Crain's Detroit Business, Feb. 10, 2014 by Crain's Detroit Business

20140210-NEWS--0001-NAT-CCI-CD_--

2/7/2014

5:52 PM

Page 1

www.crainsdetroit.com Vol. 30, No. 6

FEBRUARY 10 – 16, 2014

$2 a copy; $59 a year

A Flagstar is reborn

BANNER YEAR ANTHONY BARCHOCK

Page 3

FOR EARNINGS Although revenue fell in 2013 compared with the previous year, Flagstar’s net income more than quadrupled.

Retrenched bank putting legacy issues behind

A new face in Detroit’s emerging watch scene

Net income Revenue Earnings per share

2013

87¢

$62.7M

$1,500M

$4.37

$983.0M

JOHN BROUWER

CRAIN’S MICHIGAN BUSINESS

$261.2M

Health data firm ArborMetrix gets injection of funding

2012

Source: Flagstar Bancorp Inc.

billion in 2007 — and now has 111 branches, compared with 179 in 2009. Since then, the bank (NYSE: FBC) has Troy-based Flagstar Bancorp Inc., after What Tom and Mark sold its 49 bank branches outside of Michifour years of downsizing and tumult, may Hammond are doing these days, Page 26 gan, sold off mortgage-servicing rights for finally have put its well-publicized trou$40.7 billion worth of home loans, and sold bles behind it. $1.3 billion in commercial loan commitIts stock hit a 12-month high of $21.63 on Jan. 23, up ments in New England. 76 percent from its 12-month low of $12.29, and earnFlagstar also agreed to pay nearly half a billion dolings per share for 2013 were five times the year before. lars to settle lawsuits over claims of shoddy homeAnalysts are expecting the trend to continue and rec- mortgaging rights and more recently has had two ommending the stock as a buy. large rounds of layoffs — 300 employees in July and 600 in January. There’s been a lot of movement to get to that place. The difficult moves are credited with the turnThe bank is about half the size of its peak in terms of assets — $9.1 billion today compare to a peak of $17 See Flagstar, Page 26

BY TOM HENDERSON

CRAIN’S DETROIT BUSINESS

FINDING FOUNDERS

GR makerspaces: Mother of contention? Page 17

GlobalHue widens its ad spectrum

Oh, no! Startup mistakes and how to avoid them, Page 11

ISTOCK PHOTO

Second Stage

Chrysler spot a step to general accounts BY BILL SHEA

IMMIGRANT DOERS, AMERICAN DREAMERS In many ways, metro Detroit was built by the hopes and dreams of people from other countries. And foreign-born entrepreneurs will be vital to the region’s future. Crain’s Detroit Business wants to tell their stories. We are seeking nominations for first-generation immigrants who have had business success for an American Dreamers feature to be published in the June 2 issue of Crain’s. Nominations — either for yourself or someone else — are due March 3. Visit crainsdetroit.com/nominate for details. For questions, contact Senior Reporter Sherri Welch at swelch@crain.com or (313) 446-1694. For technical questions about the form, contact Ashley Henderson at ahenderson@crain.com or (313) 446-1685.

CRAIN’S DETROIT BUSINESS

Atwater Brewing’s Mark Rieth: “We have eight new markets ready to go as soon as product is available.” LARRY PEPLIN

Barreling along Atwater brews out-of-state expansion plan; its craft stays home BY NATHAN SKID CRAIN’S DETROIT BUSINESS

By the time the truck carrying 2,100 cases of Atwater Brewing Co.’s Dirty Blonde Ale reaches the South by Southwest music and film festival in Austin, Texas, next month, the Detroit-based brewery will be in the final planning stages for construction of an 80,000-square-foot brewing facility there. Mark Rieth, president and CEO of Atwater Brewing, said the motto for the satellite facility will be: “Brewed in Austin. Born in Detroit.” Rieth said the brewery will cost up to $15 million

Advanced Manufacturing COMING

NEWSPAPER

to build and have the capacity to brew 100,000 barrels of beer. It will open during the first quarter of 2015, he said. A beer barrel is 31 gallons, or a little more than 14 cases. Atwater is planning a similar brewery in North Carolina to open in late 2015. The new facilities will alleviate some of the production pressure from the Detroit brewing operation, Rieth said. “We have eight new markets ready to go as soon as product is available, with another five planned for 2016 and beyond,” Rieth said. “The additional op-

APRIL 7

Two minutes of Bob Dylan narrating a soliloquy about America, Detroit and Chrysler during Super Bowl XLVIII wasn’t solely aimed at selling cars. The agency behind the television commercial, Southfieldbased GlobalHue, wants to leverage its high-profile work for the automaker to help win additional Dylan’s major national client Chrysler spot gives a boost work. That represents to GlobalHue’s something of a shift profile. in GlobalHue’s primary business strategy, which has been to produce full-service advertising aimed at specific diverse audiences. GlobalHue isn’t abandoning its successful formula, but instead it sees a way to boost its profile and revenue by winning general ac-

See Atwater, Page 29

ISSUE FOCUS: Companies leading the way in the use of new materials and manufacturing technology.

Ad Close: March 27 | Advertising Information: Marla Wise at mwise@crain.com or 313-446-6032.

See GlobalHue, Page 28

20140210-NEWS--0002-NAT-CCI-CD_--

2/7/2014

3:52 PM

Page 1

Page 2

February 10, 2014

CRAIN’S DETROIT BUSINESS

MICHIGAN BRIEFS A train in Traverse City? Nonprofit gets on board with the idea The Michigan Land Use Institute, which advocates for sustainable land use, plans to look at whether it makes sense to use a train to link Traverse City and some nearby communities. The nonprofit plans to conduct a preliminary feasibility study about using existing railroad track to transport people from downtown Traverse City to the area of Acme Township and Williamsburg, the Traverse City Record-Eagle reported. Train service would help support a growing population in the area, which includes attractions such as Grand Traverse Resort and the Turtle Creek Casino & Hotel. The idea comes as the Michigan Department of Transportation plans work on U.S. 31 in 2015.

With $2.3M state loan likely, Benton Harbor’s EM plans his exit Now that the state has agreed to lend the city of Benton Harbor $2.3 million, Emergency Manager Tony Saunders said he’s getting ready to leave, Michigan Radio reported. With the state loan, the city can pay off vendors, restructure debt and operate in the black. Saunders said he’ll hire a new city manager and issue executive orders to try to keep the City Com-

‘Duck Dynasty’ as spiritual tool? Well, it is a calling Grand Rapids-based Zondervan announced last week that it would publish a book and accompanying church curriculum titled Faith Commander: Living Five Values from the Parables of Jesus. No surprise there. Zondervan publishes religious books. The authors are Korie Robertson and her mother, Chrys Howard. Korie, the Grand Rapids Business Journal noted last week, is the wife of Willie Robertson, CEO of Louisiana-based Duck Commander. OK, if you’re still in “huh?” mode, think “Duck Dynasty,” the A&E reality series about a family and their du1ck-call company. (That’s the CliffsNotes descripmission from facing the same problems that got Benton Harbor into a mess in the first place. One example, Saunders said, would be to mandate regular contributions to the pension fund. During the past four years, the city has operated under three versions of Michigan’s emergency manager law.

MICH-CELLANEOUS 䡲

Results from an annual Grand Valley State University survey of CEOs and business leaders in a four-county region of West Michigan generated a confidence index of 70.42 percent toward the end of 2013, compared with 67.85 percent a year earlier, MiBiz reported. The results were the best showing since 2000.

tion. We don’t have space for the longer one.) “With the Faith Commander curriculum, we took some commonly found themes that the show ‘Duck Dynasty’ actually teaches,” Korie Robertson said in a news release. “We use these, not in a preaching sort of way, but really the kind of way that shows how we live our lives and the way our family works.” Said John Raymond, a vice president of Zondervan parent HarperCollins: “The book and program will help bring entertaining storytelling to church.” Hard to argue with that.

䡲 Gov. Rick Snyder last week appointed Jody Vanderwel of Holland and Terri Jo Umlor of Kingsley in the Upper Peninsula to the board of the Michigan Strategic Fund. Vanderwel is the president of Grand Angels LLC, a West Michigan investment group. Umlor is CFO and executive vice president of Springfield Inc. Appointments to the Strategic Fund board are subject to consent of the state Senate. 䡲 Holland-based Haworth Inc. plans to buy a majority stake in the Italian furniture company Poltrona Frau, the Grand Rapids Business Journal reported. 䡲 ArtPrize 2013 drew more than 389,400 visits and had a $22 million economic impact on Grand Rapids, said MLive.com, reporting on an economic impact study conducted by Anderson Economic Group and

commissioned by Experience Grand Rapids, the region’s visitors bureau. Attendance rose 20 percent over ArtPrize 2011. 䡲 Organizers of the Blue Water Film Festival in Port Huron said they don’t expect the event to take place this year, the Times Herald in Port Huron reported. 䡲 Grand Blanc-based Serra Automotive acquired Tennessee’s largest-volume General Motors dealership, Tom Bannen Chevrolet-BuickGMC. Terms were not released. The Madison, Tenn., dealership is

operating as Serra Chevrolet-BuickGMC. 䡲 Dearborn-based Carhartt Inc. plans to celebrate its 125th anniversary through a new beer to be brewed by Holland-based New Holland Brewing Co., the Grand Rapids Business Journal reported. The beer is to debut in the fall. 䡲 Ada-based direct seller Amway Corp. last week announced record annual sales of $11.8 billion for 2013, up from $11.3 billion in 2012. 䡲 Supporters of a proposed downtown Grand Rapids streetcar line plan to update their vision for the project and pursue funding by this summer, The Associated Press reported. The Rapid publictransit system wants to know what an electric streetcar line would cost and where the money could come from. In the early 1900s, Grand Rapids had as many as 70 miles of streetcar lines. Find business news from around the state at crainsdetroit .com/crainsmichiganbusiness. Sign up for Crain's Michigan Business e-newsletter at crains detroit.com/emailsignup.

CORRECTION 䡲 In Crain’s list of largest accounting firms, published Jan. 27, audit, accounting, tax planning and compliance, management consulting and employee benefit audits should have been included as service specialties of MPR Group Inc.

2 nna ght b. Pe Hei FeVillaling at ter S

What can you do today to stay ahead of the curve?

Macomb Automotive Suppliers Forum

Thursday, February 27, 5:30-8:00 PM Villa Penna, 43985 Hayes Rd., Sterling Heights

• Michigan’s New Strategic Road Map to Promote, Retain and Grow the Automotive Industry Keynote by Nigel Francis (MEDC)

Speakers/Panelists

• “Ahead of the Curve” Panel Discussion - Michigan- and Macomb-led initiatives for automotive parts suppliers - What you need to know about OEM expectations and contracting strategies - Maximizing your strategic business advantages

• Q&A and Networking with Macomb automotive supply executives and automotive-focused attorneys

Nigel Francis

Mark Hackel

Tom Manganello Glenn Stevens

Mike Beck

Sr. Automotive Adviser to the State of Michigan and Sr. VP, Automotive Industry Ofﬁce, MEDC

Macomb County Executive

Chair of the Vice President, Automotive Industry MICHauto Group, Warner Norcross & Judd LLP

Vice President of Global Operations, Fori Automation

Who Should Attend? Presidents, CEOs, CFOs, Purchasing Directors, Sales Directors and other senior executives. Automotive suppliers and other manufacturers welcome.

http://wnj.com/MacombAuto2014 dfthompson@wnj.com 248.784.5086

A BETTER PARTNERSHIP ® Macomb County Southﬁeld Midland Lansing Grand Rapids Holland Muskegon WNJ.com

20140210-NEWS--0003-NAT-CCI-CD_--

2/7/2014

5:34 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 10, 2014

Page 3

Health data analysis firm ArborMetrix gets funding lift

Inside

BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

dor Center, where Canvas Watch has been incubating. “He’s kind of serving as the connector between the consumer and the designer. So it’s much more horizontally integrated than Shinola. “People are just beginning to scratch the surface in terms of what it means to design and manufacture consumer products in Detroit. This is one of the few regions in the world where you can do all of that.” Design is where Reinhold is trying to set Canvas Watch apart from competitors. In particular, he’s focused on the design of the watch faces.

Which is better to use on patients getting hernia surgery: A synthetic mesh patch that costs $140 or a biologic mesh made from pigskin that costs $22,000? And which patch leads to higher infection and complication rates? Which gets patients out of the hospital sooner? The surprising answers: No one knows, according to Michael Rosen, M.D., chief of general and gastrointestinal surgery at the Clevelandbased University Hospitals Case Medical Center and co-director of the hospital’s Comprehensive Rosen Hernia Center. The answers could come soon from ArborMetrix Inc., an Ann Arbor-based software company that helps health care organizations lower costs and improve patient outcomes. ArborMetrix is expected to announce Monday that it has closed on a funding round of $8.3 million. Rosen said the American Hernia Society has been using ArborMetrix software to combine data from 40 surgeons and about 700 patients since August, and will meet in March to begin devising standards of care and decide which procedures and devices best

See Watch, Page 29

See ArborMetrix, Page 27

ANTHONY BARCHOCK

Shaun Reinhold (right) says his Canvas Watch Co. is focused on design aspects of watch production rather than assembly and manufacturing. The watchmaker has been incubating at the Detroit Creative Corridor Center and raising funds.

A new face BY AMY HAIMERL CRAIN’S DETROIT BUSINESS

There’s a new watchmaker in town. Shaun Reinhold is preparing to launch Canvas Watch Co. LLC with a Kickstarter campaign. He hopes to raise $40,000 to finish production on 500 watches — 250 each of his initial two designs. “This is geared toward a younger audience,” said Reinhold, 25. “It looks somewhat similar to a graphic design rather than just a traditional watch face.” But don’t call Canvas Watch Co. the anti-Shinola or the other Shinola. This is a company that has bootstrapped on $45,000 raised

Watchmaker plans to dial in sales with timely design, Kickstarter boost from friends, family and Reinhold’s savings and is primarily focused on the design aspects of watch production rather than the assembly and manufacturing. “Canvas Watch is much smaller than Shinola,” said Matt Clayson, director of the Detroit Creative Corri-

We got it wrong: Valassis founder alive, well, and investing Crain’s Detroit Business prides itself on getting the story right. But when we get it wrong, we sometimes do it in a big way. Such was the case in our Jan. 13 print edition when we reported on the pending sale of Livonia-based Valassis Communications Inc. to San Antoniobased Harland Valassis Clarke Holdings Corp. The story referred to the company founder as “the late George Valassis.” But founder George Valassis, nearing his 85th birthday, is very much alive, maintaining homes in Clarkston and Manalapan, Fla., and fending off condolence calls to his wife of 20 years, Sandra.

Crain’s corrected the error on Jan. 14 in the online version of the story and ran a print correction on Jan. 20. But in the age of the Internet, errors of fact can take on a life of their own. Valassis said the original Crain’s story had been picked up by several bloggers, who have kept the story of his demise alive, prompting additional condolence calls to his wife into February. Valassis says he keeps a low profile but, with his wife, is a major contributor to the University of Michigan, where they have endowed three professorships in the urology department of the medical school. “I have had nine cancer operations; I’m a survivor,” he told Crain’s. Valassis graduated from UM with a degree in business and engineering. Once dubbed the “king of

coupons,” he continues to invest in innovative products and ideas. One of the latest is Advanced Power Control Solutions LLC, with offices in Paradise Valley, Ariz., and Erie, Pa. The company (aps-global.com) has created a retrofit system to allow coal-fired power plants to burn a mixture of natural gas and coal, a solution to both reduce emissions and help plants meet stringent federal environmental standards. “Our first installation, by the end of this year, will be in Arizona, in a power plant owned by a major utility company,” said Valassis, a principal in the company. “It will save the generating plants hundreds of millions of dollars, while drastically reducing harmful emissions.” APCS won the grand prize in the 2013 Big Idea Business Plan contest and the 2013 Innovation award convened by the Ben Franklin Tech-

nology Partners, a state-sponsored initiative in Pennsylvania. APCS plans to create a presence in Michigan this year and start actively promoting the company technology to utilities, said Michael Boumansour, who lives in Clarkston and is the company’s executive vice president and COO. APCS’s advisory board includes three others with Michigan connections: George Sharp, executive director of investor relations, Ford Motor Co. Len Middleton, lecturer in strategy and entrepreneurship at the University of Michigan’s Ross School of Business. Norm Clarke, Clarke Advisors, Carefree, Ariz., and formerly of Windstone Capital Partners Inc., Scottsdale, Ariz., and a Michigan State University graduate with an MBA from Wayne State University.

COSTAR GROUP INC.

For sale: 415 Clifford

4 buildings on block: Indicator for downtown market, Page 4 Company index These companies have significant mention in this week’s Crain’s Detroit Business: Alidade Capital . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Amway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Arboretum Acquisitions . . . . . . . . . . . . . . . . . . . . . 27 ArborMetrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Atwater Brewing . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Automation Alley . . . . . . . . . . . . . . . . . . . . . . . . . 11 Baker Tilly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Bizdom Detroit . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Blackstone LaunchPad . . . . . . . . . . . . . . . . . . . . . 11 Blue Cross Blue Shield of Michigan . . . . . . . . . . . . 27 Canine to Five . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Canvas Watch . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Capuchin Soup Kitchen . . . . . . . . . . . . . . . . . . . . . 7 Chalkfly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Clark Hill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Comerica Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Community Foundation for Southeast Michigan . . . 25 Compuware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Con-way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Crypton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Detroit Creative Corridor Center . . . . . . . . . . . . 3, 11 Detroit Regional Chamber . . . . . . . . . . . . . . . . . . . 10 Detroit Vegan Soul . . . . . . . . . . . . . . . . . . . . . . . . 16 D:hive Detroit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Domino’s Pizza . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Dow Chemical . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Edington Associates . . . . . . . . . . . . . . . . . . . . . . . . 5 Eli Tea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Exclusive Realty . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Federal-Mogul . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Flagstar Bancorp . . . . . . . . . . . . . . . . . . . . . . . 1, 26 FoodLab Detroit . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Forgotten Harvest . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Fresh Corner Café . . . . . . . . . . . . . . . . . . . . . . . . 14 Friedman Integrated Real Estate Services . . . . . . . 27 Gleaners Community Food Bank . . . . . . . . . . . . . . . 7 GlobalHue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 GM Holden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Grand Valley State University . . . . . . . . . . . . . . . . 19 Griffin Claw Brewing . . . . . . . . . . . . . . . . . . . . . . . 29 Herman Miller . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Hope Center in Macomb . . . . . . . . . . . . . . . . . . . . . 7 John Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Jones Lang LaSalle . . . . . . . . . . . . . . . . . . . . . . . . . 4 Kelly Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Kenneth J. Dalto & Associates . . . . . . . . . . . . . . . 11 Kojaian Management . . . . . . . . . . . . . . . . . . . . . . 27 Lighthouse of Oakland County . . . . . . . . . . . . . . . . 7 Newmark Grubb Knight Frank . . . . . . . . . . . . . . . . . 4 Penske Automotive . . . . . . . . . . . . . . . . . . . . . . . . 21 Perrigo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Plante Moran . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Plastipak Packaging . . . . . . . . . . . . . . . . . . . . . . . 25 Presbyterian Villages of Michigan . . . . . . . . . . . . . 25 Renaissance Venture Capital Fund . . . . . . . . . . . . 27 Shinola . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Skidmore Studio . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Summit Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 TechTown Detroit . . . . . . . . . . . . . . . . . . . . . . . . . 11 United Methodist Retirement Communities . . . . . . 25 United Shore Financial Services . . . . . . . . . . . . . . 26 University of Michigan Health System . . . . . . . . . . 27 Valassis Communications . . . . . . . . . . . . . . . . . . . . 3 Ventech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Vernier Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Vistage Michigan . . . . . . . . . . . . . . . . . . . . . . . . . 11 Wayne State University . . . . . . . . . . . . . . . . . . . . . 29

Department index BANKRUPTCIES . . . . . . . . . . . . . . . . . . 7 BUSINESS DIARY . . . . . . . . . . . . . . . . 24 CALENDAR . . . . . . . . . . . . . . . . . . . . 23 CAPITOL BRIEFINGS. . . . . . . . . . . . . . . 9 CLASSIFIED ADS . . . . . . . . . . . . . . . . 25 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 8 MARY KRAMER . . . . . . . . . . . . . . . . . 17

THIS WEEK @ WWW.CRAINSDETROIT.COM

Friend of pho Reporter Nathan Skid hunts down the best Vietnamese noodle soup (pronounced “foe”) in metro Detroit. Watch him – perhaps not on an empty stomach – on “This Week in Crain’s” at crainsdetroit.com/video. DAVID HALL/CDB

OPINION . . . . . . . . . . . . . . . . . . . . . . . 8 PEOPLE . . . . . . . . . . . . . . . . . . . . . . 24 RUMBLINGS . . . . . . . . . . . . . . . . . . . 30 WEEK ON THE WEB . . . . . . . . . . . . . . 30

20140210-NEWS--0004-NAT-CCI-CD_--

2/7/2014

5:07 PM

Page 1

Page 4

February 10, 2014

CRAIN’S DETROIT BUSINESS

Four downtown office buildings for sale, but will the comps be strong? BY KIRK PINHO CRAIN’S DETROIT BUSINESS

Delivered. Michigan’s Premier Retained Executive Search Firm Over 100 years of combined experience. LLC

International Executive Search Tel: +1.248.645.1551 • www.huntergroup.com

sales@worldwise.net

Web Design • Web Marketing • Search Engine Optimization • Social Media

d or iff Cl

et re St

415 Clifford St. 1260 Library St. e. Av rd wa od Wo

Exceptional Leadership.

Not since Dan Gilbert swarmed into Detroit’s downtown real estate market in 2010 has such a flurry of central business district office buildings been poised for sales deals. Four midsize buildings totaling 295,000 square feet have been put up for sale and are actively being marketed to potential buyers. Real estate experts say how those buildings fare in purchase offers will be a marker of the how high the level of investment interest is in the 12 million-square-foot downtown office market. The buildings range from 15,000 square feet to 164,000 square feet. They are at 1260 Library St. (100 percent occupied); 511 Woodward Ave. (vacant); 243 W. Congress St. (53 percent occupied); and 415 Clifford St. (vacant). (See map.) Two of the buildings, the Woodward and Clifford sites, are being sold by Wayne County. The Library Street property is being sold by Vernier Holdings LLC with a registered agent of developer Michael Curis. The Congress building is being sold by Maria Gatzaros, widow of the late Greektown developer Ted Gatzaros. “You want to see how this real estate is absorbed and what comes of it and what the sales comps are,” said A.J. Weiner, executive vice president of brokerage in the Detroit office of Jones Lang LaSalle, which is marketing three of the four buildings for sale. “If the comps are strong, it bodes well for other sellers.” Charles Mady, CEO of Detroitbased Exclusive Realty — the company marketing one of the four buildings, the 164,000-square-foot Class B Marquette Building at West Congress and Washington Boulevard — said the CBD office market is still “sluggish.” However, if the downtown buildings sell for high enough prices, that will be a milestone for the market. “We would go up a full rung on the ladder,” he said. “We are now attracting professional buyers and developers. I get calls every day from L.A. and New York. The excitement is out there, so that would be a major boost.” In the fourth quarter of 2013, CBD office buildings sold for an average of $23.69 per square foot, according to data from the Southfield office of Newmark Grubb Knight Frank. What the four buildings are used for, whether office or a combination of uses, will become future indicators as well, brokers said. “Are they going to be tapping into the demand for residential? One would argue that would be an easy sell,” Weiner said. Some would likely remain office space, such as the 15,000-squarefoot Class B building just northwest of Gilbert’s Z Site on Library Street. Others, like the 35,000-square-foot Class B building on Woodward between Larned and Congress streets, could be transformed into mixed-

511 Woodward

s res ng Co

243 W. Congress

CDB MAP

use space for retail and office, Weiner and Mady said. The Clifford Street site, between Bagley Avenue and Times Square, includes 81,000 square feet of Class C office space. Jones Lang LaSalle is marketing the Clifford, Library and Woodward buildings. Brokers and attorneys say the next wave of real estate sales downtown is expected to attract a different crop of people seeking to invest in a market on the upswing.

