2015 Detroit business news in review: Crain's front page gallery by Crain's Detroit Business

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www.crainsdetroit.com Vol. 31, No. 1

JANUARY 5 – 11, 2015

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2014 NEWSMAKERS OF THE YEAR

New year, new state biz laws take aim at roads, wages

It was a universal truth, they said. Chapter 9 would take seemingly forever for Detroit. But then came ‘the Big Bang Theory of Bankruptcy’ KEVYN ORR

2 stars align for Detroit

Bankruptcy’s end revs up spending on auto show Meadowbrook sale: How it might be a good thing

This Just In It’s official: Gilbert new owner of Compuware HQ

NEWSPAPER

Dan Gilbert’s Bedrock Real Estate Services LLC and Meridian Health are officially the new owners of the Compuware Corp. headquarters. A 50-50 joint venture between Bedrock and Meridian, 1000 Webward LLC, closed New Year’s Eve on the purchase of the 1.1 million-square-foot building and an attached parking garage with more than 2,600 spaces from the Detroit-based IT company. The companies jointly announced a purchase agreement for the 10-year-old building in November. Compuware later said in a U.S. Securities and Exchange Commission filing that the deal is for around $142 million. Robin Schwartz, director of public relations for Bedrock, said in an email that Meridian, a Detroit-based managed care company, will move about 700 employees by spring into about 240,000 square feet and plans to expand to 2,000 employees by 2019 in about 300,000 square feet. Quicken will have more than 300,000 square feet in the building after expanding into an additional floor, she said. Compuware, which currently has about 500,000 square feet, will lease about 130,000 square feet. Schwartz said a new name for the building has not yet been decided. — Kirk Pinho

STEVEN RHODES

BY AMY HAIMERL CRAIN’S DETROIT BUSINESS

hen Emergency Manager Kevyn Orr filed Chapter 9 on July 18, 2013, nobody imagined that by the dawn of 2015, the country’s largest and most complex municipal bankruptcy would be resolved. “It happened at almost warp speed,” said Gerald Rosen, chief judge of the U.S. District Court for the Eastern District of Michigan, who also acted as chief bankruptcy mediator. Even he, an eternal optimist, was uncertain: “My wife says it’s always 78 and sunny in my world, but from the beginning I knew this would be a challenge. There were virtually no

OTHER TOP NEWSMAKERS PROFILED ON PAGES 4-5

Gerald Rosen, the mediator: “It was really the colliding together of unrelated people and events to form a perfect universe.”

assets other than the DIA’s art collection.” So what changed? It’s Rosen’s Big Bang Theory of the Bankruptcy. “It was really the colliding together of unrelated people and events to form a perfect universe,” Rosen said. At the center of that universe were Orr and Judge Steven Rhodes of U.S. Bankruptcy Court, who are Crain’s Newsmakers of the Year for 2014. See Newsmaker, Page 17

NEWSMAKER OF THE YEAR LUNCHEON Date: 11:30 a.m.-1:30 p.m. Feb. 25 Location: MotorCity Casino Hotel, Detroit Tickets: $70 for individuals, $750 for table of 10, $60 for students Register: crainsdetroit.com/events Deadline: Preregistration closes at 5 p.m. Feb. 20. If available, walk-in registration will be $90 a person. Questions? (313) 446-0300 or cdbevents@crain.com Hash it out: Join the conversation with #crainsnewsmaker.

MARY BARRA ★ DAVID BRANDON ★ MATT CULLEN ★ CHRIS ILITCH ★ GENE MICHALSKI★ BOB PAUL ★ MINA SOOCH ★ DARREN WALKER ★ M. ROY WILSON

Groups ponder value of ballot plan for roads funding BY CHAD HALCOM CRAIN’S DETROIT BUSINESS

Talking 9.9 million Michigan voters into a 1 percent increase in the sales tax, with no real relief at the gas pump due to a new fuel tax structure, could mean mounting an eight-figure public awareness campaign, experts said. But right after a costly midterm

election, finding $15 million, give or take, in just four months to rally voters in support could be a problem. The Michigan Infrastructure and Transportation Association has spent more than two years pushing for a legislative fix to the problem of roads funding, and is ready to put in at least some money to support the May ballot question.

The Michigan Petroleum Association has also said it may help with signs on trucks or supply stations for its members to raise driver awareness and public support. Business Leaders for Michigan said it will “be a part of a coalition advocating in support of the ballot proposal” and will make a voter education commitment to it, but stopped short of saying if that in-

cludes funding. The Michigan chapter of Americans for Prosperity, the Virginiabased political advocacy group backed by Koch Industries Inc. coowners Charles and David Koch, has already come out against the proposal. It’s not clear if that position will mean funding an opposiSee Roads, Page 15

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JANUARY 12 – 18, 2015

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Page 3 Search for new DIA director is well-timed CRAIN’S MICHIGAN BUSINESS

A princely sum

What’s on tap for state’s growing beer makers? Page 9

Deal to name Palace could hit $100M

This Just In Homecoming digital group among Knight plan finalists

NEWSPAPER

A Crain’s Detroit Business proposal for a Detroit Homecoming digital community is one of 126 finalists nationwide for the Knight Cities Challenge, an effort by the John S. and James L. Knight Foundation to foster “new ideas to make the 26 communities where Knight invests more vibrant places to live and work.” The proposal is one of 25 Detroit-area proposals under consideration as part of 126 ideas from around the country being reviewed. The Homecoming proposal is an offshoot of the three-day event Crain’s convened in September to re-engage successful Detroit expatriates; Homecoming repeats this fall. The digital community is designed to keep, initially, 10,000 expats in touch with news about the city and about themselves. “We discovered in the Homecoming that thousands of people who grew up in the metro area but now live and work elsewhere still ‘carry the D’ in their hearts,” said Crain’s Publisher Mary Kramer. “We can build a community around that affection that can be an economic force for Detroit.” The Miami-based foundation received more than 7,000 submissions for Knight Cities, more than 1,300 of which came from the Detroit area. Winners are to be announced in the spring, and will receive a share of $5 million in grants. Other local proposals range from creative ways to clean up blight in the city, to resources for entrepreneurs in underserved communities.

COURTESY OF PALACE SPORTS & ENTERTAINMENT

based Premier Partnerships to aid in brokering a deal for the venue’s naming rights. AND MONEY aming rights for The Palace of Mannion declined to say how Auburn Hills could fetch nearly What’s a name much the Palace naming rights expect worth? Page 19 $100 million over 20-plus years. to sell for, but expect to find a buyer Where nameThat’s based on the terms of other calling is a big within the next 12 months. arena deals in recent years. deal, Page 19 “It would be a substantial deal,” he “That’s probably within the range said, adding that a “low deal” would of the scope of average dolbe $3.5 million a year. lars,” said Dennis Mannion, For context, he said, the Palace’s West Atripresident and CEO of the Deum naming rights alone would sell for more troit Pistons and Palace Sports than $1 million annually and the North Pavilion & Entertainment. name is worth more than $1.5 million a year. Palace Sports, the manageAny deal will be for at least 10 years, Manment company for the 27-yearnion said. old, 22,076-seat arena, last year hired Santa Monica, Calif.See Palace, Page 19 Mannion BY BILL SHEA CRAIN’S DETROIT BUSINESS

MONIKERS

Crittenton expected to ascend under Ascension BY JAY GREENE CRAIN’S DETROIT BUSINESS

Ascension Health’s pending acquisition of Crittenton Hospital and Medical Center is expected to financially strengthen the 290-bed hospital and also expand specialty referrals to Ascension Health’s five Southeast Michigan hospitals, according to local health care experts. Since last week’s announcement that Rochester Hills-based Crittenton signed a letter of intent to be acquired by Ascension over four other competing systems, there appears to be a consensus among experts that the deal is a natural fit for both health organizations. The proposed deal, in which the financial terms were not disclosed, is expected to close within six months after final negotiations are completed. Discussions include agreement on clinical services and capital projects. Joining the nation’s largest and most profitable Catholic health system — Ascension’s net income in 2014 was $1.8 billion for a 9 percent profit margin — helps Crittenton in several ways, experts say. First, Crittenton — which has lost more than $73 million on operSee Crittenton, Page 20

Biz taps new way to find investors amid the crowd BY GARY ANGLEBRANDT SPECIAL TO CRAIN’S DETROIT BUSINESS

When husband-and-wife team Rachel and Tarek Kanaan opened their specialty beer and tea business, Unity Vibration Living Kombucha Tea LLC, in 2009, they quickly racked up debt, to the point of short-selling their house. But it wasn’t because the Ypsilanti-based business wasn’t successful. Quite the opposite: Distributors were asking for more product, and the Kanaans were trying to build out their brewing operations and add a tasting room to

IS CROWD INVESTING FOR YOU? Crowd investing worked for Unity Vibration. Is it the right way for your firm to raise capital? See our Second Stage section on Page 13 for a complete look at the opportunities and challenges in this new industry. keep up with demand. But they already had burned through their line of credit getting open, and they said that banks weren’t willing to offer any expansion capital. So the pair turned to crowd in-

vesting, a form of crowdfunding that allows people to actually invest in a business rather than just giving donations the way Kickstarter and other platforms are structured. “This was one of our only options,” Rachel Kanaan said. They turned to Indianapolisbased crowd investing platform Localstake LLC to help them through the legal complexities of raising capital in this manner. Over six months, they raised $136,300 from 26 people. The Kanaans say they would See Crowd, Page 20

LEISA THOMPSON

Tarek and Rachel Kanaan used crowd investing to get Unity Vibration off the ground.

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CRAIN’S DETROIT BUSINESS

www.crainsdetroit.com Vol. 31, No. 2

JANUARY 2015

$2 a copy; $59 a year

A princely sum

Inside Michigan

What’s on tap for state’s growing beer makers? Page 9

Page 3 Search for new DIA director is well-timed

Deal to name Palace could hit $100M

This Just In Homecoming digital group among Knight plan finalists

NEWSPAPER

COURTESY OF PALACE SPORTS & ENTERTAINMENT

MONIKERS

Crittenton expected to ascend under Ascension BY JAY GREENE CRAIN’S DETROIT BUSINESS

Biz taps new way to find investors amid the crowd BY GARY ANGLEBRANDT SPECIAL TO CRAIN’S DETROIT BUSINESS

LEISA THOMPSON

Tarek and Rachel Kanaan used crowd investing to get Unity Vibration off the ground.

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www.crainsdetroit.com Vol. 31, No. 3

JANUARY 19 – 25, 2015

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DTE proposal could cut rates for biz, raise bills for residents

Page 3 Suppliers in driver’s seat of self-driving prototypes Council wants to paint state as industrial design hub

BY JAY GREENE

Macomb recovery slow, with some pockets prospering

CRAIN’S DETROIT BUSINESS

Two pending electric rate hearing cases filed by DTE Energy Co. could lead to lower overall rates for large industrial and business customers, but residential customers could see their rates climb. If ultimately approved by the Michigan Public Service Commission, rates could drop by as much as 4 percent for industrial customers,

Health Care

including manufacturers, hospitals, malls, steel companies and large office buildings, said Gerry Anderson, DTE’s chairman and CEO. Electric rates also could drop by 1 percent for smaller businesses, including retail stores, restaurants, office buildings, physician and lawyers’ offices, said Anderson in an interview with Crain’s last week. See DTE, Page 21 ISTOCK PHOTO

ACA spurs hospitals to address unmet health needs, Page 11

This Just In Oakland’s G2G Marketplace to offer Kronos software Workplace efficiency and management software will be available through a government-to-government marketplace set up by Oakland County to help governments share new tools. The county will offer workplace management software online to customers of G2G Marketplace, its private sector IT services hosting program, from Chelmsford, Mass.-based Kronos Inc., the company is expected to announce this week. The company produces software that allows some government agencies to monitor when employees begin and end work shifts, tracks payroll and overtime costs and can also manage scheduling. Oakland County Deputy Executive Phil Bertolini said the county is a Kronos customer and will now make Kronos software as a service available for its government customers to purchase via G2G. Kronos was one of more than 25 companies to respond to a county request to host IT software on G2G last year. — Chad Halcom

JOA: Reading between the lines Possible sale, opt-out clause may rewrite Free Press-News pact BY BILL SHEA CRAIN’S DETROIT BUSINESS

he clock officially will begin to run this year on the fate of the joint operating agreement that props up Detroit’s two financially struggling daily newspapers. The Detroit Free Press and The Detroit News have had joint business functions — advertising, printing, delivery, etc. — under an entity now called Michigan.com (formerly the Detroit Media Partnership) while maintaining separate newsrooms. An early-termination clause within a 25-year joint operating agreement that created the current on Aug. 3, 2005, states that afHO S THE BOSS partnership ter 10 years from that date, either party Detroit’s daily papers may opt out if the partnership has sushave endured many tained three consecutive years of financial ownership changes, Page 19 losses. That means Aug. 3, 2015, begins the countdown on accruing annual losses that could trigger the end of the JOA by either newspaper’s corporate owner — McLean, Va.-based Gannett Co. Inc. (NYSE: GCI) in the case of the Free Press, and New York City hedge fund Alden Global Capital LLC for The News. But whether to go it alone in the future makes financial sense for either paper may not be a decision either current owner makes. That’s because The Detroit News is for sale, and the Free Press could be by the time the opt-out criteria are met.

W ’

See JOA, Page 18

NEWSPAPER

KENNY CORBIN

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www.crainsdetroit.com Vol. 31, No. 4

JANUARY 26 – FEBRUARY 1, 2015

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Page 3 The promise of free community college: But is it worth the price?

BIG DEALS OF 2014 113 DEALS

$43.7 BILLION IN VALUE

Dealmaking finally escaped the recession doldrums

More than 60 percent came from cars and manufacturing, but others did well, too

‘A fantastic year’ Adell creates magic kingdom from ex-Disney A.M. station Agree Realty triples its portfolio size

Inside Adoba hotel works to resolve tax bills with county, Page 4

This Just In Talks collapse between DMC, McLaren on Karmanos

NEWSPAPER

Lawyers for Detroit Medical Center and Flint-based McLaren Health Care Corp. failed to reach a settlement late Friday in a 16-month contract dispute over Barbara Ann Karmanos Cancer Institute in Detroit. Oakland County Circuit Court Judge Wendy Potts asked lawyers to return this week for instructions that could lead to a trial in early 2016. In September 2013, the McLaren and Karmanos boards entered into an affiliation in which Karmanos joined 11-hospital McLaren. Each then filed separate lawsuits. McLaren asked the court to declare DMC’s 2005 affiliation agreement void; DMC charged McLaren with breach of contract. Officials said the organizations could not agree on two key points: how Karmanos’ name could be used outside Wayne County and how much Karmanos would pay to DMC for support services. — Jay Greene

Auto, manufacturing led aggressive M&A market; PE flexed its muscles BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

f 2009 was the perfect storm for mergers and acquisitions, then 2014 was a day at the beach, watching a double rainbow with a mint julep on the way. Sure, there was $80.9 billion in deal value in 2009, but all save $4.3 billion of that was tied to bankruptcy or government bailout acquisitions. The 113 deals completed in 2014 came to nearly $44 billion, and there were very few distress deals among them. Instead, the market had a very large appetite for auto-related and manufacturing companies. Half of the deals — 56 — and $28.5 billion of value were in those sectors. “It’s a beautiful world. It was a fantastic year,” said Michael DuBay, the group practice leader for private equity

for the Detroit-based law firm Honigman Miller Schwartz and Cohn, which does a national M&A practice. He said the firm is still tallying the deal totals it advised last year, but the number of transactions was more than 100 and could hit a deal value of up to $10 billion, compared to $8.2 billion in 2013. About half of that was in Michigan. “Everybody was in the game — U.S. and foreign strategic buyers, private equity firms and banks,” he said.

