollars. Ann Arbor-based Workit Health Inc., a mobile-focused addiction treatment company, last month closed on $118 million funding round, giving the company a valuation of $500 million. And within one week of each other in the spring of this year, StockX announced $255 million in new investment at a valuation of $3.8 billion, while OneStream Software announced a $200 million haul at a valuation of $6 billion. OneStream Software is majority-owned by KKR & Co. Inc., among the largest private equity firms with nearly $350 billion in assets under management. OneStream and StockX have shared investment from Tiger Global Management, a New York Citybased hedge fund and venture capital investment group, which recently closed on $8.8 billion toward a $10 billion fund, according to a Bloomberg report last month citing anonymous sources. Such funds have hardly been the norm in Michigan’s generally sleepier investment landscape, but their presence here shows that geography is becoming less important, according to executives. “For years, I think there was a belief that you had to be on one of the coasts to raise capital and to get to a multibillion dollar valuation, just to be successful,” said Greg Schwartz, the co-founder and COO of StockX. “I think one of the things that we’ve proven is that’s not the case. You don’t need a coastal ZIP code to grow a great tech company from a capital perspective.” StockX got its original boost from a hometown billionaire. The e-commerce company counts mortgage and real estate mogul Dan Gilbert as a founder. In recent years, StockX has attracted major VC investment from firms such as GGV Capital, Altimeter Capital, as well as Tiger. Tom Shea, CEO of OneStream Software, agrees with the sentiment noted by Schwartz that the playing field has in many ways been leveled for companies not based in one of the VC-heavy coastal hotbeds. “There is such a search right now by these firms to find good business-
OneStream President and CEO Tom Shea: “If you’re a good business, they will find you.”. | PHOTOS BY NIC ANTAYA/SPECIAL TO CRAIN’S
Company valuation StockX
$3.8 billion
OneStream
$6.0 billion
Additional investment this year StockX
$255 million
OneStream $200 million SOURCE: XXXX
StockX co-founder aGreg Schwartz: “For years, I think there was a belief that you had to be on one of the coasts to raise capital and to get a multibillion-dollar valuation.”
Chris Bielinski of Littleton, Colo., center, listens in during a product management meeting at OneStream Software LLC in Rochester.
es. If you’re a good business, they will find you,” Shea said. To that end, the software executive said the growth of OneStream in less than a decade happened mostly organically, and engaging with major league financiers was not exactly part of the plan. “We never wanted to raise funds,” Shea said. “I think that sounds crazy, but we felt like we had to do the hard work to prove that we had a business model. It’s sort of, if you build it they will come. My … rule is you never want to be in a room to raise money where you need the money. So that gave us the opportunity to think very strategically about the business, because
we were just trying to be disciplined.” The presence of investors like Tiger Global, KKR and others in Michigan companies speaks volumes not just about the businesses, but about the state’s ability to attract big amounts of institutional money, said Erik Gordon, a professor of finance at the University of Michigan’s Stephen M. Ross School of Business. Michigan startups have historically had to rely on a “pass-the-hat” method of cobbling together growth capital from a variety of sources, Gordon said. StockX and OneStream are showing another way, he said. “Once you get Tiger and KKR (investment), it’s a whole other ball game,” Gordon said. “You’re raising
rounds pretty quickly and pretty easily. It’s a whole other level, like going from the Big 10 to the NFL.”
Leading the way To that end, Michigan has been receiving considerable accolades in the overall venture capital space for some time. Between 2016 and 2020, Michigan by far led the nation as the fastest-growing state for VC investment, according to a report from industry publication Crunchbase. VC investment in Michigan grew by 885 percent over that time period, according to the report. North Carolina was next, growing by 409 percent. Venture capital investment as a whole is also hitting new heights, according to a recent quarterly report from CB Insights. Global venture capital funding hit $158.2 billion last quarter, a record high and 105 percent year-over-year increase, according to the report. Socalled “mega-rounds” of more than $100 million totaled 409 in just the last quarter.
‘Downstream impact’ The types of challenges and obstacles that executives like Shea and Schwartz are working to overcome in their companies are in many ways vastly different than those at newer startups. For example, Schwartz said his focus is on keeping StockX “fast and nimble” as it’s grown to a business with a global footprint and more than 1,000 employees. Staying attentive to the needs of employees as more processes get put
in place is paramount, he said. Multiple reports have said StockX and OneStream are likely to be public companies, perhaps by as soon as next year. OneStream executives have been upfront about such an exit being part of the plan, while StockX has largely declined to comment on such matters. Reuters reported in early November that OneStream Software had tapped Morgan Stanley as the investment bank “to lead preparations for a stock market launch that is expected to happen early next year,” according to the report, which cited anonymous sources. The company could be seeking an IPO that would value it at more than $10 billion, the Reuters story said. Emerging entrepreneurs tend to be more focused on granular details than IPOs and investment banks. Justin Turk, the CEO and co-founder of Detroit-based software company Livegistics LLC, said his company, like most, needs more software developers. But how America goes about training for such positions is in need of an overhaul, Turk said during a panel discussion during the annual Detroit Homecoming event in September. Many other countries treat software development as more of a skilled trade where workers learn on the job, said Turk, whose company received a $1 million grant this past summer as part of an initiative led by musician Pharrell Williams. “From a development standpoint, I don’t really care what college you went to, even though (a lot of our developers) were college educated to some degree,” Turk said. “I want to know are you a full-stack developer? Are you working in JavaScript? So I think changing that ideology will help us in the technology world.” For Chinedum Okwudire, the founder and CEO of Ann Arbor-based Ulendo, a 3D-printing software company created within the University of Michigan, a key goal has been growing the early-stage business while staying intentional about with which investors it opts to work. “I think it’s very important that we care about the type of funds that are put in because they begin to affect the direction of the company,” Okwudire told Crain’s in an interview. The company recently closed on an early-stage funding round of $150,000 that included investment from Invest Detroit Ventures and Accelerate Blue, a VC fund affiliated with UM. Such funds, Okwudire said, are in line with the company’s goal of economic development within the Southeast Michigan region. With venture capital increasingly available and startup business formations hitting a record high last year, according to U.S. Census Bureau data highlighted in a report from the Economic Innovation Group, sources agreed it’s largely a matter of if, as opposed to when, more billion-dollar companies emerge from Detroit and the region’s tech sector. Schwartz said he believes StockX and others growing in the area should only accelerate that. “I think all those things just are proof points to that next entrepreneur that is contemplating where they should build their business,” Schwartz said. “And so I think that’s really the key here is to show some examples to the next entrepreneur that starts that downstream impact.” Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes
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CARING FOR KIDS Advocating for the physical, mental and emotional health of the youth in Michigan
Advocating for the health & wellness of children and families
About this report: On this monthly radio program, The Children’s Foundation President and CEO Larry Burns talks to community, government and business leaders about issues related to children’s health and wellness. This hour-long show typically airs at 7 p.m. the fourth Tuesday of each month on WJR 760AM. Here’s a summary of the show that aired Nov. 23; listen to the entire episode, and archived episodes, at yourchildrensfoundation.org/caring-for-kids.