Joe Kopietz, a partner in the real estate practice at Detroit-based Clark Hill PLC, said approval of a business improvement district downtown might be something that “some of our more passive property owners may not want to be around for.” That means more building sales could be on the horizon, he said. The Downtown Detroit Partnership is asking downtown property owners to form the district and tax themselves to fund an entity to pay for things like downtown cleanup, beautification and safety. The idea still needs city approval and then property owner approval. The district’s proposed boundaries would lie roughly between the freeways — I-75 to the north, I375 to the east and M-10 to the west — and the Detroit River, and impact the 253 commercial property owners in that expanse. How much a property owner would pay is based on floor space (60 percent) and assessed value of the property (40 percent). According to the DDP, the 30 largest downtown property owners would pay more than 75 percent of the expected annual budget of $4 million. More than one-third would pay less than $1,000 per year. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

the

leading Home Care choice of michigan *

physicians

*Based on claims data independently verified by a third party

866.902.4000

www.residentialhomehealth.com

20140210-NEWS--0005-NAT-CCI-CD_--

2/7/2014

3:52 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 10, 2014

Page 5

Screenings push prompts Summit Health to expand lab BY JAY GREENE CRAIN’S DETROIT BUSINESS

An increase in employer demand for employee health screenings is leading Summit Health to invest in a $2 million laboratory expansion project this year. The demand, CEO Richard Penington said, is because more employers are seeking to reduce health care costs by offering employees lower premiums for hitting health targets. And that requires testing. Under contracts with more Penington than 100 employers and insurance companies, Summit conducts health screenings in which it tests workers’ health for blood pressure, cholesterol, blood glucose levels, smoking and obesity (body mass index). “Insurers develop programs with self-funded employers to lower costs,” Penington said. “They offer lower premiums for healthy employees. Based on their scores, (employees’) premiums go up or down.” Last year, Summit completed 406,000 tests for 39,622 test kit samples. With its updated 4,000-squarefoot lab, the Novi-based company projects to double the number of tests it conducts over the next 18 months, Penington said. Summit, which has a portfolio of wellness services including screenings, immunizations, coaching and educational seminars, has grown from $50 million in revenue in 2012 to $80 million last year, Penington said. It projects another 25 percent growth to $100 million this year, he said.

Providence Health System also have wellness programs. “We do point-of-care (onsite) testing rather than sending samples to a lab,” said Scott Foster, Wellco’s CEO. Sandra Drake, Summit’s vice president of laboratory operations, said employers started out by providing premium discounts if employees participated in wellness programs that include health-risk assessments or by completing health coaching programs. But now more employers are charging employees higher premiums based on whether they smoke, are overweight and if their blood pressure and cholesterol are above predetermined levels, Penington said. “Until you motivate people by increasing premiums, you won’t see results,” said Drake. “We can track employers’ populations to see if they get healthy” over time.

Healthy goals Dee Edington, founder of Ann Arbor-based Edington Associates, a wellness consulting firm, said employers want to see a quicker return on investment for their wellness programs and are willing to invest more upfront to lower their health care costs. “Employers want to buy health by offering to pay (employees) so much money if they reduce their blood pressure or cholesterol,” Ed-

ington said. “That is OK, but it is a black hole because as soon as they stop paying for it, people will go right back to what they were doing.” Edington said Edington employers need to offer employees health improvement programs. “Employers have a social responsibility to help their employees, not just offer them financial rewards or penalties if they are healthy,” he said. Summit offers employers wellness consulting and health fairs in which employees can learn about healthy habits and preventive selfcare from health experts, Penington said. “We do the screening and some onsite lunch-and-learns. We feed the information to insurers, and they do the wellness education of employees,” he said. “They need to provide (employers) the tools to help (their employees) get better so you can get the return on investment.” A recent survey found that 83 percent of large and midsize employers offer employees incentives to participate in wellness programs, which include health-risk questionnaires and biometric screenings, according to Aon He-

witt, a Lincolnshire, Ill.-based human resource consulting firm. While the majority of companies still offer the incentives as cash payments, 5 percent offer incentives in the form of penalties and 16 percent offer a mix of penalties and rewards, said Aon Hewitt, noting that two-thirds of companies are considering imposing penalties for failing to score minimum health measurements.

Force of law Penington said the Affordable Care Act gives employers greater incentives to use wellness program penalties. For example, federal law now allows employers to raise the reward or penalty to 30 percent of the value of the health insurance premium. Annual discounts or penalties could average $4,500 for a family or $1,600 for an individual. Oakland County is an example of an employer that was facing double-digit health care costs and decided it needed to engage its 3,200 workers with wellness program incentives. In 2007, Oakland County began working with Summit Health to conduct health screenings and health-risk assessment surveys. Tests are conducted voluntarily on employees for blood pressure, glucose and body mass index. “A number of other nutrition, exercise and wellness-related pro-

grams have also been put into place for employees,” said Nancy Scarlet, Oakland County’s human resources director. But Scarlet said the entire program is voluntary. Employees are offered a $100 incentive to participate in the testing program. “We do not tie the incentive to health care outcomes or premiums,” Scarlet said. “Participation in 2013 was 60 percent, and closer to 75 percent when you include individuals that seek similar health screening information from the primary care physician on an annual basis.” Over the past seven years, Oakland County’s OakFit wellness program cut projected health care costs 74 percent from a projected $64.9 million in 2013 to the actual spending of $37.6 million. Health care costs had been rising at a 9 percent annual clip before 2007, she said. “We literally flattened the curve over the course of seven years,” she said. Oakland has spent $2.3 million on the program with Summit for an 11.7 percent return on investment, Scarlet said. “Those figures don’t include the true value of the program that we experience through employee testimonials asserting the program has improved their health, morale and quality of life,” she said. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

Growth mode Penington co-founded the company, then called Retail Health Network, in 2004 with COO Doug Finch, whom he had met in 1991 while attending Harvard Business School. The company was renamed in 2007. Growth and a need for lab space led the company last year to move out of its 15,000-square-foot building in Southfield into its new 50,000-square-foot headquarters in Novi at 27175 Haggerty Road, the former Tower Automotive headquarters, Penington said. The company has 175 full-time employees in the U.S., with 122 of those in Michigan. It also uses about 100-150 temporary workers, about 45 of which are in Michigan, during peak demand times. Penington said the company is on track to hire 252 workers by 2016, which would fulfill the requirements to receive $514,000 in state employment tax credits the company was awarded by the Michigan Economic Growth Authority in 2011. Summit competes with several other companies that also provide wellness consulting, screening and testing programs. In Michigan, the Bingham Farms-based Michigan Community VNA and Wellco of Royal Oak conduct wellness testing services. Health organizations that include Henry Ford Health System and St. John

Kyle Sasena, VP, International Banking Specialist Fred Fordon, SVP, Commercial Banking Manager

The Entrepreneurial Bank. Level One Bank makes international trade easy. Import and export, safe and eﬃcient. Level One, your international bank, right here at home. Call us. Contact Greg Wernette Entrepreneur and Chief Lending Oﬀicer, 248-737-0300

32991 Hamilton Court ∫ Farmington Hills, MI 48334 ∫ levelonebank.com Commercial Banking ∫ Retail Banking ∫ Mortgage Services

20140210-NEWS--0006-NAT-CCI-CD_--

2/7/2014

5:03 PM

Page 1

Page 6

February 10, 2014

CRAIN’S DETROIT BUSINESS

Crypton weaves plan for solid growth in textiles biz BY CHAD HALCOM CRAIN’S DETROIT BUSINESS

Bloomfield Hills-based Crypton Inc. looks for a solid year of textiles growth in 2014 by weaving new markets and a new acquisition into its long-established pattern of marketing and distributor companies to spur sales. The company has been expanding steadily into noncore markets like consumer products, fabric wall coverings for offices and hotels and, most recently, apparel and home furnishing items like shower liners and outdoor seating cushions sold through big-box retailers. China is also expected to become a new consumer fabrics market for Crypton, after the company closed Dec. 31 on the purchase of Oakland, Calif.-based Nano-Tex from private equity firm WL Ross & Co. LLC and co-owners Norwest Venture Partners, Masters Capital Nanotechnology Fund, Firelake Capital Management and Masters Capital Management. Nano-Tex employs about 30 people in Hong Kong, which Crypton expects to keep as it tries to build new sales within China, said cofounder and co-chairman Randy Rubin. The purchase marks Crypton’s first foray into the apparel market, which Rubin said customers have inquired about for years. “We actually had retailers coming to us and saying, could you help develop this kind of shirt, and that kind of (clothing) accessory, and

GLENN TRIEST

From what began as a basement business, Randy and Craig Rubin have sustained Crypton Inc. by adding new markets, such as consumer products.

Nano-Tex was a good fit to help us do that,” she said. “It’s not a chemistry that’s foreign to us, so we should be able to incorporate it easily.” The new subsidiary could also mean adding at least three new

Winners Always Cho se

jobs this year to its headquarters. “Right now, we’re primarily shipping all over the world from here. We have established business lines in 15 countries, and it all ships from manufacturing done within the U.S. But there is a grow-

ing need for China-to-China business sales, too, and this puts us into that market,” she said. In 2006, the company had 70 employees and projected sales of about $25 million. This year, Crypton employs more than 130 and expects revenue to come in around $50 million, including sales from Nano-Tex. The company did not provide any recent pre-acquisition sales figures. Founded as Hi-Tex Inc. in 1993 by Randy Rubin and husband Craig Rubin, the company traditionally has built sales of Crypton fabrics through a sizable distributor base to hotels, restaurants, senior living centers, banks and other commercial customers. The fabric is used by companies such as Hyatt Corp., McDonald’s Corp. and Wyndham Hotels & Resorts LLC. The Nano-Tex purchase diversifies the company in the apparel market and expands its offering of fabrics for home furnishings. Nano-Tex makes performance finishes that give fabrics stain and water resistance, moisture wicking, odor control and other properties for products sold at Target Corp., Nordstrom Inc., Lands’ End, Bass Pro Shops and other retailers. “We loved the concept, but in some ways it was also a company being run by investment bankers. In order to build Crypton, over the years we spent much more than average amount of money on marketing, and that’s something we now

A Thoroug hbred

Whether you’re jockeying for position in the marketplace, working to rein in costs or racing to the finish line, you know business success involves a unique, trusted relationship between you and a strong, agile financial partner. As the only Michigan firm to ever be named a “Best of the Best” firm by INSIDE Public Accounting ... not only once ... but 18 times, Doeren Mayhew’s CPAs and business advisors understand what it takes to manage a high-performing business.

Insight. Oversight. Foresight.® 248.244.3000 doeren.com/MichiganBestCPAs

When you’re ready to take your place in the winner’s circle call on us to provide insight into your business, oversight to ensure best practices and foresight for what’s ahead.

plan to do long term with Nano-Tex. That’s why it fits for us,” Randy Rubin said. “When we look at the business, we think that’s one strong potential area of growth. We are getting into (tapping) the potential for social media, and we’re already looking at how to structure it a different way.” Craig Rubin invented the fabric that led to the launch of Hi-Tex in the couple’s basement after working in the textile industry for 25 years, selling fabric to hotels and health care providers. The company has found new markets in recent years selling fabric in other markets — Randy Rubin estimates consumer products makers account for 35 percent of business volume today — and new product lines. About two years ago, the company launched its Crypton Home brand covering consumer products, although Rubin said it was already supplying patterned materials to Jo-Ann Stores LLC since 2009 and pet bed materials for nearly 10 years. Crypton also started making fabric for wall coverings about two years ago in office buildings and hotels, as an alternative to wallpapers and paints, now that new technology makes the material easier to clean. Rubin said wall coverings are probably the fastestgrowing segment for Crypton. Company acquisitions like NanoTex also add new markets like apparel. The company may look at others that fit with its mix of products but isn’t likely to complete another until late in the year at the soonest. New overseas markets and new manufacturer demand that occurs when competitors go out of business could offer growth potential for many textile companies, said Richard Dancy, president of Detroit-based The John Johnson Co., which makes fabrics for a mix of military, automotive and industrial customers. Local companies might choose to compete more for new lines of business, amid market pressures on some of their traditional customers to offshore larger product orders, but Dancy said going overseas is a judgment call for each company. “We would be open to that kind of market, but it would depend on what our skill set is and our machine capability,” he said. “Some of our general competitors have gone under in the last few years, either because of the market or they scaled up for something they couldn’t sustain. So you have to be ready for it.” John Johnson recently purchased new equipment to expand its line of products and expects to add customers as some competitors go out of business. “We will pick up a little business, overall. But a lot of our market is shrinking, outside of small product orders,” Dancy said. Military fabric and other component orders have been slow as the federal government scales down procurement spending, Dancy said, but fabric and other materials that tier-one and tier-two auto suppliers use to move parts between plants are in solid demand. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom

20140210-NEWS--0007-NAT-CCI-CD_--

2/7/2014

3:53 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 10, 2014

Page 7

Charity food providers adapt, overlap to meet local demand BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

A decade ago, there was a stark difference between the canned goods and boxed mixes that Gleaners Community Food Bank of Southeastern Michigan distributed and the milk, meats and other highly perishable foods that Forgotten Harvest rescued and turned over to help feed the hungry. Today, there’s increasing overlap in the types of food the two are distributing in their attempts to meet local demand. The service models continue to differ, though. While Detroit-based Gleaners warehouses food and fills orders from food providers at a slight cost, Oak Park-based Forgotten Harvest transports rescued food as quickly as possible to providers via its trucks, at no cost to them. Each approach offers advantages for the operations of local pantries and soup kitchens. The advantage of working with Forgotten Harvest is that it charges nothing for the food it delivers, said Chet Decker, executive director of Hope Center in Macomb, a client choice pantry in Fraser that serves 1,600-1,800 struggling families monthly. “But from a business standpoint, you never know what you’re getting from Forgotten Harvest,” he said. By ordering food through Gleaners, the pantry can keep a regular stock on its shelves, he said. But some of the food comes at a cost — an important consideration given that the pantry, launched in 2010, has an annual food purchase budget of just $225,000, he said, or just under a third of its $780,000 in revenue last year. “It’s a benefit to receive free food from either (one), but there’s a benefit to have that regular food on our shelves,” Decker said.

Stores pitch in Continued high demand for food assistance in metro Detroit and cuts in federal food allocations to emergency food distributors are spurring organizations like Gleaners and Forgotten Harvest to accept any food donations that come their way. In November, Gleaners entered an agreement with Grand Rapidsbased Meijer Inc. to collect perishable food from three of its stores in Livingston and Monroe counties that are outside of its shared service area with Forgotten Harvest in Wayne, Oakland and Macomb counties. The stores have contributed about 40,000 pounds of food, which could mean 160,000 additional pounds of food or more for the year, said Gleaners President Ger-

BANKRUPTCIES The following business filed for protection in U.S. Bankruptcy Court in Detroit Jan. 31-Feb. 7. Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation. Building Service Specialists Inc., 2900 Hilton Road, Ferndale, voluntary Chapter 7. Assets: $0; liabilities: $24,720.18. — Bridget Vis

ry Brisson The deal builds on rescue the food bank has been doing for years in those areas, and Forgotten Harvest’s rescue of food from Meijer locations in the tri-county area, he said. In addition to the products it receives through local food drives, Gleaners buys other types of food, including produce with a longer shelf life like apples, cabbage, potatoes and onions from area farms. It charges nothing for 50 percent to 60 percent of the food it distributes, since it comes to the food bank at no cost. But it charges providers a fee of 18 cents per pound for frozen foods it has to refrigerate or produce it has to pick up or pay shipping on. And it charges whatever it has to pay for other types of food that it buys from wholesalers, such as ground beef, Brisson said. Gleaners is now taking in highly perishable foods as well, even outside Monroe and Livingston counties. Perishable foods are often dropped off, Brisson said. And local grocery chains are not only providing perishables but also shelf-stable items such as canned goods that are dented or have crushed boxes. They also donate food when manufacturers change the weight of products on the shelf or pull food for other reasons. For example, manufacturers and stores pulled boxes of cereal with former Olympian Michael Phelps’ picture on them after he was caught smoking a bong, Brisson said.

Brisson

Goodell

When Gleaners can’t get the perishables distributed quickly enough to the food providers it serves, it will call Forgotten Harvest to help deliver them, he said. Gleaners distributed 41 million pounds of food in fiscal 2013 ended Sept. 30. That was down from 46 million the year before, largely because of cuts in government food programs, Brisson said. Its cash budget for fiscal 2014 is about $22 million, on par with 2013. “As all food banks and rescues are soliciting everyone we can to get as much food as we can, our product mix becomes more similar,” he said. “But our business methods haven’t changed ... the advantage to doing it the inventory way is by giving people choice they can plan better because they know exactly what’s coming on the truck.” Forgotten Harvest, which began by picking up food from caterers, local restaurants, grocery stores and farms, is seeing more shelf-stable items in the mix of food it takes in, said Executive Director Susan Goodell. They have been coming

from grocery store rescues, national food manufacturers and, at least occasionally, area food drives. If an item is something Gleaners already has or can’t take for whatever reason, Forgotten Harvest will offer it to the food providers it serves, Goodell said. “By working together, you’re able to extend our reach into the community and get more food to people,” she said. In 2013, the Oak Park food rescue also launched a farm operation of its own that brought in just under 1 million pounds of food, Goodell said. Forgotten Harvest distributed 45.5 million pounds of food in fiscal 2013 ended June 30, up from 43.9 million pounds in 2012 and 23.2 million pounds in 2011, operating on a cash budget of $11.2 million, said Director of Communications John Owens. Gleaners’ inventory management systems and Forgotten Harvest’s just-in-time approach compliment each other, Goodell said. “Because of the magnitude of the (hunger) problem, both systems are very much needed,” she said.

‘Not one single solution’ “There is not one single solution to the problem of hunger in metro Detroit,” said John Ziraldo, CEO of Pontiac-based Lighthouse of Oakland County, which operates pantries in Pontiac and Clarkston.

“It requires us to be flexible and responsive in the way that Forgotten Harvest can be, and it requires us to do long-term planning with the foods that Gleaners provides (in order) to make sure that there’s a predictable supply of food.” Items such as baked goods and prepared foods could only come to Lighthouse through a program like Forgotten Harvest, Ziraldo said. The rescue also brings fresh meats that are an important source of protein for the families Lighthouse services. “On the other hand, when we want turkeys for our Thanksgiving program, we’re able to plan with Gleaners. We could not have served nearly 2,000 families with a Thanksgiving meal without that,” he said. While Forgotten Harvest and Gleaners both help, many food providers say they still need to turn to other sources of food to feed the hungry. Lighthouse gets a significant amount from community food drives, Ziraldo said. Capuchin Soup Kitchen in Detroit goes through Gordon Food Service to buy food it needs that’s not always available through Gleaners, such as large cans of tomato sauce or garbanzo beans, said Brother Jerry Smith, who is executive director. It also buys food from other specialty food suppliers of dairy, meat and other items, spending about half of its food budget on items from Gleaners and half from the retailers, Smith said.

20140210-NEWS--0008-NAT-CCI-CD_--

2/7/2014

5:02 PM

Page 1

Page 8

February 10, 2014

CRAIN’S DETROIT BUSINESS

OPINION

Just how long can Crittenton go solo? an independent hospitals afford to go it alone? That’s a question reporter Jay Greene considered in his Jan. 27 report, “Local hospital merger talks are in the air.” Garden City Hospital, included in that roundup, announced last week it would be acquired by a for-profit, physician-led hospital company based in California. Hospitals generally seek mergers to save money, increase efficiency or gain access to capital for improvements. As payments from federal programs (Medicare and Medicaid) drop and new formulas pay for outcomes versus each individual service, hospitals are forced to look for ways to operate more efficiently. Bigger can be better. That’s why Crittenton Hospital’s go-it-alone strategy in Rochester Hills will be interesting to watch. With a new CEO hired last July, that hospital’s leadership wants to remain independent. Yet it’s tempting to consider another scenario. McLaren Health Care Corp. has been fighting regulators to build a new 200-bed hospital in Clarkston. Critics say more hospital beds will add cost to the region. But what if Crittenton and McLaren merged? Both hospitals would come out ahead — and so might Oakland County.

TALK ON THE WEB

Jackson leaves solid legacy The rumor mill has been spinning since George Jackson announced he would step down as CEO of the Detroit Economic Growth Corp. on March 31. Was Jackson pushed out by the new Duggan administration that had installed F. Thomas Lewand as economic development chief? Or did he leave to create a consulting firm voluntarily? Jackson says it was just time, and he will continue to serve on the board now chaired by retired General Motors Corp. executive Rod Gillum, who also will chair the search for Jackson’s successor. As a quasi-city agency, the DEGC has a tool kit of economic incentives and programs not always available to the city itself. As Gillum notes: “We have the flexibility to operate as a private entity, but with a public objective.” Jackson and his team succeeded on many projects, from knocking down cement silos on Detroit’s riverfront to redeveloping the Westin Book Cadillac Detroit Hotel to smaller projects like the Garden Theater block in Midtown. Also important was using the agency’s independence as a buffer from politics; some developers credit Jackson with protecting them from shakedowns during the Kilpatrick pay-to-play era. The search committee will include DEGC vice chairs, board members and Lewand. A successor may be named before Jackson leaves. Whoever he or she is, Jackson has left a strong foundation on which to build.

From www.crainsdetroit.com Re: Snyder proposes $52B budget; boosts for education, jobs, tax relief I would like Gov. Snyder to propose that the increased funding to higher education take place in the areas where it can most directly benefit the state economy and build the labor force — scholarships to Michigan residents for in-demand fields like engineering and for community college technical programs. Our state also needs to (help) adults who want to finish their high school education. This would simultaneously address income inequality and the economic competitiveness of our state and metro region. Dennis Nordmoe Snyder accumulated a $1.4 billion surplus on the backs of retirees on fixed incomes. It’s easy to balance the budget by raising the taxes on the people who need it most. A more reasonable approach would

Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity. have to at least exempt the first $40,000 of retirement income for everyone. You’re not a Rockefeller living on $40,000. Sam Solomon

Re: Mary Kramer: Adults need to put kids first in education Try things that improve, sure. Continue to support failed experiments like the EAA, no. Unionization has nothing to do with it. Student neglect, class size, failure of a plan, lack of accountability or public access to what happens with public funding are real problems, all of which exist with the EAA. The EAA is a terrible idea in concept and implementation. Should we not learn from the failure and move on to something that will

serve our kids better? How about properly funding public schools (and I’m not talking about pension funds)? David Roof It is obvious Ms. Kramer has not made even the slightest effort to actually find out what the EAA controversy is about. 264186

Re: Detroit City Council approves new hockey arena Holy cow! Another tax giveaway from our infamous city! As a property tax payer in the city (one of the 60 percent) and a contractor ... I cannot endorse any tax support of an activity that could easily support itself if allowed to. Just when I thought there might be some sanity coming from our city in their financial management — now this. Androcles II

KEITH CRAIN: Which came first, the chicken or the egg? Detroit has always been blessed with some patriarchs who have been able to lead the way over the decades. People like Henry Ford II and Max Fisher and Peter Karmanos are just some of the individuals who were committed to the city. No one can deny that there is a strong resurgence in downtown real estate. We can certainly thank Dan Gilbert and his investments for creating an economic environment for downtown development. Whether he led the resurgence or caused it is really unimportant. He was the catalyst for that, and we should all be thankful.

Others, like the Cotton family of Meridian Health Plan, seem to be following his lead and are investing and developing as well. I happen to think the next real estate resurgence will be in the neighborhoods of Detroit. We’ve already seen what’s happening with residential real estate downtown, and I have a sneaking suspicion that we will see the same thing in the neighborhoods as it spreads from the core.