Biggest deals, the list: ZF-TRW leads the pack, see Page 11

See Big deals, Page 20

ON THE WEB 䡲 Venture capital investment nearly doubles from 2013

䡲 Searchable database of deals, crainsdetroit.com/bigdeals ISTOCK PHOTO

McLaren now eyes lower-cost, short-stay hospital 2 opponents of full-service plan on board BY JAY GREENE CRAIN’S DETROIT BUSINESS

Blocked by the Michigan Legislature, the courts and business opposition in its efforts to build a new full-service hospital in northern Oakland County, Flint-based McLaren Health Care Corp. is now relying on its architects, consultants

MCLAREN’S PLAN B Old proposal: A $300 million medical-surgical hospital at its 80acre McLaren Health Care Village at Clarkston. New proposal: A $30 million to $50 million, 30-bed short-stay hospital with high-tech diagnostics and a 24-hour emergency department. CONtroversial? Unlike acute-care medical-surgical beds, short-stay beds don’t require certificate of need approval.

COURTESY OF MCLAREN HEALTH CARE CORP.

Besides a short-stay hospital, McLaren also would also like to expand its outpatient cancer center and build a second medical office building at its Clarkston Health Care Village.

and business intuition to come up with a plan to build a cutting-edge short-stay hospital in Indepen-

dence Township. McLaren’s “hospital of the future” may not be the $300 million

medical-surgical hospital it once proposed at its 80-acre McLaren Health Care Village at Clarkston. It may be, instead, a much smaller, less costly, $30 million to $50 million, 30-bed short-stay hospital with high-tech diagnostics and a 24-hour emergency department. At least two leading opponents of McLaren’s $300 million hospital — St. Joseph Mercy Health System CEO Rob Casalou and Economic Alliance for Michigan President Bret Jackson — now are on board for McLaren’s developing plan for a high-tech outpatient health care facility. Over the next six months, Truven See McLaren, Page 21

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FEBRUARY 2 – 8, 2015

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The more things change, more they stay the same

Page 3 Detroit sites in search of developers to give them new life 2 masters of disasters unite to expand in Midwest With new owner, TI Auto closes book on 2009 woes Inside Linkner’s new adventure in entrepreneurship, Page 5

This Just In Judge narrows scope of DMC-McLaren dispute An Oakland County judge narrowed the issues in dispute Friday on whether Barbara Ann Karmanos Cancer Institute improperly broke its affiliation agreement with Detroit Medical Center by joining Flint-based McLaren Health Care Corp. in 2013. Last week, lawyers for McLaren and DMC said they’d reached an impasse in trying for an out-of-court resolution, in a 16-month legal battle before Oakland Circuit Judge Wendy Potts. Potts in a Friday ruling eliminated two of seven McLaren’s claims against DMC: intentionally inflicting economic harm and creating unfair competition. She let five others stand, including a claim DMC violated state antitrust law by holding Karmanos to an affiliation agreement without end. No trial date is set, said Greg Lane, McLaren’s chief administrative officer. The DMC sold its cancer business to Karmanos in 2005 in a below-market-value deal for $9.9 million, which carried an exclusive affiliation agreement with no end date. McLaren sued DMC in September 2013, the same day it reached an affiliation agreement for Karmanos to join its hospital system. — Jay Greene

t was 30 years ago this week that Crain Communications launched Crain’s Detroit Business. Our front-page story in that first issue was about the ongoing circulation war between the Detroit Free Press and The Detroit News. Both papers wanted to remain independent. But we quoted a newspaper analyst who predicted a “joint operating agreement” was imminent. The announcement came in April 1986. And in the last minutes of the Reagan administration, Attorney General Ed Meese

declared the Free Press a “failing paper” and approved the JOA, which was finalized in late 1989. This story wasn’t covered very often or very well in the dailies, but it was a big story for Crain’s and the local business community, which included advertisers. Today, the JOA is still front-page news; our latest story on the dailies ran Jan. 19. I always thought that the business community needed its own business weekly. We were already publishing a successful Automotive News, but there was plenty of news being ignored. Our motto then and now: “There is more to Detroit than just cars.” It is just as true today as it was in 1985. There are lots of businesses in Southeast Michigan that have nothing or little to do with the automobile industry: retailing, banking,

CRAIN’S DETROIT BUSINESS: THE BIG 3-0 Looking back: In this issue, we begin a weekly feature looking at stories from 1985 and what has happened since they appeared, Page 4 On the Web: Read (or reread) a PDF of the entire first issue of Crain’s, crainsdetroit.com/30

See Crain, Page 19

Detroit’s mayor has earned high marks for style, speed and stability in his first year. But now comes year two

Duggan’s challenges turn more complex BY AMY HAIMERL | CRAIN’S DETROIT BUSINESS

ike Duggan has juice. In his first year as Detroit mayor, he has shown that he’s got the power to move the intractable, to make the impossible possible. He’s got a way to make people believe, to step in line. When he stood up at his invocation last January and told the gathered crowd “we are not going to tolerate this kind of service in the city of Detroit,” it stood in ovation, agreeing and believing. One week in, the mayor had already impressed by getting trash picked Mayor Mike Duggan will up and roads plowed during a polar vortex. deliver his State of the City That required classic Duggan: a tactical mind, a address at 7 p.m. Feb. 10. no-nonsense demeanor and a willingness to play enIt will be live streamed forcer. He assumes anything can get done, and holds at detroitmi.gov. those around him to the same exacting standards he sets for himself. He is also a man who lionizes the underdog, the one who speaks truth to power. But now he is the mayor. He is the power. And he doesn’t always appreciate truth-telling. “The mayor gets the highest marks from me,” said one executive, who spoke on the condition of anonymity. “But he’s a tough S.O.B., and I wouldn’t want to be on the wrong side of him.” Duggan arguably has more to deal with than any mayor

STATE OF THE CITY

See Duggan, Page 20

If year one for Detroit Mayor Mike Duggan was about speed and problem-solving, year two is about long-range thinking.

NEWSPAPER

NATHAN SKID/CDB

Nexteer eyes bigger brand with HQ move to SE Mich. BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS

In an effort to grow brand recognition, Saginaw-based Nexteer Automotive Corp. is moving its global headquarters to Southeast Michigan. The former Delphi Corp. steering division plans to secure a lease in northern Oakland County in the next few weeks to move roughly 150 employees, including its Csuite, global financial team, human resources, information technology and sales staff, the company told Crain’s. Joe Perkins, senior vice president and CFO, said the move is triggered by a need to better en- Perkins gage its customer and supply base as well as drum up more media coverage. “We feel constrained being outside of Detroit in our ability to promote our brand,” Perkins said. See Nexteer, Page 21

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FEBRUARY 9 – 15, 2015

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Compuware units predict growth

Page 3 Nonprofit offers to help startups become high-fliers

Strategy: Push mainframes, seed cloud biz

Lori Blaker: Making a world of difference with family biz

BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

Chris O’Malley, the president and CEO of Compuware Corp., which was reconfigured as a mainframe-only business in December, says he has no intention of running a shrinking company. He says that within three years he will halt a decade-long decline in revenue and prove wrong O’Malley those who say an ongoing slide for the aging computer platform is inevitable. John Van Siclen, the president and CEO of Dynatrace LLC, the stand-alone business spun out from Compuware to focus on cutting-edge, cloud-based technologies, says his company will beat early expectations, too, and despite a round of layoffs in January is on a fast growth track.

Inventors make Ernest effort to revive the typewriter CRAIN’S MICHIGAN BUSINESS Kennedy: More than Obamacare mandate foe, Page 17

When Compuware, the Detroitbased computer services company, was bought by Thoma Bravo LLC, a Chicago-based private equity firm, for $2.4 billion in a deal that closed in December, it was quickly split into two companies, which long had been a goal of former Compuware CEO Bob Paul. (See accompanying Q&A.) Compuware was founded in 1973 as a mainframe support business, Van Siclen but recent acquisitions had made it a major player in the a segment known as application performance management, which allows large companies to monitor in real time the performance of their various software applications. The mainframe business has high margins, but has

LIFE AFTER COMPUWARE: WHAT FORMER CEO BOB PAUL IS DOING – AND PLANNING PAGE 26

See Compuware, Page 26

Second Stage On Feb. 11, 1985, Crain’s reported that Stroh’s Detroit plant was likely tolikely be torn down. Detroit plant was to be tornStroh’s down troubles and razed. were an omen a shift in the beer industry. This story tells of how Stroh’s troubles were representative of a shift in the beer industry.

ISTOCK PHOTO

LOOKING BACK

30 YEARS AGO THIS WEEK How 3 startups survived the first 3 months, Page 11

This Just In 2 businesses win $100,000 grants in NEI challenge

NEWSPAPER

The New Economy Initiative has announced the two winners of its $100,000 NEIdeas challenge: Detroit-based J & G Pallets and Trucking and Highland Park-based Sherwood Prototype. The two firms will both receive $100,000 grants to help them grow their businesses. “These are businesses that have wreathed a lot of storms and have the potential to grow quite significantly,” said Dave Egner, executive director of NEI. NEI devised NEIdeas last year to help small businesses in Detroit, Highland Park and Hamtramck that have been open at least three years and are looking to grow. The challenge was broken into two parts: $10,000 grants to 30 firms and $100,000 grants to two firms. The program is expected to relaunch this spring. — Amy Haimerl

For Stroh’s, the Bell’s tolled The crumbling of a Detroit institution rang in the era of craft breweries BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS

troh Brewery Co. announced 30 years ago it would raze its 1 million-square-foot brewery, bottling and warehouse buildings on Gratiot Avenue at I-75. The late Peter Stroh, chairman of the iconic Detroit beer company, said no amount of investment could save the brewery in the face of a declining beer audience — which dropped from 31 million barrels to 24 million barrels annually. That year, 1985, marked the beginning of the end of Stroh and a culture shift for Michigan beer drinkers as a small-time home brewer took his craft legal. Larry Bell founded Kalamazoo-based Bell’s Brewery Inc. the same year Stroh’s was razed and today is one of the largest local beer producers — expected to produce 410,000 barrels of craft beer in 2015.

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See Beer, Page 29

The Stroh Brewery Co. plant along Gratiot Avenue in Detroit. Today, it’s the site of Brewery Park, the headquarters of Crain Communications Inc. – and where Crain’s Detroit Business has been written since 2001.

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www.crainsdetroit.com Vol. 31, No. 6

FEBRUARY 2015

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Compuware units predict growth

Inside Michigan

Strategy: Push mainframes, seed cloud biz BY TOM HENDERSON

John Kennedy: More than just a foe of Obamacare mandate, Page 17

CRAIN’S DETROIT BUSINESS

Page 3 Nonprofit offers to help startups become high-fliers Lori Blaker: Making a world of difference with family biz Inventors make Ernest effort to revive the typewriter

LIFE AFTER COMPUWARE: WHAT FORMER CEO BOB PAUL IS DOING – AND PLANNING PAGE 26

See Compuware, Page 26

ISTOCK PHOTO

LOOKING BACK

30 YEARS AGO THIS WEEK How 3 startups survived the first 3 months, Page 11

This Just In 2 businesses win $100,000 grants in NEI challenge

NEWSPAPER

71486 02858

For Stroh’s, the Bell’s tolled The crumbling of a Detroit institution rang in the era of craft breweries BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS

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See Beer, Page 29

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www.crainsdetroit.com Vol. 31, No. 7

FEBRUARY 16 – 22, 2015

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Page 3

LOOKING BACK: Black Monday killed an IPO, but he found profits in Porta Johns Snyder’s medical education cuts startle hospital officials

Wayne digs into pension deficit County goals: Cut health care costs, avoid bankruptcy BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

Wayne County does not plan to file for Chapter 9 bankruptcy or to issue bonds to cover a growing shortfall in funding for its pension system, according to Tony Saunders,

who became the county’s chief restructuring officer in January. According to a report for County Executive Warren Evans by Ernst & Young LLP, the pension system has gone from a funding ratio of 95 percent in 2004 to a ratio of 44 percent today, with an unfunded lia-

bility of $850 million. Low interest rates have played a part, but the underfunding is also due to a history of generous matches, “13th checks” and genSaunders erous early retirements for limited years worked. “Even understanding that local government pension funds are of-

College grads in the showroom: Victory Automotive’s pitch

Health Care

Converging on care: Mental health services better, but to-do list still long, Page 11

This Just In

New path to invest in Mich. small biz Pair launch equity crowdfunding platform

Last call for nominations for Crain’s 20 in their 20s

NEWSPAPER

It’s your last chance to nominate a 20-something professional who is making his or her mark in the region. Candidates for Crain’s 20 in their 20s recognition program are not limited to any particular field or activity but include up-and-comers who are making waves as young professionals within a company, have shown success or originality as entrepreneurs, or have made local impacts in some other demonstrable way. Besides the corporate world, candidates are considered from creative industries, nonprofits and social entrepreneurship arenas. Winners will be profiled in the June 1 edition and honored at a future awards event. Nominees must be 29 or younger before June 1. Nominations are due Feb. 20. To fill out the form, visit crainsdetroit.com/nominate. Questions? Contact Amy Haimerl: ahaimerl@crain.com or (313) 446-0416.

BY AMY HAIMERL CRAIN’S DETROIT BUSINESS

The first equity crowdfunding platform designed exclusively for Michigan small-business owners and investors launched on Sunday. Called MichiganFunders.com, the website takes advantage of new crowdfunding laws signed by Gov. Rick Snyder in 2013 that allow entrepreneurs to raise between $50,000 and $2 million from local investors by offering equity shares, selling debt or creating a revenue-sharing model. Anyone,

not just investors considered accredited by the Securities and Exchange Commission, will be able to participate. “We’re excited to give people another way to invest in their communities,” said co-founder and CEO David Tessler. “We want people to be able to build something right here,” added Niles Heron, co-founder and chief business development officer. “There is a diverse support group ready to accept those new ideas.” There are several ways equity crowdfunding can work (See story, Page 21). MichiganFunders’ distinction is that it allows only Michigan companies and investors to participate. That simplifies the legal and regulatory oversight because there is no interstate commerce. But it’s also just good

ten less well-funded than states’, this is still a very low funding ratio,” said Amy Resnick, executive editor of Pensions & Investments, a sister publication to Crain’s. “It would impact the county’s ability to fund other services.” Saunders said the county plans to start making up that shortfall through savings in health care costs it negotiates in upcoming contract talks with 11 unions. It is See Pensions, Page 24

MichiganFunders.com co-founders David Tessler (right) and Niles Heron hope to take advantage of new state crowdfunding laws that allow entrepreneurs to offer equity stakes.