Host Larry Burns, President and CEO, The Children’s Foundation
Chris Perry, Executive Director, The Jamie Daniels Foundation
Tom Berman, President and CEO, Nano Magic
David Silver, Founder and Executive Director, Detroit Horse Power
Larry Burns: You are the first-ever executive director of The Jamie Daniels Foundation. How is that role going?
Larry Burns: Tell us about Nano Magic.
Larry Burns: Tell us about Detroit Horse Power.
Tom Berman: I am the CEO of Nano Magic, formerly known as Nanofilm. Nano Magic is a liquid nano coating company that has industrial applications and consumer packaged products. Basically, we clean and we protect. What we’re able to do at the molecular level is create a protective barrier to keep glass, porcelain and ceramic surfaces cleaner longer, easier to clean, and scratch and abrasion resistant. We are powered by science but it works like magic.
David Silver: When I was an elementary school teacher, I was influenced by the research on social-emotional learning. As I was having conversations with my students about confidence, empathy and perseverance, it prompted me to reflect on how I had the chance to develop those success skills with my early experiences with horses. But that’s not something that my students could directly relate to because young people growing up in Detroit rarely, if ever, have access to horses and certainly not at the depth of relationships you can form with a horse. That motivated me to step outside the classroom to make the positive skill development opportunities available to kids like my Detroit students.
Chris Perry: Substance abuse is what many refer to as the silent epidemic. Roughly 2.5 million people in the U.S. are addicted to opioids or heroin. Last year, over 96,000 Americans died of an overdose, and that’s a 25 percent increase over the previous year. The Jamie Daniels Foundation is so important because we focus on youth, teenagers and young adults. We know that 90 percent of those struggling with substance use disorder started engaging with alcohol or drugs prior to their 18th birthday. There’s such a stigma around it. That’s why I call it the silent epidemic — because it touches more people than you might think. Burns: Tell us about the recent roast of former Red Wing and hall-of-famer Brett Hull. Perry: Darren Pang served as the emcee, and there were quite a few laughs and jokes, mostly at Brett’s expense. Most importantly, we were able to create awareness around substance use disorder, the impact it’s having in the community and what we’re doing about it. Bally Sports Detroit is a great partner. They will air the roast throughout the year because they recognize the importance of it. It’s still early, but it looks like we raised over $350,000 from this program. Burns: Tell us about the collegiate recovery effort that The Jamie Daniels Foundation is funding at different universities. Perry: This started a couple of years ago at Michigan State University, which was Jamie’s alma mater. The Jamie Daniels Foundation, along with The Children’s Foundation, provide support for the recovery programming on that campus, including peer-to-peer counseling, housing and The Jamie Daniels scholarship. This year we’ve expanded to three more universities: Central Michigan, Ferris State, and Mid Michigan College. What’s great about our partnerships with these institutions is that we come in and identify what their needs are and then we support them. It’s not a cookie-cutter approach. We’re now talking to two more universities. We’re looking to add to our roster of universities as we go forward. This is a critical need on campus for young adults. Burns: What’s on the horizon for The Jamie Daniels Foundation? Perry: Substance use disorder was once considered a moral failure. Now the medical community has recognized that it’s a disease that we need to approach from a medical perspective and give people the support necessary. Ken often likes to talk about the fact that we’re willing to have conversations about ailments that impact us below the shoulders, but anything above the shoulders is taboo. Going forward, one of the things that we’ve been working on is recovery housing here in Oakland County. This would be a housing unit for people who are coming out of recovery and need a safe place to live. We’re still in the beginning stages of it, but we’re very excited about that. There would be counseling and staff on call 24/7. It’s something that’s desperately needed in our community.
Burns: Things are going well? Berman: Things are going really well. Despite a pandemic, we’ve been growing. We moved the operation from Cleveland, Ohio, to the Detroit Metro area a year ago and hired 40 people. We felt like there was a great opportunity to build a company here because of the talent pool and a lot of other resources, relationships and roots. We are in a brand new 30,000 square foot headquarters and manufacturing facility in Madison Heights. We’re creating jobs and making stuff right here in the Detroit Metro area. Burns: Tell us about your involvement in Crohn’s and Colitis Foundation and Leaders For Kids, our Children’s Foundation affiliate partner. Like The Children’s Foundation, Leaders For Kids has expanded their view of helping youngsters in social determinants of health. Berman: I was diagnosed with ulcerative colitis as a child and I probably spent more time in the hospital than I did outside of the hospital for a few years there. I got involved in the Crohn’s and Colitis Foundation — even serving as president for a term — to help make a positive impact and do things that I wish would have done when I was a kid. Leaders For Kids is an advisory board created to support the charitable work of Children’s Hospital of Michigan Foundation. This organization of emerging leaders from southeast Michigan is passionate about the health and wellness of children in the region. Our vision is to “improve children’s health and wellness so they have more days to play, nights to dream, and time to just be kids.” The Foundation’s mission is to raise funds for pediatric medical research and education, community benefit programs and sponsor community events on key issues that advance the health of children in Southeast Michigan. The pediatric research conducted at the hospital, Wayne State University and through independent research grant opportunities gives this initiative national and global reach. We host two events annually in an effort to raise funds for crucial programs needing assistance. The founders of the Leaders For Kids have done a fantastic job of putting together a great group, raising a lot of money and having fun while doing it. One of the things that we’re focused on is getting more young people involved. Because philanthropy is important to me, a portion of proceeds for every sale of Nano Magic products is going to charities that are aligned with our mission and other organizations that are meaningful to our team members, including Leaders For Kids.