With the aggressive attack on blight as well as Mayor Mike Duggan’s recent announcement on real estate tax reductions, all the ingredients seem to be poised for a housing resurgence in our neighborhoods. It has happened in other cities, and although it won’t happen overnight, I have a suspicion that it will happen soon. Often, all it takes to create the demand is for a few to create a trend. Today young people are looking for

housing downtown and in the neighborhoods. Today it’s not available, so we’re going to see both new housing as well as rehabilitation projects in the neighborhoods. Initially that will probably all be supported by young empty-nesters who probably don’t have any demand for many city services like education and health care. The downtown core seems to be rapidly running out of real estate for commercial development, which means that before too long we’ll see more new construction downtown. With the construction of our new surface rail system, that will

undoubtedly open up more opportunities for commercial and residential real estate development. There are lots of opportunities, and I can’t think of anything more exciting. We’re going to see another renaissance for the city of Detroit. Certainly all this activity is going to create lots of contracting jobs in both new and rehab projects in the city. And along with all the real estate, we will continue to see small businesses sprouting up throughout the city. If we all can survive the winter cold, we’re going to see a lot of excitement when spring arrives.

20140210-NEWS--0009-NAT-CCI-CD_--

2/6/2014

4:00 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 10, 2014

Page 9

Snyder’s budget reflects his push to create jobs er cases, there might be improvements. The goal? Increase Inside the $52.1 billion While plenty of increases can be only one company that the number of Michigan-educated found throughout Snyder’s state budget Gov. Rick Snyder can do the type of work engineers. presented to the Legislabudget proposal, including for that needs funding. An additional $50 million in jobs, there were some cuts as well, ture last week, 10 percent bonding would be available for including the film incentive prois allocated to help crecommunity colleges. They could gram. ate, as Snyder calls it, Another new recom- compete for funds to retool equip“more and better jobs.” mendation from Snyder ment that educates students in To create those jobs, the Snyder again called for cutting in the budget aims to high-skilled and high-demand ocstate’s economic developthe state’s financial commitment in help community colleges cupations. ment strategy — and and universities pump Finney said he was excited half, to $25 million. He recommendspending — need to be out more highly skilled about the potential from the new ed doing the same last year, but aligned in the right ways. lawmakers kept it at $50 million. students into the work- bonding programs. Snyder’s answer inChris Gautz The incentives are used to lure force. “That’s a direct result of all the cludes a budget with a Snyder recommends $100 mil- feedback we’ve been getting from film production to the state. Com$15 million increase for community revitalization and business at- lion in bond funds for universities businesses around the state that panies receive tax dollars to reimtraction, something Michigan Eco- that have accredited engineering there is a talent shortage out burse a portion of their expenses, based in part on the amount of nomic Development Corp. President programs to compete for capital there,” he said. and CEO Michael Finney says is sorely needed. “It just takes a lot of resources to get these projects done,” Finney said. “There’s still a lot of need for public sector support.” In the current fiscal year budget, $120 million is allocated for revitalization and attraction. This increase would bring that to $135 million in the coming fiscal year, which begins Oct. 1. Community revitalization refers to funding economic development in established areas. Finney said that money is used to support projects such as the ongoUsed to be, the idea of having money was to alleviate financial worry. Yet there’s no shortage ing renovation of the David Whitney Building in downtown Detroit. of successful people who worry their investments are returning too little on the The David Whitney project, a $82 million mixed-used developone hand or risking too much on the other. More than likely, they have the ment, is expected to open this sumwrong investments not to mention the wrong advisor. It’s different for mer. The project contains groundfloor retail as well as a 135-room clients of Greenleaf Trust. When asked if they were comfortable Aloft hotel and 108 apartments. As part of the deal, the state referring us to others, the answer overwhelmingly was yes.* chipped in a $1 million performance-based grant from the MichiMaybe it’s because of our goals-based approach to wealth gan Community Revitalization Program and a $7.5 million performanagement, with specialized disciplines in asset mance-based loan. management, personal trust services and retirement Of the $135 million in the proposed budget, Finney said he explan services. Or maybe it’s because we have no pects about $55 million to be used for community revitalization, with conflicts of interests in our investment positions, the remainder going to business attraction and state assistance for and are aligned with our clients’ wants, needs and businesses already here that seek incentives to expand. desires. Whatever the reasons, with over $6B in

Capitol B r i e fi ng s

Workforce power

Cut film incentives?

work they do in Michigan and on the number of Michigan residents they hire to do the work. The Warner Bros. Superman/Batman feature film being made in Michigan was awarded $35 million in state incentives, while most projects approved for incentives receive far less. Finney said the film industry in Michigan has value, but he supports the governor’s recommended funding and would not be advocating for it to receive more than $25 million. Chris Gautz: (517) 403-4403, cgautz@crain.com. Twitter: @chrisgautz

If you’re worried about your investments, you’re not a client of ours.

Auto power A new initiative in the budget is $5 million to go toward the Automotive, Engineering and Manufacturing Technology Fund. Nigel Francis, a former vice president of Mercedes-Benz AG and former chief engineer of alternative-powertrain vehicles and technologies for Tata Technologies Inc. in Novi, will have control over the fund as the state’s senior automotive adviser, Finney said. The money will be used to seed specific projects, Finney said, possibly on advanced materials or autonomous vehicles. Francis “will be the driver behind that,” Finney said. Once the budget is approved, which is expected to happen in June, Finney said Francis will develop a strategy to use the funds that Finney and his staff will approve. Francis already has crafted a high-level strategy to grow the state’s automotive sector, particularly as it relates to advanced technologies and engineering, Finney said. Some of the funds Francis will dole out would be through competitive bids, Finney said. But in oth-

assets, we’ve grown nearly 20% annually since 1998, all the while earning exceptionally high levels of client satisfaction. Call us at 877.530.0555 and take a step back from worry. For your peace of mind, it’s a big step forward. * 2013 Greenleaf Trust survey.

Financial Security from Generation to Generation

34977 woodward avenue, suite 200 birmingham, mi 48009 greenleaftrust.com 248.530.6202 877.530.0555

20140210-NEWS--0010-NAT-CCI-CD_--

2/6/2014

4:01 PM

Page 1

Page 10

February 10, 2014

CRAIN’S DETROIT BUSINESS

Duggan among speakers set for Detroit Policy Conference sociology at the University of Pennsylvania, who became well known nationally for his 1996 book The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit. The conference, scheduled for 8:30 a.m. to 3 p.m. Feb. 27 at the MotorCity Casino Hotel, is expected to draw about 800 people. It will feature panel discussions on improving Detroit’s neighbor-

BY KIRK PINHO CRAIN’S DETROIT BUSINESS

Detroit Mayor Mike Duggan will be one of three keynote speakers at the Detroit Regional Chamber’s 2014 Detroit Policy Conference later this month. The other keynote speakers are Cathy Chang, an urban artist, designer and planner; and Thomas Sugrue, a David Boies professor of history and

hoods, economic investment, regionalism, small-business resources and the city’s path forward through Chapter 9 municipal bankruptcy, among others. “Our theme is Detroit’s next chapter, and we really want to have a conversation about the issues,” said Evette Hollins, the chamber’s urban initiatives manager. “We’ve built a pretty well-

rounded agenda. “It has something for just about everyone.” The conference began in 2012 as the Detroit Business Conference and drew about 400 people. About 600 people attended last year’s conference. Event sponsors are MotorCity Casino Hotel; Opportunity Detroit; Blue Cross Blue Shield of Michigan;

PLATINUM STANDARD FRACTIONAL CTIONAL AND MANAGED BUSINESS AVIATION PROGR PROGRAMS. SERVING ALL SOUTHEASTERN MICHIGAN.

CORPORATEEAGLE.COM

Corporate Law Experience

IS YOUR PLACE A COOL PLACE?

In Your Corner.

■ Comprehensive corporate transactional practice including business planning and startup, corporate governance and finance, venture capital, mergers and acquisitions, joint ventures and contracts. ■ Transportation, logistics, and product distribution, real estate, and energy. ■ In Your Corner.

First Tier Ranking in Corporate Law ■

Metro Detroit

■

Grand Rapids

■

Kalamazoo

■

Grand Haven

■

Lansing

MLive.com; ITC Holdings Corp.; Sprint; Automation Alley; Comcast Busi1ness Class; the Detroit Economic Growth Corp.; Office Depot; TSFR Apple Venture LLC; Wayne County Duggan Community College District; the Wayne State University Front Door Program; Brinks, Gilson & Lione; Detroit Metropolitian Credit Union; the Detroit Yacht Club; Greektown Casino-Hotel; Hi- Chang tachi Business Finance; Metro Cars; Miller, Canfield, Paddock & Stone PLC; and the Charter One Foundation. Register at detroitchamber. com; cost is $99 for chamber Sugrue members and $165 for nonmembers. Registration is accepted until the day of the conference, said James Martinez, the chamber’s director of communications. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

Richard P. Manczak Contact Rick at rpmanczak@varnumlaw.com

Crain’s biennial Cool Places to Work in Michigan awards returns this year, and once again Crain’s is working with Best Companies Group of Harrisburg, Pa. The competition has two parts: one questionnaire for employers, another for 2014 employees. The combined, weighted results will determine who qualifies for Cool Places designation. Best Companies supplies all participating companies — regardless of whether they win the Cool Places recognition — with a Best Companies Group employee feedback report based on employee responses to the 72question survey. The report can help company executives identify strengths and weaknesses in their company culture and practices. To be considered for Cool Places to Work in Michigan, companies must register at www.coolplacestoworkmi.com by April 18. Other important dates, samples of the surveys and other information are on the website. Once registered, companies will be invited to participate in the surveys. Businesses and nonprofits can apply. Applicants must have a minimum of 15 employees working in Michigan and been in business at least one year, among other criteria. Companies pay a fee based on company size to Best Companies to cover survey costs. The cost ranges from $610 to $895 for online surveying, and $765 to $1,660 for paper surveying.

20140210-NEWS--0011,0012,0013,0014,0015,0016-NAT-CCI-CD_--

2/6/2014

6:26 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 10, 2014

Page 11

growing small businesses EDITOR’S NOTEBOOK Amy Haimerl is entrepreneurship editor. She can be reached at (313) 446-0416 or at ahaimerl @crain.com

Amy Haimerl

Company culture is for small business, too If somebody had asked my dad what his company culture was, he would have locked them with a 1,000foot John Wayne stare. That would sound like a bunch of woo-woo-woo hippie stuff to him, one of the last stoic sons of the West. But in truth, the family excavating business did have a culture. It was written on the back of his business card: “The bitterness of poor quality and workmanship remains long after the sweetness of the low bid is forgotten.” In that phrase he told all potential clients that he and my brother and mother hustled. That they were fair and committed. That they believed in quality. Still, he would have thought that’s just how you run a business, not some fancy business school lingo about culture. I might have agreed with him until I sat this week with Ross Sanders, the executive director of Bizdom, the startup accelerator founded by Dan Gilbert. We were talking about startups, and Sanders declared the biggest mistake they make when launching is not defining company culture: “You can Google an income statement, but what we teach is an emphasis on culture and core values. This is the foundation everything else is built on.” He gave me Detroit-based Chalkfly as an example. It had $2 million in revenue last year selling office supplies online — and it expects to double revenue this year. Part of its success, he posited, is its focus on company culture. He told me that Chalkfly’s culture is about how it still sends handwritten notes with invoices. It delivers flowers to clients’ administrative assistants on Administrative Professionals’ Day. It nails the customer service because that is what the founders believe in. I got it. Company culture isn’t just for tech entreprenuers with all the resources handed to them in fancy incubators and accelerators. It’s for every small business owner, regardless of how tiny. It’s about how you greet customers in your store. How you speak with clients on the phone. It’s who you are and how you present yourself. It’s even for a man who is more comfortable digging in the hard rock of Colorado than in government bonding and bidding meetings. It explains why he taught my brother to put on a clean shirt and nice boots before you go. He just called it acting like the owner, not the help, even when you were both.

BY AMY HAIMERL | CRAIN’S DETROIT BUSINESS

here’s nothing as American as starting up a business, becoming your own boss, taking your idea and seeing it on shelves or in other products. Entrepreneurship is in our DNA. And in Detroit even more so: It’s our history, and it’s also our future. The New Economy Initiative just landed another $33 million from some of the nation’s biggest foundations to spend on entrepreneurship and innovation. Bizdom Detroit has incubated nearly two dozen portfolio companies. Eleven companies have popped up after getting a boost from the Hatch Detroit business competition. D:hive has helped more than 200 entrepreneurs get their start. Add in all the business consultants and chambers of commerce and lawyers and accountants, and this town is flush with startup help. But the statistics of business failure are still staggering. New firms with employees only have a 50 percent shot at making it past year five, according to a Dun & Bradstreet Credibility Corp. report based on U.S. Census data. Other research makes it seem worse, some slightly better, but it all tells the same story: It’s tough out there for an entrepreneur. So Crain’s talked with area business owners and business-development agencies about the mistakes startup entrepreneurs make. We asked them to identify key lessons startups could learn to ensure they are more than just statistics. Here’s our panel:

How to avoid the oh, nos! Common mistakes startups must sidestep to survive and thrive

䡲 April Boyle, director of small-business initiatives, D:hive 䡲 Liz Blondy, owner, Canine to Five 䡲 Matt Clayson, director, Detroit Creative Corridor

Center 䡲 Alan Whitman, Detroit office managing partner, Baker Tilly 䡲 Leslie Lynn Smith, president and CEO, TechTown Detroit 䡲 Jess Daniel, co-founder, FoodLab Detroit 䡲 Robert Holland, CEO and chairman, Vistage Michigan 䡲 Ken Dalto, owner, Kenneth J. Dalto & Associates 䡲 Aubrey Agee II, program administrator, Blackstone LaunchPad 䡲 Mike Cope, senior vice president

for small-business banking in Michigan, Comerica Bank 䡲 Tom Anderson, senior director, Automation Alley 䡲 Ross Sanders, executive director, Bizdom Detroit

Mistake No. 1: Unfocused dreaming That dream you have of starting a shoe store/bookstore/bar/bakery? Yeah, it makes April Boyle cringe just a little bit. As the director of small-business initiatives at D:hive, she would like you to focus. “We have people come in and say I want to open … and they have, like, nine different business models,” said Boyle. “I had a guy who does bike shop/brunch/gallery/urban farm/event space. And it was like, holy crap. You have to simplify and start with one thing. Do a really great job with that one thing and then build on it.” Through D:hive’s Build program, Boyle has advised more See Mistakes, Page 12

ISTOCK PHOTO

20140210-NEWS--0011,0012,0013,0014,0015,0016-NAT-CCI-CD_--

2/6/2014

Page 12

6:26 PM

Page 2

February 10, 2014

CRAIN’S DETROIT BUSINESS

Second Stage

Mistakes: Common errors startups should sidestep to survive ■ From Page 11

than 200 budding entrepreneurs, many of whom needed help narrowing down their ideas. The program’s curriculum actually forces that at about week four of a 12-week program by making small-business owners think unit sales, break-even points and typiBoyle cal transaction size. Once they realize that, for example, a typical customer is going to be an $18 sale, they can extrapolate how many times they need to sell that unit to break even. And that, she said, starts getting everyone focused. “We tell them they can’t leave the room until they define their unit of sale,” she said, laughing. “So when they have these nine things, they start realizing maybe their dream is too big.”

Mistake No. 2: Chase funding before clients “People hear these rumors that the streets of Detroit are lined with golden coins for entrepreneurs, that we have a lot of grants here,” said Matt Clayson, who works

with creative industry startups, such as filmmakers and designers, at the Detroit Creative Corridor Center. “There are supportive services here, there are business advantages of coming here, but it’s not because we’re throwing money out of the car.” But entrepreClayson neurs still arrive on the shores of Detroit thinking that they can get free and easy money to launch their dreams. And Clayson routinely gives them this advice: “Don’t go out of the gate asking for funding. Go out of the gate asking for clients.” Why? Because the best source of revenue is from sales, not from grants or loans. Planning for the first client and the second client and third client, and focusing on how you are going to find them, builds a sustainable business rather than one that is teetering on debt. For Liz Blondy, that meant spending the bulk of her day thinking about how she would entice customers to her doggie day care, Canine to Five. And for a neighborhood business like hers, she found that other local businesses were a great source of referrals.

Often, it’s less “ hard to figure out where you get the money from than how you will pay it off.

”

Jess Daniel, Food Lab Detroit

“Really engage with your neighborhood,” she said. “Take two hours to introduce yourself to your 30 closest businesses and then continue to build those relationships so you can do business together.”

Mistake No. 3: Borrow too much, too early “Money is very important, but having it at the right stage of your business is more important,” said Jess Daniel, cofounder of FoodLab Detroit, which develops food entrepreneurs. “But often, it’s less Blondy hard to figure

out where you get the money from than how you will pay it off.” Ouch. To help guide her small businesses, she starts with a deceptively simple question: What would you use it for? Then she has them break it down line by Daniel line to see where the money would go. That way, the owners are thoughtful of how much they really need and don’t take out more than they can repay. “You’d be surprised,” she said, “how many people can’t answer that question, but yet they are coming and saying they need to do a Kickstarter or apply for a loan.” Daniel knows from experience how hard it can be, struggling to start with little capital but also not wanting to take on debt she couldn’t repay. She had her own popup restaurant, Neighborhood Noodle, and she needed a weekly reserve of $2,000 to stock inventory and buy food. Sometimes you need that Kickstarter campaign or microloan to get going — not everyone has access to family and friends’ money — but, she warns, keep expenses under control, understand where every dime of the loan will go and how

S B A P R E F E R R E D L E N D E R | T E R M L O A N S | R E A L E S TAT E L O A N S | L I N E S O F C R E D I T

$194,000,000 in Commercial Loans in 2013. Your hometown advantage. Being local means we’re able to leverage approvals and decisions right from our home ofﬁce here in Michigan. It means more answers backed by the knowledge we've gained from being rooted here since 1917. This means a lot for the business customers we help daily. Trust us, that’s a big advantage for small business. www.thefsb.com/sba | 866-372-1275

you will make money to repay it.

Mistake No. 4: Hoard equity ownership The cash-seeking mistake isn’t unique to small businesses or neighborhood retail. Most of the entrepreneurs accelerating at TechTown Detroit are developing high-tech startups that will need significant equity investments to get their innovations to market. Smith Still, Leslie Lynn Smith still tells them to focus on customers not cash. “The first and last thing that every entrepreneur asks us about is capital,” she said. “Get me money, get me money, get me money. But we tell them revenue is the best kind of money, so let’s figure out how to get customers first.” But she also has to prepare them for the day when they will be ready for investment. And as much as those entrepreneurs want money, they don’t like the idea of giving up any ownership. “We have to talk about getting other people’s money and what that actually costs you,” said Smith. “Once they get comfortable with that, they don’t want it to be a whole lot of anything. But my advice is … all of nothing is still nothing. Continuing to own the whole doesn’t increase its value.” Alan Whitman empathizes with Smith. He constantly tries to explain the same thing to his clients at Baker Tilly. “One hundred percent of something may not be as great as some lesser percentage of a piece of your business,” he said. “That’s a hard thing to drill into entrepreneurs’ heads.”

Mistake No. 5: Start up with credit cards but no financial plan For businesses that are building a product or are capital intensive, the worst thing an entrepreneur can be is undercapitalized. That doesn’t mean your credit cards are fair game. “We are all excited, we have a couple of credit cards that are not filled, we Holland haven’t really talked with our family, but I’m so excited about this idea that I’m just going to use these credit cards to rent space, hire a few people, make a few trips,” said Robert Holland, CEO and chairman of Vistage Michigan. “Pretty soon you’ve maxed out two of them, but they keep sending them to me in the mail, so I’ll start a third or a fourth.” Instead, he recommends working up an Excel pro forma about See Next Page

20140210-NEWS--0011,0012,0013,0014,0015,0016-NAT-CCI-CD_--

2/6/2014

CRAIN’S DETROIT BUSINESS

February 10, 2014

6:26 PM

Page 3

Page 13

Second Stage From Preceding Page

how long it will take to develop the product idea. Once you have that time frame, put together a skeleton business plan that shows how much you need to cover expenses for that long, including paying yourself, others, space rental, prototyping, etc. Now, he said, you know exactly what it will take to get the business off the ground and for how long you need to plan for losses. “A lot of folks are engineers, software developers; they never learn how to put together a capitalization plan, so they are just winging it and get into trouble and there is no way to continue,” Holland said. But with even a basic spreadsheet of costs, you can tell if it’s smart to start on a credit card (rarely, but not never) or if you can take a viable financial plan to friends, family or the bank.

Mistake No. 6: Start undercapitalized Of course, just because you shouldn’t chase cash before clients doesn’t mean you can start out with nothing. How much you need depends on what kind of business you’re starting. Daniel may have only needed $2,000 for her noodle shop, but a high-tech innovator is going to need significantly more cash. Whatever type of business you are opening, don’t let excitement and passion keep you from good financial planning. You don’t want to be another small-business carcass on the startup highway. To avoid that, corporate turnaround expert Ken Dalto advises clients to have 120-150 days worth of money in the bank to cover all of their expenses, all of their inventory, all the things they need to create sales. “Assume not Dalto one dollar will come in during that period,” he said.

Play with your “ financials. Run scenarios. For example, ask, ‘If I’m really, really successful, and this happens, the impact on my cash would be what?’

”

Mike Cope, Comerica Bank

Plus, he advises having another 60 days worth of cash on hand to cover receivables. Why 60 days? Because that’s how long it takes most clients to pay these days, so you need to be able to survive while the check is in the mail. “If you don’t capitalize correctly from the start, you have to go back to square one and get capitalized correctly, through investors, parents, banks, whatever,” he said. “But you have to restructure before you recapitalize. You can’t just recapitalize because you’ll just find yourself in the same hole.”

Mistake No. 7: Fail to understand the financials Mike Cope sees a lot of small businesses come through the doors of Comerica Bank, where he is the senior vice president for small-business banking in Michigan. He primarily advises second-stage companies, but there is, he said, Cope a near-universal mistake among small businesses: not understanding the financials. “Really understand them,” he said. “Don’t do a financial statement just because a banker asked

INTELLECTUAL PROPERTY ATTORNEYS

“

They are not just patent lawyers, but our trusted advisors.

JAMES SCAPA, CEO Altair Engineering

YOUNG BASILE. Advisors to the world’s most innovative companies.

ANN ARBOR

•

TROY

•

SILICON VALLEY

WWW.YOUNGBASILE.COM

for it. Play with your financials. Run scenarios. For example, ask, ‘If I’m really, really successful, and this happens, the impact on my cash would be what?’ ” That doesn’t mean every entrepreneur needs to be an accounting expert. In fact, Cope highly recommends that every business owner surround themselves with a strong team of lawyers, accountants and the like. But, he said, every CEO should be able to understand the basics, like unit sales. “When it’s a fresh startup, I think oftentimes either the owner is not being realistic or doesn’t have enough information to nail the unit sales,” he said. “But this is how you can decide if you can make a go of it.”

Mistake No. 8: Fail to plan If there’s one mistake Aubrey Agee, of Wayne State University’s Blackstone LaunchPad accelerator, wishes entrepreneurs would stop making, it’s this: fail to plan. “The strength and weakness of the entrepreAgee neur is that they have this great idea that they are passionate about or they think they will make a whole lot of money on,” he said. “But they get so focused on it that they lose sight on a lot of things. They don’t do their homework; they don’t understand competitors.” He recently worked with a pair of engineering students, one a Ph.D. and one a master’s student, who bullheadedly focused on building a prototype while ignoring the business side of launching: competitive analysis, marketing, financial planning, etc. “They just focused on making the product,” he said. “They spent time and money and then found out someone else had made it faster and cheaper than they did.” By comparison, he is seeing Wayne State student Elias Majid turn his tea company, Eli Tea LLC, into a successful venture. Majid’s teas are now found in several local restaurants, and he’s working to grow his wholesale distribution. “He is a force of nature,” said Agee. “His product is good, of course, but he is constantly learning. He steps back and does the 10,000-foot view. He’s engrossed in his product and making it profitable.”