See Equity, Page 21

JOHN SOBCZAK

Chassix misses 2nd bond payment; creditors concerned BY DUSTIN WALSH AND CHAD HALCOM CRAIN’S DETROIT BUSINESS

Gores

After missing a payment of $17.4 million to bondholders this month, Chassix Inc. has asked the bondholders to organize and retain advisers — and a creditor’s filing asserts that the company is taking steps toward a possible bankruptcy. The Southfield-based supplier of chas-

sis, brake and powertrain components did not make a scheduled payment twice since December on $525 million of bond debt it carries. Chassix, owned by Tom Gores’ Platinum Equity LLC, is working with bondholders during a 30-day grace period to formulate a restructuring plan by early March, according to a Debtwire report. Sources familiar with the situation told Crain’s that Chassix may file bankruptcy around the time its grace period

expires March 4 on $375 million worth of senior secured notes to bondholders. Chassix and Platinum Equity executives declined to comment. “This is a delicate situation,” a source who declined to be named told Crain’s. “I used to hear that Tom Gores took pride in the fact that he does not put companies into bankruptcy; let’s just say I haven’t See Chassix, Page 23

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Page 3 Hub for tech startups planned for Ann Arbor Energy suppliers have 5-year plans; they’re secret Focus: Law

The big business cases of 2014, Page 11 This Just In Fountain Bistro will close for revamp, reopen in April The Fountain Bistro restaurant in Campus Martius Park will close for several weeks as interior renovations are completed. The park is managed and operated by the Detroit 300 Conservancy. Owner Jay Lambrecht said the restaurant will close its leased space March 2 and is expected to reopen April 2. The renovations include new floors, new lighting, adding a waitress station and changing the color scheme. The tablecloths in the bistro will also be removed “to make the restaurant a little more approachable,” Lambrecht said. “Downtown has a great demographic right now — a lot of younger people in their 20s and 30s, and the core businesspeople who have been down here for the good times and bad,” said Lambrecht, who also owns Bookie’s Bar & Grill on Cass Avenue in Foxtown. Lambrecht said the renovation will cost at least $100,000; seasonal menu changes are also planned, as usual. Fountain Bistro, which opened in 2010, seats 80 people inside and at least 60 on an outdoor patio. — Kirk Pinho

Affordable senior complex prompts Midtown concerns

Some say Michigan’s corporate tax incentives helped save the auto industry, save jobs and keep taxpayers here. But with more than $9 billion in credits still outstanding, others say the program planted the seeds of big-time budget trouble

Mixed income needed to bring biz, Mosey says BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

Good policy or a MEGA mess? BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS

tate-sponsored corporate tax incentives, which aided the auto industry during last decade’s recession, are coming home to roost. The state faces a $289 million budget shortfall in 2015, largely attributed to the nearly $11.7 billion in business tax credits promised to as many as 240 businesses over the past 20 years. A large portion of those credits were authorized for the automotive industry to leverage new jobs and retain jobs during an industry bleed-out last decade — which claimed more than 219,000 auto manufacturing jobs between 2000 and 2009 out of the more than 800,000 total job losses during that period. Ford Motor Co., General Motors Co. and FCA USA LLC (formerly Chrysler Group LLC) were promised tax cred-

its worth nearly $4.5 billion if they retain more than 86,000 jobs in Michigan through 2032, according to the Michigan Economic Devel-

opment Corp.

Demand is reportedly outstripping housing stock in Detroit’s Midtown area, but a new affordable senior living complex planned along its northern edge isn’t getting a welcome from the neighborhood. Midtown Detroit Inc., the economic development group working to revitalize the area, believes Seward Street, where the complex is planned, needs a different kind of development to further economic development there. “If you want to attract retail and commercial, you have to have mixed income,” said Midtown Detroit Inc. President Sue Mosey. Ann Arbor-based LC Consultants LLC, whose principals Michael and Bob Jacobson also own Leelanau Wine CelMosey lars Ltd. in northern Michigan, have an agreement to purchase a building at 59 Seward between Woodward and Second avenues for an undisclosed amount. See Midtown, Page 25

But with $9.38 billion in credits overall still outstanding, elected officials and tax policy experts are left wondering whether the program, which was discontinued in 2011, will result in a net positive for the state economy. Mike Johnston, vice president of government affairs for the Michigan Manufacturers Association, told legislators last week the billions invested by the auto industry during the recession would not have happened if the

Michigan Economic Growth Authority program didn’t exist. “Some policymakers are attributing the budget challenge to the MEGA program,” he told the House tax policy committee.

UM report: Take time to weigh impact of fracking BY JAY GREENE CRAIN’S DETROIT BUSINESS

To frack or not to frack? Michigan is still sorting out the answer to that question. One option to safeguard water quality and public health in the state on the practice of deep-well hydraulic fracturing is to impose a temporary moratorium to give time for an indepth environmental impact study and further regulations on the practice, according to a draft report released last week by the University of Michigan’s Graham Sustainability Institute. For now, environmental concerns — plus market dynamics driving cheaper energy from natural gas — seem to outweigh pressure from the hydraulic fracturing industry for permission to proceed with additional high-volume

See Credits, Page 22 See Fracking, Page 24

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ROCKET FIBER: PHASE 1 COVERAGE AREA

Page 3 Panasonic unit plays ‘Taps’ for apps, rethinks strategy

LOOKING BACK: ’80s office boom still rumbles in ’burbs Lions invite fans to take a hike at new fantasy football camp

Retirement Communities

Senior housing surges as population ages, Page 11

This Just In ChemicoMays becomes subsidiary of Chemico Group

NEWSPAPER

Southfield-based Chemico Group of Cos. acquired the shares previously held by Indianapolis-based Mays Chemical Co. of joint venture ChemicoMays LLC, the companies announced last week. Terms were not disclosed. The ChemicoMays name will remain, but the venture will be a wholly owned subsidiary of Chemico Group of Cos., Dave MacLeod, vice president of business development and supply chain, told Crain’s in an email. Leon Richardson, founder and CEO of Chemico, will remain CEO of ChemicoMays. The split was amicable and allows the Chemico and Mays Chemical to “focus on their own core competencies,” Chemico said in a release. Chemico, including the former joint venture, employs more than 250. ChemicoMays said its revenue was more than $100 million in 2014. — Dustin Walsh

According to figures provided by Rocket Fiber, the download times for ... “Star Wars” movie on Blu-ray: about seven hours at a typical residential Internet speed of 10 megabits per second but about 4½ minutes at gigabit speed. An album on iTunes: About one minute on residential Internet and less than a second at gigabit speed

Packard Plant owner eyes bids for historic downtown buildings BY KIRK PINHO CRAIN’S DETROIT BUSINESS

Rocket Fiber’s launch includes second stage Plans include retail electronics store, training center BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

‘To chase the animal’

here’s more than meets the eye to Rock Ventures LLC’s plans to install fiber-optic cable to provide ultrafast Internet access in downtown Detroit and Midtown. In addition to the upcoming rollout of gigabit-speed Internet, which made headlines last week, Rock Ventures’ new company, Rocket Fiber LLC, also wants to: 䡲 Open a retail electronics store in downtown Detroit. 䡲 Launch a training center to help bridge the digital divide by teaching computer and Internet literacy. 䡲 Become another provider of cable televi-

sion in the city. Rocket Fiber is preparing a proposed cable-franchise agreement for approval by the Detroit City Council. No city, state or federal approvals are needed to provide the internet service. Rocket Fiber plans in several months to move into about 5,000 square feet of space at 1505 Woodward, one of Dan Gilbert’s buildings, after the building’s reconstruction is finished. The electronics store and training center may share a location with each other or be in separate buildings, said Rocket Fiber CEO Marc Hudson, who hopes to have them open in the second half of this year. The concept of the training center is still being developed. Hudson envisions it as a community gathering space with a combination of training and meetings. It will not compete with Grand Circus, one of Gilbert’s forprofit family of companies that offers IT classes and computer-coding boot camps. Gilbert and Rock Ventures have internally financed the $30 million cost of the first phase See Rocket, Page 17

Over breakfast at the Inn on Ferry Street in Midtown, Fernando Palazuelo slides salt and pepper shakers across the table like chess pieces. They are a representation of his Detroit real estate strategy. Yes, he says, he’s getting ready to make a series of big moves. The new owner of the 3.5 million-square-foot Packard Plant on the city’s east side has much broader ambitions for his portfolio in the city, which first took notice of him in 2013 when he bought the shuttered plant — all 47 buildings, all 40 acres — for a mere $405,000 at a Wayne County tax foreclosure auction. Palazuelo is a native of Spain who has been developing historic but dilapidated sites in Peru since losing everything in the recession. He said in an interview with Crain’s last week that he plans to make offers to buy five of See Palazuelo, Page 19

LARRY PEPLIN

Packard Plant owner Fernando Palazuelo wants to make offers to buy five downtown buildings.

Rockwell Medical bets on growth of iron replacement drug BY JAY GREENE CRAIN’S DETROIT BUSINESS

After 10 years in the research and federal drug approval pipeline, Wixom-based Rockwell Medical Inc. has received the green light to market its Triferic drug, a medication for kidney disease patients who need iron replacement therapy. Triferic is expected to boost Rockwell’s annual sales by at least $200 million and

as high as $600 million over the next five years, said CEO Rob Chioini. “This is a pretty big deal for a lot of reasons — for our company and for the 400,000 patients in the U.S. that can use this drug,” Chioini said. “It is a businesschanging kind of event.” With the approval last month by the U.S. Food and Drug Administration and the recently completed marketing and distribution contract with Deerfield, Ill.-based

Baxter Healthcare, Rockwell (Nasdaq: RMTI) expects to start negotiating sales contracts and prices over the next several months to leading national dialysis companies, including DaVita Kidney Care and U.S. Renal Care. Up to 25 new clinical jobs are also planned, due to the growth plans for the drug. See Rockwell, Page 20 Chioini

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Page 3 Honigman hires Carl Levin to advise on government At Roush Industries, theme park biz ups, downs are OK

One year into life as a nonprofit mutual, expect more change, CEO Loepp says.

2 Cobo events allow young innovators to see the D CRAIN’S MICHIGAN BUSINESS Hotel demand raises supply – that’s good, maybe, Page 15

COURTESY OF BLUE CROSS BLUE SHIELD OF MICHIGAN

Blue Cross likes that mutual feeling

Insurer uses its new nonprofit mutual status to chart growth BY JAY GREENE CRAIN’S DETROIT BUSINESS

The new Crainsdetroit.com: Check it out, give feedback Do you read Crain’s on your mobile phone? If so, your experience just got a lot easier. The new Crainsdetroit.com is “responsive.” That means story elements automatically resize to improve readability on every device, from your mobile phone to your tablet to your desktop. At its core, the site’s content hasn’t changed. New features include: 䡲 A streamlined home page so readers can browse breaking news but still find their favorite features. 䡲 A simpler method to share story links on social media or in an email. 䡲 A Top Stories feature box is at the top of every page, allowing busy readers an at-aglance look at the latest stories. 䡲 The Events section allows users to get all the information about an event from one page, with one click to register. Take a look and let us know what you think about the new site. — Nancy Hanus, digital strategy manager

Dan Loepp says there have been many changes at Blue Cross Blue Shield of Michigan during its first full year as a nonprofit mutual health insurance company. But Loepp, who will reach his 10-year anniversary next month as Blue Cross’ CEO, says stay tuned: More big changes will come during the next 18 months. So far, the new corporate structure has: 䡲 Allowed Blue Cross to cancel two dozen money-losing individual market plans, which has saved the insurer up to $100 million annually in underwriting losses. 䡲 Entered specialty insurance product lines it was banned from before. 䡲 Participated the past two years in the Michigan Health Insurance Exchange, where it

has garnered more than 100,000 subscribers and arguably forced competitors to lower prices. “We have the opportunity to grow nationally as we are now a nonprofit mutual,” Loepp said. “We are in a spot where we are looking” at possible investments in health comLoepp panies or joint ventures with other Blues plans, he said. For example, Loepp said, the Accident Fund Insurance Co. of America, a Blue Cross forprofit subsidiary that sells workers’ compensation insurance, “now has the ability to sell other lines of products, and they are looking at opportunities.” Michael Cox, former attorney general now heading Livonia-based Mike Cox Law Firm PLLC, said the Blues’ Accident Fund can now package workers’ compensation contracts with property casualty lines, long-term disability, life insurance and even auto insurance. “They can get into these higher-margin lines of insurance and bundle these products,” said Cox, who previously had sued Blue Cross to force the Detroit-based insurer to diSee Blues, Page 34

How to let go While growing a company, many a CEO faces this common pain point: How to delegate — and build and develop a team that the CEO feels comfortable delegating to. Turn to our Second Stage report that begins on Page 11 to hear from two companies that made the leap and for tips from experts.

LOOKING BACK Minoru Yamasaki was hired to design Brookfield Office Park, a high-end complex in Farmington Hills

COURTESY OF ETKIN LLC

Brookfield Office Park (above) was one of the final works of Minoru Yamasaki but one of many local buildings he designed, including Temple Beth El.

Yamasaki’s ‘cool’ legacy BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

hen Crain’s reported on the high-end Brookfield Office Park that Etkin Equities Inc. was developing in Farmington Hills 30 years ago, no one had any idea the project would be among the last designed by Minoru Yamasaki. The acclaimed Japanese-American architect, known for projects including the World Trade Center in New York City, died in February 1986, at age 73, less than a year after the story ran. But Brookfield Office Park and many of the other local buildings and structures Yamasaki designed, including One Woodward, Temple Beth El, the Yamasaki Building at the College for Creative Studies and the McGregor Memorial Conference Center at Wayne State University, stand on, as does Yamasaki’s architectural COURTESY OF ARCHIVES OF MICHIGAN legacy, experts said. Minoru Yamasaki left a Yamasaki “made miniconcrete legacy upon his malism cool,” said Mark death in 1986. Harvey, state archivist at the Archives of Michigan. The architect’s work has a worldwide following. See Yamasaki, Page 37

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Inside Michigan Hotel demand throughout state raises supply – and that’s good, maybe Page 15

One year into life as a nonprofit mutual, expect more change, CEO Loepp says.

Page 3 Honigman hires Carl Levin to advise on government At Roush Industries, theme park biz ups, downs are OK 2 Cobo events allow young innovators to see the D

COURTESY OF BLUE CROSS BLUE SHIELD OF MICHIGAN

Blue Cross likes that mutual feeling

Insurer uses its new nonprofit mutual status to chart growth BY JAY GREENE CRAIN’S DETROIT BUSINESS

LOOKING BACK Minoru Yamasaki was hired to design Brookfield Office Park, a high-end complex in Farmington Hills

COURTESY OF ETKIN LLC

Brookfield Office Park (above) was one of the final works of Minoru Yamasaki but one of many local buildings he designed, including Temple Beth El.