Burns: How do you use horses to teach life skills? Silver: We focus on five core character traits that spell out the acronym PERCS: perseverance, empathy, responsible risk-taking, confidence and self-control. For example, self-control is about being in tune with our own emotional state — pausing, reflecting before acting. Horses are very in tune with what you’re feeling and will mirror back to you. Burns: To be a good rider, you have to be cool, calm and collected. Silver: Horses respond to that calm confidence that puts the surroundings at ease, that says, “There’s nothing to worry about here. I’m in control. I’m your partner. I believe in you. And I’m here to look out for the both of us.” Riding is always the highlight for our students, but we do a lot on the ground, working in partnership with the horse. Certainly grooming is an important time to understand the world from the horse’s perspective. Horses can’t meet all of their basic needs on their own — putting yourself in the horse’s hooves, so to speak, is a great way to learn about empathy and how to care for others around us. Burns: Let’s hear about your capital campaign to build a new center for your horses in Detroit. Silver: Our current programming is just scratching the surface of what’s possible when Detroit’s youth are able to have access to the benefits horses can provide. Currently we’ve been transporting kids outside the city to partner barns that let us use their space and their horses. Through a partnership with DPSCD, we’ve secured a large vacant land site to turn into an unmatched urban equine education center. It’s at Linwood and Fenkell. It used to be Paul Robeson School, but it burned down 10 years ago and the district didn’t have a plan for reactivating this space to serve students. It’s a unique partnership that we’ve formed. It’s an $8 million capital campaign that we’ve embarked on, and we are grateful for early support we’ve received along that journey. We are eager to connect with more outstanding stakeholders that believe horses have something powerful to offer kids and communities in Detroit’s future. Burns: How can people connect with you? Silver: Our website is detroithorsepower.org.
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NOVEMBER 29, 2021 | CRAIN’S DETROIT BUSINESS | 21
STROH
From Page 3
The just-sold East Atwater and Jos. Campau properties had been on the market since the summer 2020 but were not included in the sale announced in May. The purchase price was not disclosed at the time, although varying deeds for the properties swapping ownership between the Strohs and Gilbert indicate that no less than $28.5 million was paid, also based on real estate transfer taxes. That includes an estimated $16 million for the less-than-half-full Stroh River Place and $9 million for the parking spaces, land records show, plus $3.5 million for chunks of land. Anne Galbraith-Kohn, senior vice president within the Southfield office
of Los Angeles-based CBRE Inc.’s investment and institutional properties team, worked on both sales. She declined comment. The riverfront has long held an interest for Gilbert, who briefly considered putting what was then Quicken Loans Inc.’s Detroit headquarters next to the Renaissance Center before opting to lease space in what was then the Compuware Corp. headquarters, now called One Campus Martius. Gilbert, the billionaire founder of Rocket Companies Inc. (NYSE: RKT), also owns a 2.75-acre chunk of east riverfront land he bought three years ago from Detroit bankruptcy creditor Syncora Guarantee Inc. for $5 million, or $1.82 million per acre. In addition, he had negotiations with General Motors Co. on development of at least 10 acres of surface
parking east of the RenCen, although those discussions have produced nothing tangible. He and the automaker also discussed a purchase of the RenCen, which also did not materialize. In addition, Gilbert had been working on a deal for the 43-acre former Uniroyal Tire Co. factory site across from Belle Isle, but those negotiations fizzled at some point in the last couple years, Bridge Detroit reported in September 2020. His efforts at new development in recent years have faced challenges, including construction delays and design changes at the J.L. Hudson’s department store site and the Monroe Blocks project. Gilbert’s team has also been working on a new development on a site that used to house the half-built Wayne County Consolidated Jail; that
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The current sale comes several months after Gilbert’s Detroit-based Bedrock LLC real estate development, ownership, management and leasing company announced it had purchased the roughly 500,000-square-foot Stroh River Place office building. | COSTAR GROUP INC.