Mistake No. 9: Don’t plan for growth When Liz Blondy opened Canine to Five in Midtown Detroit, she was not thinking about growth. She was thinking about just keeping her doors open and the dogs fed. For the first few years, that was good enough. But by 2012, she had bought two adjacent parcels of land from the city, trying to accommodate outdoor play space for the dogs and employee parking. There wasn’t enough room for both. So by 2013, she had expanded into Ferndale, hoping that would alleviate the pressure. She also See Mistakes, Page 14

DETROIT JUNE 9-12, 2014

HOW ARE E YOU SHAPING THE FUTURE OF MANUFFACTURING? Manufacturers, this is our time. We’re energized with new processes and technology, ready and eager to supply the entire enterprise hungry for solutions. Modeling & Simulation Quality Measurement Software Advanced Materials Automation Micromachining Cybersecurity

PREPARE FOR WHAT’S NEXT.

EXHIBIT T AT THE BIG M. produced by

bigMevent @bigMevent IN PARTNERSHIP WITH MEDC LOGO TO COME

EXHIBIT. SPONSOR. ATTEND. GO TO BIGMEVENT.COM OR CALL 800.733.3976 TO LEARN HOW!

20140210-NEWS--0011,0012,0013,0014,0015,0016-NAT-CCI-CD_--

2/6/2014

Page 14

6:26 PM

Page 4

February 10, 2014

CRAIN’S DETROIT BUSINESS

Second Stage

Mistakes: How to avoid common pitfalls startups can fall into ■ From Page 13

raised her prices, from $25 a day to $27 a day — to control growth. “I thought that would help, that we’d no longer be faced with not having enough space,” she said. Nope. “I have the exact same problem of where to grow and how to grow.

Wow, I didn’t learn from that mistake.” So, now, she is committed to solving the problem. She is writing a vision plan and thinking about what she wants Canine to Five to look like in five to 10 years. “I’ve realized,” she said, “that I

could have spent more money on the front end to pick a location that could accommodate what I wanted to look like in five to 10 years, if I’d stopped and known what I wanted to look like in five to 10 years.” Not every startup’s growth is-

sues are focused on physical space, but all of them should know what they want to be when they grow up, so to speak. Without a vision plan or some guidelines, you won’t know if you’re making smart decisions to get you where you want to be.

you know the what. now hire the how.

B UILT

F INANCIAL S OLUTIONS ON G ENERATIONS OF T RUST

• • •

Insurance Employee Benefits Retirement Planning

Ä¦®Ä Ù®Ä¦ Ö½ ÄÄ®Ä¦ ÝçÙò ù®Ä¦ Äò®ÙÊÄÃ Äã ½ ÊÄÝãÙç ã®ÊÄ Ã Ä ¦ Ã Äã

535 Griswold Street, Suite 1600 • Detroit, MI 48226 • www.lovascogroup.com • 313.394.1700 A Member Firm of M Financial Group. Registered Representative with M Securities: Securities offered through M Holdings Securities, Inc., A Registered Broker/Dealer, Member FINRA/SIPC. LoVasco Consulting Group is independently owned and operated.

248.447.2000 www.atwell-group.com

ƚǁĞůů͛Ɛ ĐŽŶƐƵůƚĂŶƚƐ͕ ĞŶŐŝŶĞĞƌƐ ĂŶĚ ƉƌŽũĞĐƚ ŵĂŶĂŐĞƌƐ ƚƵƌŶ ŽďƐƚĂĐůĞƐ ŝŶƚŽ ŽƉƟŽŶƐ ƚŚƌŽƵŐŚ ŝŶĚƵƐƚƌǇ ĞǆƉĞƌƟƐĞ͕ ůŽĐĂů ŬŶŽǁůĞĚŐĞ ĂŶĚ ĨŽĐƵƐĞĚ ƐƚƌĂƚĞŐǇ͘

Mistake No. 10: Grow too fast In the startup stage, it’s all about the hustle. You don’t want to say no to anything because, well, who knows when another client or sale will land. But eventually, you find yourself overextended and underdelivering. And that’s something no business owner ever wanted. “You find yourself going for the easy sales just to cover costs because you’re often undercapitalized and have grown too fast,” said Dalto. “You have to ask yourself, ‘What business are you in?’ Are you focusing on the real business you want to build, or are you doing three or four different things because you need sales?” That happened to Fresh Corner Café, a fresh-food delivery company and caterer with a mission to bring fresh food into Detroit neighborhoods by selling in corner stores. “We hoped that by increasing the number of stores and keeping up regular three-times-a-week deliveries, we would achieve a level of ubiquity, and the losses would start turning into profits,” said CEO and co-owner Noam Kimelman in an email. “Instead, we just lost a whole bunch of money.” Now Kimelman is working to slow growth and restructure how the company operates. That’s exactly what Dalto would recommend to his clients. “When you get in this situation, you have to go through some kind of restructuring,” he said. “You have to cut overhead, not grow as quick, put in financial controls, get monthly financial statements. My rule of thumb is throttle the sales down by 20 to 25 percent.” Fresh Corner Café is starting by focusing only on well-lit and clean corner stores with high traffic. They are working more closely with store owners, and are staggering their growth in low-income neighborhoods with larger, more profitable accounts in other areas. We were “trying to force fresh food into stores that will never be able to sell fresh food,” Kimelman said. “We were possibly too idealistic in the types of corner stores we could affect. We (now) require a significant level of storeowner buy-in by removing the guarantee on products. We used to refund any products that didn’t sell before expiration.” The retrenching also spawned a nonprofit, Detroit Food Academy, to lead food education and nutrition initiatives by teaching high school students to build triple bottom line food businesses.

Mistake No. 11: Don’t ask for help To grow successfully, entrepreneurs must ask for help. They need good accountants, lawyers, bankers, advisers. They can’t be both the vision and the expert on how to structure the company and set up financial controls. There must be a team of support. “You come with a skill — you are a really good tool maker or a doctor or fill in the blank and you See Next Page

20140210-NEWS--0011,0012,0013,0014,0015,0016-NAT-CCI-CD_--

2/6/2014

6:27 PM

Page 5

CRAIN’S DETROIT BUSINESS

February 10, 2014

Page 15

Second Stage From Preceding Page

like it — but now when you run the business, it’s a bit of a game changer. There are 140 things coming at you,” said Cope. “You can’t become an expert at everything before you get into the business, but you can surround yourself with good advisers.” Whitman couldn’t agree more. For about 18 months, he watched one of his clients grow too quickly. But the entrepreneur didn’t want to ask for help or take advice, he said. When the company finally hit $3 million in Whitman sales, the owner came to Whitman for help. He realized quality was sliding and he could lose his largest customer. “A lot of entrepreneurs are too tied up in the product they have developed or solution they have developed and don’t spend time paying attention on how to go to market, how to turn that product into a sustainable business,” Whitman said. “They are worried too much about the immediate versus focusing on the important. … They also aren’t willing to accept help. It’s a control-alt-delete in your brain. Reboot your brain to recognize to be willing to accept help.” Whitman helped his client restructure his financials, creating a three-month projected financial plan so he could understand what was happening in the near term. He also created a “within/without” plan to model what would happen if the company suddenly lost its largest customer. The informal network is just as critical as the full advisers. Having other business owners to chat with and use as a sounding board is imperative. Look for a mentor in your field or another owner you admire and approach them about guiding you and your growth. If you present yourself as sincere and committed to growing your business and creating jobs the community, they will take you seriously. “I was surprised how very infrequently these small businesses have anyone that they can go to ask questions,” said Smith, whose program also works with small TechTown businesses in Detroit’s underserved neighborhoods. “It is rare that they are talking to one another about business advice. They may be talking about other things, but because of the perceived competiveness, they never talk about the business struggles. So we try to help them build that network.”

founders are often a scientist who has a very clear idea of what the innovation is, and they keep pushing that idea and never test it in the marketplace,” he said. Anderson “They don’t necessarily listen to what the customer is telling them. Don’t wait until your service is perfect; get in the market as soon as you can and then listen.” And keep listening. The other critical piece is continuing to adapt based on the feedback from

the market. If the market prefers a blue widget to your beloved red, make it blue. Jeremy Sanger, the founder of Ventech LLC, is a perfect example of an entrepreneur who adapted to the market. His Wixom-based company, which builds a device that provides near-instant heat, was originally geared toward the auto market. “But it’s hard for startups to sell into automotive, so he struggled,” Anderson said. Then Sanger transitioned into the school bus market, because his product could cut bus idling time and driver overtime by warming buses faster. “That had good economics,” An-

derson said, “but school communities are slow making decisions and strapped for funds.” Sanger’s third attempt was the winner: He provides his heating device to oil companies working in the arctic temperatures of Alaska. “It’s a mater of being responsive to where the opportunity is in the market,” Anderson said. “But you have to do it in a focused or strategic way. You can’t chase after every opportunity. Decide which one you can best address and then focus.”

Mistake No. 13: Don’t communicate clearly Whether you’re pitching to an

investor, a bank or a potential client, you don’t have much time to make a sale. So make every second count. “I see a lot of entrepreneurs who don’t get outside their Sanders own business,” said Ross Sanders, executive director of Bizdom. “They use acronyms. They talk about how, not what. If it takes 15 of 20 minutes to explain your business, you get five minutes of advice and consideration.” See Marketing, Page 16

“HOW CAN DTE ENERGY HELP MY BUSINESS SAVE?” Each business is different, so DTE Energy offers an online Interactive Business tool which lets you get information tailored to your speciﬁc business environment. From grocery stores to warehouses, you’ll ﬁnd tips, incentives, rebates and more that will help you reduce your energy use. We also provide a number of other online tools to help our business customers use less energy and save more money.

DTE wants to help you save, so get started at dteenergy.com/interactivebusiness

Mistake No. 12: Don’t listen to customers Three words: Minimum viable product. Those are the three words Tom Anderson of Automation Alley would like all tech startups to repeat like a mantra. Get the idea developed, get it out there, and see how the market reacts. Don’t let perfect get in the way of innovation. “In these companies, the

Start saving today visit:

dteenergy.com/interactivebusiness

20140210-NEWS--0011,0012,0013,0014,0015,0016-NAT-CCI-CD_--

2/6/2014

Page 16

6:27 PM

Page 6

February 10, 2014

CRAIN’S DETROIT BUSINESS

Second Stage

Marketing: Panel offers advice on how startups can start well ■ From Page 15

Mistake No. 14: Hire poorly “They need bodies to handle the product development or delivery of services so they end up hiring anyone who can breathe or fog a mirror,” said Holland. “But you have to be careful because not having

the right talent will kill a startup.” So how do you do that? You ask the right questions of yourself and the candidate both in finding the right talent and the right fit for the company. Say you need someone with analytical capacity, for example. Is it

Strong. And ﬂexible.

When businesses face the changing the demands of growth, purchasing goods, or making payroll, they require a strong, yet flexible solution. Crestmark can help. Providing asset-based lending to small- and midsized businesses nationwide for over 17 years.

statistical, logic, what is it that actually needs done? You have to know exactly what the position needs to do and how it fits in the overall structure of your operations. For candidates, try questions such as: 䡲 What is the most difficult thing you have done in the past? 䡲 What projects have you worked on that were difficult? 䡲 How did you overcome them? “If they have a good track record, they can explain all of this,” Holland said. But what if they have the right talent, how do you know if they are a good cultural fit? Holland suggests these questions: 䡲 Have you ever been in a job and your boss asked you do something illegal? How did that make you feel? What did you do about it? 䡲 Did you ever have to terminate anyone in your work and how did you feel about that? Was it the right thing to do? 䡲 In your previous jobs, did you ever feel completely engaged where you woke up excited to go to work? Tell me about that job? “That,” Holland said, “will give you a good idea of their culture. “Every dollar is so important that everyone has to be pulling in the same direction. Hire for cul-

ture and hire the right talent. Take your time to make sure you are being very specific and filtering through the candidates.” Cope from Comerica Bank said the same principles apply to forming partnerships. But it’s harder to get rid of a partner than an employee, so be doubly cautious. “Ask yourself if you really know each other,” he said. “Do you have the same guiding principles? Because the only way to get out of a partnership is to sell it or close it.”

Mistake No. 15: Say yes to everything When you’re a food entrepreneur, everyone wants your food. For a party, for an event, for a meeting, for everything. And they want you to donate it for free. “People say, ‘Oh, well, you’ll get a lot of good exposure,’ ” said Daniel of FoodLab. “It’s not always clear whether that exposure, spending money on that product, will yield the results that you are looking for.” To avoid giving away everything in the name of charity or exposure, think about who your target market is. Who do you want to be catering for? Who do you want coming in your restaurant? Then

Hire for culture “ and hire the right talent. Take your time to make sure you are being very specific and filtering through the candidates.

”

Robert Holland, Vistage Michigan

ask the event organizer who they anticipate will attend their event. See if it matches up with your target demographic. Detroit Vegan Soul is an example of a company that was smart about how it handled requests, Daniel said. “They did a ton of catering and got a ton of pickup and interest in the beginning,” she explained. “But I noticed when I sent requests over the FoodLab listserv they always had good questions to ask. There were times when I saw them passing up opportunities because they knew it wasn’t right for them.”

PRESENTING

DETROIT MAYOR Tuesday, Feb. 25 11:30 a.m. - 1:45 p.m. MotorCity Casino Hotel

B R O U G H T T O Y O U B Y

In the past few years, Crain’s Newsmaker of the Year event has drawn more than 500 people. Attendees in 2013 included presidents, CEOs, CFOs, COOs, VPs and directors from more than 163 companies and organizations in Michigan. Join this year’s crowd to jumpstart your network for 2014. Bring your friends and colleagues too.

TITLE S PONS OR

M AJ OR S PONS ORS

Mike Duggan

Individual Ticket: $65 Table of 10 (reserved seating): $700 Student Rate: $55 For more information contact cdbevents@crain.com or 313-446-0300. Sponsorships are available. Contact Marla Wise at mwise@crain.com or 313-446-6032.

CO-TITL E SPONSOR

20140210-NEWS--0017,0018,0019-NAT-CCI-CD_--

2/6/2014

4:06 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 10, 2014

Page 17

PUBLISHER’S NOTEBOOK Contact Mary Kramer at mkramer @crain.com.

CRAIN’S MICHIGAN BUSINESS Mary Kramer

New barrier for border bridge It has got to be aggravating, especially to a common-sense nerd. Gov. Rick Snyder put all his political capital into battling for a new bridge to link Detroit and Canada. Despite strong-arm lobbying and a multimilliondollar campaign against the bridge, he — and the Canadian government and Michigan companies — won. But now federal foot-dragging is putting the project behind. Canada is footing the bill for bridge construction — about $2 billion. All the U.S. side needs to do is pay for a new customs plaza on the Michigan side — about $250 million. And that’s where the holdup is. The bridge means a lot to companies all over the state, from automakers looking for faster border crossings to other companies wanting to move product across the border. At the West Michigan Policy Conference in Grand Rapids a few years back, a chorus of companies from that part of the state talked about bottlenecks in getting everything from raw materials to products into and out of their plants and stores. The money for the plaza would come from the U.S. Department of Homeland Security. Michigan’s congressional delegation has some pull there. If ever the Michigan congressional delegation needed to use some muscle to get an allocation, it’s now.

PHOTOS BY JON BROUWER

“TechShop does things differently – it is a more corporate model. We’re more of a community-based model,” says GR Makers founder Casey DuBois.

Creative tension ‘Makerspace’ movement brings invention – and some contention – to Grand Rapids BY MATTHEW GRYCZAN

Fraud knows no income limits Sen. Debbie Stabenow got a media lesson last week when she was scolded by Alex Wagner, an anchor on the MSNBC cable network, for daring to suggest that expanded aid to lowincome people also should have safeguards against fraud. The exchange, which occurred after a bill expanding food stamps passed the Senate and headed to President Barack Obama’s desk, was highlighted on The Daily Call website. Stabenow, who was a guest on Wagner’s segment, explained how she pushed for increased food and energy aid to low-income Americans but “to be credible” endorsed measures to spot fraud in the program. That’s when Wagner chided her for using the word “fraud” because it “maligns people who are truly needy.” Maybe someone should give Wagner the heads-up that every state in the union has fraud investigators for government programs. In fiscal 2012, Michigan investigators identified more than $112 million in “fraud, cost savings and established program disqualifications, a 107 percent increase” over the 2011 fiscal year. Ripping off the system can happen at the top, within companies and among people of all income brackets.

CRAIN’S MICHIGAN BUSINESS

lternately described as a tremendous asset for West Michigan or the “great Satan,” the arrival of TechShop Inc. in Grand Rapids no doubt would bolster the ability of entrepreneurs to build prototypes cheaply through “makerspaces” — community-operated workshops that offer members the use of sophisticated machine tools. Initially slow to embrace the idea, the Grand Rapids area in the past few months has seen a spike in activity in the somewhat quirky world of homegrown makerspaces, where members can experience everything from how 3-D printers operate to an awesome display of 30-foot-long bolts of electricity crackling from a Tesla coil. But the two fledgling makerspaces already in Grand Rapids — GR Makers and The Geek Group — are wary of the strong possibility that TechShop soon may enter the market. San Carlos, Calif.-based TechShop already operates a well-equipped and capital-intensive makerspace in Allen Park that has attracted 800 paying members — compared with typical grass-

A member of GR Makers works on a monitor that he hopes will keep track of temperatures, water levels and doors.

MAKER SCHOOL? A charter school for “maker movement” is an idea that needs more study, Page 19

roots makerspaces, which struggle to break paying membership of 100. A map on the TechShop website clearly targets Grand Rapids as a future location, and recent changes in Michigan law on raising funds through crowdfunding may have moved the tipping point for TechShop to sooner rather than later.

Aside from the sometimes “Mythbusters” feel of homegrown makerspaces, the organizations can serve a practical purpose in helping entrepreneurs shorten the distance from hatching an idea to selling it in the marketplace, supporters say. “West Michigan is a community with lots of ideas,” said Rick DeVos, founder of the annual ArtPrize competition in Grand Rapids and Start Garden, a $15 million startup fund and incuDeVos bator. “What has been missing is an open, fluid infrastructure that can help people turn their ideas into prototypes. “Creators need advisers who know how to design, engineer and actually make something from a set of drawings or sketches.” DeVos would not say whether he is working with TechShop to locate in the area, but several individuals in the Grand Rapids maker community said it’s common knowledge that Start Garden, DeVos and a small group of financiers are lobbying TechShop to enter the market. See Makers, Page 18

20140210-NEWS--0017,0018,0019-NAT-CCI-CD_--

2/6/2014

4:06 PM

Page 18

Page 2

February 10, 2014

CRAIN’S DETROIT BUSINESS

CRAIN’S MICHIGAN BUSINESS

Makers: 3’s a crowd? ■ From Page 17

Reliable, modernized grid Energy is essential to the way we live, work and play. ITC operates, builds and maintains the region’s electric transmission infrastructure. We’re a Michiganbased company working hard to improve electric reliability and increase electric transmission capacity throughout the Midwest.

We’re ITC – your energy superhighway.

www.itctransco.com

TechShop said it intends to raise $60 million to open its do-it-yourself fabrication facilities in a dozen cities, among them Grand Rapids. “We see this market as very capable of supporting more than one maker-style resource,” DeVos said in a statement. Mark Hatch, co-founder and CEO of TechShop, said in a statement that the company “cannot comment on any potential partnerships or other investments that have not been publicly disclosed.” TechShop views “small investments as a key to its participatory and community-based business model,” the statement said, along with corporate and institutional partnerships such as ones it has with Ford Motor Co., Arizona State University and Autodesk Inc. TechShop locations average 15,000 to 17,000 square feet, but the Allen Park site is 33,000 square feet. Average investment is more than $1 million in high-end equipment, design software including Autodesk Inventor Suite and tools. The company has more than 5,500 members nationwide and posted revenue of about $6.5 million in 2012. If TechShop enters Grand Rapids, all three spaces may compete for the same customer: Hobbyists with a bent for technology and startups that want easy and cheap access to sophisticated manufacturing.

Poster boys for makerspaces One need look no further than Sergio Troiani and Gary Hammerlund to find the customers the makerspaces are chasing. Frustrated that he couldn’t find an aluminum case for his iPhone 5 that didn’t interfere with its reception, Troiani set about making one for himself in the spring of Troiani last year. But fabrication was foreign to the business major from Grand Valley State University who hails from Plymouth. “After I had the initial concept of it, I found out about GR Makers, and they helped me to get my first CAD drawing and offer some advice on how it could be manufactured,” said Troiani, 19. “There were a few gentlemen there with manufacturing backgrounds who said it would be extremely difficult to make or may not be worth the while, but others were encouraging and suggested I could find some manufacturers overseas that could do this.” After a few design iterations, Troiani introduced his Kloque (pronounced cloak) aluminum iPhone case on Kickstarter.com in mid-January and already has reached his goal of $25,000 to fund the first production run. Troiani said he continues to visit the GR Makers space on Wednesday nights for a free community gettogether where makers swap ideas. One of Troiani’s mentors was Hammerlund, who during a gathering one Wednesday night was asking around for ideas on how to fabricate plastic precision parts

for his Foam Buddy low-pressure spray system, designed for use by contractors to apply expandable foam insulation in buildings. Hammerlund, a Grand Rapids native and one of the founders of the GR Makers space, has several orders in hand after showing it at some business functions. He was back at the makerspace looking for ways to do economical, lowvolume production of a few parts that are custom-machined. “A person can have a lifetime of experience in manufacturing and still not have the solution, so this sort of sharing is essential,” said Hammerlund, 59, who once helped develop proprietary processes at Grand Rapids-based Ranir Corp., which makes dental products such as toothbrushes. “A lot of young people come in who don’t quite understand the art of prototyping to begin with. Some think everything can be made in China for a quarter.” The Wednesday night brainstorming validates the maker philosophy in Grand Rapids — and make the tedious process and investment of hours of launching GR Makers worthwhile, said Casey DuBois, who is credited as being the force behind the organization. DuBois, 47, hosted makers at a storage barn in Jenison for more than a year before linking up with Mutually Human, a software and Web development company in Grand Rapids that helped GR Makers occupy 3,200 square feet in a renovated factory. GR Makers is slowly accumulating tools and equipment by scrounging and asking for donations, along with collecting monthly dues from about 40 of the nearly 400 people who informally call themselves members. For $50 a month, members get 24/7 access to the facility and equipment. “We are for-profit, but we are for low profit,” DuBois said. “We don’t have much overhead, and we want to spend money on the next machine tool rather than other things.” In DuBois’ case, the next tool is a laser cutter versatile enough to slice through materials such as cardboard, vinyl and textiles but also engrave on metal and glass. DuBois is carefully weighing where to buy a laser cutter with a $9,000 contribution the group received from Start Garden and Michigan Industrial Tools, a Grand Rapids-based tool manufacturer that also contributed $3,000 worth of hand tools to GR Makers. As to the possible entry of TechShop, DuBois remained philosophical about the competition for members paying monthly dues. “TechShop does things differently — it is a more corporate model,” he said. “We’re more of a community-based model. We are electronics-oriented and have a good number of females involved — probably 45 percent of our members are women.”