Yamasaki’s ‘cool’ legacy BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

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Page 3 State to HealthPlus: Stop bleeding on bottom line

Entrepreneurship: Where Michigan ranks vs. other states 21st

12th

31st

41st

49th

44th

2013

2008

SOURCE: MIQUEST

Entrepreneurial climate: Measures the underlying conditions, such as economy, education and lending

Blake’s Orchard sees fresh pickings from hard cider DDOT asks number cruncher to help improve service

Health Care Consolidation of physician practices expanding, Page 9

This Just In Plans for Romulus outlet center get initial OK

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Developers of a luxury outlet center planned for Romulus have gained initial approvals from the city and set a groundbreaking for July, pending final lease negotiations with retailers. As planned, the $100 million, open-air concept will include 80-90 national retailers, according to the site plan submitted to the city. Newton, Mass.-based New England Development and Baltimore-based Paragon Outlet Partners LLC said the project will create an estimated 300 construction jobs and 1,2001,500 retail jobs. They are not seeking any incentives from the city, said Tim Keyes, economic development director for Romulus. If everything goes as scheduled, the 366,000-square-foot Outlets of Michigan is expected to open at Vining Road and I94 by fall 2016, Kelvin Antill, development partner at Paragon, said late last week. He declined to name any of the retailers that have committed or say what percentage of space has been leased so far. The developers now must submit a more detailed plan to the city to secure a building permit for the 325,000square-foot project. — Sherri Welch

Entrepreneurial change: Measures direction of success entrepreneurs are experiencing relative to other states

Entrepreneurial vitality: Measures state’s entrepreneurial activity, including business creation and capitalization

State’s biz climate warming, study says Entrepreneurial vitality still needs work, say experts BY KIRK PINHO CRAIN’S DETROIT BUSINESS

Michigan’s entrepreneurial economy continues to grow as new businesses open, smallbusiness lending improves and export-related jobs grow, according to the Michigan Entrepreneurship Score Card, which is compiled by the Lansing-based nonprofit MiQuest.

The report measures three index scores: “change,” “vitality” and “climate.” The state sits in the middle of the pack for climate and vitality. But in terms of entrepreneurial change, which MiQuest measures as the momentum of growth relative to other states, Michigan has skyrocketed from 49th in 2008 to 12th today. “The support we’ve given the entrepreneurial community through the (Michigan Economic Development Corp.) and others has really seemed to make a difference in how we are emerging now that we’ve actually been investing in it and encouraging entrepreneurship since 2009 or so,” said Diane Durance, president of MiQuest. See Biz climate, Page 18

O’Neal’s goal for Delphi: Smaller but stronger BY DAVID SEDGWICK CRAIN NEWS SERVICE

When Delphi Automotive took journalists for rides in its driverless Audi SQ45 this winter during the International CES, the retrofitted crossover wasn’t restricted to the highway. The vehicle ventured onto Las Vegas streets for encounters with taxis, buses, limos and pedestrians. It handled them all nicely. Other major suppliers have rolled out driverless prototypes to showcase active safety technology. But Delphi is getting contracts. And it’s a good example of CEO Rodney O’Neal’s core business strategy in his eight years at the helm: Shed slow-growth businesses and invest in promising high-margin technologies. “We think (active safety) is the future,” O’Neal said in a Feb. 27 interview. “I put my money where my mouth was, and we backed it up with investments.” See Delphi, Page 17 Rodney O’Neal: “I loved being on the factory floor. ... You knew what had to be done that day, and you either did it or you didn’t. Instant feedback.” BLOOMBERG

Machinery ready to dig into Wings site BY BILL SHEA CRAIN’S DETROIT BUSINESS

eavy machinery has been placed at the site of the new Detroit Red Wings arena in anticipation of major construction beginning in the next few weeks. A specific start date for earth-moving hasn’t been disclosed by Olympia Development of Michigan, the real estate arm of team owners Mike and Marian Ilitch’s business holdings. The $535 million multiuse arena and events center is scheduled to open in summer 2017. “We have moved heavy equipment on-site to prepare for the start of construction on the new (arena) in the next several weeks and to comply with local frost laws,” Doug Kuiper, vice president of corporate communications for Ilitch Holdings Inc., said in a statement. Frost laws restrict weight limits on roads and highways during the spring, when the thaw can weaken the ground underneath the See Wings, Page 19

Earth-moving equipment (above) is in place to start work at the site of the new multiuse arena for the Detroit Red Wings. In the interim, a sign reminds passersby of what’s to come in the summer of 2017. LARRY PEPLIN

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Page 3

Snyder hits road to push Prop 1 Plan’s perils: Complex add-ons, state chamber’s stance

Looking Back: How Detroit reached its lofty presence

BY BILL SHEA CRAIN’S DETROIT BUSINESS

With just seven weeks left before Election Day, Gov. Rick Snyder last week began making the rounds to stump for a contentious ballot proposal that would generate $1.2 billion for Michigan’s crumbling roads by increasing the state sales tax. Critics, however, say Pro-

Direct primary care: Can it contain health care costs?

posal 1 on the May 5 ballot is too complex and confusing because of the 10 other bills linked to the measure that would increase funding for schools and local governments. Snyder, who spoke with Crain’s during a visit on March 19, acknowledged the uphill struggle the “Safe Roads Yes” vote campaign faces to increase the state sales tax one percentage point to 7 percent. The measure requires a constitutional amendment approved by the voters

rather than via legislative or executive fiat. “It’s hard. It’s a tax increase,” he said. This is one reason hundreds of presentations will be made to groups by the campaign coalition in the coming weeks, and why Snyder himself is so active in making the case. He even brought a piece of a crumbled concrete bridge to his interview with Crain’s as a physical re-

Defense bill could retire Selfridge jets

UM biz school to offer DPS lessons in leadership

Finance: M&A Awards Compuware restructuring: Bob Paul to tell how, Page 11

BY CHAD HALCOM CRAIN’S DETROIT BUSINESS

DIA MIA? FORGIVE ME Crain’s Bill Shea reflects on Rivera and Kahlo and his first visit to the DIA (yes, he knows), Page 11 PHOTOS COURTESY OF THE DETROIT INSTITUTE OF ARTS

The economic impact of the Diego Rivera and Frida Kahlo exhibit has extended beyond the walls of the Detroit Institute of Arts and has become, in a sense, a new Detroit industry.

Next week: New look, same must-read

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Next week, after more than 750 issues using its current design, Crain’s Detroit Business will come to your office sporting a new look. How new, you ask? Take a look at the copy of the paper now in your hands. Now look at the picture above this blurb. Yes, that’s the exact issue as this one, using the elements of Crain’s new look. We hope to see you next week with the rest of the story.

See Roads, Page 35

DAVID HALL

Rivera-Kahlo show’s impact reaches far beyond the DIA BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

nly a week into its four-month run, the Diego Rivera and Frida Kahlo exhibit at the Detroit Institute of Arts is already drawing people from around the region, country and world. But the economic impact of the exhibit is extending well beyond the museum’s walls to other arts and cultural groups, and to area restaurants and shops. About two dozen local arts and cultural groups are hosting programs thematically tied to the exhibit, capitalizing on the opportunity to attract new audiences.

And a dozen area restaurants are offering drinks and dishes created with Rivera and Kahlo in mind, from entrées taken from Kahlo’s cookbooks and notes at El Zocalo in Detroit’s Mexican Town to Union Street’s “Ode to Detroit Industry” cocktail with Mezcal, a distilled spirit known as Tequila’s cousin, Maraschino liqueur and fresh lime as key ingredients. Then there’s Hamtramck’s Rock City Eatery with “Panzón + Friducha,” a dish featuring pan-seared beef tongue and “ash-baked beets,” among other ingredients, that hails from Rivera’s birthplace in Guanajuato, Mexico. See Kahlo, Page 37

Selfridge Air National Guard Base in Harrison Township could become a base without fighter planes for the first time in 100 years if Congress passes a 2016 defense bill that adopts a U.S. Air Force plan to retire the A-10 Thunderbolt jet. The A-10 fleet has flown largely intact through several years of budget sorties between military leaders who want to retire it and senior members of Congress who keep it in service. Most recently, a compromise version of the 2015 National Defense Authorization Act passed in December halted a plan to retire the fleet but allowed the service to put up to 36 aircraft on backup status if the federal government deems it necessary. Last month, the Air Force anSee Selfridge, Page 36

COURTESY OF NORTHROP GRUMMAN CORP.

Selfridge officials estimate that about 180 full-time and 455 part-time jobs are directly tied to flight, operation and maintenance of its A-10s.

“Double Portrait of Diego and I,” Frida Kahlo, 1944

Rocking the Intellectual Property World AT T O R N E Y S AT L AW

(see our ad on page 2)

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CRAIN’S Readers first for 30 Years

DETROIT BUSINESS March 30-April 5, 2015

Go figure: Data on D’s retail scene

LOOKING BACK What the ‘Hail’? Yessians call How UM song their own tune went so wrong

PAGE 3

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Foundations buoy Belle Isle’s future Aquarium, conservatory are high priorities By Sherri Welch swelch@crain.com

Foundations are lining up support up behind efforts to set priorities for Belle Isle in the years ahead and build the Belle Isle Conservancy’s ability to make them happen. The foundation support is positioning the conservancy to become to Belle Isle what the Detroit Riverfront Conservancy is to the riverfront. Scripps Whitcomb Conservatory

This month, a strategic planning process to determine where early investments should be made on the island launched with support from foundations, the Michigan Department of Natural Resources and the conservancy. The effort is running parallel with a study making strategic recommendations specifically for the Belle Isle Aquarium and Scripps Whitcomb Conservatory looking at the opportunities for joint operation with other key cultural assets like the Dossin Great Lakes Museum and Belle Isle Nature Zoo. Both efforts are expected to wrap

Because they are the future of your company. Crain’s looks at millennials – the largest age group in the workforce.

up by fall. “Now that the conservancy is laying the groundwork for investment with more capacity, other foundations are seeing it’s a good time to invest,” said Laura Trudeau, managing director at Kresge Foundation, which provided funding to create the conservancy and provided $300,000 in operating support between 2013 and 2014. Also spurring foundation investment is the clear resolution over who’s in control of the island, the state’s commitment to work cooperatively with the conservancy and its willingness to provide matching

SPECIAL REPORT STARTS ON PAGE 11 Extras: More photos, complete look at survey data, plus a place for millennials to tell us their story: crainsdetroit.com/millennials

See BELLE ISLE, Page 29

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How did Michigan lawyers secure trademark protection for

faces only their fans could love? (see page 7)

THE FIXER When city’s red tape gives a client the blues, ‘expeditors’ can get things done in Detroit By Amy Haimerl ahaimerl@crain.com

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rian Ellison is in the business of solving people’s problems. He’s a fixer, a doer, a get-itdone guy. He’s the one you call when nothing and no amount of pleading can get your business, building or development right with the city of Detroit. In the industry, Ellison is what’s known as an “expeditor,” someone who makes a living knowing whom to call and how to maneuver through seemingly opaque city processes. Expeditors, mostly, help large-scale developers and national retailers push their projects through cities they don’t call home and don’t understand.

A few, like Ellison, help the hometown team by smoothing the path for small-business owners. And before you ask, yes, they get it done on the up-and-up, not an old-school, greasy-palm kind of done. “When you first talk to Brian, he’s very impressive and it just doesn’t wear off,” said Joshua Van Berkum, a real estate developer who recently hired Ellison’s firm, Intersection Consulting Group LLC, to untangle a deal with the Detroit Land Bank Authority. “Brian very much carries [JOHN SOBCZAK] “The minute I hear a case, I know himself like an entrepreneur. I feel very comfortable working with him where your stuff is hung up,” said Brian because he knows how government Ellison, whose Intersection Consulting Group LLC helps businesses navigate See FIXER, Page 28 the city of Detroit’s bureaucracy.

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CRAIN’S Readers first for 30 Years

DETROIT BUSINESS April 6-12, 2015

Big money not always best

Will The News’ fate be decided soon?

Cuts threaten mental health authority

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OPENING DAY

Mexican mogul tied to Marquette deal Downtown building sale signal of more to come? [COURTESY OF SAFE ROADS YES] The pro-Proposition 1 ad campaign emphasizes safety concerns about poorly maintained roads.Would more facts build more support?

Roads tax ad push hitting potholes Prop 1 message concern: Emotion over detail By Dustin Walsh dwalsh@crain.com

Proposal 1, the May 5 ballot measure to provide additional funding to repair Michigan’s crumbling infrastructure, faces its own rough road as the advertising campaign may be falling flat. The campaign surrounding the proposal, which would generate $1.2 billion for roads repairs through a sales tax increase, has been focused on the dangers of Michigan roads. But is feeding on the emotions of drivers enough? That’s the question being asked by some advertising and public relations experts who assert the campaign is too thin on the education needed for voter buy-in. And if the proposal fails, it could raise questions about whether an earlier proposed strategy, which emphasized improvements to edu-

cation funding as well as road safety, would have made a difference. The proposal would have faced an uphill battle with either strategy. Other obstacles are the expected low voter turnout common to stand-alone elections and the complex nature of the overall proposal — only part of which is on the ballot — which is difficult to explain in soundbites. The ads, led by Lansing-based public relations firm Martin Waymire and Lansing-based GOP advertising agency WWP Strategies, focus on a campaign called “Safe Roads Yes.” The Safe Roads Yes effort had more than $3 million on hand at the last campaign finance reporting mile marker, on Feb. 10, according to an analysis by MLive.com.

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An entity with ties to Carlos Slim Helú, the Mexican business mogul with a net worth Forbes magazine pegs as $77.1 billion, has purchased a downtown Detroit office building. Real estate brokers are watching the deal closely and speculating that the purchase marks the beginning of an effort by Helú to scoop up other Detroit properties. The 164,000-square-foot Mar quette Building at West Congress Street and Washington Boulevard was sold to 243 Congress LLC , which is linked to Helú, late last year for $5.8 million. December’s purchase, documented in county records, of the 115-year-old vacant office building gives Helú an entry to a Detroit real estate landscape dominated by another billionaire, Dan Gilbert. “It’s unlikely he would stop at one, isn’t it?” asked Paul Chouk-

See PROPOSAL 1, Page 29

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ourian, managing director of the Southfield office of Colliers International Inc. “If they show some success with it, the floodgates could open. With that much ability, what might be a small investment for him could be huge in the city of Detroit. A fraction of his net worth could be a monster investment.” Steve Morris, principal of Farmington Hills-based Axis Advisors LLC , said the purchase might be considered a market test. “The probability is that this building certainly has a demand now with what’s going on, and that he’s just getting his feet wet and will look to do other things,” Morris said. “You can’t buy major office buildings that have a lot of vacancy that you can turn around. Those are gone. So this gets the appetite wet and there is the possibility, with his

track record, that he could build. There is need for lots of apartments and a need for office space.” See MARQUETTE, Page 28

[AP] Carlos Slim Helú

Blue Cross cash kept HMO afloat $30M needed to meet state requirements By Jay Greene jgreene@crain.com

crainsdetroit.com Vol. 30 No 14

By Kirk Pinho

Blue Cross Complete , a Medicaid HMO owned by Blue Care Network , needed a $30 million cash infusion last year to stay financially solvent and meet the state’s reserve requirements. Under health care reform and Healthy Michigan Medicaid expansion, Blue Cross Complete has more than tripled in size to more than 75,000 members in the three Southeast Michigan counties where it is licensed to do business.