property had been slated to get a graduate school campus for the University of Michigan developed with fellow billionaire Stephen Ross. The two men have parted ways on that project, which has since been moved to west of the Fox Theater in the Ilitch family’s District Detroit area. The former Gratiot jail site is now being dubbed an “innovation district.” Some of Gilbert’s new development and redevelopment efforts — four projects, including the Hudson’s site and Monroe Blocks project — received $618.1 million in so-called “transformational brownfield” tax incentives in May 2018 from the state on $2.14 billion in new construction
that also includes an addition to the One Campus Martius building, where Rocket is headquartered, as well as the redevelopment of the Book Tower and Book Building on Washington Boulevard. In the last decade, Gilbert has amassed a Detroit real estate portfolio totaling over 100 properties — buildings, parking decks, vacant land and industrial properties — in and around the city’s central business district. The company says its portfolio includes more than 18 million square feet. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB
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MAY 24, 2021 | CRAIN’S DETROIT BUSINESS | 62
11/24/2021 1:19:00 PM
INSURANCE
From Page 3
Depending on how Hood and the Attorney Grievance Commission act, the magistrate judge’s 28-page order disqualifying McEttrick and her firm from representing Allstate could be a setback for insurers in the courts. “It is nice to see that this magistrate is trying to put an end to these games,” said Dewnya Bazzi, owner of AT Law Group in Dearborn and an attorney who defends medical providers in Allstate’s lawsuits. These federal lawsuits generally work like this: Allstate and other insurers use the power of the RICO law to allege medical providers are in collusion to use Michigan’s limitless medical benefits for injured drivers to run up the cost of treatment. Rather than spend the money on challenging such a lawsuit, the providers settle, often for a small fraction of what they billed. “If you want to defend yourself against Allstate Insurance Co., it’s a daunting task,” said Gary Blumberg, a Dearborn attorney who represents doctors in RICO lawsuits. “(Medical providers) are little pebbles in that world of rocks.” McEttrick, who did not return multiple messages seeking comment, has led Smith & Brink’s practice on behalf of Allstate in recent years, establishing an office in Livonia for the Braintree, Mass.-based law firm. In late October, Smith & Brink changed its name to King, Tilden, McEttrick & Brink P.C. But Stafford used the old name throughout her written opinion. Defense attorneys for medical providers who have been on the receiving end of Smith & Brink’s lawsuits say the firm, and McEttrick in particular, use the power of the RICO Act to push doctors to settle in order to avoid costly discovery proceedings. There’s no record of a RICO case brought by auto insurers in the Eastern District of Michigan going to trial in recent years — all of them end in settlements. “It’s a legal shakedown,” said Lawrence Falzon, a partner at Wigod & Falzon P.C. in Southfield. Falzon represented a Southfield physical medicine and rehabilitation doctor and a Florida-based urine testing laboratory that were roped into the RICO lawsuit that Stafford disqualified McEttrick and her firm from litigating. Blumberg represented a Southfield interventional pain doctor in the lawsuit. In 2019, Allstate sued Zawaideh’s ZMC Pharmacy using the RICO Act, alleging the pharmacy was running a racket to inflate the cost of prescription drugs. McEttrick and her law firm partner Nathan Tilden were Allstate’s principal attorneys on the lawsuit. The seemingly far-removed clients may been have roped into the same lawsuit from Allstate because they served the same injured driver, Falzon said. “The thread between them is extremely thin, but because of the way the law is written, (the out-of-state insurers) get to take advantage of that,” Falzon told Crain’s. “I suspect if you looked at (Smith & Brink’s) war room, they would have some kind of chart as to who’s got the biggest accounts receivable and then they try to draw the string between them.” Falzon and Blumberg’s clients settled over the summer, records show. But Zawaideh, the Royal Oak pharmacist, was the only defendant
A locally-based laywer representing Allstate Insurance Co. suggested Jalal Zawaideh, the owner of ZMC Pharmacy LLC in Royal Oak, could “stay off Allstate’s radar” if he billed the auto insurance company “less than competing providers,” according to the judge’s ruling. | BLOOMBERG
Jalal Zawaideh, the owner of ZMC Pharmacy LLC in Royal Oak, was the only defendant among a dozen medical providers who didn’t settle a lawsuit. | ZMC PHARMACY VIA FACEBOOK
among a dozen medical providers who didn’t settle and ended up in a deposition room in August that led to Smith & Brink getting booted from the lawsuit. Stafford ruled Nov. 12 that McEttrick engaged in improper “substantive discussions” with Zawaideh during a break at an Aug. 5 deposition without Zawaideh’s attorneys present — a violation of ethics rules for plaintiffs attorneys. McEttrick’s comments to Zawaideh included a suggestion that the pharmacist could “stay off Allstate’s radar” if he billed the auto insurance company “less than competing providers” using a Medicare fee schedule under Michigan’s new auto insurance reform law, according to the judge’s ruling. “Zawaideh testified that he challenged McEttrick’s advice that he simply bill Allstate according to the Medicare fee schedule to be assured payment,” the judge wrote. During the deposition break, Zawaideh testified that the Allstate attorney also brought up a $200,000 pharmacy bill for one injured driver and told him jurors would be shocked by that figure if the lawsuit went to trial because “they could purchase a house with that kind of money.” “McEttrick violated (Michigan Rules of Professional Conduct) by engaging in substantive discussions that went to the nub of the case — ZMC’s billing practices and Allstate’s
allegations of fraud,” Stafford wrote in her ruling. Zawaideh testified that McEttrick also talked to him about Allstate’s lineup of expert witnesses should the lawsuit go to trial and told the defendant he “would not be happy with the report, or with her, after he read it,” according to the judge’s ruling. When McEttrick suggested Zawaideh could avoid legal action from Allstate if he lowered his bills, the pharmacist testified that he replied, “the case could be dismissed.” “Zawaideh testified that McEttrick laughed and said that ‘this case is not getting dismissed,’” the judge wrote. Stafford said Zawaideh’s testimony was corroborated by a court reporter, Sharolyn Pavlovich, who reluctantly testified after initially trying to quash a subpoena from ZMC Pharmacy’s attorneys at the Bloomfield Hills law firm Fink Bressack. “Most egregiously, McEttrick lied in her affidavit and under oath during the evidentiary hearing,” Stafford wrote in her ruling. “Those lies may qualify as perjury ...” Stafford also disqualified Smith & Brink shareholder attorney Nathan Tilden because he was in the deposition room with McEttrick and the court reporter and “he did nothing to stop the discussion” McEttrick was having with Zawaideh, the judge said. Tilden did not return email messages seeking comment. McEttrick and Allstate Corp.