Woe to TechShop Chris Boden, CEO of The Geek Group makerspace, was less moderate of his assessment of TechShop See Next Page

20140210-NEWS--0017,0018,0019-NAT-CCI-CD_--

2/6/2014

4:06 PM

Page 3

February 10, 2014

CRAIN’S DETROIT BUSINESS

Page 19

CRAIN’S MICHIGAN BUSINESS

A ‘maker’ charter school? More study is needed BY MATTHEW GRYCZAN CRAIN’S MICHIGAN BUSINESS

Could West Michigan be the site of the nation’s first elementary or high school based on the “maker movement” — the trend that encourages people to marry the latest technology with traditional skills to physically build projects? Perhaps, given that Mr. Maker himself — Dale Dougherty, founder, president and CEO of Sebastopol, Calif.-based Maker Media Inc. — and Gene Eidelman, president of the New York City-based charter school operator Mosaica Education Inc., have discussed the idea of how such a school might operate in metro Grand Rapids. At Eidelman’s suggestion, Dougherty said, he’s considering a visit to Grand Rapids in late February or early March to gauge community interest in launching a public school built on the maker movement. Rob Kimball, deputy director of the Charter Schools Office at Grand Valley State University, said he is working with Maker Media’s staff to organize a venue for Dougherty to meet with inventors, local makers and others to gauge interest and show a new documentary, “Maker,” that examines the movement. Maker Media publishes Make magazine and organized Maker Faire Detroit, held annually at The Henry Ford Museum in Dearborn. This year’s Maker Faire is July 26-27. Dougherty emphasized that the idea of K-12 education with a maker emphasis is far from even the preliminary proposal stage. “I’m getting some requests from a number of people who say they want to start something, but it’s

not clear what they want to start,” said Dougherty, who first visited Grand Rapids in 2010 to raise the profile of Maker Faire Detroit. “I think I get the idea of a maker school, but no one has really defined what that is. And because it is not well-defined, it takes significant effort to build curriculum.” Without a well-defined curriculum and mission, a charter public school might “only pay lip service to making but focus on traditional curriculum,” which is outside his area of interest, Dougherty said. Eidelman said he suggested a maker-themed school because he is familiar with the Grand Rapids area and his company already operates charter schools in Michigan. Mosaica Education operates eight charters in the state, including a high school, middle school and two elementary schools in Muskegon Heights. Nationally, it serves more than 11,000 students in eight states and the District of Columbia. Kimball said Grand Valley is intrigued by the idea and might want to act as the organization to grant a charter to community stakeholders who incorporate as a nonprofit board to launch such a school. In such a case, GVSU would issue the charter and the board would contract with a service provider, such as Mosaica Education. GVSU then would measure the performance of the school in relation to the school district in which it resides. Matthew Gryczan: (616) 916-8158, mgryczan@crain.com. Twitter: @mattgryczan

From Previous Page

and more ambitious about his nonprofit’s goals than GR Makers. Boden calls TechShop “the great Satan.” “They will destroy community hacker spaces wherever they go,” he said. “And if they come into the Grand Rapids area, they will destroy GR Makers and The Geek Group overnight.” Boden said his organization will fight TechShop for members or “move to where TechShop isn’t.” To a good extent, The Geek Group may have more to lose in terms of investment because its operation is much larger than that of GR Makers. The group’s “galactic headquarters” runs out of a 43,000square-foot former YMCA gym that has been converted into video production facilities, computer stations and a series of laboratories filled with donated equipment involving high-voltage electricity, laser optics, alternative-powered vehicles, chemistry and electronics. The Geek Group, funded largely through private donations instead of monthly memberships, said it has more than 25,000 members worldwide, most of whom are individuals who sign up for its free online videos and materials. Boden said the group has more than 100 paying members in the Grand Rapids area. The organization has a bent toward demonstrating science and technology in a big way, as opposed to GR Makers’ emphasis on helping entrepreneurs get products to market. Among its group projects are a monstrous version of a Newton’s cradle toy that uses bowling balls instead of small ball bearings; Project Stomper, which squashes quarters to the size of dimes; an industrial robot that crushes TV monitors; and Gemini, a Tesla coil that throws 30foot-long bolts of electricity. It was a demonstration of Gemi-

JON BROUWER

Name tags for more than 40 members hang by the door at a GR Makers meeting in Grand Rpaids.

ni that caused a fire Jan. 2 that closed the facility a day after it was first open to the public. Volunteers with The Geek Group have worked for the past month to remove a layer of soot deposited on more than a third of the inside of the building by a bank of burning capacitors that powered the Tesla coil. The Geek Group intends to build a national science center in metro Grand Rapids called the Avalon Research Institute, with capacity to handle up to 500,000 visitors a year, the organization’s website says. “Imagine a facility that is a combination of NASA, MIT, and ‘Mythbusters,’ ” it states. “It’s a place where real people — not just academics but anyone with a sincere and passionate desire to learn — can have access to the tools, materials and guidance to help them explore the areas of science and technology that interest them.”

Coexist and complement If Grand Rapids follows the same experience as metro Detroit, fear that grass-roots makerspaces will crumble if TechShop arrives may be unfounded. Some likely users see it as a tremendous resource for the area. Matt Oehrlein, president of the

i3 Detroit makerspace in Ferndale, said paying membership has been climbing steadily to more than 130 since the founding of his space four years ago — even after TechShop opened its doors in May 2012. Members of i3 Detroit “are definitely in their first phases of building something, and most people are building just one or a couple of something,” said Matt Switlik, a member of the group. “TechShop is the organization that I would go to the minute I decide I really like this and I need to make thousands of them. TechShop fills that gap when I want to scale up.” TechShop is more businessoriented, involving more advanced projects requiring sophisticated machine tools, while i3 Detroit appeals more to individuals who want to tinker, he said. The two “coexist and complement each other,” he said. Joe Finkler, president of inventor networks in Grand Rapids and Muskegon and a board member of the Michigan Inventors Coalition, said a TechShop in West Michigan would give inventors there a way to achieve the next step in commercializing their ideas. TechShop, he said, is “really a community-based workshop from what I’ve seen at Allen Park. The prototyping studios that they had were awesome.” At the regular Grand Rapids Inventor Network meetings, members often will swap stories and advice on their projects with experts in patent law, prototyping and marketing. “We get them all excited at the meeting about the possibilities, but then it gets to the point where they say, ‘What do I do next?’ ” Finkler said. “This (TechShop) would be a place that would keep the momentum going.” Matthew Gryczan: (616) 916-8158, mgryczan@crain.com. Twitter: @mattgryczan

GUARANTEE YOUR OPENING DAY TICKETS FULL, 41 AND 27-GAME PLANS STARTING AS LOW AS $15 PER GAME GREAT BENEFITS* INCLUDING: Season Ticketholder discount • Postseason ticket priority • Plus many more! *Some restrictions apply

20140210-NEWS--0020-NAT-CCI-CD_--

2/6/2014

4:45 PM

Page 1

Page 20

February 10, 2014

CRAIN’S DETROIT BUSINESS

CRAIN’S MICHIGAN BUSINESS

The entrepreneurial spirit is alive and well. We witness it each day in our businesses, our communities and our world, with each fresh idea, innovative approach and success we see. The EY Entrepreneur Of The Year™ Program shows how fostering the spirit of innovation is making the most successful businesses thrive. If you’ve been inspired by a successful entrepreneur in your community — or are one yourself — submit a nomination for our Entrepreneur Of The Year 2014 Program. Deadline for completed nominations is March 14, 2014. To learn more or to request nomination materials, call +1 313 628 7389 or visit us at ey.com/us/eoy/mnwo.

Nationally sponsored by

Regionally sponsored by

You’re working hard to improve your world. Be recognized for it.

Market becomes a growing presence in downtown GR BY ROD KACKLEY SPECIAL TO CRAIN’S MICHIGAN BUSINESS

Grand Rapids’ Downtown Market, which opened to overflow crowds Labor Day weekend, was intended to be a “a gritty urban experience that also supported local agriculture,” said David Frey, a co-chair of Grand Action, the nonprofit that leads much of the economic development downtown and led fundraising for the market’s construction. The early indication, Frey said, is that what they intended is what they got, as well as a venue helping grow small businesses and clean up a Grand Rapids neighborhood. The 130,000-square-foot market — about one-twelfth the acreage of Detroit’s Eastern Market — includes the Market Hall, where 20 vendors are located on the first floor; an outdoor area for a farmers market; outdoor rain gardens; a green roof covered with plants and vegetation; walls that include plants and an irrigation system; and 50 wells drilled 400 feet deep to bring heat from the Earth to heat the market. The outdoor market is scheduled to open again May 3. “We were just shy of 100 vendors last year,” said Mimi Fritz, president and CEO of the Downtown

Did you know? Commercial lending dates back to around 2000 B.C.

TCF Bank has loaned over $1 billion to businesses in Southeast Michigan. ®

Did you know that TCF Bank : s Initiates commercial loan relationships starting from $2 million? s Offers operating and capital leases starting at $50,000? s Commercial loans and leases represent over 50% of earning assets? ®

To learn more, contact: Patrick Skiles at 734-542-2790 (Commercial Loans) or Walt Dzielsky at 734-953-8541 (Leasing)

COURTESY OF DOWNTOWN MARKET

Among the attractions of Grand Rapids’ Downtown Market: A farmers market with about 100 vendors.

Market. “The market shed was full every Saturday, and sometimes the space under Wealthy Street filled up on Saturday, too.” Jeff Butzow, owner of Fish Lads, the market’s only fishmonger, said Downtown Market representatives came looking for him in Seattle, where he ran two retail outlets selling fresh fish and seafood at Pike Place Market. Being a Traverse City native, he was familiar with Grand Rapids and said coming back to Michigan “seemed liked a good fit.” Shelby Kibler left the Zingerman’s Bakehouse baking school in Ann Arbor, where he was the principal, to start his own business in the Downtown Market, an artisan bakery called Field & Fire. Jermale Eddie, director of education for the Grand Rapids Urban League, and his wife, Anissa, are first-time business owners. They opened the Malamiah Juice Bar. The Eddies, Kibler and Butzow said their sales were either meeting the goals of their business plans or close enough to make them feel good about the decision to set up shop in the market. Fritz said most vendors tell similar stories, although she said market officials don’t have numbers yet on sales per square foot. She did not have foot traffic numbers, either. The market also has become a hub for the redevelopment of the south side of downtown Grand Rapids, which is filled with vacant warehouses, storefronts and homeless shelters behind one of the city’s landmarks, Van Andel Arena. Mike Jacobsen, an Ann Arborbased developer who owns LC Cos., has turned one empty furniture warehouse into the $18.5 million Baker Lofts residential and retail building. He is working to turn the old Klingman’s Furniture warehouse into apartments for the 20- to 40year-old crowd. Jacobsen said the market can’t take all the credit for redevelopment in the area, but the impact can’t be ignored. “It’s the Downtown Market and other things, as well,” he said. “It was a whole series of events that made this a solid area.”

20140210-NEWS--0021-NAT-CCI-CD_--

2/6/2014

4:42 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 10, 2014

Monthly

Page 21

Australia

WHERE MICHIGAN DOES BUSINESS

A Amway employs about 150 in Australia.

Amway Co. Based: Ada Operations: Headquarters for Amway Australia and New Zealand in Sydney; business centers in Melbourne, Brisbane, Perth and two in Sydney; and a warehouse in Sydney Employees: About 150 Products: 450 nutrition, beauty and home products Top executive: Michial Coldwell, general manager of Amway Australia More information: Australia was the first Amway market outside North America, and was launched in April of 1971.

ustralia had an estimated $1.5 trillion GDP in 2012 after 20 consecutive years of economic growth. About 70 percent of its GDP comes from the services sector, which accounts for 75 percent of jobs in Australia. The country is also rich in natural resources, such as minerals, and energy resources such as oil, coal and uranium. Large industries beyond the service sector include mining, industrial and transportation equipment, food processing, chemicals and steel, and it is the world’s second-largest exporter of coal. Manufacturers have cited high wages by international standards, and Australia’s high dollar as deterrents to profitability, but the Australian government predicts its economy to grow by 3 percent in 2014-15. China, Japan and the United States are Australia’s major trading partners.

Crain’s monthly World Watch report showcases companies that are already leaders in growing global markets — and those that are expanding operations. Each World Watch Monthly features a different country. If you know of a Michigan company that exports, manufactures abroad or has facilities abroad, email Jennette Smith, managing editor, at jhsmith@crain.com

COMING UP March: Chile and Argentina April: Italy

Compuware Corp. Based: Detroit Operations: Compuware Asia-Pacific Pty. Ltd. head office in Sydney; other offices in Canberra, Melbourne and Brisbane Employees: 72 Products: IT software and services, and products and services for developing and maintaining mainframes Top executive: Steve Jobson, vice president for Australia and New Zealand Clients: Jetstar Airways, Telstra Corp. Ltd., the Government of Australia, Perth Airport and Fonterra Co-operative Group Ltd.

AUSTRALIA Brisbane

Sydney Adelaide Canberra Melbourne

Con-way’s Menlo unit has a Brisbane warehouse.

Con-way Inc.

Domino’s Pizza Inc. Based: Ann Arbor Operations: 505 stores throughout the country; master franchise is based in Brisbane Employees: 11,000 Products: Pizza, beverages, chicken and side items Top executive: Don Meij is CEO of Australian business entity Domino’s Pizza Enterprises.

Kelly Services Inc. Based: Troy Operations: Eleven locations across Australia in the cities of Sydney, Parramatta, West Sydney, Perth, North Adelaide, Canberra, Melbourne, Mulgrave, Brisbane, Gold Coast and Townsville Employees: About 150 permanent employees and about 2,000 temporary employees are assigned each week Products: Commercial (office, administrative, industrial), engineering, IT, finance, outsourcing and consulting services Top executives: Natalia Shuman, senior vice president and general manager, AsiaPacific and Europe, Middle East and Africa regions; and Karen Colfer, VP and managing director, Kelly Australia and New Zealand Clients: Companies from the banking and finance, transport, supply chain and logistics, manufacturing and production, government, science, trades (mining) and engineering industries

Perth

More information: Meij starred in an episode of “Undercover Boss Australia” in 2010.

Based: Ann Arbor Operations: Menlo Worldwide Logistics, a subsidiary of Con-way, has offices in Sydney and Brisbane and a warehouse in Brisbane. Employees: 30-50 Products: Warehousing, distribution and transportation management, supply chain engineering and value-added services Top executive: Greg Brown, country manager of operations for Australia Clients: Four consumer/retail clients

Sydney, Melbourne, Brisbane and Perth, and through Living Edge, a Herman Millerowned commercial and retail distributor for Australia. Employees: Approximately 60 Products: Furnishings and interior systems and related services for the workplace, residential, health care and educational environments Top executive: Brian Walker, CEO of Herman Miller Inc.

Federal-Mogul Corp. Based: Southfield Operations: A distribution center-aftermarket office in New South Wales Employees: Approximately 40 Top executives: Paul Jefferson, president, Asia Pacific, Federal-Mogul Vehicle Components Segment

Penske Automotive Group Based: Bloomfield Hills Operations: Operates through Penske Commercial Vehicles, which is based in Brisbane Employees: 280 Products: Commercial vehicles (Western Star trucks, MAN trucks and buses and Dennis Eagle refuse collection) Top executive: Paul Glavac, president of Penske Commercial Vehicles More information: Penske Automotive Group acquired the commercial vehicle business of Transpacific Industries Group Ltd., which operates in Australia and New Zealand, in August.

GM Holden Ltd.

Dow Australia and New Zealand employs about 400.

Dow Chemical Co. Based: Midland Operations: Head office for Dow Australia and New Zealand in Altona, other facilities in Camberwell, Geelong, Brisbane, Perth, and Sydney in Australia, and Auckland, New Plymouth and Otahuhu in New Zealand Employees: About 400 Products: Performance materials, performance plastics, advanced materials, agricultural sciences, microbials, functional materials, building products, and water solutions and processes divisions. Also: AgroFresh Inc. and Dow Oil, Gas & Mining offices Top executive: Craig Arnold, managing director of Dow Australia and New Zealand

Based: Detroit Operations: Headquarters in Port Melbourne; an engine manufacturing plant, vehicle manufacturing plant in Adelaide; and more than 230 dealerships nationwide Employees: Approximately 3,500 Products: 45 models from six vehicle body styles and two core vehicle architectures for domestic and export customers Top executive: Mike Devereux, chairman and managing director More information: Holden is one of seven fully-integrated General Motors Co. operations. GM announced in December that it would be closing its Australian manufacturing by the end of 2017.

Herman Miller Inc. Based: Zeeland Operations: Commercial, retail sales and service, and furniture rental operations in

Perrigo employs about 150 near Perth.

Perrigo Co. Based: Allegan Operations: Manufacturing, warehousing, laboratories and office space in Balcatta, a suburb of Perth Employees: About 150 Products: More than 100 individual presentations of products in the Australian market including prescription products, formulated devices, antiseptics, disinfectants and other health care essentials Top executive: Sharon Kochan, executive vice president, international Compiled by Bridget Vis

20140210-NEWS--0022-NAT-CCI-CD_--

2/6/2014

3:59 PM

Page 1

Page 22

February 10, 2014

C RAINâ&#x20AC;&#x2122; S DETROIT BUSINESS

CRAIN'S LIST: LARGEST GREATER MICHIGAN EMPLOYERS Ranked by outstate full-time employees Company Address Rank Phone; website

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 10. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

Top executive

State of Michigan

Richard Snyder governor

Spectrum Health Systems Inc.

Richard Breon president and CEO

P. O. Box 30014, Lansing 48909-7514 (517) 373-0184; www.michigan.gov

100 Michigan Ave. NE, Grand Rapids 49503 (616) 391-1774; www.spectrumhealth.org

Outstate employees Jan. 1, 2014

Outstate employees Jan. 1, 2013

Michigan employees Jan. 1, 2014

35,135

35,500

44,853

State government

17,324

15,955

17,436

Health care system

Worldwide employees 2014 Type of business

â&#x2013; Biggest increase: 8.6%

McLaren Health Care Corp.

Philip Incarnati president and CEO

16,891

17,400

19,500

Integrated health care delivery system

General Motors Co.

Mary Barra CEO

14,443

14,536

44,280

219,000

Automobile manufacturer

CHE Trinity Health B

Richard Gilfillan president and CEO

12,122

11,175

25,809

87,813

Health care system

Michigan State University

Lou Anna Simon president

11,050

10,850

11,050

Public university

CMS Energy Corp.

John Russell president and CEO

6,360

7,200

Energy company

The Dow Chemical Co.

Andrew Liveris president, chairman and CEO

6,000

52,000

Sparrow Health System

Dennis Swan president and CEO

5,249

5,220

5,249

Alticor Inc. (Amway)

Steve Van Andel chairman Doug DeVos president

5,000

21,000

Consumer products and business opportunities supported by a global agribusiness, manufacturing and logistics supply chain

Perrigo North America C

Joseph Papa chairman, president and CEO, Perrigo Co. plc

4,600

9,800

Pharmaceuticals

Nexteer Automotive Corp.

Laurent Bresson president and COO

4,300

4,295

4,300

10,428

Steering and driveline tier-one automotive supplier

Dow Corning Corp.

Robert Hansen chairman, CEO and president

4,200

4,600

4,200

11,000

Silicon-based materials and technology

Grand Rapids Public Schools

Teresa Weatherall Neal superintendent

3,500

Pre-K to 12 education system

Herman Miller Inc.

Brian Walker president and CEO

3,497

3,500

6,800

Commercial office, health care, education and residential furniture

Covenant HealthCare

Spence Maidlow president and CEO

3,465

3,458

3,465

Health care system

Munson Medical Center

Alfred Pilong president

3,434 D

3,434

3,434 D

Health care

Kellogg Co.

John Bryant president and CEO

3,293

3,314

3,437

31,000

Food processor

Borgess Health

Paul Spaude president and CEO

3,284

3,434

3,284

Health care system

Grand Valley State University

Thomas Haas president

3,225

3,171

3,228

Allegiance Health E

Georgia Fojtasek president and CEO

3,106

Western Michigan University

John Dunn president

3,067

3,072

DTE Energy Co.

Gerard Anderson chairman and CEO

3,008

2,917

9,446

10,149

Energy and energy-technology company

Genesys Regional Medical Center

Elizabeth Aderholdt president and CEO

2,923

3,264

Hospital and health system

Stryker Corp.

Kevin Lobo president and CEO

2,800

2,700

2,800

24,000

Medical technology company offering innovative medical technologies, including reconstructive, medical and surgical, and neurotechnology and spine products

G3235 Beecher Road, Flint 48532 (810) 342-1100; www.mclaren.org

300 Renaissance Center, Detroit 48265 (313) 556-5000; www.gm.com

20555 Victor Parkway, Livonia 48152 (734) 343-1000; www.trinity-health.org

East Lansing 48824 (517) 355-1855; www.msu.edu

1 Energy Plaza, Jackson 49201 (800) 477-5050; www.cmsenergy.com

2030 Dow Center, Midland 48674 (989) 636-1000; www.dow.com

1215 E. Michigan Ave., Lansing 48912 (517) 364-1000; www.sparrow.org

7575 Fulton St. E., Ada 49355-0001 (616) 787-1000; www.amway.com

515 Eastern Ave., Allegan 49010 (269) 673-8451; www.perrigo.com

3900 E. Holland Road, Saginaw 48601-9494 (989) 757-5000; www.nexteer.com

2200 W. Salzburg Road, Midland 48686 (989) 496-4000; www.dowcorning.com

1331 Franklin SE, Grand Rapids 49501-0117 (616) 819-2000; www.grps.org

855 E. Main Ave., Zeeland 49464 (616) 654-3000; www.hermanmiller.com

1447 N. Harrison, Saginaw 48602 (989) 583-0000; www.covenanthealthcare.com

1105 Sixth St., Traverse City 49684 (231) 935-5000; www.munsonhealthcare.org

1 Kellogg Square, Battle Creek 49016 (269) 961-2000; www.kelloggcompany.com

1521 Gull Road, Kalamazoo 49048 (269) 226-7000; www.borgess.com

1 Campus Drive, Allendale 49401 (616) 331-5000; www.gvsu.edu

205 N. East Ave., Jackson 49201 (517) 788-4800; www.allegiancehealth.org

1903 W. Michigan Ave., Kalamazoo 49008 (269) 387-1000; www.wmich.edu

1 Energy Plaza, Detroit 48226 (800) 235-8000; www.dteenergy.com

One Genesys Parkway, Grand Blanc 48439 (810) 606-5000; www.genesys.org

2825 Airview Blvd., Kalamazoo 49002 (269) 385-2600; www.stryker.com

Specialty chemicals, advanced materials, agrosciences and plastics

Health care system

Public university

Health care system

Public university

This list of Greater Michigan employers encompasses companies with a significant employee presence in Michigan but outside of Wayne, Oakland, Macomb, Livingston or Washtenaw counties. Number of full-time employees may include full-time equivalents. It is not a complete listing but the most comprehensive available. Crain's estimates are based on industry analyses and benchmarks, news reports and a wide range of other sources. Unless otherwise noted, information was provided by the companies. Actual revenue figures may vary. NA = not available. B Catholic Health East and Trinity merged in May 2013 to form CHE Trinity Health. C Perrigo Co. acquired Elan Corp. plc Dec. 18, 2013. Perrigo Co. and Elan Corp. plc have been combined under the global name Perrigo Co. plc, incorporated in Ireland. D As of July 1, 2013. E Signed letter of intent Dec. 3 to be acquired by UM Health System. LIST RESEARCHED BY BRIANNA REILLY

20140210-NEWS--0023-NAT-CCI-CD_--

2/6/2014

4:43 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 10, 2014

CALENDAR TUESDAY FEB. 11 Macomb Business Awards. 8-10 a.m, Sterling Heights Regional Chamber of Commerce & Industry. Recognizing Macomb County businesses that are leaders in workforce development, energy efficiency, diversification, philanthropy and new endeavors. With opening remarks by Gov. Rick Snyder; keynote speaker Tom LaSorda, former CEO of Chrysler Group LLC and founder of IncWell LP; emcee Huel Perkins, news anchor, WJBK Fox-2 Detroit; and awards presentation by Macomb County Executive Mark Hackel. Andiamo Italia, Warren. $20. Contact: Maria Zardis, (586) 469-6489; email: maria.zardis@macombgov.org; website: www.suscc.com.

WEDNESDAY FEB. 12 Gen Now: Communicating Among Generations. 8:30-11:30 a.m. Michigan Diversity Council. With Lance Richards, vice president, office of innovation, and Jason Morga, vice president, Americas marketing, Kelly Services Inc., exploring communicating, motivating and creating a workplace that brings out the best in each generation. Wayne State University Oakland Center, Farmington Hills. $40 members, $60 nonmembers. Contact: Tatiana Grant, (248) 514-9620; email: tgrant@infusedpr.com; website: www.michigandiversitycouncil.org.