All of the state’s 13 Medicaid HMOs have increased membership in the past year as Michigan has added more than 600,000 people through its Healthy Michigan Medicaid Expansion. Nearly 20 percent, or about 1.8 million, of the state’s population is now covered by Medicaid. But Blue Cross Complete — one of two Medicaid HMOs that lost money in 2014 — has lost $22.7 million during the last two years, according to annual reports filed to the Michigan Department

of Insurance and Financial Services . Flint-based HealthPlus Partners lost $8.9 million in 2014. The financial losses for Blue Cross Complete were attributed, in part, to the Medicaid plan adding administrative staff, technology and infrastructure to support a push for greater market share over the next several years. Blue Cross Complete is licensed to enroll Medicaid members only in Washtenaw, Livingston and Wayne counties. New Medicaid patients also used medical resources at a slightly higher rate than expected. See BLUE CROSS, Page 28

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CRAIN’S Readers first for 30 Years

DETROIT BUSINESS April 13-19, 2015

Mall evolves as shoppers do

Data Detroit: 7.2 sq. miles drive the city

Making deals: It’s as hard as you think

PAGE 6

PAGE 3

LOOKING BACK

GOP balks at funding Healthy Michigan plan Governor’s planned ‘lockbox’ is bare By Jay Greene jgreene@crain.com

When championing Medicaid expansion under health care reform in 2013, Gov. Rick Snyder spoke often about his desire to place half of the near $1 billion in state savings over the next decade into a “health savings lockbox.” The state savings, primarily from lower general fund spending on mental health and prison health costs, would be used in fiscal 2017 when federal funding for

Healthy Michigan Medicaid expansion started to decline and the state needed to contribute up to 10 percent of total costs to keep the program going. But despite Snyder’s budget recommendations to fund the lockbox in fiscal 2014 and 2015, the state Legislature failed to place 50 percent of state savings — which amounted to more than $220 million — into the health savings subaccount of the governor’s budget stabilization fund.

With the state facing a budget shortfall of at least $400 million in fiscal 2016, there also is no proposal this year to set aside state savings from Healthy Michigan expansion. “We are concerned about further funding for Healthy Michigan,” said Rick Murdock, executive director of the Michigan Associa tion of Health Plans , which represents 12 of the state’s 13 Medicaid HMOs. Murdock said his concern is two-fold: One, how legislators will

thenderson@crain.com

By Bill Shea bshea@crain.com

See TIGERS, Page 28

TechTown, Automation Alley help Civionics grow By Tom Henderson

See LOCKBOX, Page 29

MLB’s reach to women in play at D Shop The Detroit Tigers’ D Shop retail store at Comerica Park is a petri dish in which the economic results of Major League Baseball ’s ongoing effort to market the game to women can be viewed. The walls, racks and shelves inside the 6,000-squarefoot shop brim with jerseys, hoodies and T-shirts designed specifically for women in a full range of sizes, and other apparel and merchandise aimed at female fans — designed to appeal to what MLB has said is the gender that makes up 46 percent of baseball fans. Both the brick-and-mortar Tigers ballpark shops and the team’s official online store are filled with jewelry, footwear, handbags, makeup, swimwear, medical scrubs, maternity wear, luggage and fitness gear. Also for sale are Pandora bracelets and charms and a Dooney & Bourke line of handbags, all in Tigers livery. The past couple of years have seen the amount of

Ann Arbor startup gets a regional lift

[GLENN TRIEST]

The D Shop at Comerica Park has walls,racks and shelves full of hats,T-shirts,hoodies,purses and jewelry for the discerning female Tigers fan.

Can a village raise a tech startup? Ann Arbor-based Civionics LLC hopes so, as it tries to make the switch from being a company existing on government research grants for its wireless sensors to one that will make products to sell to customers. The company, spun off from the University of Michigan in 2009 to provide wireless sensors to monitor the health of civil engineering projects, is a poster child for the regional cooperation that has evolved in recent years to help promising tech startups become actual companies. Civionics was founded by Jerome Lynch, a UM professor of civil and environmental engineering, and Andy Zimmerman, one of his doctoral students. Lynch is now chief science officer; Zimmerman is CEO, though he lives in Colorado now, and a new CEO likely will be named soon. Civionics is based in the tech incubator at UM’s north campus; it is

[LEISA THOMPSON]

Jerome Lynch,chief science officer for Civionics,holds one of the company’s sensors. being mentored by an executive in residence at Detroit’s TechTown who likely will become the compaSee CIVIONICS, Page 27

crainsdetroit.com Vol. 31 No 15

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Page 1

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April 20-26, 2015

New rules for nonprofits: Lots of them

Detroit City FC kicks it up, aims to go pro

Tech firm helps Ford build a bike

PAGE 3

On the beam for cancer treatment

ISTOCK PHOTO

DETROIT BUSINESS

Zoo’s formula for producing its power: E = e-a-t Page 4

Investors plan to revive the Brewster Wheeler site with retail and housing, but developers also see potential not far away

McLaren, Beaumont to open proton centers Why proton beams?

By Jay Greene jgreene@crain.com

Proton beam therapy is a type of radiation treatment that uses protons rather than Xrays to treat cancer. A proton is a positively charged particle that is part of an atom. At high energy, protons can destroy cancer cells.

Seven years after fierce battles over the need for multiple proton beam cancer centers, McLaren Health Care Corp. this spring expects to open the first proton beam therapy center in Michigan, next to its 458-bed Mc Laren Regional Medical Center in Flint. McLaren officials told Crain’s they hope to conduct their first treatment on a prostate cancer patient in one of the three rooms that are part of the $50 million McLaren Proton Therapy Center. But Troy-based Beaumont Health, which first proposed a $159 million proton beam center in 2008, isn’t far behind. Beaumont plans to open a $40 million, single-room proton beam center in Royal Oak in spring 2017. Proton beam therapy is a controversial form of megavoltage radiation that some have suggested is effective in some prostate and pediatric cancers because it causes less damage to surrounding tissue while directing high dosages at tumors. It also has been used to treat lung

In 1990, hospitals in the U.S. began using proton beams to treat patients. But the method is controversial because of a lack of definitive clinical trials. Unlike traditional radiation treatment, which can damage surrounding tissue, proton therapy can target tumors more precisely with lower radiation doses to surrounding healthy tissue. Proton therapy is seen as having some benefit to treat tumors surrounded by sensitive structures — such as the eye, brain and spinal cord — where the potential for radiation damage is high. Source: American Cancer Society

See PROTON, Page 21

Special Report

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A prettier picture for Brush Park? By Kirk Pinho

The Karmanos Cancer Institute and other health care organizations in the region are strengthening their oncology networks, Page 11

crainsdetroit.com Vol. 31 No 16

[LARRY PEPLIN PHOTOS]

The now-cleared site of the Brewster-Douglass housing projects (top) lies just beyond the basketball courts of the Brewster Wheeler Recreation Center (above left).Old buildings meet new near where Alfred and Brush streets intersect (above right).

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kpinho@crain.com

reater downtown could be looking at a reawakening of one of its most historic — yet languishing — enclaves now that redevelopment plans have been announced and the city negotiates with and seeks developers for more than 30 acres of land in and around Brush Park. But the big unanswered question is: What will happen with the areas immediately to the south and west of the Brewster Wheeler Recreation Center site at I-75 south of Wilkins Street? Last week, the city announced that two redevelopment teams will turn their efforts to the recreation center’s history and to its future with a $50 million project with restaurant and meeting space and approximately 150

[UNION JOINTS LLC]

A rendering of the BrewsterWheeler mixed-use project.

residential units with first-floor retail. But beyond that project, between three separate requests for proposals, the city has put up 32.6 acres of land for development nestled between the Midtown and Eastern Market District areas and east of the Ilitch family’s developments surrounding a new arena for the Detroit Red Wings. See BRUSH PARK, Page 19

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4/24/2015

6:20 PM

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CRAIN’S Readers first for 30 Years

DETROIT BUSINESS April 27-May 3, 2015

Surfing garb in the Motor City? How gnarly

LOOKING BACK: The withdrawal of bank HQs in Mich.

PAGE 3

PAGE 6

No-fault bill: $1B from health care? Unlimited medical untouched, but payment rates for care are cut By Chad Halcom chalcom@crain.com

A proposed overhaul to Michigan’s no-fault automotive insurance law could pull more than $1 billion of revenue away from the state’s health care industry, but it is unclear whether it would save drivers more money over the long run. The House Insurance Committee

voted 9-6 along party lines Thursday to report two no-fault reform bills, SB 248 and SB 249, to the House floor, where party leaders are expected to discuss them further this week. A slightly different version passed the Senate 21-17 earlier this month. The bills would cap the amount health care providers could bill for services covered under no-fault and provide for a two-year $100 annual

rollback in premium charges. The legislation also establishes a new Michigan Catastrophic Claims Association to begin covering all medical costs over a benefits cap on insurers, which starts at $545,000. This fund replaces the current nonprofit claim association, which was established in 1978 and has more than $18 billion in accumulated assets to cover claims, and would have only the as-

sets it collects directly from vehicle owners. The current MCCA would become the Michigan Legacy Claims Associa tion and continue reimbursing insurers for over-the-cap expenses on policies issued before the new fund takes over claim coverage. The result, over time, could be one fund that has billions more in assets than it actually needs and another that could dramatically increase premiums if it See NO-FAULT, Page 29

Beringea backs U.K.med device biz looking to be local

The “living office” at Herman Miller headquarters in Holland. The idea: Office design should help meet business goals. MarxModa LLC wants to sell the living office from a downtown Detroit headquarters

By Tom Henderson thenderson@crain.com

[HERMAN MILLER INC.]

Ex-biz consultant becomes chair man With local acquisitions, startup seeks headquarters in Detroit to sell Herman Miller’s ‘living office’ By Sherri Welch swelch@crain.com

For years, Joe Marx sold business management consultant services to Fortune 500 companies. Now he’s selling them strategic office designs and Herman Miller office furniture. Through two separate first-quarter deals, Marx and his Grand Rapids-based Marx Consulting Group LLC acquired WorkSquared Inc . in Novi and Pontiac-based Facility Matrix Group for undisclosed amounts.

WorkSquared’s prior owners were Laurie VanLangevelde and Daniel Rosema; Chris Sowers and David Daugherty previously owned Facility Matrix Group. Marx has since merged the two companies to form the state’s sole Herman Miller dealership: MarxModa LLC, retaining a combined 100 employees. The now-Pontiac-based company operates Joe Marx: Acquired from sites in Grand Rapids, Kalamazoo, Lansing, WorkSquared, Traverse City, Livonia and downtown Detroit, an FacilityMatrixGroup appointment-only showroom in Bedrock Real Es See MARXMODA, Page 27

According to the Centers for Disease Con trol and Prevention , hospital-acquired infections are the fourth-leading cause of death in the U.S. A small company in the U.K., with help from a local venture capital firm, wants to help stop hospital germs in their tracks. Backed by $4.5 million in funding by Farmington Hills-based Beringea LLC , All In One Medical , which is based in Wolverhampton, England, has been scouting locations in Southeastern Michigan for a manufacturing facility it wants to have running within a year. The plant will employ 35-40 to make its patented disposable antimicrobial curtains, room dividers and window blinds for hospitals and medical clinics. Using the same chemicals that coat the curtains and blinds, the company is launching a line of antibacterial powders, soaps and lotions under the brand name of Fantex. It has See BERINGEA, Page 28

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Merging of the Minds We make M&A manageable

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DETROIT BUSINESS May 4-10, 2015

Sakthi sees the pros of hiring ex-cons PAGE 3

‘Golden corridor’ – but slow as molasses

Brighton firm’s coating clearly has potential

Why Kroger had Hiller’s Markets on its shopping list,

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DVP pushes aside rumors of trouble Hermelin: ‘Early-stage investing is messy. … We’re here for the long haul’ By Tom Henderson

the long haul,” he added.

thenderson@crain.com

[LARRY PEPLIN]

Drivers inch their way along Hall Road.The amount of traffic is both a blessing and a curse for merchants along the corridor that some call Hell Road.

M-59 gridlock drives traffic talk in Macomb Officials see no quick cure to the curse of the Hall crawl By Doug Henze Special to Crain’s Detroit Business

Slogging through stop-and-go traffic on northern Macomb County’s main east-west thoroughfare — four lanes deep in exhaust and exhaustion — it’s easy to understand why some locals have dubbed it “Hell Road.” For the business district along the stretch of M-59 officially known as Hall Road, that gridlock has become both blessing and curse. The area has seen a major development push in recent decades, but the traffic backups can also be a deterrent to visitors. “I refer to M-59 as Macomb County’s Golden Corridor,” said Joe Sowerby, president of com-

Special Report: Macomb County’s economy is revving up from the last recession, with tech jobs helping drive a resurgence in manufacturing, Page 11

mercial real estate brokerage Anton, Sowerby & Associates in Mount Clemens. “Everybody wants to be on M-59. That traffic is the lifeblood of businesses in the busy commercial district.” Borrowing a line made famous by Yogi Berra, parts of M-59 have become so crowded “nobody goes there anymore.” “There have been a number of restaurants that have come and See GRIDLOCK, Page 19

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Trying to build something When the trio founded DVP, there were no early stage investors in Detroit. It was a barren landscape for venture capital, and Gilbert was ready to try and build something. “We’d been losing our best and brightest for years,” Hermelin said. “They’d been starting companies, but they’d been starting them in San Francisco.” They raised their first fund, which has $55 million under management and of which $30 million has been committed to portfolio companies. Brian Hermelin: And, critically, the only institutional “Relax. DVP is money in the fund is $2.25 million doing fine.” from the Pure Michigan Venture De velopment Fund . That means not having to answer to foundations or pension funds that See DVP, Page 21

Living through giving A. Alfred Taubman left a legacy in education, health care, galleries and research into diseases. His philanthropy is expected to live on through his children and the Taubman Foundation, Page 7

[ASSOCIATED PRESS]

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crainsdetroit.com Vol. 31 No 18

Rumors have been swirling in the local venture-capital community that Detroit Venture Partners is in trouble. Five years after being founded by Dan Gilbert, Josh Linkner and Brian Hermelin as a way to invest in earlystage technology companies, DVP is yet to have any big wins. Meanwhile leadership has been in flux, there have been layoffs at several portfolio companies, and some founders abandoning Detroit for the fertile grounds of San Francisco. “Confidence in DVP by the venture community has been lacking,” said one area venture capitalist who asked not to be named. “Rumors have been swirling.” Hermelin, who is DVP’s managing partner, has a message to those who doubt: Relax. DVP is doing fine. “Early-stage investing is messy,” he said. “It’s hard. It’s hand-to-hand combat. We’re about where we should be four-and-a-half years in. We’ve got some really promising companies we like a lot. We’ve got some companies we hope can get some wind behind them. And we have some that are tough. “We didn’t get in this for a quick return. We’re here for

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5/8/2015

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CRAIN’S Readers first for 30 Years

MICHIGAN EDITION This monthly issue reaches 5,000 additional readers outside of metro Detroit

Could rail be the newway north? Page 15

DETROIT BUSINESS May 11-17, 2015

[ISTOCK PHOTO]

HORSE RACING: IS IT ON THE RIGHT TRACK? PAGE 3

The Bank of America building in Troy is expected to sell for as much as $150 per square foot.