(NYSE: ALL), the Northbrook, Ill.based parent company of Allstate Insurance Co., did not return messages from Crain’s seeking comment about the judge’s ruling. Richard King Jr., president/managing director and shareholder of King, Tilden, McEttrick & Brink, P.C. did not return a message seeking comment. ZMC’s attorneys pursued a judicial review of the Allstate legal team’s conduct after Fink Bressack managing partner David Fink confronted McEttrick and Tilden about the matter on an Aug. 10 videoconference, court records show. “These conversations did not occur,” McEttrick told Fink, according to a transcript of the call in court records. In her affidavit, McEttrick told the judge she “had very little conversation with defendant Zawaideh on August 5, and never any conversations alone with him.” However, when under oath in an evidentiary hearing, McEttrick acknowledged making a comment about how a jury might view $200,000 in charges for prescription drugs for one patient. Zawaideh testified that McEttrick boasted “about the strength of Allstate’s case,” the judge wrote, “but he also said McEttrick asked him about his past and future billing practices, which invited him to disclose privileged information.” McEttrick later claimed that one of ZMC Pharmacy’s lawyers — Morgan Schut, an associate at Fink Bressack — tried to entrap her by leaving her alone in the deposition room with Zawaideh. “But they neither cite evidence to support this alleged plot nor explain how defense counsel successfully solicited Pavlovich to falsely corroborate Zawaideh’s allegations,” the judge wrote. The judge ruled that Zawaideh’s claim about McEttrick’s comments was supported by a text message Schut sent Zawaideh shortly after the deposition ended, outlining that McEttrick had advised the pharma-
cist to “just bill so you won’t be on our client’s radar.” Stafford also blasted Allstate’s legal team for lobbing “baseless accusations that Fink committed misconduct” in his interactions with the court reporter when Fink sought her testimony. Allstate’s lawyers at Smith & Brink also engaged in “deny-and-attack gamesmanship” and “scorchedearth tactics to discourage” Fink from informing the judge of McEttrick’s comments to the pharmacist, Stafford said. “Using another disreputable tactic, Smith & Brink painted Zawaideh as a criminal whose allegations were unworthy of consideration, even though he has been neither found liable in this lawsuit nor guilty of any crimes,” Stafford wrote. Fink declined to comment. The judge’s ruling came as a shock to defense attorneys in Southeast Michigan that have spent years defending medical providers in lawsuits against Allstate and other outof-state insurers. “It raises some serious questions in the matter in which they practice in this district,” Blumberg said. “I’ve never seen anything like the order that came down from that magistrate judge.” Falzon, the Southfield attorney who represented other medical providers in the lawsuit, said he hopes federal judges in Detroit will apply more scrutiny to RICO lawsuits that Allstate and other auto insurers such as State Farm Insurance and Liberty Mutual Group bring against medical providers. Falzon called Stafford’s disqualification of McEttrick and Allstate’s lead team at Smith & Brink “highly unusual.” “But I didn’t doubt a word of it,” Falzon said. “(McEttrick’s) running that whole RICO task force for Allstate. You get pretty cocky when you’re always winning.” Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood
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HOSPITALS
From Page 1
“There have been several waves of extinction for community hospitals and we’re facing another one,” said COO Jim Nemeth, who spent more than 20 years in nursing leadership at Beaumont Health before going to Memorial. “The island chains of community hospitals are trying to survive. We’re working our hardest to provide the same level of care, at least for the first hour of an ER visit, that the large systems do ... we’re drowning.” Memorial is an evolving hospital, one that’s invested millions in improved care. For example, its $45 million orthopedics, neurology and wellness center is under construction, casting a modern shadow against the aging hospital facade 400 yards to the east. It’s slated to open next fall. But Memorial and other independent hospitals like it are still a distant island in the archipelago of health care, Nemeth said, lacking the resources to “be all it can be.” It’s a system that’s racing the rising tides of regulation, increased costs during the pandemic and an inability to get larger reimbursements from insurers, all of which is sinking the rural hospital’s cash flow.
Flood of patients; drought of payments The emergency department at North Ottawa Community Health System is being crushed by patients as well. The independent hospital in Grand Haven is treating twice as many patients as normal, Jen VanSkiver, chief communications officer, told Crain’s. The small hospital on the Lake Michigan coast is capable of treating 30 patients, but staffing shortages have made that volume impossible to handle. Now, more than 18 patients pushes the system to its limit.
Memorial Healthcare President and CEO Brian Long is worried about further staffing shortages in the wake of a COVID-19 vaccine mandate for health care workers. “Thank God for exemptions and we’ll use them ... by the law,” he said. | NIC ANTAYA FOR CRAIN’S DETROIT BUSINESS
Of the eight inpatients on Nov. 17, half were COVID-19 patients, VanSkiver said. “Across the board, we’re seeing more and more patients,” she said. “At a time when we have less staff than we’ve had in decades. Now map on top of that growing financial pressures ...” North Ottawa has received roughly $2 million in state and federal COVID relief funds but its COVID-related expenses have surpassed $8 million. That’s about 10 percent of its annual revenue. The hospital recouped some of those costs from CMS and private insurers, but the gap is wide and getting wider, VanSkiver said. “We get reimbursed for care of patients, but none of that covers the back-office work required for COVID patients or the additional PPE or screeners at the door,” VanSkiver said. “Is it harder to operate as an independent hospital than ever before? That’s a resounding yes.”
Of North Ottawa’s four COVID patients, two were on ventilators. If vented patients don’t recover in a week or less, hospitals lose money, Memorial’s Nemeth said. Nemeth said insurers and federal programs only cover a patient on a ventilator for about a week, where the average COVID patient requiring ventilation remains on the machine for an average of 14.6 days, according to a study of COVID patients in Inova Fairfax Hospital in Virginia. “We start losing money on day seven,” Nemeth said. “If they stay on a ventilator for another day or another 23 days, we get nothing.”