DUGGAN: CRAIN’S NEWSMAKER OF THE YEAR FOR 2013 Join Crain’s Detroit Business to hear our Newsmaker of the Year for 2013, Detroit Mayor Mike Duggan, address the Southeast Michigan business community. The event takes place 11:30 a.m.1:30 p.m. Feb. 25 at MotorCity Casino Hotel. The luncheon also will honor the winners of Crain’s 2013 BestManaged Nonprofit and the Newsmaker Student Scholarship awardee. Tickets are $65 for individuals, $55 for students and $70 each to reserve a table for 10. For more information, call Kacey Anderson at (313) 446-0300, email her at cdbevents @crain.com, or visit www.crainsdetroit.com/events. Join the conversation with #crainsnewsmaker. tive strategies and online tools help campaigns sway public decision and realize political relevance. Automotive Industry Action Group, Southfield. $25 members, $35 nonmembers, $20 students; $5 more at the door. Contact: Deniella Ortiz-Lalain, (248) 8353636; email: dol@optechus.com; website: www.womcomdetroit.org.

Have a specific need? Our candidates have specific training.

Business

Computers

Health

Engineering/Technology

FEB. 13 Economic Forecast Breakfast. 8-9:30 a.m. Birmingham Bloomfield Chamber of Commerce. With Paul Traub, business economist, Federal Bank of Chicago Detroit Branch; and Sam Valenti III, president and CEO, Valenti Capital LLC, and chairman, World Capital Partners. Townsend Hotel, Birmingham. $40 BBCC members, $50 nonmembers; $290 corporate table of eight. Contact: Andrea Kaczmarek, (248) 430-7688; email: andreak@bbcc.com; website: www.bbcc.com.

UPCOMING EVENTS Powerful Political PR. 5:30-8 p.m. Feb. 18. Association for Women in Communications-Detroit Chapter, Logos Communications. With Christine Bricker D’Angela, senior consultant, Logos Communications; Kelly Rossman-McKinney, CEO, Truscott Rossman LLC; and Graham Davis, director of digital media, Truscott Rossman. Learn how savvy messaging, innova-

Education & Human Services

When you have a position to fill, you want someone who’s qualified and ready to hit the ground running. Baker College’s HireQualified® can help. Our candidates are highly trained in very specific areas by instructors who are working professionals. They know what’s needed in their industries and teach practical experience over theory. The service is free—the result is just the person you are looking for. To learn more about how we can help you find the best candidate for your needs, or to schedule a meeting at your place of business, visit HireQualified.com.

Free recruiting services from America’s leading career college.

HireQualified.com

Grow Your Business Through MBE Certification and Minority Business Development Agency Services. 3-5 p.m. March 5. Asian Pacific American

THURSDAY

Chamber of Commerce, Michigan Hispanic Chamber of Commerce. With Diane Lee, project director, Detroit Minority Business Development Agency. Free; open to all. Register by March 4. Contact: Christina Mui, (248) 430-5855; email: christina@apacc.net; website: www.apacc.net.

Great Lakes Business Intelligence & Big Data Summit. 8 a.m.-5 p.m. March 13. Wit Inc. Presentations will include two tracks of business intelligence case studies and best practices, and one track of technology innovations from companies such as Qliktech, Informatica, Hortonworks, Microsoft and iDashboards. With Rebecca Costa, sociobiologist and author of The Watchman’s Rattle, and Gary Robinson, program director, IBM’s Big Data organization; and others. Troy Marriott, Troy. $129. Contact: Amanda Mansour, (248) 641-5900 ext. 244; email: bisummit@ witinc.com; website: www.greatlakes bisummit.com/2014.

Offering more financing

SOLUTIONS than ever before. Hennessey Capital is now Hitachi Business Finance We successfully partner with businesses looking for new opportunities to grow with a new world of creative financing options. 248.658.1100

Page 23

Sh &

THE MICHIGAN DEAL MAGAZINE SUPPLEMENT | ISSUE DATE: March 10

featuring

The Biggest

ow c Sp a s e Y ac o u ec rB los i g g es e s Feb t D . 1 eals 4. !

Statewide M&A Deals of 2013

A comprehensive list of major M&A deals in 2013 The size of the deals The companies involved The deal advisors In-depth coverage of the M&A environment in Michigan Stories featuring prominent dealmakers Their thoughts on the state of dealmaking D IS TRIBUTION

PA RTN ERS

ZZZ.+LWDFKL%XVLQHVV)LQDQFH.FRP

For advertising information, contact Marla Wise at 313-446-6032 or mwise@crain.com. ISSUE DATE: March 10 | AD CLOSE: Feb. 14

Don’t miss getting in front of this influential audience of deal makers!

123,000 Nationwide Distribution

20140210-NEWS--0024-NAT-CCI-CD_--

2/6/2014

4:03 PM

Page 1

Page 24

February 10, 2014

CRAIN’S DETROIT BUSINESS

PEOPLE ARCHITECTURE Wayne Chubb to vice

president,

Hobbs + Black Associates Inc., Ann Arbor, from senior associate.

FINANCE

CONSULTING

Terry Dykhouse to shareholder, Doeren Mayhew & Co. PC, Troy, from tax

Jim Ruthven to vice president of strategy and busi-

Chubb

Inc., Northville, from territory services executive, IBM Corp., Detroit. Rick Klein to principal, Walker Parking Consultants, Ann Arbor. He continues as director of operations.

ness development, Preferred Solutions

manager. Others moving to shareholder: Dawn Jasinski from audit manager; Jason LeRoy from manager, valuation and litigation support group; Aaron Partridge from audit manager;

BUSINESS DIARY

and David Ritter from consulting manager.

LAW Mike Cooney, member, to director, litigation department, Dykema Gossett PLLC, Detroit. Also, Jin-Kyu Koh, member, to group leader in the business services department, continues as leader of the Korean business team. Kevin Zielke, member, to chair of the financial review committee, continues as leader of the pharmaceutical team.

THE MILLER LAW FIRM Changing the Odds in our Clients’ Favor

Acker

The Miller Law Firm is Recognized as a Leader in Complex Business Litigation Q

Automotive Supplier Counseling

Commercial and business lawsuits

Employment litigation

Shareholder and partnership disputes Referral fees honored on contingency fee cases

950 West University Drive, Suite 300 Rochester, Michigan 48307

248-841-2200

millerlawpc.com

Stothers

Jordan Acker to manager, election and campaign finance law section, Goodman Acker PC, Southfield, from attorney-adviser and briefing book coordinator, U.S. Department of Homeland Security, Washington, D.C. Melonie Stothers to member, Barris, Sott, Denn & Driker PLLC, Detroit, from associate. Brendan Cahill to director, automotive industry group, Dykema Gossett PLLC, Bloomfield Hills, from leader, corporate finance practice group. He is a member at the firm. Daniel Aleksynas to shareholder, Dobrusin Law Firm PC, Pontiac, from associate.

IN THE SPOTLIGHT The Henry Ford has named Brent Ott as CFO. Ott had served as manager of financial strategy and analysis. He succeeds Denise Thal, who left to become executive vice president for business operations at Planned Parenthood of Michigan. Ott Ott, 29, earned a Bachelor of Business Administration in accounting from the University of MichiganDearborn. He joined the staff of The Henry Ford in 2000, and in 2009 he was honored for his role in implementing The Henry Ford’s financial system.

MANUFACTURING Tom Reiter to vice president of information services, Carhartt Inc., Dearborn, from president and owner, Nover LLC, Kansas City, Mo.

Joseph Mejaly Reiter

to vice president and gener-

al manager, AxleTech International LLC, Troy, from vice president and president of aftermarket and trailer group, Meritor Inc., Troy.

It’s a Michigan thing You take pride in working hard … … and it shows. That’s why Rehmann is honored to be part of Pure Michigan Business Connect, helping Michigan businesses reach the next level of their exciting futures. Contact us today to learn more about our commitment to Michigan, business and you.

ACQUISITIONS Agree Realty Corp., Farmington Hills, acquired Cannon Station, Fort Oglethorpe, Ga. The 44,000-square-foot strip mall is net leased to Michael’s, Dollar Tree and Aldi. The purchase price was approximately $5.8 million. Website: www.agreerealty.com. Gilbarco Veeder-Root, Greensboro, N.C., technology provider for retail and commercial fueling operations, acquired the national gas pump video network of Outcast Media, Santa Monica, Calif., with an office in Berkley. Outcast will operate as the media business unit of Gilbarco. Websites: www.outcast.net, www.gilbarco.com.

CONTRACTS Front Street PR, West Bloomfield Township, an online marketing agency, launched a website redesign and consulting and email marketing services for Sheryl Shenefelt, Birmingham, author, speaker and nutritionist. Websites: www.sheryl shenefelt.com, www.frontstreetpr.com. Danlaw Inc., Novi, a provider of automotive electronics and engineering services, named CANsystem Co Ltd., Seongnam, South Korea, a technical provider to the Korean auto industry, as a reseller for Mx-Suite, an embedded software test tool designed to help automotive engine control unit module suppliers improve efficiency and quality. Website: www.danlawinc.com.

Brogan & Partners Advertising & Consultancy Inc., Birmingham, added two clients to its health care roster: Pharmacy Advantage Specialty Pharmacy, Troy, and Prezio Health, Madison Heights. Websites: www.brogan.com, www.preziohealth.com, www.phar macyadvantagerx.com. Graphic Resource Group, Troy, a point-of-sale marketing company, was awarded a five-year U.S. Navy contract to manage its Fleet & Family Readiness branded merchandise program. GRG developed and will maintain and manage a Web-based online store and inventory. Website: www.graphicre source.com. MRPR Group PC, a certified public accounting and business advisory firm with offices in Southfield and Ann Arbor, contracted with Identity Graphics Design, Warren, to develop MRPR’s new brand identity and update its website. Website: www.mrpr.com.

EXPANSIONS Ricardo Inc., Van Buren Township, the U.S. subsidiary of Ricardo plc, a consultancy for engineering, technology, project innovation and strategy, announced that it has completed the asset purchase of a technical center in Santa Clara, Calif., to be used for developing and testing capabilities for after-treatment systems used with gasoline, diesel, dual-fuel and natural gas-powered engines, as well as for fuel cell development and testing. Website: www.ricardo.com.

Employee Benefit Consulting Group LLC, Orland Hills, Ill., opened an office

Phil Bahr, CPA, CGMA SE Regional Managing Principal phil.bahr@rehmann.com | 248.458.7900

at 103 E. Liberty St., Suite 212, Ann Arbor. Website: www.ebenefitconsult ing.com.

NEW PRODUCTS BorgWarner Inc., Auburn Hills, an-

Steven B. Maltzman, CPA, CGMA SE Regional Managing Principal steven.maltzman@rehmann.com | 248.579.1100

nounced its next-generation 6.35mm inverted tooth silent engine timing chains are launching on engines from Mitsubishi, Suzuki, Hyundai, General Motors Korea and one Chinese automaker. The chain is designed to reduce friction and improve fuel economy. Website: www.borgwarner.com.

NEW SERVICES Colombo & Colombo PC, Bloomfield

Detroit, Ann Arbor, Farmington Hills, Troy rehmann.com

866.799.9580

Hills, a law firm specializing in auto dealership law, launched a new website, www.colombopc.com. Baskin-Robbins, Canton, Mass., launched online ordering of ice cream cakes for metro Detroit customers at www.baskinrobb ins.com/onlineordering.

20140210-NEWS--0025-NAT-CCI-CD_--

2/7/2014

3:55 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 10, 2014

Page 25

Rivertown seniors development in 2nd phase BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

Presbyterian Villages of Michigan is in the second phase of development at its $43.5 million Rivertown Neighborhood near Detroit’s east riverfront. After opening an affordable assisted living complex in one of two former Parke-Davis manufacturing facilities on the Detroit campus last spring, Southfieldbased PVM and Chelsea-based United Methodist Retirement Communities Inc. began construction of a $7.5 million independent senior apartment building in the fall. The four-story, 50-unit building, which is just under 50,000 square feet, is expected to open in July. The development, and existing Rivertown complex, is at McDougall Avenue and Franklin Street, two streets south of Jefferson Avenue. “The demand for that building has been the greatest we’ve ever seen,” said PVM President and CEO Roger Myers. More than 300 people have expressed interest in living there, but PVM Myers won’t begin taking applications until late March, he said. With a $2 million grant from the Baltimore-based Harry and Jeanette Weinberg Foundation in hand, PVM is getting ready to begin renovations on a second existing building on the site in August. The 20,000-square-foot building, adjacent to the assisted living center, will be home to the Harry and Jeanette Weinberg Green Houses on its upper floors. An alternative to nursing home care, the houses will provide a home-like setting, with 10-12 private rooms for senior citizens, a communal kitchen and living areas, social programming and 24-hour nursing care. PVM plans to put a cafe on the ground floor. The goal is to open the houses

COURTESY OF PRESBYTERIAN VILLAGES OF MICHIGAN

Presbyterian Villages of Michigan is in the midst of the second phase of development of Rivertown Neighborhood. An independent living apartment building (upper left) is under construction and expected to be completed in July. PVM plans to begin renovating an existing building on the site to provide an alternative to nursing home care.

and community cafe by late 2015 or early 2016, contingent on PVM’s ability to raise the final $2.5 million needed to fund the secondphase projects, Myers said. The total cost of the second phase is projected to be $13 million, Myers said. As part of the new developments, PVM also plans to create additional parking to the north of the campus and a garden and park area — the Rivergarden Community Park — on property leased from the UAWGM Center for Human Resources, Myers said. The hope is to complete at least part of the park this summer. The park will be just south of the Rivertown development on the grounds of the UAW center. “We really see this Rivergarden as being an asset, a resource for the surrounding area even though it focuses on the Rivertown neighborhood,” Myers said, noting conversations with the Detroit RiverFront Conservancy are already underway to look for ways to tie in Riverwalk programming with the new park. The second-phase projects are part of a $43.5 million senior community development that’s been four years in the making. A $2 million grant from the Community Foundation for Southeast Michigan from the Detroit Neighborhood Fund

provided seed money for the project. Other sources of funding for the first phase included Detroit, Wayne County, the state and federal governments, the Masco Corp. Foundation, the Kresge Foundation and the Weinberg Foundation with another $250,000 grant, brownfield tax credits and low-income housing tax credits. Subsidized by the U.S. Department of Housing and Urban Development, the assisted living apartments are fully occupied by 80 low-income seniors. PVM worked jointly with UMRC on the assisted living piece of the project and with Henry Ford Health System on the Center for Senior Independence, a health and wellness center located on the first floor. The center provides health and wellness care to seniors living in the surrounding neighborhoods with transportation to the center. Also in the building: a pharmacy, beauty salon and large commercial kitchen for meal preparation for residents. Job creation was always a big part of PVM looking at the investment being made, in addition to serving the elders, Myers said. PVM projects that the community, when complete, will create more than 200 full-time jobs, rang-

MARKET PLACE

INDUSTRIAL EQUIPMENT

BUSINESS OPPORTUNITIES

TAYLOR FORKLIFT 120,000 LB.

ATTENTION MARKETING COMPANY OWNERS! ENTREPRENEUR LOOKING TO BUY

(Rigger Special)

For Sale or Lease Hydraulic Boom & Counter Weights Jack ~ 248-705-5897 jvdonaldson@aol.com

Call Us For Personalized Service: (313) 446-6068 FAX: (313) 446-0347 E-MAIL: cdbclassified@crain.com INTERNET: www.crainsdetroit.com/section/classifieds

See Crainsdetroit.com/Section/Classifieds for more classified advertisements

A privately held, international marketing company is looking to expand through acquisition. If you are looking to sell your marketing firm, let’s talk. Contact the owner directly, 100% confidential. KKing@ContinuityPrograms.com (248)891-2020

MANUFACTURING SERVICES

Sherri Welch: (313) 446-1694, swelch@crain.com. Twitter: @sherriwelch

Plymouth Plastipak Packaging Inc. has emerged as the successful bidder for the U.S. assets of blow molder Constar International Holdings LLC. Plastipak will pay $102.45 million for Constar’s assets, according to a Feb. 6 asset purchase agreement. According to court documents, Judge Christopher Sontchi in U.S. Bankruptcy Court in Wilmington, Del., is scheduled to approve Plastipak’s bid on Feb. 10. Trevose, Pa.based Constar had filed for Chapter 11 protection from creditors in December. Plastipak was North America’s No. 3 blow molder in Plastics News’ most recent ranking, with 13 plants and sales of $1.65 billion. The sale of Constar’s assets started in bankruptcy court, but they ended up in a bidding war between two of North America’s largest blow molders. Hawthorn, Australia-based Amcor Ltd. originally looked like it was going to end up the winner. It was the stalking horse bidder when Constar first filed for protection on Dec. 19. Amcor is North America’s largest blow molder, according to Plastics News data — the company’s regional headquarters is in Ann Arbor. But Constar said the transaction with Amcor was subject to higher and better offers, and within a few weeks after the deal was announced, two other potential bidders emerged: Plastipak and Atlanta-based CKS Packaging Inc. Both filed objections with the court over the rules Amcor and Constar had set up for the sale. On Feb. 6, Amcor announced that it was dropping its bid for Constar. Industry sources suggest Constar would have been a relatively small bolt-on acquisition for Amcor. According to Amcor, Constar’s U.S. business now has six plants and annualized sales of about $190 million. From Plastics News

REAL ESTATE COMMERCIAL PROPERTIES

WATERFRONT PROPERTY

PETOSKEY CONDOS

CKX Supplier Solutions • • • •

Specializing in Chrysler Supplier Issues Production Tooling Veriﬁcation Engineering/Sales/Purchasing Services ED&D/Prototype Tooling

Cathy Kirk

ckxllc.com 586-612-9363 cathykirk@ckxllc.com

MISCELLANEOUS SELL US YOUR OLD INVENTORY We buy all kinds of surplus and obsolete inventories, raw materials, machinery, equipment and scrap.

CHEAP PARKING! Detroit (New Center) 1200 Parking Spaces Corporate or Individual 6 Minute Shuttle Service to Downtown 3 Minutes to DMC Fully Staffed Garage Pconkey@hdcpartners.com

ing from doctors, nurses, therapists, resident aides, food service and other service staff members, he said. So far, 110 jobs have been created through the affordable assisted living facility and Center for Senior Independence.The community is expected to provide housing for more than 150 senior citizens and to serve an additional 600 through the health and wellness center, café, salon and river garden, said Paul Miller, president of the Presbyterian Villages of Michigan Foundation. The Rivertown Neighborhood is a very strong anchor on the near-east side of Detroit, said Mariam Noland, president of the Community Foundation for Southeast Michigan. The community keeps elderly people in Detroit in a safe environment and makes “first-class services” available to low-income residents, she said. With the Weinberg Foundation grant, the project has been able to attract national foundation dollars, Noland said, and could be replicated in other places. “I think this is a model for the country,” she said.

Plastipak Packaging winning bidder for Constar

JP Kraft Jr. 734-427-6600 | jpkraft@corepg.com

INVESTMENT PROPERTY

AVAILABLE NOW Taylor/Romulus Area Near Detroit Metro Airport 4,000 to 80,000 sq. ft. Ideal for logistics, mfg., service co., distribution, office warehouse etc. Call for Availability Yvon Rea 734-946-8730 or visit our website www.reaconstruction.net

CRAIN’S CLASSIFIEDS WORK! To Place Your Ad Call (313) 446-6068 or Fax (313) 446-0347

• • • • • •

Harbor Watch...Lake Views! Highest Quality Design-Build Owners “Love” HW! Healthy Association Walk Everywhere From $299,000 to $449,000

Joe Blachy (231) 409-9119

Email: joe@joeblachy.com Website: joeblachy.com Call anytime between 7am & 10pm 7 days a week! 420 Howard St., Petoskey, MI 49770

20140210-NEWS--0026,0027-NAT-CCI-CD_--

2/7/2014

5:21 PM

Page 1

Page 26

February 10, 2014

CRAIN’S DETROIT BUSINESS

Flagstar: Retrenched bank putting its legacy issues behind ■ From Page 1

around. But is the pain really over? Yes, says bank President and CEO Alessandro DiNello. “I’m done cutting,” DiNello told Crain’s. “It pains me that we’re impacting so many people, but I’m extremely optimistic about the future. We certainly hope we don’t have to make any further workforce reductions. “We had to reDiNello trench, but now we’re at the point where we can rock-and-roll. We can go from derisking the business and cleaning things up to growing. That’s when it gets fun.” There wasn’t much fun a few years ago. Flagstar had its roots in Oak Hills Mortgage, founded by Tom Hammond in 1981 and later renamed First Security Mortgage. A sister company, First Security Savings Bank, which would eventually become Flagstar, was formed in 1987. The business was built on mortgage originations and servicing and enjoyed years of go-go growth, but it also built a branch network offering general banking services. By 2009, the bank was reeling in the wake of the housing collapse. It went from a top state performer that consistently had returns on equity of 20 percent to one drowning in red ink. It would be 15 straight quarters of losses, totaling more than $1.1 billion, before Flagstar would finally get into the black, in the second quarter of 2012. A stock that traded as high as $15.49 in 2006 hit a low in 2009 of 61 cents. Until the bank did a 10-for-1 reverse stock split, it faced delisting from the New York Stock Exchange. Hammond, who was Flagstar chairman at that point, and son Mark, president and CEO, left the bank that year, soon after MatlinPatterson Thrift Investments LP, a New York City-based private equity fund, became a major shareholder. It eventually invested $1 billion in the bank and owns 63 percent of the stock.

Loose lending? Cleveland’s National City Bank and Flagstar became the local poster children for mortgage excesses. National City got heavily into subprime mortgages, but unlike other banks, it didn’t try to sell them off, either to Fannie Mae or Freddie Mac or as bundled securities to investors. It decided to keep them on its own books and in 2008 found itself in a fire sale to Pittsburgh-based PNC Financial Services Group Inc. Flagstar managed to keep afloat, thanks to periodic infusions of cash from MatlinPatterson, which brought in Joseph Campanelli, a veteran New England banker, to replace the Hammonds. Campanelli was critical of the bank’s leadership under the Hammonds, and press releases by the bank frequently referred to “legacy issues” created under previous management. Today, Mark Hammond acknowledges that Flagstar and

SLEW OF SUITS: FLAGSTAR’S PAID MORE THAN $463M Since the beginning of 2012, Flagstar Bancorp Inc. has lost lawsuits or agreed to settle claims totaling more than $463 million over charges of shoddy or fraudulent underwriting practices during the pre-recession housing and refinancing boom. In February 2012, the bank reached a $133 million settlement with the U.S. Department of Housing and Urban Development to settle a lawsuit in the Southern District of New York, admitting it made false claims that caused the Federal Housing Administration to issue insurance on loans that were ineligible. Last February, the bank lost a federal lawsuit in the Southern District of New York and was ordered to pay $90.1 million to a bond insurer, New York City-based Assured Guaranty Municipal Corp., over the same issues in 2005 and 2006. In May, the bank agreed to pay $110 million to settle a federal lawsuit in the Southern District of New York accusing it of making misrepresentations to Armonk, N.Y.-based MBIA Inc. to insure mortgage-backed securities that defaulted. In November, Flagstar announced a settlement of $121.5 million with the Federal National Mortgage Association, more commonly known as Fannie Mae, to resolve demands that the bank repurchase defaulted loans that were sold from 2000 to 2008. In December, the bank agreed to pay the Federal Home Loan Mortgage Corp., commonly known as Freddie Mac, $8.9 million to resolve repurchase requests for home loans originated between Jan. 1, 2000, and Dec. 31, 2008. — Tom Henderson

The mortgage “ business is very cyclical, and Flagstar has handled this cycle very well.