[COSTAR GROUP]

Banking on a big sale BOA building could score high, brokers say, but will market comply? ing’s high occupancy rate and rental figures kpinho@crain.com are positives, going prices aren’t quite in the The Bank of America building in Troy is on upper end of that range. Even prominent, the market — and when it sells, it is expected Class A office buildings in the region aren’t to be one of the biggest suburban office supporting a $150-per-square-foot-or-highbuilding sales in recent memory. er sale price, he said. Depending on whom you ask, the For example, in downtown Detroit, Dan 450,000-square-foot building directly east of Gilbert purchased the 1 million-square-foot The Somerset Collection on West Big Beaver Kevin Kernen: Not One Detroit Center building for $100 million Road could sell for between $100 and $150 a sold on office ($100 per square foot) and, along with Meridian Health, the 1.1 million-square-foot Com square foot or $45 million to $67.5 million. building prices puware Corp. headquarters building on Some brokers predict it could be even more. But Kevin Kernen, managing director of valuation Campus Martius for $142 million ($129 per square and financial options for Southfield-based Stout Ri sius Ross Inc., said that although the landmark buildSee BANK, Page 26 By Kirk Pinho

Snyder eyes future as his profile builds Despite Prop 1 fail, guv pitches ‘comeback story’ By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

LANSING — Gov. Rick Snyder has put an end to rumors that he plans to run for president next year. But that doesn’t mean he’s not thinking about his political future. A packed national travel schedule, which is positioned as a way to tout Michigan’s “comeback story,” is viewed by political watchers as Snyder’s effort to gain name recognition on a national stage. From California in late April to a New York visit late last week, Snyder is seemingly making traction in at least

raising his profile. But why is the term-limited Republican governor traveling the country to promote Michigan’s economic recovery — and Detroit’s emergence from bankruptcy — if he doesn’t eventually aspire to a national post? Snyder offered a brief statement Thursday saying he is promoting Michigan’s economic success story to a national audience in See SNYDER, Page 27

Rick Snyder: Talking about Michigan’s future, not his

Sleep industry wakes to customer demand By Dustin Walsh dwalsh@crain.com

[REVERIE]

Sleep is a component of lifestyle,says Reverie CEO Martin Rawls-Meehan.

Sensors, biomarkers and algorithms are becoming part of everyday health technology — from the use of step trackers to connected diet plans built into smartphones. The industry of sleep isn’t lying

crainsdetroit.com Vol. 31 No 19

down on the job; even mattress and sleep system makers, such as Bloomfield Hills-based Reverie, are creating their own customizable, high-tech devices to keep up with other sectors. Reverie, a dba of Ascion LLC, is increasing its research and development spending to carve out its slice of the increasingly technologyheavy but highly competitive $14.2 billion U.S. mattress industry.

“Sleep is more than just laying on a flat surface; it’s a lifestyle component,” said Martin Rawls-Meehan, founder and CEO of Reverie. “People are demanding customization and technology from all of their products and, in the bedding category, allows us to take the sector to the next level.” Reverie, which has manufactured adjustable beds since 2003, generat-

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heavy lifting

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ed revenue of just under $100 million in 2014 and expects to surpass that this year. Rawls-Meehan relocated the company from Massachusetts to metro Detroit in late 2011. It employs 150 employees, 40 of them in Bloomfield Hills. The company’s current offerings include an adjustable bed with See REVERIE, Page 25

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CRAIN’S Readers first for 30 Years

DETROIT BUSINESS May 18-24, 2015

BEAUMONT, HENRY FORD POST PROFITS

CREAM AND SUGAR? ... VITAMINS?

PAGE3

Former churches find new uses in the afterlife Page 3

Van Buren Township is suing Visteon Corp. after a failed bond deal that could bankrupt the community. Should the company share blame?

Poll: Biz willing to pay more Visteon: Lesson in caution for better roads By Dustin Walsh dwalsh@crain.com

Fuel or sales tax hikes are favored options By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

Metro Detroit businesspeople say they would be willing to pay more out of their own pockets to repair Michigan’s failing roads and bridges, both in the form of higher taxes and fees — and nearly half of them would even consider corporate income tax changes. The roads, they agree, are broken. What they don’t agree on is just what Plan B for roads should look like. Of the 300 business owners and managers surveyed in a poll commissioned by Crain’s Detroit Business and law firm Honigman Miller Schwartz and Cohn LLP , a majority, 56 percent, believe some combination of fuel tax and fees could fill the funding gap. The polling was conducted by Lansing-based Epic-MRA. Respondents said lawmakers and Gov. Rick Snyder must make reaching a deal on an alternative funding plan a priority in the wake of Proposal 1’s defeat this month. These respondents to the Crain’s poll said coming up with Plan B quickly is essential. But they nearly uniformly opposed cuts to some existing state programs to match the $1.2 billion that Proposal 1

The road to funding 4% 10 %

56%

31%

It will be necessary to raise state taxes, fees or both Funding can be raised by cutting existing programs and services It will take a combination of both cuts and new taxes Undecided/refused

[ISTOCK PHOTO]

crainsdetroit.com Vol. 31 No 20

[LARRY PEPLIN]

Denita Donahoo (left) gets a grip lesson from instructor Terri Anthony-Ryan last week at the Belle Isle Golf Range.

New owner aims high for Belle Isle golf, but expenses put her in the rough By Bill Shea

NEWSPAPER

See VISTEON, Page 22

Survey: Biz owners, managers would pay for roads, if plan is right

Source: Crain’s/Honigman poll See ROADS, Page 25

A lawsuit between Van Buren Township and its largest corporate resident, Visteon Corp., underscores the risks of government-led investment in economic development — and whether corporations should be held accountable when these kinds of projects go awry. The suit, filed May 12 in U.S. Bankruptcy Court in Delaware, alleges the multinational auto supplier breached its contract over bonds tied to the construction of Visteon’s opulent 263-acre campus near Ecorse Road and I-275.

The case isn’t the first time economic development desires have burned municipalities, but experts say this case should serve as a cautionary tale. The biggest issue: vague language about shared risk and the dollars involved. Legal experts in this area of law say indemnity clauses in any contract like this must be ironclad. The Visteon development opened in 2004. When the Visteon Village campus was envisioned, it wasn’t known that Visteon would ultimately end up in bankruptcy court or that the commercial real estate market

bshea@crain.com

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Since she took over the Belle Isle Golf Range on April 1, Francine Pegues said she has had only enough time to hit a single bucket of range balls. That’s distressing for the president of the Michigan Women’s Golf Association who first took up the game 39 years ago, but her time has been occupied by keeping the driving range and golf training center open and maintained. “At this point, I have spent more money than I an-

ticipated,” she said. “The state underestimated what it would cost to open the doors here.” Michigan, which made the island a state park last year, gave Pegues a three-year contract in February to operate the golf facility, and her intent has been to use the center as a tool to bring golf to underserved populations, especially children, she said. Unexpected expenses and troubles have made that a difficult goal. See GOLF, Page 21

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5/22/2015

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Page 1

CRAIN’S Readers first for 30 Years

DETROIT BUSINESS May 25-31, 2015

Denver VC firm opens office in Ann Arbor

MGM,Lions offer fans tunnel vision

PAGE 3

Surrealist artist Balazs Szabo is helping a local law firm find a new home for his paintings of Detroit, Page 3

M-1 RAIL PICKS UP STEAM [LARRY PEPLIN]

Workers last week put together the tracks that will carry M-1 Rail streetcars. The line itself will bear the name of Quicken Loans Inc., after the mortgage lender bought naming rights

Midtown pioneer turns focus north 11-building buy seen as jump-start for New Center By Kirk Pinho

Quicken Loans buys M-1 naming rights Streetcar line to hire company for help on name, branding By Bill Shea bshea@crain.com

Detroit-based Quicken Loans Inc. has bought the naming rights for the M-1 Rail streetcar line currently under construction on Woodward Avenue, but the actual name is yet to be decided, project organizers said. That the online mortgage lender owned by Dan Gilbert is the naming rights buyer isn’t a surprise; Gilbert has been the $137 million streetcar project’s co-chairman (with Roger Penske) nearly since its 2008 inception. Plus, Quicken upped its financial contribution last year to make it the largest single corporate donor at $10 million. Gilbert’s footprint in

downtown Detroit continues to build. Bedrock Real Estate Services LLC has acquired more than 70 properties — mostly buildings and parking decks — in Detroit totaling more than 11 million square feet for a total investment of more than $1.7 billion. Many of those properties are along Woodward or within easy walking distance of the streetcar line. Additionally, one of Gilbert’s chief aides, Matt Cullen, is M-1 Rail’s CEO. Cullen was unavailable for comment on this story. The naming rights deal is believed to have been part of Quicken’s increased capital investment, which was originally $3 million. See QUICKEN, Page 24

kpinho@crain.com

In the late 1980s, the unofficial “Mayor of Midtown” saw the potential in the seedier areas surrounding Wayne State University . And it’s been a slow and steady process over decades to make Midtown the thriving neighborhood it is today. Now Sue Mosey, one of the pioneers of that enclave’s resurgence, is increasing her focus on the New Center area, which finally shows signs of coming into its own. Midtown De troit Inc. , of Sue Mosey: New which Mosey is Center is new center the executive diof her attention rector, purchased 11 buildings last month in New Center and envisions a catalytic, high-impact mixed-use redevelopment there that could jump-start New Center, the neighborhood just north of the reinvestment booms in Midtown and downtown.

Mosey said New Center’s promise is becoming more apparent now that the M-1 Rail project, the 3.3mile rail loop between Congress Street and Grand Boulevard in New Center, is under construction and investment will be pushed north along Woodward Avenue. Midtown Detroit, a nonprofit 501(c)(3) economic development group, purchased nearly 64,000 square feet of space along Woodward between Milwaukee Street See NEW CENTER, Page 25

A toppaints CFO paints A CFO numbers byby numbers

A desire named streetcar: Deal is almost done M-1 Rail’s long process to acquire six streetcars is near the end of the line. Inekon Trams of the Czech Republic will provide six streetcars at a total cost of $30 million, with a contract expected to be worked out in the next two to three weeks, Page 24 © Entire contents copyright 2015 by Crain Communications Inc. All rights reserved.

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[COSTAR GROUP INC.]

Buildings at 6560 and 6565 Woodward Ave.are two of the 11 purchased last month by Midtown Detroit Inc.in the New Center area of Detroit.

[GLENN TRIEST]

As if the CFO As ifjob theofjob ofisn’t CFO hard isn’t enough, hard imagine managing the finances enough, imagine managingwhile the the assets of your areofa finances whileorganization all the assets pokeryour chiporganization in a bankruptcy And are acase. poker chip this comes after completing a millage in a larger bankruptcy case. And to pullthis outcomes of a budgetary quagmire. after completing a That’sregional the story for Robert millage to pullBowen, out of a CFO of the Detroit Institute of Arts. budgetary quagmire. And that’s why he’s the Crain’s That’s the storyone forof Robert Bowen, CFOsCFO of the year. Read his story of the Detroit Instituteand of thoseArts. of 12And other honorees andone of that’s why he’s finalists, beginning onofPage 11. the Crain’s CFOs the year. Read his story and the stories of 12 other honorees and finalists, beginning on Page 11.

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The man who gave Beaumont $10M, and why PAGE 4

DETROIT BUSINESS June 1-7, 2015

A123 plans to double capacity of plants By Dustin Walsh

MICHIGAN’S BUDGET: THE STATE OF AFFAIRS

Biz pushes back on proposed MEDC cuts This is no time to stall state’s post-recession growth, biz leaders say

dwalsh@crain.com

A123 Systems LLC plans to announce today that it will double capacity at its three manufacturing plants, including two in Michigan, in a $200 million investment. In Michigan, battery cell production will increase from 3.3 million cells out of its plants in Livonia and Romulus to 4.3 million cells, said Jason Forcier, CEO of A123. The Livonia-based lithium-ion battery maker will increase battery capacity to 1.5 gigawatt hours at its plants in Michigan, Hangzhou, China and Changzhou, China over the next three years. Previous capacity was 750 megawatts. Its parent company, China-based Wanxiang Group Corp. , is funding Jason Forcier: All the expansion. “We’re at caA123 plants are at pacity at all of our capacity production facilities,” Forcier said. “The growth of our low-voltage business caused us to find ways to create more efficiencies as well as expand our operations.” After emerging from Chapter 11 bankruptcy in 2013, A123 refocused its business on low-voltage lithiumion batteries used by automakers for weight savings and to power other MPG-lowering technologies. This is a diversion from its original plan of manufacturing large lithium-ion battery packs to power electric vehicles — though it still does that work for the Chinese market. In the low-voltage market, A123 supplies automakers such as Daim See A123, Page 18

By Lindsay VanHulle lvanhulle@crain.com

MACKINAC ISLAND — Tim Allen probably won’t stop selling Pure Michigan on TV. The popular marketing campaign starring the movie star and native Michigander has helped the state attract millions of out-of-state visitors and hundreds of millions of dollars in new tax revenue. The “Pure Michigan” slogan is everywhere — on the radio, on buses, on license plates. But the $29 million program has been thrust into the center of a larger debate. Republican lawmakers are eyeing nearly $200 million in economic development money to

Dems’ road plan? In due time. Expect numerous versions of a road funding deal to swirl in the Capitol in coming months. But the top Democrat in the Senate says, “The proper way to do it is, as we go forward, to propose ideas at the right time,” Page 17

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Losing it – and trying to keep it: Cherry picking miffs small firms, Page M3

Mackinac Policy Conference coverage:

Capitol Briefings: Ann Arbor-to-Traverse City rail line should be a priority, Democratic Party chairman says, Page 7

Conference highlights, Page 12 Mary Kramer: Detroit’s future needs money — and jobs, Page M12 fix the state’s failing roads and bridges. Business leaders are pushing back against proposed cuts that would amount to nearly half of the Michigan Economic Development Corp .’s funding, arguing that the

state has momentum in a post-recession economy and now is not the time to slow it down. Key administrative figures, from MEDC CEO Steve Arwood to Gov.

Developing it: Is STEM education taking root? Page M4

See MEDC, Page 17

Proposed state budget boosts hospitals, but HMOs fall short But not every health care industry constituent is happy about the state of the state Hospitals in Michigan appear to come out health budget. Officials for the Michigan Association of Health Plans say the state’s 13 Medicaid the big winners in at least the working version of the 2015-16 state budget. HMOs got the short end of the stick as their traThose 133 hospitals will receive more than ditional Medicaid funding was cut by 1 percent, $450 million in additional federal Healthy or about $22.2 million. Michigan Medicaid funds for about 600,000 It’s all part of a groundswell of support in the enrollees — and a full restoration of $160 milLegislature to shift any state general fund exlion in graduate medical education payments cess from state departments to a revised $55 — if the Michigan Department of Health and Laura Appel: More billion state budget that would support a big Human Services budget approved last week by funding, but only hike in roads spending. (See related story, this House and Senate conference committees is after givebacks page.) passed by the full Legislature. The House and Senate conference commitThe graduate medical education payments go to tees gave unanimous approval of Health and Human teaching hospitals, and were previously cut from Gov. See HOSPITALS, Page 16 Rick Snyder’s proposed budget. By Jay Greene jgreene@crain.com

crainsdetroit.com Vol. 31 No 22

Talent

$2 a copy. $59 a year.

Crain’s Private 200 FCA leads the way, Page M47

Celebrating it: Meet the 10th class of Crain’s 20 in their 20s. Section starts on Page M19

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Retooling the workforce

Detroit’s food economy takes root Page M14-15

The war for talent What’s a hiring manager to do? Page M3

Apartment fund: $200M being raised for Detroit housing

New recipes for community colleges, Page M35

Page M13

Private 200 Crain’s List M47-M54

The state of STEM education,

Page M4

When you look at health care, can you really see what’s going on? Learn more at priorityhealth.com/transparency.

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Special Mackinac Section

COVER PHOTO: HENRY FORD COLLEGE BY LARRY PEPLIN

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SPECIAL REPORT: MACKINAC POLICY CONFERENCE

Retooling the workforce

Detroit’s food economy takes root Page M14-15

The war for talent What’s a hiring manager to do? Page M3

Apartment fund: $200M being raised for Detroit housing Page M13

Private 200 Crain’s List M47-M54

New recipes for community colleges, Page M35

The state of STEM education, Page M4

COVER PHOTO: HENRY FORD COLLEGE BY LARRY PEPLIN

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[CHICKEN SHACK INC.]