Reimbursement woes Brian Long, Memorial’s president and CEO, said the hospital and others like it are taking a bath from private insurers because they simply do not have the negotiating power of larger systems like Ascension or
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Beaumont. Tsunami of frustration “We receive typically lower reimbursement than urban systems,” Long Complicating matters is the imsaid. “We’ve been going through ne- pending CMS rule requiring all gotiations with a number of payers health care workers receive the and we simply cannot get clear and COVID-19 vaccine by Jan. 4. unambiguous information from Nearly 450 of Memorial’s 1,500 them. We know our reimbursement is employees remain unvaccinated. being impacted every day. We’re see“Throughout this process, we’re ing unilateral changes from Blue trying to be apolitical and create an Cross every day it seems. The private environment where we can provide insurers used to be where we’d make the health care of our community,” 75 percent of our money, but we’re Long said. “We’re opposed to anystarting to lose now.” thing that hurts our ability to proBlue Cross Blue Shield of Michigan vide health care. Listen, I wouldn’t accounts for 25.4 percent of Memori- get on a motorcycle and drive al’s revenue and other insurers make around without a helmet, but it’s up 11.5 percent. perfectly legal. That’s the right of the BCBSM, however, said in a state- individual. In this case, with that 30 ment to Crain’s that the Detroit-based percent remaining unvaccinated, insurer supported health systems and we could see a significant impact. I physicians offices with $687 million in don’t know how many wouldn’t get advance payments through June 2020 vaccinated. But we’re at about 120 to ensure the organizations could percent of capacity, which is straincontinue operations and investments ing our current complement of emwith predictable revenue. ployees. If we lose even 7 percent of And the insurer denies it’s under- those people, we couldn’t continue paying Memorial. services. It would be painful.” “We are currently in good faith About 75 percent of North Ottanegotiations with Memorial Hospi- wa’s workforce is vaccinated, tal about reimbursement,” the state- VanSkiver said. ment said. “Blue Cross’s approach is “(The CMS rule) puts a lot of presnot to air differences in the news sure on hospitals at a time when we media, but rather address them with need every available pair of hands the local health system during our on deck,” she said. “We, of course, negotiations. Our objective, as al- want to do the right thing in our ways, is to arrive at fair and reason- community, but it’s also important able reimbursement that promotes for everyone to remember that inaffordable, quality care for our fection control was invented at hosmembers.” pitals. Our PPE guidelines are exOn the second-floor inpatient de- tremely high and robust. There are partment, Nemeth demonstrated face shields, N95 masks, gloves and how easily hospitals lose money from gowns. We know how to keep our lower insurer reimbursements by staff safe and care for patients that asking a registered nurse to describe are infectious.” the patient in bed 46: A patient with At metro Detroit’s large health severe cellulitis, a bacterial skin in- systems, which mandated the vacfection, from a cat bite. The patient cine themselves, roughly 1 percent required an inpatient stay for pre- to 1.5 percent of workers were either scription antibiotics to ensure the in- terminated or left the systems for fection subsided and the patient not complying with the mandates. didn’t lose an arm. For instance, Henry Ford Health For the cat bite patient, Memorial parted ways with 400 of its 33,000 would receive the “observation” rate, workers after its mandate went into which pays about half as much as the effect last month. traditional inpatient rate, Nemeth North Ottawa was able to hire said. some of those workers to relieve its “This patient met with an orthope- own workforce pressures. dic surgeon and is receiving two days If the trend follows, Memorial of antibiotics,” Nemeth said. “They are could expect to lose as little as 20 of receiving the same level of care as the its roughly 450 unvaccinated empatient in the next bed, but we get half ployees, which Long said would still the price.” impact care. The most recent changes to obserHowever, Memorial is allowed to vation versus inpatient reimburse- accept religious and medical exment came in August for BCBSM. emptions and Long intends to use The reason the margins from BCB- them. SM are so important is because gov“Thank God for exemptions and ernment programs that account for the majority of Memorial’s “ACROSS THE BOARD, WE’RE SEEING revenue — Medicare MORE AND MORE PATIENTS.” made up 45.7 percent — Jen VanSkiver, chief communications officer, of its $219.1 million in North Ottawa Community Health System revenue last year and Medicaid contributed 16 percent — are perennial money we’ll use them ... by the law,” he said. losers. While the religious and medical Of the $26.7 million Memorial net- exemption rules are narrowly deted from Medicare last year, it lost $8.3 fined, the approval of these exempmillion. Of the $28.3 million from tions is up to the employer and, acMedicaid, Memorial recorded a $9.9 cording to experts, is likely to leave a million loss. way around the federal rules for Brian Peters, CEO of Okemos-based some employers. Those employees Michigan Health and Hospital Associ- who are allowed exemptions, ation, said rural Michigan is aging and though, would still be subject to becoming poorer, putting more pres- weekly mandatory COVID testing sure on rural hospitals like Memorial. under the rules. “For Memorial, it’s very difficult if “The 450 weekly tests is not an innot impossible to generate a positive significant job, but we’re already domargin on Medicare,” Peters said. ing that,” Long said. “For the free“This wasn’t a problem 30 years ago dom and respect to our employees, when Medicare was a smaller popu- we have no problem continuing that lation of your patient volume, but practice.” Medicare funding hasn’t kept pace with the older and sicker rural com- Contact: dwalsh@crain.com; munities.” (313) 446-6042; @dustinpwalsh
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BAKERY
From Page 3
A similar deal is in place with Michigan State University, Kordas said. The company also has a deal with Bobby’s Burger Palace, owned by celebrity chef Bobby Flay. In 2020, Metropolitan Baking began delivering products to Comerica Park and Little Caesars Arena, though no contract has been signed with the Ilitch-managed entities, Kordas said. The company also services all Big Boy locations in Michigan, along with Lefty’s Cheesesteak, A&W Restaurants and Halo Burger. The company services a variety of large venues in addition to Comerica Park and LCA, including Yankee Stadium, Caesars Palace, Motor City Casino, The Detroit Zoo and Detroit Metropolitan Airport. One longtime client called Kordas’ baked goods the most consistent, freshest, best-quality products on the market. “We’ve been proud to use Metropolitan Baking Co. hot dog buns at National Coney Island for years,” National Coney Island Inc. President and CEO Tom Giftos said. “The bun is a key element in creating the perfect Coney Island hot dog — it has to be formulated just right and we wouldn’t trust a product other than (Metropolitan) to handle that task in our restaurants.” Several grocers have also bought into what Metropolitan Baking Co. is selling. On the retail side, Kordas’ baked goods can be found in Kroger, Sam’s