”

Mat Ishbia, United Shore Financial Services

management got caught up in a general atmosphere of loose lending practices, but said he also believes critics ignore the bank’s good performance in earlier years. “I was blamed over the years for everything that went wrong, and I never responded. If that’s what they wanted to do, fine. But for 15 years, we had returns on equity in excess of 20 percent. Our returns were among the best in the country,” he said. DiNello, who had the title of community bank president at the bank during the Hammonds’ tenure, says that while the Hammonds have taken some shots in recent years, what gets lost in the criticism is that unlike other institutions that focused on mortgages, such as National City, Countrywide Financial and Washington Mutual Bank, Flagstar survived. The Hammonds “built a big franchise that was strong enough that it allowed the bank to survive. The Hammonds took a mortgage business and built a banking brand with a lot of branches. That’s what saved it. MatlinPatterson would never have invested in just a mortgage business,” DiNello said.

The road back Flagstar began showing signs of a turnaround in the second quarter of 2012, when it showed its first profit after the 15 quarters of losses. It has been profitable in all but

one quarter since. And even in that quarter, the fourth quarter of 2012, Flagstar originally reported positive net income. But after losing a judgment of $90.1 in a federal lawsuit in the Southern District of New York, the bank restated its figures to create a cash reserve to handle the judgment. The bank had net income for 2013 of $261.2 million, or $4.37 a share, on revenue of $983 million, up from net income of $62.7 million, or 87 cents a share, on revenue of $1.5 billion in 2012. For the quarter, the bank had net income of $160.5 million, or $2.77 a share, on revenue of $185 million, compared to net income of $12.8 million, or 16 cents a share, on revenue of $213.1 million in the fourth quarter of 2012. The layoffs over the past year were part of a restructuring effort to save $40 million annually and were also the result of a decline in mortgage originations because of rising interest rates and a smaller pool of homeowners who still need to refinance. While Flagstar had $37 billion in originations last year, one of its best years ever, it was off substantially from the $52 billion in originations the year before. Analysts aren’t concerned about the drop-off in volume, which follows an industry trend. Other banks with a large national mortgage business, such as San Francisco-based Wells Fargo & Co. and New York City-based J.P. Morgan Chase & Co., recently announced declines in mortgage originations in the fourth quarter, and the Mortgage Bankers Association predicts mortgage production nationally at $1.15 trillion in 2014, down from $1.7 trillion in 2013 and $2 trillion in 2012. Analysts responded to the report with buy recommendations, praising the bank’s cost-cutting measures and its diversification away from a reliance on mortgage servicing rights for a preponderance of its income. For example, Flagstar continued to strongly increase commercial lending, a thrust begun early in 2011, growing originations by $197 million last year to $433 million. “We think the significant moves (the bank) has taken in the fourth quarter and throughout the year have positioned it well to sustain

Former Flagstar execs find other pursuits Tom Hammond, 70, stays active, according to Mark Hammond, dividing his time between hunting and fishing and two family businesses: RecordBuck Ranch, a 20,000-acre hunting operation in Utopia, Texas; and Mineral Valley LLC, which owns ranch, timber and gold mining operations in Oregon. After being out of the mortgage business for nearly four years, Mark Hammond was named last June as co-chairman of Troy-based United Shore Financial Services LLC. Like Flagstar Bancorp Mark Hammond Inc., the bank Hammond used to run, United Shore is a major national mortgage lender based in Troy. But, Hammond says, he’s not back in the mortgage business full time. Hammond, 48, says his time is spent on Bloomfield Hills-based Alidade Capital LLC, a private equity firm he co-founded in 2011 to invest in office, retail, multifamily and industrial real estate. Alidade is raising its third and largest fund, targeting at least $100 million and expects to have a first close this month or next. It raised a total of $62 million in its first two funds, which have invested in 17 deals involving 36 buildings. — Tom Henderson profitability in any environment,” wrote Paul Miller, an analyst with Arlington, Va.-based FBR Capital Markets & Co., who rated Flagstar stock an outperform. “We continue to believe Flagstar remains well-positioned to exceed street expectations in 2014.” Kevin Barker, an analyst with Washington, D.C.-based Compass Point Research & Trading LLC, and K. Scott Siefers, a managing director at New York City-based Sandler O’Neill & Partners LP, both have rated the stock a buy with a target of $23. Barker wrote that he believes Flagstar has taken actions that “would fundamentally change the structure of its balance sheet and drive down its expense base … (it) is in a much better position to earn an operating profit going forward.” What did the analysts like beyond the bottom-line numbers? The best news was that Flagstar was able to put $410.4 million in deferred federal tax assets back on the books, which raised the bank’s book value from $17.96 a share to $20.66. The same recapturing of tax assets led to Flint-based Citizens Republic Bancorp Inc. recording its best profit ever in the second quarter of 2012, good news that eventually led to its acquisition by Akron, Ohio-

based FirstMerit Corp. last year. In a complicated bit of ledgerkeeping, losses in one quarter can be partially deducted from profits in future quarters, but they can’t be carried on the books as an asset if there doesn’t seem to be a good likelihood of future profits. Flagstar was mired in red so long that those possible future tax deductions had to disappear from the books. But after a string of profitable quarters — voila! — they were allowed to come back on the books as an asset. Because Flagstar knew it was regaining its federal tax assets, it decided to settle $132.3 million in claims by Fannie Mae and Freddie Mac and put the last of its legal disputes over loan quality behind it. The bank also used cash on hand to prepay $2.9 billion in long-term advances at an average interest rate of 3.29 percent from the Federal Home Loan Banks, resulting in a one-time loss of $177.6 million but years of future savings. “The mortgage business is very cyclical, and Flagstar has handled this cycle very well. They’ve done a good job of being competitive and relevant in all markets, wholesale and retail, and that’s not easy to do,” said Mat Ishbia, president and CEO at Troy-based United Shore Financial Services, like Flagstar one of the largest wholesale mortgage underwriters in the country. Mark Hammond has served as co-chair of United Shore since last summer. United Shore had its best year ever in 2013, underwriting 46,124 loans for $10.2 billion, compared to 34,632 loans for $7.2 billion in 2012. And in the third quarter, it ranked as the No. 1 mortgage wholesaler in the country, underwriting $2.3 billion in loans originated by other companies, up 29 percent from the third quarter of 2012. Flagstar was the third-largest wholesaler in the quarter, with $1.8 billion, off sharply from the $4.1 billion it in the same quarter of 2012, when it ranked No. 2.

A plus report One analyst didn’t wait for the earnings report on Jan. 22 to point out the bank’s turnaround. On Jan. 9, Sandler O’Neill released a report it called its “Top Ideas for 2014,” in which its analysts in various industries named their top stock picks. Siefers named Flagstar as his, saying it was undervalued and praising the $130.4 million in settlements the bank had recently announced of buy-back requests from Fannie Mae and Freddie Mac over allegations Flagstar had issued mortgages to borrowers who weren’t qualified. “Getting these legacy liabilities behind FBC should be another milestone for the stock,” Siefers wrote. In fact, the phrase “legacy issues” was a bank favorite in not only news releases, but also in earnings reports and during post2009 interviews with management. The phrase is a direct reference to faulty mortgage loans made during the Hammonds’ tenure. “We didn’t do subprime loans, but we did do the Alt-A loans, what See Next Page

20140210-NEWS--0026,0027-NAT-CCI-CD_--

2/7/2014

5:21 PM

Page 2

CRAIN’S DETROIT BUSINESS

February 10, 2014 From Previous Page

were later called liar loans,” Mark Hammond said. “In retrospect, we should have exited from that business, but it was hard to do. We were making a lot of money. “Common sense disappeared. You saw loan applications where bus drivers were claiming income of $180,000, but you weren’t worried about the loan going bad or losses because property was always appreciating. That world ended so fast. “A lot of people knew credit was too loose. But bankers thought it was a cycle they were going to be able to manage and weather. ‘Yeah, we’ll take the hits, but we have reserves set aside and it will be all right.’ No one saw how deep it would get,” he said. “The focus on consumer protection by regulators, now? That’s a good thing, absolutely. There were a lot of lessons learned,” he said. “Credit was too loose all the way around. And credit was mispriced. There’s blame to go all the way around, from the ratings agencies to the banks to Freddie Mac and Fannie Mae.” Brian Pollice, leader of the financial services practice for Southfield-based Plante Moran PLLC, said that despite the $463 million in settlements it has made, “Flagstar wasn’t doing anything the other big lenders weren’t doing, too. “They were all caught in the same game; they were all caught up in the mortgage web,” Pollice said. Among recent settlements over mortgage loans by big banks, J.P. Morgan announced a settlement of $614 million on Feb. 4; a New York state judge approved an $8.5 billion settlement by Bank of America on Jan. 31; and Wells Fargo & Co. announced a settlement of $591 with Fannie Mae in December. DiNello said that while Flagstar did a big business in what were eventually deemed liar loans, it resisted getting into the subprime business. “Tom and Mark wouldn’t do subprimes. They withstood all the pressure they were getting from industry rags, from the analysts and even from our own bankers to do subprime,” DiNello said. “Our bankers were leaving for other banks. Mark kept saying, ‘We’re in for a bubble. This has been going on too long.’ ”

Thinking small Finally, Flagstar execs and analysts think the legacy issues are a thing of the past and the bank can move forward. DiNello said one growth strategy will be to acquire smaller banks in Michigan. “Smaller banks are in a highregulatory environment, now, and some of them are looking to be acquired. We’ll have some meaningful opportunities,” he said. What won’t be happening will be a return to a predominant reliance on the mortgage business. “We knew we needed to diversify,” DiNello said, “but we were making so much money, it was like a drug.” Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

Page 27

4 Arboretum complex buildings sell for $10M BY KIRK PINHO CRAIN’S DETROIT BUSINESS

A joint venture between Farmington Hillsbased Friedman Integrated Real Estate Solutions LLC and Bloomfield Hills-based Kojaian Management Corp. is the new owner of nearly three-quarters of the 600,000-square-foot Arboretum Office Complex in Farmington Hills. The sale of 428,000 square feet to Arboretum Acquisitions LLC was for about $10 million, according to a real estate source. Bingham Farms-based Core Partners LLC handled the leasing and management of the four buildings prior to the sale. Bingham Farms-based Burton-Katzman LLC owned the buildings. Friedman will take over leasing, manage-

ment and construction operations for four of the five buildings at the complex, located on 12 Mile Road between Farmington and Drake roads, according to Robert Gagniuk, associate of brokerage services for Friedman. Kojaian will not have any role in leasing, management or construction, Gagniuk said. Improvements are planned on the buildings’ exteriors, landscaping and lobbies. The buildings are 26 percent occupied, according a marketing brochure by Jones Lang LaSalle, which represented Burton-Katzman. According to Washington, D.C.-based real estate information service CoStar Group Inc., the four buildings have the following individual occupancy rates: Arboretum I (115,000 square feet): 33 percent leased. Arboretum II (129,000 square feet): 53 per-

cent leased. Arboretum III: (163,000 square feet): vacant. Arboretum R: (20,000 square feet): vacant. Key tenants are Grand Rapids-based Priority Health, Liberty Mutual and Logicalis Inc., according to the marketing brochure. Priority Health, however, is moving from the complex in mid-May to 20,000 square feet in the American Center office building northwest of Franklin and West 11 Mile roads in Southfield. Leasing and management at the 114,000square-foot Arboretum IV building, which was not included in the sale, is handled by Southfield-based Signature Associates Inc., Gagniuk said. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

ArborMetrix: Health data firm gets funding lift ■ From Page 3

serve which kinds of hernias. “There are 300,000 hernia surgeries a year, and there’s no standard operating procedure. There are hundreds of meshes and thousands of procedures,” he said. “For example, at the same hospital, for the exact same kind of hernia, one surgeon will use a $140 mesh. Another will use a $22,000 mesh. “Sometimes a $22,000 mesh might be appropriate. But when? The answer is, we don’t know. There’s no data. The $22,000 mesh is used because it’s had great marketing. About $500 million of them were used last year in this country. But it’s marketing that drove that, not data from outcomes. Clearly, ArborMetrix is going to improve quality of care at a reduction in cost.” The round was led by RPM Ventures of Ann Arbor and joined by Ann Arbor-based Arboretum Ventures, which put up the $1.5 million in seed capital that launched ArborMetrix in 2011; the student-run Wolverine Fund of the University of Michigan’s Ross School of Business; and the Ann Arbor-based Renaissance Venture Capital Fund, which usually invests in other VC firms but made an exception this time to invest in a specific company. “This region has always been strong in health care IT, going back to Medstat in the mid-1990s, but granular, actionable data to improve health care has been the big challenge,” said Chris Rizik, Renaissance Venture’s CEO and fund manager, referring to Medstat Inc., which was sold to the Thomson Corp. in 1994. “What they are doing is going to be front and center with everything that’s going on with Obamacare. It’s a really exciting company,” he said of ArborMetrix. The investment round also included the first investment from the new Detroit Innovate Fund I LP, a sister fund to the First Step Fund, both of which operate under the auspices of Invest Detroit and have been funded by the New Economy Initiative for Southeast Michigan. The First Step Fund invests $50,000 in startup companies. Detroit Innovate is designed to invest much larger amounts to promising area companies and invested $300,000 in ArborMetrix. It has a goal of raising at least $10 million, including commitments of $5 million from NEI and $2.25 million from the Michigan Economic Development Fund.

An idea for a company Early in 2011, John Birkmeyer, M.D., a professor of surgery and chairman of surgical outcomes research at the University of Michigan Health System, approached Tim Petersen, a managing director at Arboretum Ventures he knew through playing tennis, about an idea he thought might turn into a business. There was a crying need for better analytics to judge health care procedures and outcomes,

he said, especially with the impending rollout of the federal Affordable Care Act. Arboretum decided to put in $1.5 million to develop a business plan, hire a few people and see if there was indeed a business there. Paul McCreadie, another managing director at Arboretum, was named chairman of the ArborMetrix board. Other company founders are Justin Dimick, M.D., chief of the division of minimally invasive surgery at the UM Health System, and McCreadie Doug Staiger, a Dartmouth College economist who had developed metrics for measuring the quality of hospital health care. Since then, ArborMetrix has gathered Webbased, cloud-stored data from more than 200 hospitals and more than 5,000 doctors. Blue Cross Blue Shield of Michigan helped ArborMetrix with proof of concept, that it could analyze data from hospitals to help define best practices; to correlate procedures with high infection and complication rates, and help lower costs by showing benefits or the lack thereof of certain procedures or devices. The first joint effort between Blue Cross and ArborMetrix was to do a study on angioplasty, according to David Share, M.D., a senior vice president in charge of the Detroit-based insurance company’s Collaborative Quality Initiatives program. It began with data being shared by six hospitals in Michigan and now involves every hospital in the state that does the procedure. ArborMetrix is gathering and analyzing data for other Blue Cross collaboratives, including a bariatric collaborative, urological surgery collaborative, spinal collaborative and breast oncology initiative. James Montie, M.D. — a professor of urology at UM and co-director of one of the Blue Cross quality initiatives, the Michigan Urologic Surgery Improvement Collaborative, made up of 32 urology centers around the state — said he hopes ArborMetrix data will help clarify a major issue in prostate care: what prostate tumors require surgery and which don’t. Meanwhile, he said, at least four academic papers on prostate care have either been published or are in the process, based on 18 months of ArborMetrix data involving 6,000 patients. “It has surpassed our expectations,” he said. Through various surgical quality initiatives, Blue Cross Blue Shield has identified more than $85.9 million in cost savings statewide in two years of working with ArborMetrix, including a 10 percent reduction in mortality, 29 percent reduction in pneumonia, 33 percent re-

duction in cardiac arrest, 15 percent reduction in length of stay and 18 percent reduction in surgical-site infections, according to Share. One result of data gathered from 36 hospitals in Michigan showed that a device commonly used in vascular surgery, inserting a filter to capture small blood clots, resulted in higher mortality rates and longer patient stays compared to similar surgeries conducted by doctors who didn’t use the filter. After vascular surgeons in the state saw the data and began ending their use of the filters, the mortality rate fell from three in 1,000 operations to one in 10,000. “The project has been extraordinarily successful,” said Share. “The company has shown that it has powerful tools to optimize patient care and outcomes.” ArborMetrix’s customers include the American Association of Endocrine Surgeons, the American Hernia Society, the Pediatric Cardiac Critical Care Consortium and Atrius Health.

Growth curve In July 2012, as data was being compiled and customers were signing on, ArborMetrix was able to recruit Brett Furst, a 23-year veteran of the IT industry, as CEO. Most recently he had been a vice president at Covisint, a business unit at Detroitbased Compuware Corp. that managed large volumes of data collection and sharing for the automotive and health care industries. Those metrics also drove fundraising for the current Furst financing round, which will fund the hiring of developers, customer service reps and sales staff. The company, which moved into about 9,000 square feet in the former MLive headquarters on East Liberty Street in downtown Ann Arbor several months ago, employs 32 and plans to hire about 10 more by the end of the year. Furst said the company plans on the $8.3 million to carry it until the second quarter of 2015, at which point the company should be cash-flow positive and able to fund future growth without further need of equity capital. He said ArborMetrix grew revenue by 108 percent last year to less than $5 million, with projections of up to $10 million this year. “We didn’t start generating revenue until the third quarter of 2012, so revenue is still fairly modest, but we’re on a significant growth trajectory,” said McCreadie. “The rate at which we’ve gone from trying to decide if there was a business to getting customers and getting to market has been really quite remarkable.” Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

20140210-NEWS--0028-NAT-CCI-CD_--

2/7/2014

5:04 PM

Page 1

Page 28

February 10, 2014

CRAIN’S DETROIT BUSINESS

GlobalHue: Diversity-focused ad agency widens its spectrum ■ From Page 1

counts in addition to diversity work. The agency, and others who market to African-American, Hispanic, Asian, gay and youth audiences, are increasingly bidding for general work because America’s demographics are changing — especially racially and ethnically. In a nutshell: The United States is less white, and that trend isn’t changing. Multicultural market-

ing, in the view of some in the ad industry, is becoming just marketing, and more often, products and services will be advertised to what is a diverse audience. “We argue that an agency like us is better equipped for the ‘new’ general market. We are the ideal agency for this ‘new’ America,” said Kelli Coleman, GlobalHue’s executive vice president of communications

We are pleased to welcome

Daniel B. Willard, CFA as Executive Director of our Firm

63 Kercheval Avenue, Suite 222, Grosse Pointe Farms, MI 48236 p.313.882.7100 f. 313.882.8124 pointecapital.com

and a 2008 Crain’s “20 in their 20s” honoree for her work at the company founded by her father, Don. The data backs her up. A 2011 language use survey by the U.S. Census Bureau’s American Community Survey revealed that 21 percent of the domestic population aged 5 and over spoke a language other than English at home — 60.6 million people out of 291.5 million. Immigration and birth and death rates show that whites will be a minority in the U.S. by 2043, according to 2012 Census data released last year and reported by The Associated Press. Advertisers and their agencies have taken note and deploy a mix of diversity and general ads to what they see as an audience increasingly of many races and ethnicities. During the Super Bowl, a CocaCola spot created by Portlandbased Wieden + Kennedy got attention — mostly positive, but also noticeably negative — for being built around people of different races, ethnicities and religions drinking the soda while young women sang “America the Beautiful” in seven languages. Cereal giant General Mills Inc. during the game re-aired a Saatchi & Saatchi New York ad from last year that featured a multiracial family at breakfast eating Cheerios.

Clients, cash GlobalHue has done diversity advertising since Coleman, 62, opened the shop in 1988 as Don Coleman and Associates. It began as a general agency, but today has units aimed at African-American, Hispanic, Asian and emerging youth markets. Coleman renamed the agency in 2002 and then also was among Crain’s Newsmakers of the Year. The client roster for diversity has included several major names: Wal-Mart, Verizon Wireless, American Airlines and the U.S. Navy. GlobalHue recently has picked up assignments from HBO, United Airlines, U.S. Bank, NBA, Microsoft and Pepsi. Chrysler is the big fish, however. GlobalHue has been the automaker’s diversity advertising agency since 2000, but in 2009 it picked up the entire Jeep brand account, then estimated to be worth $50 million. Don Coleman was among the early ad industry executives to recognize the increasing importance of diversity marketing, and he carved out a niche that’s steadily grown. His agency is the largest multicultural advertising firm and Don Coleman the 131st-largest overall by revenue ($64 million in 2012), according to Advertising Age’s annual agency report. “He recognized an underserved market and built a powerful advertising agency with a clear niche under the multicultural and diversity umbrella,” said Tim Smith, president and CEO of Detroit-based Skidmore Studio. “The great work they have done in that space has allowed the agency to flourish.”

Others in the ad industry laud what GlobalHue is doing. Craig Brimm, creative director and founder of Culture Advertising Design in Atlanta, said the Dylan spot is pivotal because it arms GlobalHue with evidence of its ability to execute general campaigns for a major corporation to a worldwide audience. “I think it is such a valuable important spot. It starts a movement,” said Brimm, who blogs about African-American advertising issues at kissmyblackads.blogspot.com. He sees a trend of multicultural agencies seeking more general work. “GlobalHue is one of those companies that can easily be at the forefront,” Brimm said. “It’s going to be good for agencies across the board. It’s a turning point.”

jority” marketplaces such as Miami, where it’s the agency-of-record for both general and Hispanic advertising for Blue Cross Blue Shield of Florida (branded as Florida Blue). “We made the strategic choice (to seek general ad work) when our experience can work in a relevant way in the mainstream,” Mizrahi

Dylan, diversity, difficulty

Playing football to shilling Chevys

It may not be easy for GlobalHue to shed its diversity-only reputation and grab more major general clients, one observer noted, but doing it for Chrysler is a cap feather. “If they can leverage that (Dylan ad) into becoming a major national player, that’s great, but the jury’s still out on whether that will happen,” said Peter DeLorenzo, former longtime auto advertising executive and publisher of the autoextremist.com automotive industry blog since 1999. “(Chrysler Chief Marketing Officer) Olivier François relying on them has given them more credibility.” François is the mastermind behind the ongoing feel-good “Imported From Detroit” campaign that launched in 2011 with the “Born of Fire” ad with Eminem for the Chrysler 200 (as was the Dylan spot). The Dylan commercial wasn’t the first Chrysler Super Bowl work for GlobalHue. While the Dylan commercial was GlobalHue’s first “Imported From Detroit” entry, the firm also drew praise last year for the Oprah Winfrey-narrated Jeep spot tied to returning veterans. Kelli Coleman declined to discuss any aspect of the Chrysler advertisement at the request of the automaker. Skidmore’s Smith said he’s surprised GlobalHue would seek nondiversity work. “We live in an era where the Kelli Coleman agency-of-record relationship is already being redefined by clients and is a tremendous risk for any agency to redefine themselves today,” he said. “But to be fair, advertising is not a business for the risk-averse or the faint of heart. If the direction they are passionate about is a more traditional (agency-of-record) agency, I hope they kick some ass.” Still, more diversity agencies are changing their business model to adopt some form of general marketing work. “This is one of the biggest discussions happening among multicultural agencies in the U.S.,” said Isaac Mizrahi, managing director of Miami-based firm Alma DDB,

GlobalHue was born from Coleman’s wheeling and dealing, but that came after a football career. A Toledo native who played under coach Bo Schembechler at the University of Michigan, and later as a linebacker in the National Football League, Coleman took his first ad industry job in 1978 with Campbell Ewald, then headquartered in Warren. He earned a marketing MBA from Hofstra University while recovering from a knee injury while with the New York Jets. Coleman quickly proved he knew the ad business: Five years after joining Campbell Ewald, he was promoted to senior vice president and management supervisor on the agency’s largest account, Chevrolet. Later that year, he took a job in Chicago as senior vice president and account director with Burrell Advertising, which specialized in diversity advertising. He branched out on his own in 1988. Coleman, who declined to talk for this story, sold a 49 percent stake of his original company to True North Communications in 1999, and New York City-based advertising holding company Interpublic Group of Cos. bought True North two years later. Coleman bought back that stake in 2005 for an undisclosed sum, and the agency remains independent. Acquisitions of San Antoniobased Montemayor & Asociados (then the nation’s fourth-largest Hispanic agency) and Los Angeles-based Innovasia Communications (then the third-largest Asian agency) in 2000 led to the creation of the diversityfocused agency — and led to what was then DaimlerChrysler increasing its spending with the agency. GlobalHue’s headquarters are 109,000 square feet in the Southfield Town Center, with a 40,000square-foot office in New York City’s financial district. The company has about 400 staffers and piles of industry awards garnered over the years — and it has suffered the loss of accounts and layoffs that are typical of the ad industry’s business cycles. Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19

which does Hispanic and general market work. Alma’s strategy is to seek general and Hispanic work for clients in heavily diverse markets, Mizrahi

said. He called them “minority ma-

said. Alma isn’t seeking general national clients, but it sees other diversity agencies, such as GlobalHue, successfully doing that. “There is no one single model,” he said.