Shack copycat? Trademark filing raises IP law questions PAGE 3

Ford to update research hub Plan is estimated at $1 billion; RFP calls for major makeover of Dearborn campus By Kirk Pinho kpinho@crain.com

Ford Motor Co. is embarking on a 10-year plan to modernize its research and engineering hub in Dearborn and consolidate the majority of its 26,000 local employees there in reconfigured and updated office and testing space. Real estate sources who asked to remain unnamed expect Ford to embark on the estimated $1 billion reinvestment in the complex after selecting an architecture firm. While a Ford Land Development Corp. representative said Friday there were not yet specific plans to announce, the project outlined in a request for proposals document suggests building improvements and new building construction, building demolition, infrastructure upgrades, more green spaces and gathering places, and added parking. The complex includes engineering offices, testing labs, parking and ancillary buildings. The automaker plans to weigh architectural options on how to best reconfigure the campus. Brokers and architects say the space is due for a makeover. “Based on what I know about that environment and what they have accomplished since then, anything they can do to improve that core asset and development arena would be so positive for the community, for Ford,” said Mark Woods, COO of Southfield-

based Signature Associates Inc. Woods spent more than a decade as vice president of Ford Land, the automaker’s real estate subsidiary, MarkWoods: Any before leaving in improvement would 2003. be “so positive” Ford requested that bidders submit two master plan concepts: One that retains the existing dynamometer building and the Research and Innovation Center, and another without that requirement. The five-building research and engineering campus was developed in the early 1950s, and additional buildings were constructed over the years to meet increasing demand. Site review

Overall, the Dearborn-based automaker owns 71 buildings totaling about 13.1 million square feet in and around the city, according to a Ford request for fee proposals/qualifications for a new campus facility and workplace master plan that was issued in November and obtained by Crain’s last week. CoStar Group Inc., a Washington, D.C.-based real estate information service, reports the Research and See FORD, Page 23

[TOM HENDERSON]

Marysville City ManagerRandall Fernandez (left) with Randall Jostes, CEO of Environmental Liability Transfer Inc., which is responsible for slowly disassembling a former DTE Energy plant to create a prime piece of land along the water (below).

Riverfront renaissance Demolition of Marysville DTE plant will leave a hole that city officials, developers are eager to fill By Tom Henderson thenderson@crain.com

he DTE coal-fired power plant in Marysville sits brown and hulking, its 12 stories and 300,000 square feet dominating the skyline from the banks of the St. Clair River. If officials in Marysville, a city of almost 10,000 just south of Port Huron, have their way, what will rise on the site in the coming years will include a boutique hotel, condominiums, a fine-dining restaurant, a day-slip marina and perhaps a water park. Built in 1922, the 167-megawatt plant employed 250 for most of its productive life, until it went offline

in 2001. That hit to the city’s tax base has been more than made up for by the rapid expansion in recent years by SMR Automotive Systems, a tier-one auto supplier whose campus is a mile south of the DTE Energy Co. site. (See story, Page 24.) In bits and pieces, the DTE plant has started to disappear, its brick façade is being pulled off and stacked in piles, its tons of steel being torched into

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See MARYSVILLE, Page 24

Michigan Business A monthly report on statewide business issues Grand Rapids planners want to go the extra mile around Medical Mile, PAGE 9

recyclable chunks. The demolition crew originally planned to topple the main body of the plant on its side later this month and finish carting off its pieces over the next six months, but now it is considering imploding the building later in the summer. It is expected to be at least 18 months before environmental remediation is complete, with groundbreaking on development scheduled for late 2016 or early 2017. The plant sits on 20 acres of prime riverfront real estate, with a deep water port and 1,800 feet of river frontage, built in an era when

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DETROIT BUSINESS June 15-21, 2015

DTE plans public park near its downtown HQ PAGE 3

Olga’s in bankruptcy: Too much debt over downtown store Page 3

Meridian plans to double workforce Posts range from senior level to call center consulting By Jay Greene jgreene@crain.com

Meridian Health Plan has been on a rapid growth trajectory for the past three years. Now, the company’s hiring spree is going into overdrive. The company, which operates Medicaid health plans and provides other health services, expects to triple revenue to $3 billion this year. As part of that

growth, it’s doubling its workforce this year as it hires more than 1,275 employees — including more than 700 in Detroit — by December. Last week, Meridian posted job opportunities for 827 new employees, including many entry-level positions in its fast-growing call center, to add to its current 1,215 workforce. Some 1,085 are in Michigan.

Prevailing wage hits a prevailing wind lvanhulle@crain.com

LANSING — Inside the Capitol, lawmakers this spring debated whether to repeal Michigan’s prevailing wage law. Outside, high atop the dome, construction workers were erecting scaffolding, preparing to repair damaged and corroded decorative features on the façade of the 136-year-old building. The $6.4 million project is the first such

operations, said Sean Cotton, Meridian’s chief administrative officer. “Mostly (the hirings) are to support Medicaid in Michigan, Illinois and Iowa,” Jon Cotton said. “We have added 130,000 in Michigan, much more than we expected. We added 100,000 in Illinois, and now we are the largest there with 250,000 Jon Cotton: (members).” Meridian this year already has hired Meridian also will raise minimum See MERIDIAN, Page 19 wage to $17 an hour

What’s next for Garden Fresh founders?

But would repealing it save money? The research isn’t clear By Lindsay VanHulle

The company also announced it will increase its minimum wage to $17 per hour to attract the best qualified and also to reward its current staff, said Jon Cotton, president and COO of Meridian Health Plan of Michigan, the state’s largest Medicaid health plan with 422,000 members. But other mid- to senior-level positions will include those in finance, legal, nursing, case management, care coordination, information technology and corporate

restoration since 1992. As is required on all building projects funded with state dollars, its contractor — Lansing-based Christman Co. — pays its workers a prevailing wage, defined as union-scale wages and benefits. In Ingham County, a laborer earns $32.92 per hour under the county’s prevailing wage, according to the Michigan Department of Licensing and Regulatory Affairs . A painter earns $31.74 per hour. An operating engineer’s hourly wage ranges from $37.60 to $51.50, depending on the type of machinery they use.

Aronsons plan high-pressure food processing firm tinue to pay it forward with a new business to help other food manufacturers grow. Garden Fresh Gourmet’s founders are planWhat do you do after selling your Ferndalebased food company to a Fortune 500 company ning a new business to provide cold water, highpressure processing to small fresh food manufor a cool $231 million? If you are Garden Fresh Gourmet founders Jack facturers in the region. The process extends shelf and Annette Aronson and partner and Vice life without the need to freeze the product or to Chairman Dave Zilko, you conadd preservatives. As an example, Garden Fresh salsa Next course: that has not gone through the process Plans for salsa can last in the refrigerator, sealed, for 55 brand under days. After going through the process, it Campbell’s, can last 100 days, Aronson said. Page 22 Yet to be named, the new operation will be based in Ferndale and be the first “high-pressure tolling” operation in Michigan, Jack Aronson said, enabling small food processors of items such as juice and beverages, seafood and meats, ready-to-eat meals and produce to use the technology without incurring out-of-state costs. High-pressure tolling refers to exposing the food to high pressure at low temperatures in a bottle to kill By Sherri Welch swelch@crain.com

See PAY, Page 20

LINDSAY VANHULLE/CDB

See GARDEN FRESH, Page 22

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GARDEN FRESH GOURMET

Garden Fresh Gourmet’s owners plan a new business to help small fresh food manufacturers extend shelf life of their products without freezing the product or adding preservatives.

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DETROIT BUSINESS June 22-28, 2015

Wesley Berry: 30 years of change ... and a thorn in its side

House goes on break, leaves roads funding to Senate

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Fisher, Kahn buildings eyed for multifamily use By Kirk Pinho kpinho@crain.com

Maybe the Fisher Building and Albert Kahn Building need new leases on life — or maybe they just need new leases from a different type of tenant. The three-day auction for the iconic New Center office buildings begins today, and real estate experts say out-of-state investors are viewing at least one of the buildings as a multifamily conversion. This potentially would bring hundreds of new rental units to an area short on such housing — and a new residential emphasis to two Detroit landmarks. Portions of both buildings — perhaps 20 percent to 40 percent or 185,000 to 370,000 square feet of their total square footage of 925,000 — could be converted to multifamily in an area that multifamily real estate experts see as ripe for such redevelopment. By the time the high bidder closes on the deal, receives city approvals and completes construction, the $179.4 million M-1 Rail mass transit project likely would be finished, and New Center would become the next pocket of greater downtown ripe for multifamily redevelopment. A big selling point of New Center is a market option for renters Multifamily in the Fisher? It’s possible, real estate experts say

SHINOLA

‘Friends and family’ plan to grow Shinola Rock, Kresge among investors in $125M funding round to expand company

See BUILDINGS, Page 23

By Kirk Pinho and Tom Henderson

PIERRETTE DAGG/CDB

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Do copyright rules for literature and music also apply to the technology underneath the hood? Read about the car conundrum in a report on intellectual property, Page 11

n infusion of capital to support the growth of Shinola and other American-made consumer product lines was signed under a sort of “friends and family” financing plan last

month.

Bedrock Manufacturing Co. raised $125 million, sources say, in a funding round that includes Dan Gilbert’s Rock Ventures LLC and the Troy-based Kresge Foundation, plus other investors. The funding is in exchange for a minority equity stake in Bedrock Manufacturing, the Plano, Texas-based parent company to Shinola/Detroit LLC. Shinola, Rock and Kresge declined to confirm the terms of the deal, which closed in May. The funding is described by the Shinola leadership team as relationship-based outreach to a close circle of friends and colleagues as part of a mission to expand the business and create more American jobs. “In the process of getting to know each other, we recognized that we have several mutual friends who are adventurous and like-minded,” said Tom Kartsotis, founder of Shinola, in a Bicycles are also part ofthe statement to Crain’s. “As time passed, we decided that a small Shinola product lineup ‘friends and family’ round of financing would enhance our ability to aggressively build businesses that are predicated on creating world-class manufacturing jobs in America,” he said. “We are excited to welcome our new partners who include Dan Gilbert and Kresge.” Bedrock Manufacturing is not related to Bedrock Real Estate Services LLC, Gilbert’s real estate company that owns more than 70 properties in See SHINOLA, Page 22

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Special Report No downtown? No problem. Rochester Hills creates hubbub in its retail hubs. Page 9

June 29-July 5, 2015

Looking Back: Local theaters change focus

Avast impact: How marriage State’s boating ruling might economy affect benefits

PAGE 3

Pontch may get second tower

Adding a second tower to the Crowne Plaza Pontchartrain could bring the hotel up to 800-850 rooms, making it the state’s second largest.

Plan adds more rooms to attract conferences By Sherri Welch swelch@crain.com

he owners of the Crowne Plaza Pontchartrain Detroit are considering a second tower on its downtown Detroit site, the Detroit Metro Convention & Visitors Bureau has confirmed. Construction of a second tower — which experts say would cost in the $30 million-to-$35 million range — could bring the hotel up to 800-850 rooms. That would make it the state’s second largest, behind the riverfront Detroit Marriott at the Renaissance Center.

And it could help the city gain an edge in attracting large conferences. “One of our challenges is we don’t have as many hotel rooms that are an easy walk to the convention center like many of our competitors do,” said Michael O’Callaghan, executive vice president and COO of the convention bureau.

Campbell Ewald wins contract from Henry Ford By Bill Shea bshea@crain.com

A second tower at the Pontchartrain would allow the RenCen Marriott and other hotels downtown to “play well together as a group in bringing these conventions to the city,” he said. “(We) need to create some more inventory of rooms if we’re going to be successful in bringing large meetings to Detroit.” In the near term, the addition of that many rooms could decrease occupancy and average daily rate numbers for hotels downtown, said Ron Wilson, CEO of Hotel Investment Ser vices Inc., a hotel owner, developer and operator. “But long term, it’s a benefit to have that number of rooms,” Wilson said. The owner — Pontchartrain

The Detroit-based advertising agency Campbell Ewald has picked up a pair of new clients this month, work that potentially softens the blow of losing the massive U.S. Navy recruiting account in May. The firm intends to announce today that it has been hired by Detroit-based Henry Ford Health System as its agency of record. Terms haven’t been disclosed, but the health system spent $4.1 million on advertising last year, according to an annual survey by Voicetrak Inc., a Tucson, Ariz.-based market research company. That new account comes on the heels of the June 18 announcement that Campbell Ewald had won the three-year, $150 million contract to market California’s state-run health

See PONTCHARTRAIN, Page 21

See CAMPBELL EWALD, Page 19 PIERRETTE DAGG/CDB

State firm has novel role in saving Hemingway’s legacy in Cuba By Kirk Pinho kpinho@crain.com

Ronald Staley and The Christman Co.in Lansing are helping erect a building that would preserve Ernest Hemingway’s artifacts on the grounds of his Cuban home, Finca Vigía. THE CHRISTMAN CO.

Cocooned by palm, mango and avocado trees and bamboo shoots atop a hill overlooking downtown Havana 12 miles away, Finca Vigía — Ernest Hemingway’s home for more than two decades until just before he committed suicide in 1961 — is one of the top tourist attractions in Cuba. On its 12 acres in tiny San Francis-

co de Paula are some of the famed American author’s most prized possessions: about 9,000 books, rough drafts of his own work, letters, photographs, the heads of exotic game — and the guns he used to get them — from hunts in the island nation’s brutally hot and humid climate. It’s that climate and the way the documents were stored that jeopardizes many of Hemingway’s more fragile items, and it’s that climate

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that Ronald Staley, senior vice president of Lansing-based The Christman Co., first experienced nearly three years ago as an adviser to a nonprofit trying to preserve those artifacts for many more years to come. Today, Staley and Christman, which earlier this year opened a new office in the Fisher Building in Detroit, are more than advisers for a See HEMINGWAY, Page 21

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Public notices: Newspapers fight to keep tiny type, PAGE 3

DETROIT BUSINESS JULY 6-12, 2015

Somerset Park sale may bring upgrades By Kirk Pinho kpinho@crain.com

he $200 million-plus price tag is just the beginning for the New Jersey real estate company that just bought the largest apartment complex in Michigan. What is expected to come next is tens of millions of dollars in improvements to at least some of the

But they weren’t kept up to the very high-end standards that would be expected near the shopping mecca of Somerset Collection at West Big Beaver Road and Coolidge Highway, experts said. “You’re going to have to turn that into a more attractive, upscale project,” said Samuel Beznos, CEO of Farmington Hills-based Beztak Cos., which owns and manages an-

Washington, D.C.-based real estate service CoStar Group Inc. The Solomon Organization LLC