Hamtramck-based Metropolitan Baking Co. was founded in 1945 by George Kordas and is being run by the founder’s son and grandson. | JOHN SOBCZAK FOR CRAIN’S DETROIT BUSINESS
Club, 7-Eleven, Quality Dairy and Nino Salvaggio International Marketplace and about 400 independent grocers throughout Michigan. Metropolitan Baking Co. also copacks for national bakeries and grocery chains, Kordas said, but nondisclosure agreements prevent him from revealing those brands. Food service, restaurants, schools, institutional accounts, catering companies and sports stadiums account for 90 percent of the company’s business, Kordas said. Kordas is taking the reins from his 74-year-old father, James, who still serves as owner of the company. James Kordas grew up in the bakery started by his father, learning the ins and outs of the plant on his way to becoming president. He said he
trusts his son to lead the company going forward. “I trust him just as my father trusted me,” James Kordas said. “He’s been tasked with spearheading the dramatic growth of our company and has thrived in doing so. I’m incredibly proud of my son, our employees and our family’s success over three generations. I think Metropolitan Baking Co. is in great hands, with a very bright future.” George Kordas, named president of the company in 2018, said he has had designs on working with large food service companies. Metropolitan now delivers products to food service companies such as Sysco, Gordon Foods, Lipari and US Foods. Metropolitan Baking’s Hamtramck plant uses automated ma-
chines to wrap 140 packages of bread and buns per minute. “We’re doing it all fresh, and we realized we had the capacity to service some large, national restaurant chains,” Kordas said. “Once we got in the door with some food service companies and realized how to distribute nationally, a light bulb went off. A few more companies popped in because they heard about our products, and the name spoke for itself. We’ve been able to perform. We haven’t let anybody down.” That has pushed the baker to continue to update its processes. The Hamtramck facility, with close to 100 employees, is fully automated. The entire baking process has been mechanized from start to finish — similar to that of an auto manufacturing plant but with high-volume breads, buns and rolls produced in an efficient step-bystep process. New relationships and partnerships could lead to expansion, Kordas said. “Over the last 10-15 years we’ve knocked down some property on our land to create more green space,” Kordas said. “As we grow and add to our business, we never want to become a dinosaur. We’re looking to build on 25,000 to 30,000 square feet on the north end. We’re looking to break ground in the next 18 to 24 months. That should increase our capacity for production another 25 percent.” The Metropolitan Baking Co. staff, comprising factory employees, bakery staffers and machine operators, has grown by 15 since the start of the pandemic, according to Kordas.
Once the expansion is complete, the company will add at least 30 fulltime staffers, he said. The baker has been able to keep a full staff throughout the coronavirus pandemic as it saw a unique demand shift from 75 percent food service to 90 percent retail. Kordas said retail sales also offset any losses from pandemic-related restaurant closures. Employee safety has been prioritized. For a stretch of 2020, the production line was retrofitted and includes partitions to help enforce social distancing and safety. Kordas said the company has had just two known cases of COVID-19. “We were running six days a week, 18-19 hours a day. It was difficult at times, but we made it through,” he said. “I’m proud of our response. Our team really stepped up to the plate. We knew we had to keep employees safe, and we had to make sure grocery shelves and restaurants were full of bread.” Kordas hopes his family’s business continues to be the go-to for restaurants, grocery stores, food service and more. Succession planning is taking place, he said, although his father remains majority owner. “I’m slowly gaining shares,” Kordas said. “I have two daughters who could potentially take over one day. This is very much a family business. The growth has been nice and steady. We haven’t taken too many extreme risks. I’m hoping we’re around forever.” Contact: jason.davis@crain.com (313) 446-1612; @JayDavis_1981
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NOVEMBER 29, 2021 | CRAIN’S DETROIT BUSINESS | 25
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THE CONVERSATION
Bonnie Richter on why real estate agents need more training REAL ESTATE ONE ACADEMY: For more than 20 years, Bonnie Richter, the director of the Real Estate One Academy, has been teaching new real estate agents about the field. It’s changed over the years, as technology and the real estate market have evolved. But Richter said she thinks real estate education needs to change even more to keep up with the needs of consumers. Real Estate One is working with new agents to pair them with experienced Realtors to get on-the-ground training. Richter thinks that will help keep more people in the field. She’d also like to see an increased focus on education, in the hopes that more teaching will mean people who are more prepared to help consumers navigate the major financial choices that come with buying a home. | BY ARIELLE KASS `Is there more interest in real estate as a career now? There’s extraordinary interest in the career. Our classes are still very full, very high demand, but a lot of it has to do with it’s not that difficult to get your license. It’s 40 hours of classroom instruction and you have to pass an exam. You get a license. My personal opinion is that’s not enough. You can sell real estate, you can do almost anything after you take those courses. Once an individual gets their license and they find out how much more they need to do, it’s not an easy job. It certainly requires a lot more time, expertise, investment — investment of time and dollars — than many people are prepared for. So the demand is there, but the longevity is not what a lot of people expect. I don’t think they expect it to be as challenging and demanding as it is. `What would you like to see changed? This will not be popular for most people, but I believe the time has come that our license instruction to get your real estate license in Michigan should require more instruction. I would recommend 60 (hours) at the minimum in order for us to be able to add additional information that would be part of our real estate industry day. There’s just not enough time to get all of it in. I guess it’s similar to what you find in a regular educational environment in our schools, there’s just not enough time, so you gloss over things that would otherwise be very important. `Do you think 60 is enough? To me that’s the bare minimum. I also think the continuing education requirement should be more specific than what it is. … I tell our associates and brokers all the time, listen, you have a license, that’s the equivalent of doing brain surgery on someone’s financial life. It’s a significant decision for most