20140210-NEWS--0029-NAT-CCI-CD_--

2/7/2014

5:02 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 10, 2014

Page 29

Watch: Maker sets timely design, Kickstarter push ■ From Page 3 His body and bands are made of stainless steel and leather, like most midpriced watches. But for the face, he hired two designers, including one from the College of Creative Studies in Detroit, to develop stylized dials that could be printed on the surface. “The dial is actually printed onto the sapphire lens as opposed onto the surface of the dial, so it floats above the hands,” Reinhold said. “It allows me to print on new designs the way you would print onto a T-shirt. Moving it to the other surface, I get depth by using layering in a different way.” The first batch of watches will be available to backers of his Kickstarter campaign, which allows people to fund an idea in exchange for rewards. The first 100 to pledge at least $245 to Canvas Watch Co. will receive one of the original Canvas watches. After that, customers will have to pledge $295 to receive a watch. Right now, there are seven other watchmakers raising funds through Kickstarter. The challenge, however, is that if you don’t meet your goal — $40,000 in Reinhold’s case — you don’t collect a dime of what was pledged; the money is returned to your backers. Still, Reinhold isn’t worried. He’d always envisioned building a company this way. “I always wanted to go the Kickstarter path to get product to people as quickly as possible and be able to bootstrap it on my own,” said the Novi native. The watches will be produced by Wiegand Custom Watch LLC, a Cleveland-area company known for its own brand of Lum-Tec watches sold by independent jewelers and range from $500 to $900. But eventually, Reinhold would like to bring production to the Detroit area.

Initially, Reinhold looked to China and other Asian countries for manufacturers, but he realized it would be logistically impossible to handle the supply chain. And he should know: Reinhold has a degree in supply chain management from Michigan State University and worked most recently for Palo Alto-based Tesla Motors Inc., handling the interior components of the Model S. “It was insane,” said Reinhold. “I pretty much lived at work. If there was a problem with a supplier, I’d go tell my boss, and he’d say, ‘OK, get on a plane tonight.’ No expense was spared because we were so focused on timing. I would charter planes to pick up parts. I have stories of me hand-carrying parts and getting on planes with parts in the middle of the night.” He loved the life, but when the Model S launched, he realized he might have seen the pinnacle of his career. “I knew it would be the best of the best for me, and I couldn’t see it going up from there,” he said. So he decided it was time to come home to Michigan, where his then-girlfriend, now-wife was living. As part of that agreement, she gave him time to think about starting a business, which had been a goal since college. Reinhold started tinkering at the Allen Park outpost of Menlo Park, Calif.-based TechShop Inc., a maker space that gives people access to 3-D printers and other tools for a monthly membership price of $125. At the time, he didn’t know he wanted to make watches; he just wanted to make something. “I’ve always tried to do little Internet-type companies,” he said “Different ideas for apps — the typical mid-20s ideas that a guy has.

But I wasn’t a developer, so I thought, if I’m going to do my own business, it needs to be building something physical because that’s where my skills are at.” He landed on watches because it was the most difficult thing he could imagine accomplishing. He also saw Shinola succeeding and was motivated by its story, but he had no desire to replicate its business model. He has no intention of building retail stores; he plans to grow slowly and be an online-only brand like Chicago-based Threadless or New York City-based Warby Parker. In fact, it was Threadless that inspired Reinhold’s unique watch faces. The company allows designers to submit graphics for limitededition T-shirts. They can take the same shirt but print anything on it. Reinhold sees the same thing for watches eventually. But, warns Jeffrey Stoltman, associate professor of marketing at Wayne State University, “the breakout is easier said than done. Part of it will be how unique what they are doing is and how unique their narrative is.” Tactically, he warns that Reinhold must have a stellar website from day one, no excuses, if he plans to be an Internet-only retailer. “He’s putting himself out there as a creative enterprise, so that landing page, that platform, has to be all that and a slice of cheese,” Stoltman said. “If it looks staid or plain vanilla, it works against the narrative he’s trying to create.” He thinks Threadless is a good example for Reinhold to mimic because the brand identifies itself, tells its story, from the moment customers land on its page. Getting that story right, defining who you are, from the first viewing is

difficult but imperative because it can help you harness the megaphone of what Stoltman calls the “agents of buzz,” those bloggers and social media types known for finding the cool things first. To capture their attention, Reinhold needs both a well-designed watch and story that makes them special. He needs to be able to identity how Canvas Watch Co. is different and why it’s part of the zeitgeist. “He has to ask himself, ‘Is it an interesting narrative?’ ” Stoltman said. “Some people try to put out a story that they believe is compelling, but nobody else feels that it’s that compelling.” He should also ask if the moment is right for that particular story to be told. “Shinola is interesting because of when its story is being told,” Stoltman said. “It is being told in the middle of this dark period in Detroit specifically and manufacturing generally, which makes it that much more compelling.” Shinola, for its part, is thrilled to see another watch maker in the city. The company is growing, sales are strong and it now employs more than 230, said Shinola President Jacques Panis. Plus, the recent North American International Auto Show drove more people into its flagship store in Midtown. “With more watch manufacturing here, it’s nothing but good for Shinola,” Panis said. “There will be more skilled labor that is going to come to town, more training available, people that are more driven to help figure out how to make components in America. It’s a really good thing, and we’re really excited to hear about it.” Amy Haimerl: (313) 446-0416, ahaimerl@crain.com. Twitter: @haimerlad

Atwater: Out-of-state expansion brewing for beer ■ From Page 1

erations out of state will allow the Detroit facilities to handle the local markets, which are, and always will be, our main priority.” But Rieth said he wants the brewer to grow in scale enough to become a mega-regional player. Last year, Reith invested $2 million into the Rivertown brewery in Detroit, at 237 Jos. Campau St., increasing its capacity to 30,000 barrels annually. In addition, Atwater began producing beer out of Brew Detroit, a 70,000-square-foot contract-brewing center at 1401 Abbott St. in Corktown. Atwater will produce 40,000 additional barrels of beer out of the new facility. This isn’t Rieth’s first foray into contract brewing. Atwater was contracted to brew Kid Rock’s Bad Ass Beer for concerts at DTE Energy Music Theatre. When Rieth took over Atwater in 2005, it produced 800 barrels of beer. This year, Atwater is on pace to produce about 70,000 barrels — generating revenue of up to $10 million. By the end of 2015, Reith said the brewery is expected to produce 100,000 barrels of beer. By 2018, Rieth said, Atwater could produce more than 250,000 barrels. Paul Gatza, director of the Boul-

der, Colo.-based Brewers Association, a nonprofit trade organization, said one of the biggest challenges of expanding is coming up with enough capital to make an impact. “Oftentimes when companies go national, they try to get to as many states as quickly as they can, but they don’t go very deep in markets,” he said. “To do that, you need infrastructure that can support it. And it helps to have representatives in the new market to spread the word.” In addition to infrastructure, Gatza said, an expanding brewery needs to find the right wholesaler that can make or break a brand entering a new territory. “You need expertise in the area of contracting, evaluating and figuring out the local wholesalers’ footprints — which is not always an easy thing,” Gatza said. “If you blow a wholesaler decision, you are screwed in a market, which means your beer could sit in a warehouse while others get crucial shelf space.” Atwater isn’t the only Michigan brewer with expansion in the hopper, but each has a unique business model in mind based on the popularity of certain products. Scott Newman-Bale, CFO of Elk

Rapids-based Short’s Brewing Co., said his brewery, known for its eclectic flavors like Key Lime Pie and Huma Lupa Licious, is also expanding. Newman-Bale said Short’s is investing $6 million to expand its production facility, increasing total output to 60,000 barrels from 39,000. In 2013, Short’s produced 23,600 barrels of beer, generating revenue of $8.4 million. But, unlike Atwater, instead of using the new facility for a national push, Short’s is doubling down on Michigan, Newman-Bale said. “We are the antithesis of expanding in that we only want to be a Michigan brewery,” he said. “I think it allows us to keep our focus on product rather than trying to meet sales goals.” Newman-Bale said there is plenty of room for growth in-state. “The beauty of craft breweries is the individual characters that make up the industry,” he said. “At some point, the story behind the product gets harder to portray on a broader scale.” Scott LePage, adviser for his parents’ Griffin Claw Brewing Co., said the Birmingham brewery for now is focused on mastering Michigan before it expands out of state. (The

LePages also built The District Lofts next door to Big Rock/The Reserve which they also own with partners.) “A lot of breweries can’t even supply the local market, and yet you’ll see them pouring beer in Brooklyn,” LePage said. “We want to do it right locally than go even further into the state before we look out of market.” But LePage said demand is so high for the Griffin Claw beers, especially for its Norm’s Raggedy Ass India Pale Ale, that the brewery added a third shift and is operating at maximum capacity. The brewery, which opened in April 2013, is slated to produce about 15,000 barrels of beer in its first full year of production. “We could make just our IPA full time and not keep up,” LePage said. “Then we are entering six other beers in the marketplace. Finding the balance of how much to brew of what is a difficult thing.” But all that demand means one thing: expansion. “Instead of small growth, we might just want to go big, and that is something we are pursuing,” he said. Nathan Skid: (313) 446-1654, nskid@crain.com. Twitter: @NateSkid

www.crainsdetroit.com EDITOR-IN-CHIEF Keith E. Crain GROUP PUBLISHER Mary Kramer, (313) 446-0399 or mkramer@crain.com ASSOCIATE PUBLISHER Marla Wise, (313) 4466032 or mwise@crain.com EXECUTIVE EDITOR Cindy Goodaker, (313) 4460460 or cgoodaker@crain.com MANAGING EDITOR Jennette Smith, (313) 4461622 or jhsmith@crain.com MANAGER, DIGITAL STRATEGY Nancy Hanus, (313) 446-1621 or nhanus@crain.com MANAGING EDITOR/CUSTOM AND SPECIAL PROJECTS Daniel Duggan, (313) 446-0414 or dduggan@crain.com SENIOR EDITOR/DESIGN Bob Allen, (313) 4460344 or ballen@crain.com SENIOR EDITOR Gary Piatek, (313) 446-0357 or gpiatek@crain.com WEB EDITOR Kristin Bull, (313) 446-1608 or kbull@crain.com WEST MICHIGAN EDITOR Matt Gryczan, (616) 9168158 or mgryczan@crain.com DATA EDITOR Brianna Reilly, (313) 446-0418, bjreilly@crain.com WEB PRODUCER Norman Witte III, (313) 4466059, nwitte@crain.com EDITORIAL SUPPORT (313) 446-0419; YahNica Crawford, (313) 446-0329 NEWSROOM (313) 446-0329, FAX (313) 4461687 TIP LINE (313) 446-6766

REPORTERS Jay Greene, senior reporter: Covers health care, insurance, energy utilities and the environment. (313) 446-0325 or jgreene@crain.com Amy Haimerl, entrepreneurship editor: Covers entrepreneurship and city of Detroit. (313) 4460416 or ahaimerl@crain.com Chad Halcom: Covers litigation and the defense industry. (313) 446-6796 or chalcom@crain.com Tom Henderson: Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho: Covers real estate, higher education, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor: Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Nathan Skid, multimedia editor: Also covers the food industry and entertainment. (313) 446-1654, nskid@crain.com Dustin Walsh: Covers the business of law, auto suppliers, manufacturing and steel. (313) 4466042 or dwalsh@crain.com Sherri Welch, senior reporter: Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com LANSING BUREAU Chris Gautz: Covers business issues at the Capitol and utilities. (517) 403-4403 or cgautz@crain.com

ADVERTISING SALES INQUIRIES (313) 446-6052; FAX (313) 393-0997 SALES MANAGER Tammy Rokowski SENIOR ACCOUNT EXECUTIVE: Matthew J. Langan ADVERTISING SALES Christine Galasso, Jeff Lasser, Dale Smolinski, Sarah Stachowicz CLASSIFIED SALES Angela Schutte, manager, (313)-446-6051 DIRECTOR OF MARKETING AND EVENTS Elizabeth Buscher DIGITAL MARKETING MANAGER Jennifer Chinn AUDIENCE DEVELOPMENT DIRECTOR Eric Cedo EVENTS MANAGER Kacey Anderson SENIOR PRODUCER FOR DIGITAL/ONLINE PRODUCTS Pierrette Dagg SENIOR ART DIRECTOR Sylvia Kolaski SALES SUPPORT Suzanne Janik, YahNica Crawford PRODUCTION MANAGER Wendy Kobylarz PRODUCTION SUPERVISOR Andrew Spanos

CUSTOMER SERVICE MAIN NUMBER: Call (877) 824-9374 or write customerservice@crainsdetroit.com SUBSCRIPTIONS $59 one year, $98 two years. Out of state, $79 one year, $138 for two years. Outside U.S.A., add $48 per year to out-of-state rate for surface mail. Call (313) 446-0450 or (877) 824-9374. SINGLE COPIES: (877) 824-9374 REPRINTS: (800) 290-5460, ext. 125; (717) 505-9701, ext. 125; or lindsay.wilson @theygsgroup.com TO FIND A DATE A STORY WAS PUBLISHED: (313) 446-0406 or e-mail infocenter@crain.com CRAIN’S DETROIT BUSINESS IS PUBLISHED BY CRAIN COMMUNICATIONS INC. CHAIRMAN Keith E. Crain PRESIDENT Rance Crain TREASURER Mary Kay Crain Executive Vice President/Operations William A. Morrow Executive Vice President/Director of Strategic Operations Chris Crain Vice President/Production & Manufacturing Dave Kamis Vice President/Chief Human Resources Officer Margee Kaczmarek Chief Information Officer Anthony DiPonio 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 for a special issue the third week of August, and no issue the third week of December 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. Entire contents copyright 2014 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is strictly prohibited.

20140210-NEWS--0030-NAT-CCI-CD_--

2/7/2014

5:20 PM

Page 1

Page 30

February 10, 2014

CRAIN’S DETROIT BUSINESS

RUMBLINGS Patterson will respond to furor ... sort of akland County Executive L. Brooks Patterson will deliver his 20th State of the County address on Wednesday. And yes, he will respond to a recent firestorm of critical media coverage. Patterson, 75, has been in headlines recently for comments he made about Detroit published in a Jan. 20 article in The New Yorker Patterson magazine. He said he will address the controversy in his speech. “I’ll explain how it all happened, but I’m not going to spend an inordinate amount of time on it,” he said. “You can’t ignore it.” Patterson said in a Friday interview that he will tout things like Oakland County’s $243 million budget surplus and property values rebounding to near 2007 levels in the next couple years. “We’ve broken the grasp of the long recession,” he said. Patterson, who was confined to a wheelchair following a near-fatal August 2012 car accident in Auburn Hills, said he plans on walking across the stage for the invitation-only address. He will also unveil new county initiatives, which he declined to discuss on Friday, and address programs like Emerging Sectors, Medical Main Street, Automation Alley

and G2G Cloud Solutions, according to a news release. The county last week announced that $518 million in high-tech business was invested in 2013 through Emerging Sectors, the county’s business retention and attraction program specifically geared to replace lost manufacturing jobs with ones in high-tech fields. He said about 400 to 500 people were invited to the speech, which begins at 7 p.m. at the Marriott Centerpoint in Pontiac. WDET-FM (101.9) will air the speech live and Civic Center TV will stream the speech; it will be carried on www.oakgov.com/exec. Crain’s will also cover the event.

Fund seeks investors from all-star guest list A West Michigan investment firm is coming to town to make a pitch for Southeast Michigan capital for its Michigan Prosperity Fund. Blackford Capital LLC, which moved its headquarters from Santa Monica, Calif., to Grand Rapids in 2010, has sent invitations to some of the locally prosperous to find out more about the fund during a gathering Tuesday at the Townsend Hotel in Birmingham. The list of about 75 heavyweights scheduled to be in attendance include former Gov. John Engler; Dave Porteous, McCurdy Wotila & Porteous; Meijer Inc. co-CEO Mark Murray; and former Axletech

WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF FEB. 1-7

International Chairman and CEO Mary Petrovich, all of whom are members of the fund’s advisory board; also Cindy Pasky, CEO, Strategic Staffing Solutions; and Frank Newman, the former president and CEO of F&M Distributors Inc. who is now president and CEO of Holland-based Stow Co. Inc. Word is that principals for the fund are asking for minimum investments from accredited investors of $500,000. In addition to high returns, the fund’s purpose includes keeping the capital spent buying Michigan companies inside the state. The fund made news locally last June when it bought Mopec Inc., an Oak Park-based maker of pathology and mortuary equipment. That was the fund’s second investment and its first in Southeast Michigan. At the time, the fund had raised about $7 million of its target of $20 million.

Challenge Detroit seeks fellowship candidates Challenge Detroit is looking for 30 good men and women. The program is launching a nationwide search for people to come to Detroit for a yearlong fellowship as members of its third class. The program, run through Birmingham nonprofit The Collaborative Group, brings the winners to Detroit and places them in positions with companies such as General Motors Co., CBS Detroit Radio, Detroit Lions, United Way of Southeastern Michigan and Crestmark Bank. For their service, fellows earn $36,000 per year, plus benefits, and work four days per week. On Fridays, they volunteer on “challenge” projects designed to improve Detroit. Applications are due by March 9 and can be found at challengedetroit.org.

BEST FROM THE BLOGS READ THESE POSTS AND MORE AT WWW.CRAINSDETROIT.COM/BLOGS

A head-scratcher? Maybe not

“

Even I had to read the Congressional Budget Office report a second time to find the truth in headlines that led you to believe the Affordable Care Act was expected to cut the number of full-time jobs by 2.2 million over the next 10 years.

”

Jay Greene’s blog about health care, insurance and the environment is at www.crainsdetroit.com/greene

Is Bistro 82 next best eatery?

“

If all goes well … Bistro 82 in Royal Oak could battle for the title of best restaurant in Oakland County.

”

Nathan Skid’s Detroit-area restaurant blog can be found at www.crainsdetroit.com/skid

Garden City Hospital signs sale pact with California firm arden City Hospital signed an asset purchase agreement with Prime Healthcare Services, a for-profit hospital chain based in Ontario, Calif. The sale price was not disclosed. Under the terms of the agreement, Garden City would remain an acute-care hospital and continue to provide the same level of charity care to the community.

ON THE MOVE Southfield-based auto supplier Federal-Mogul Corp. named Daniel Ninivaggi as co-CEO and CEO of its aftermarket group. He replaces Kevin Freeland, who is leaving for personal reasons. Rainer Jueckstock continues as the other co-CEO. Margaret Dimond was named president of Detroitbased Karmanos Cancer Hospital. Dimond, CEO of McLaren Medical Group since 2008, is assuming responsibilities held by COO Gary Morrison, who resigned in December. Warren-based supplier SRG Global Inc. named Dave Prater, 52, as president and CEO. He replaces Kevin Baird, 52, who was named president of the flat glass division for SRG’s parent, Auburn Hills-based Guardian Industries Corp. Prater was SRG vice president of engineering, commercial and program management. Detroit Media Partnership LP, which oversees the business operations of The Detroit News and Detroit Free Press, hired Aaron Velthoven, 31, in the new position of vice president of marketing. He had been vice president of digital strategy at advertising agency Ogilvy & Mather. Consumer marketing for the partnership had been overseen by Rich Harshbarger, who left to become CEO of Santa Barbara, Calif.based nonprofit Running USA. Harshbarger was also executive director of the Detroit Free Press/Talmer Bank Marathon. Robert Chapman, 64, executive director of EcoWorks, Detroit, formerly Warm Training Center, plans to step down at month’s end. Stevens Corvidae, president of the Southeast Michigan Regional Energy Office, a group co-founded by

EcoWorks, will be interim executive director. Southfield-based Jewish mental health agency Kadima named Eric Adelman executive director, effective Feb. 25. Adelman, 35, succeeds Judy Shewach, Kadima’s administrative director, who had served on an interim basis. Adelman has been Michigan region director for Washington, D.C.-based BBYO. The University of Detroit Mercy appointed Phyllis Crocker, 57, a professor of law and associate dean at Cleveland-Marshall College of Law, Cleveland State University, as its law school dean. She succeeds interim dean Troy Harris on July 1. Tami Salisbury, 45, executive director of the Eight Mile Boulevard Association, has stepped down to become executive director of Rochester-based Paint Creek Center for the Arts. Jordan Twardy, the Eight Mile Association director of programs, will take her place. Baker College of Allen Park appointed Kristine Barann, vice president of finance, as its next president. She will succeed Aaron Maike, who will become president of Baker College of Owosso on Sept. 1. Victor Cardenas, assistant Novi city manager, was named interim city manager. Clay Pearson resigned last month to become city manager of Pearland, Texas.

COMPANY NEWS Grand Rapids-based BarFly Ventures is investing $3.3 million to open the largest HopCat bar in the state at 4265 Woodward Ave. in Midtown. HopCat was rated the No. 1 brewpub in the United States by RateBeer.com. Construction on Rivers Edge of Auburn Hills, a $10 million, four-story retail and residential development on 1.07 acres of vacant land, is expected to begin this summer and be completed by summer 2015. San Antonio-based Harland Clarke Holdings Corp. completed its tender offer in its acquisition of Livonia-based direct-marketing and newspaper coupon giant Valassis Communications Inc. Valassis will keep its name and become a private, wholly owned subsidiary of Harland Clarke. Sterling Heights-based General Dynamics Land Systems, and Avfuel Corp. and Arotech Corp., both of Ann Arbor, won more than $120 million in new contract awards and product orders from the U.S. Army and Marine Corps to supply vehicles, fuel and training equipment.

OTHER NEWS The Detroit City Council gave the go-ahead to build a $450 million Detroit Red Wings hockey arena with the help of state-issued bonds backed by local property taxes. Detroit won’t take legal action for now against Bank of America Corp. and UBS AG over a costly swaps deal, even after canceling a forbearance agreement it reached with the banks in July, Bloomberg reported. The Canadian government plans to start buying land in Detroit for the U.S. portion of a new bridge linking the nations, outgoing Canadian Consul General Roy Norton in Detroit told the Detroit Free Press. The Wayne County Airport Authority’s Division of Financial Planning and Analysis reported that the airport served about 32.4 million passengers last year, up 0.5 percent from 2012. Landings and takeoffs were down 0.5 percent for the year. The 26-year-old Southgate Digital Cinema 20 will undergo a $2.5 million renovation that will add a lounge, bring high-tech upgrades to one of its auditoriums and improve its parking lot. The renovation will be completed in May. More than $500 million was invested or retained in Oakland County last year under the county’s Emerging Sectors program. President Barack Obama signed a $100 billion-ayear farm bill during a visit to Michigan State University and launched the “Made in Rural America” initiative to help American farmers and rural businesses boost exports, the AP reported. Obama also ate lunch with Detroit Mayor Mike Duggan. The Committee to Restore Michigan’s Part-time Legislature got the green light to collect signatures for a constitutional amendment, the AP reported. The group must collect roughly 322,000 valid signatures to qualify for the November ballot an initiative that would limit lawmakers to meeting 60 straight days every year, with exceptions for special sessions. The Michigan Lottery launched its first $30 instant game, “$2,000,000 Cash.”

OBITUARIES Eleanor Breitmeyer Gebert, a longtime society reporter and editor at The Detroit News, died Feb. 5. She was 87. Eric S.C. Giles, founder, co-owner and chef of the Sunday Dinner Co. restaurant in Detroit, died Jan. 31. He was 49.

DBpageAD_DBpageAD.qxd 2/3/2014 1:42 PM Page 1

DBpageAD_DBpageAD.qxd 1/31/2014 9:21 AM Page 1