Bonnie Richter vice president of brokerage services Real Estate One family of companies and director Real Estate One Academy
consumers and you should take the position that you’re given serious enough to say, you know, ‘I will take accelerated and additional education,’ and it is available. `Do people get into it initially without understanding the amount of work that goes in? No question. No question. One of my comrades said to me once, ‘You know the trouble with real estate is, it’s the easiest yet hardest job to do.’ Because you are self-employed, because you are in business for yourself and most people really don’t understand what it takes to be self-employed and what it takes to build a business. Once they get their arms wrapped around what that means, then it flushes people ouT. ` Have you talked to them about what drove them to real estate? Of course we have people who are
looking to be investors and who are looking to change direction in that capacity, they’re going to buy real estate for a living. But we also have individuals, a lot of which are from the old service professions, who say, you know, ‘I’ve learned something about myself since COVID, I want to do something that is at a higher level and I’ve also learned that I’d like to have the flexibility that comes with being self-employed.’ ` Do you feel like most of them will have success? I can only say that the numbers are what they are. The largest number of people who start their career in real estate will not stay in real estate. … Twenty percent of Realtors have had their license for a year or less. `I’m curious if people find it’s not a good fit. The job market is so robust right now
that we have seen those that have returned to prior professions. We had some individuals that returned to the medical profession because nursing was in such high demand. … But on the other hand, we’ve also seen an increase of those that were in the educational profession, the teaching profession, who have now beefed up their real estate career engagement and are making that shift. … I just got some calls today from people who are working in the auto sales business inquiring about getting into real estate because they don’t have product to sell. `Can you tell me why training is important to you? Because it’s important that the consumer be protected. We have an obligation as a licensed profession to make sure the consumer has the expertise for one of the biggest decisions they’re ever going to make in their life. `What drew you? I was in the medical profession and at the time, the medical profession was designed in such a way that it was difficult for me to walk out of a pediatric ward of a hospital. … My heart broke more in the medical profession than I could take, so I got into another serving business. It’s less heartbreaking and more rewarding. ` What else do you do when you’re not doing this? I’m fortunate to have a family who expects that grandma will be there when needed. … My neighbor got me caught up in gardening because he said I couldn’t grow in clay and I’ve proven him wrong. I grew cauliflower, broccoli, beans, eggplant. Most of it is to show my granddaughter that you can grow things and what they look like when they grow.
READ ALL THE CONVERSATIONS AT CRAINSDETROIT.COM/THECONVERSATION
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Editor-in-Chief Keith E. Crain Publisher KC Crain Group Publisher Jim Kirk, (312) 397-5503 or jkirk@crain.com Associate Publisher Lisa Rudy, (313) 446-6032 or lrudy@crain.com Executive Editor Kelley Root, (313) 446-0319 or kelley.root@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Digital Editor for Audience Elizabeth Couch, (313) 446-0419 or elizabeth.couch@crain.com Digital Portfolio Manager Tim Simpson, (313) 446-6788 or tsimpson@crain.com Assistant Managing Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Assistant Managing Editor Lauren Abdel-Razzaq, (313) 446-5800 or lauren.razzaq@crain.com Senior Editor Chad Livengood, (313) 446-1654 or clivengood@crain.com Special Projects Editor Amy Elliott Bragg, (313) 446-1646 or abragg@crain.com Design and Copy Editor Beth Jachman, (313) 446-0356 or bjachman@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687 TIP LINE (313) 446-6766 REPORTERS
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RUMBLINGS
Signs of life near Packard Plant site, but it’s not Palazuelo ONE OF THE MOST ACTIVE industrial developers in Southeast Michigan has started assembling property near the Packard Plant in Detroit. An entity tied to NorthPoint Development LLC bought two properties at the Wayne County tax-foreclosure auction last month, according to land records. The purchases suggest that NorthPoint, which has no less than 3 million square feet of space in varying stages of the development process across the region, is not giving up on building around the sprawling and troubled plant, even though a reported deal between the Kansas City, Mo.-based developer and the plant’s owner collapsed. The properties, at 5708 Helen St. and 7043 E. Palmer St., are just a couple blocks from the footprint of
An affiliate of NorthPoint Development LLC has started assembling land in the shadow of the Packard Plant on Detroit’s east side, including property around Helen Street and East Palmer. | KIRK PINHO/CRAIN’S DETROIT BUSINESS
Fernando Palazuelo’s property, which Mayor Mike Duggan earlier this month vowed during his mayoral campaign victory speech to have the city demolish following years of unkept redevelopment promises. City land records say NorthPoint’s
new properties were owned by Central Quality Service Corp. It’s not known how much NorthPoint paid for them. An email was sent to a spokesperson for the Wayne County Treasurer’s office seeking additional details. A local representative for
NorthPoint declined comment. The last few years have been bumpy for Palazuelo’s vision for the Packard Plant, which he paid $405,000 for in 2013, also at a Wayne County tax-foreclosure auction. Most recently a Detroit City Council standing committee voted to put several Packard Plant properties on the path to demolition, citing dangerous conditions. Palazuelo disputed that and said he is working on a deal for a developer to buy the property, raze it and develop new buildings there. NorthPoint’s development efforts around the region include the former Cadillac Stamping Plant property near Coleman A. Young Municipal Airport and the Eastland Center shopping mall property, among others.
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Chairman Keith E. Crain Vice Chairman Mary Kay Crain CEO KC Crain Senior Executive Vice President Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly, except no issues on 1/4/21, 7/5/21 nor 12/27/21, combined issues on 5/24/21 and 5/31/21, 11/15/21 and 11/22/21, by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Contents copyright 2021 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is prohibited.
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