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knows that renovations are needed, with its managing director saying his Summit, N.J.-based company plans to spend “a lot of money” on improvements to the units themselves as well as things like exterior and common area upgrades. “We intend to be here for a long period of time. We want to improve the product physically, which we intend to do quickly,” said Zach Solomon, who last week declined to specify the company’s renovations budget. Somerset Park was once considered a true luxury complex when it first developed nearly 50 years ago. But over the years — including a time in the mid-1980s when it was informally known as “Sin City” due to the high number of young single professionals living there — the property’s prestige has lessened. Renovations could help turn that around. Somerset Park Beznos, whose comApartments pany has spent in excess ■ Total investment: $200 million of $5 million in the last few years upgrading ■ Number of units: 2,226 Muirwood, said im■ Upgrades: Expected to cost provement costs to the apartments alone at “tens of millions” Somerset Park could 2,226 units in the Somerset Park other of the area’s larger apartment reach $10,000 to $15,000 per unit if Apartments tucked just south of the complexes, the 1,400-unit Muir - things like HVAC systems need reSomerset Collection in Troy. That’s wood Apartments in Farmington placement. following what is believed to be the Hills. So if, for example, one-third of largest single-complex multifamily “The location would warrant a the units receive maximum upsale in the state in at least 15 years. more high-end product.” grades, that would put renovation The seller, the Frankel family of A typical unit renovation would costs between $7.4 million to $11.2 local real estate fame, and property increase rents between 5 and 10 million; if all the units receive manager, Troy-based Nyman Man - percent, Beznos said. At Somerset those upgrades, it could be $22.2 agement Co., did a good job main- Park, most rents range between million to $33.4 million. And that’s taining the units, spread out across $821 per month for a one-bed- not including the cost of improve217 acres and 156 buildings, multi- room unit to $1,545 per month for ments to things like common family real estate experts said. a three-bedroom, according to areas, grounds, club houses, tennis courts, the golf course, and any of the other features at Somerset © Entire contents copyright 2015 by Crain Communications Inc. All rights reserved. Park. crainsdetroit.com Vol. 31 No 27 $2 a copy. $59 a year. Andrew Hayman, president of Southfield-based Hayman Co., said it’s most likely that only some of the units would receive significant renovations to keep some apartments affordable to a broader group of renters. He said renovaSEE SOMERSET, PAGE 18

Plan for TriMas spinoff: Eye small acquisitions would be carve-outs from larger companies looking to generate thenderson@crain.com cash. Even in its first few hours as a He expects the company to public company last week, the close its first acquisition “in the new Horizon Global Corp . spinoff next quarter or so.” from Bloomfield Hills-based Tri “The first bite of the apple could Mas Corp. was already chasing sev- be a deal as small as $50 million. eral acquisitions. Deals at the opposite end Mark Zeffiro, president, could be triple that,” ZefCEO and co-chairman of firo said. “What I like the newly spun-off Horiabout the opportunity is zon (NYSE: HZN), said the these are fragmented and new company could hold regional markets where a secondary offering as we have the opportunity early as the third quarter to deploy capital very effifor acquisition capital. ciently.” Zeffiro, who was in New Sam Valenti: “This Wednesday’s IPO didn’t York last week to open the is basically going to raise any capital for HoriNew York Stock Exchange be a private-equity zon. The stock was disand see Horizon open for company that tributed to current TriMas trading, said the company trades as a public shareholders at the rate of is looking for small manu- company.” two shares of Horizon facturers in various indusstock for every five shares tries both here and abroad — but of TriMas stock they held — 18 has an expansion focus on China million total. and South America. And, he said, it Company holdings is considering joint ventures with Horizon Global officially shares other companies. “This is basically going to be a headquarters space with TriMas in private-equity firm that trades as a the Bloomfield Hills office of Valenpublic company,” said Sam Valenti ti Capital LLC , a wealth-manageIII, the executive chairman at Tri- ment firm, although 300 employMas and co-chair with Zeffiro at ees work in Plymouth Township at what is the operational headquarHorizon. “You want to add dry powder to ters for the company. Horizon Global has two busithe balance sheet,” he said of a secondary offering. “It gives you ness units, Cequent Americas and the flexibility to do big acquisi- Cequent Asia Pacific, Europe and tions. For now, we can fund acqui- Africa. The two dominate the towing, trailer and cargo management sitions through cash flow.” Zeffiro said current deals being industries, operating under such looked at include several small SEE TRIMAS, PAGE 17 family businesses and several that By Tom Henderson and Chad Halcom

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CRAIN’S Readers first for 30 Years

How to add vets to your duty roster (a cool car doesn’t hurt) PAGE 11

DETROIT BUSINESS JULY 13-19, 2015

Furniture giant’s structurefollows-strategy approach targets millennials, leads to big growth

Art Van hopes to appeal to millennials with its new line of furniture.

ART VAN FURNITURE

Art Van: $1B within reach By Sherri Welch swelch@crain.com

rt Van Furniture Inc. is bullish on the market for millennials and their penchant for minimalist bedroom sets; new product lines and geographic expansion are among the reasons the company expects to reach $1 billion in annual sales within three years.

For the Warrenbased company, which has spent the past couple of years expanding both in its hometown state and in other Midwest markets, the $1 billion mark is within reach if current projections hold true. Art Van brought in $620 million during fiscal

Moving Van. Agency to open Chicago office to help client Art Van, Page 28

2014 ended Sept. 30, up from $575 million in 2013 and $385 million in 2009. “Given the (anticipated) success of the next three years, we will be at an estimated billion by 2018,” CEO Kim Yost told Crain’s last week. “We have a three-year plan ... that says that’s doable,” with the company’s expansion in SEE ART VAN, PAGE 28

Tech innovator likes to ‘play where the puck is going to be’ By Gary Anglebrandt Special to Crain’s Detroit Business

Mohammed Islam: Blood analysis without the blood.

Mohammed Islam could be a poster child for a patenting professional. He’s founded six companies based on his patents. He teaches courses on the subject, showing University of Michigan engineering students the right and wrong ways to win patents. And he has collected more than 150 patents of his own, or so he thinks. “The last time I checked, in total, it was

around 150. I lost count,” he said. Islam’s field is optical and laser technology. He is a professor of electrical and computer engineering, and separately of internal medicine, at UM. Omni MedSci is developing a wearable glucose monitor that diabetics could use to track blood sugar levels without the need to draw blood. “We’re going to use lasers to do glucose monitoring,” Islam said. The initial version would be a desktop unit using fiber lasers to do measure-

Omni MedSci had nine issued patents at the start of this year, picked up four more this year and has 15 more pending. It Omni MedSci ‘s wide-ranging research does not license any technology from UM. interests helped make it No. 1 on Crain’s 2015 The company, thus far paid for out of list of the 25 most innovative companies. Full Islam’s pocket, is trying to get funding coverage of the rest begins on Page 17. from financial and strategic backers. His goal is to have a headset ready in three ments, before graduating into a wearable years. Omni MedSci has had meetings that probably would go around the ear with Microsoft, Apple, Dell and Johnson & where plenty of blood flows. Eventually SEE INNOVATOR, PAGE 25 cheaper LEDs would replace lasers.

Eureka Index: Michigan’s innovative companies

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Intellectual property? AT T O R N E Y S AT L AW

Game on.

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DETROIT BUSINESS JULY 20-26, 2015

The proposed fees — $30 for hybrids and $100 for electric vehicles — are considered a tax fairness measure since alternative-fuel vehicles use less gasoline and so their owners pay fewer gas taxes.

For filmmakerturnedhousing investor, Detroit is like Wild West

As IAC CEO says goodbye, supplier may seek a good buy ... or buyer

PAGE 3

Automakers balk at EV fees Alternative: Lawmakers should offer incentives to buyers By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

LANSING — Automakers are pushing back against proposed higher state registration fees for alternative-fuel powered cars. The extra fees — $30 for hybrids and $100 for electric vehicles — would go toward a nearly $1.5 billion road funding plan and are con-

sidered a tax fairness measure since alternative-fuel vehicles use less gasoline and so their owners pay fewer gas taxes. But automakers, racing to meet more rigorous federal fuel-economy standards, have concerns the fees will discourage would-be buyers of the fuel-efficient vehicles in a still-developing market.

In a letter last month to Senate Majority Leader Arlan Meekhof, the Washington, D.C.-based Alliance of Automobile Manufacturers said lawmakers should be offering incentives to buyers rather than raising fees. The alliance represents a dozen global automakers, including the Detroit 3. “Public policies that negatively

MIS drives toward sound investment

differentiate advanced technology vehicles — such as electric and hybrid vehicles — discourage consumers from adopting these new technologies,” wrote Wayne Weikel, the alliance’s state government affairs director. “Consumer choice is the key factor in driving competitiveness in the marketplace, and state policy should not penalize residents of SEE FEES, PAGE 16

Fata’s civil cases: Who will share the blame? By Chad Halcom chalcom@crain.com

COURTESY OF LIVE NATION

The success of the FasterHorses country music festival has Michigan International Speedway looking at concerts as a source of revenue that’s not from auto racing. By Bill Shea bshea@crain.com

he success of the three-day Faster Horses country music festival at Michigan International Speedway has prompted the track and the concert promoter to begin plans for a rock festival that could be akin to Lollapalooza, Coachella and Bonnaroo. The idea is still in the talking stage, but it represents the track’s latest effort to boost revenue outside of auto racing. MIS, which opened in 1968 in the Irish Hills area of Brooklyn, south of Jackson, is best known for its two NASCAR Sprint Cup races, the Quicken Loans 400 in June and the upcoming

Track president wants music festivals to be part of a more diverse – and lucrative – lineup Pure Michigan 400 on Aug 14-16.

Attendance at the races has fallen since the recession. It used to top 80,000 yearly. “It kind of dawned on us we’ve got a great facility, we’ve got a great team here, let’s start to expand our portfolio and look at becoming an entertainment destination,” MIS President Roger Curtis said.

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Music festivals, beer and wine tastings, driving schools, vehicle testing, obstacle course runs and private events such as weddings are elements of the 1,180-acre track’s expanding nonrace calendar that helps it generate revenue. The corporate business hurt by the recession also has started to rebound. “Entertainment, hospitality, suites and corporate sponsorships have been very strong,” said Curtis, who began working in motorsports in 1991 and became MIS president in 2006. What all that adds up to in revenue, track executives will not say, but Crain’s estimates it at SEE MIS, PAGE 17

Former oncologist Farid Fata may have taken responsibility at sentencing for an excessive chemotherapy treatment scheme that afflicted cancer patients for years, but who will share blame with him in upcoming civil court hearings is unclear. Federal officials have collected about $10 million in various cash and asset seizures since Fata’s 2013 arrest to go toward satisfying a $17.6 million criminal judgment that was part of his July 10 sentencing. U.S. DisFarid Fata: trict Judge Paul $10 million seized to Borman will depay $17.6 million cide at a restitucriminal judgment. tion hearing within 90 days how much of the judgment will go to the government — because Medicare and Medicaid paid millions for his fraudulent treatments — or to benefit his victims. But Fata also faces 27 pending civil lawsuits from victimized patients and their families before Oakland County Circuit Judge Rudy Nichols, plus a whistleblower lawsuit in federal court from his former SEE FATA, PAGE 18

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DETROIT BUSINESS

Detroit’s new high-tech parking system: Meter runs in sun,

Putting shift in paradigm shift: All-woman race team takes aim at Indy 500,

PAGE 3

JULY 27-AUGUST 2, 2015

Disability: Rolls rise, funding dries One out of 12 working-age adults in Michigan collects either SSDI or SSI benefits. Experts disagree on exactly why the state ranks as the fifth-fastest-growing in disability benefits claims. Is it lenient judges, the workforce, the brain drain? One thing seems clear: The federal disability fund will run out late next year. Two decades of kicking the can down the road has left a safety net system without a safety net. Michigan’s climbing enrollment rolls

Claims draining trust fund reserves

Spike in claims winding down

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Wayne County looks to squeeze revenue from its empty space By Kirk Pinho kpinho@crain.com

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In the kingdom of the broke, revenue generators are king. So as it tries to stem the financial bleeding and faces a Wednesday deadline to request a hearing on Gov. Rick Snyder’s declaration of a financial emergency, Wayne County and a consortium of local real estate companies are trying to repurpose and better use the space the county owns. That includes squeezing more revenue out of the Guardian Building downtown, reviewing all owned and leased properties, and making a final decision about the site of the halfbuilt county jail on Gratiot Avenue. Among the possibilities for the Guardian, the landmark 643,000square-foot building at 500 Griswold, are a more aggressive marketing campaign by 400 Monroe Associates LLC for event and meeting space on the 32nd floor to bring in more money and issuing a request for proposals to turn the building’s vault and the surrounding space on the bottom floor into a restaurant. Armed with a new management contract that the county says saves it about $190,000 per year and a lease

GLENN TRIEST

Wayne County has hired real estate companies to help it generate more revenue from the Guardian Building along with other real estate. More photos inside the Guardian Building,crainsdetroit.com. for the 11th and 12th floors by the Detroit Land Bank Authority that begins Saturday generating $464,000 per year, the Guardian Building is generating more revenue than it has in several years, according to Khalil Rahal, the interim director of the Wayne

County Economic Development Corp.

Craig Fahle, director of public affairs for the land bank, said the lease for about 27,000 square feet is a result of the agency “busting at the SEE SPACE, PAGE 21

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DETROIT BUSINESS

Photographer brings hospital spaces healing imagery,

Something substantial: Tubby’s buys Just Baked cupcakes,

PAGE 3

PAGE 6

AUGUST 3-9, 2015

DMC goes it alone in nurses’ pay suit September date set for class action on hospital wage collusion By Chad Halcom chalcom@crain.com

A federal lawsuit that goes to trial next month could have eight-figure stakes for Detroit Medical Center — if the hospital system continues to contest allegations that it colluded with other hospitals to suppress wages among more than 20,000 local nurses. The hospital is the sole remaining defendant in a 2006 class-action lawsuit before Chief U.S. District Judge Gerald Rosen, since co-defendants Beaumont Health of Troy, Henry Ford Health System of Detroit, Livonia-based Trinity Health and four others have settled for more than a combined $48 million. And while the allegations against the local health care providers may be unique, attorneys said wage collusion is gaining some traction as a basis for civil court claims — and that employers should take the opportunity to review their own wage-setting, hiring and market

research practices. A class of more than 20,000 registered nurses alleges eight hospital systems in Southeast Michigan colluded to keep pay scales for acute care hospital nurses artificially lower than market forces would dictate, between December 2002 and late 2006. Some 11,581 submitted claims to divide the previous settlement funds — about $31.5 million after deducting various attorney fees, incentive awards, costs to send formal notices and other expenses. The DMC tried and failed to get the class action decertified earlier this year at the 6th U.S. Circuit Court of Appeals , and lost a motion in April to exclude expert testimony of Orley Ashenfelter, a Princeton Uni versity economics professor who has pegged total damages to the nurse class at more than $595 million. That sum may be a long shot in court, since it SEE NURSES, PAGE 19

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LARRY PEPLIN

Goal for Greektown: No cars, more traffic Summer series of outdoor dining, entertainment could expand By Kirk Pinho

kpinho@crain.com

ay no mind to that man swallowing fire on Monroe Street. He, outdoor dining and other live entertainment options might become a regular fixture on the main city blocks through Greektown. Now that a long-discussed plan to create a temporary pedestrian plaza on the weekends through Labor Day has officially kicked off, urban planning and other experts say that Greektown at Sundown organizers have identified one of the practices that make for good urban environments. Good dining options. Entertainment. Pedestrian-friendly streets. These are some of the things that happen when you regularly shut down vehicle traffic and add programming to a main thoroughfare of a commercial district. “A brilliant move that will significantly increase the number of visitors and diners,” said Robert

More than 20,000 nurses claim that eight hospital systems in Southeast Michigan colluded to keep pay scales artificially lower

crainsdetroit.com Vol. 31 No 31

Greektown by day – but on weekends, a pedestrian plaza.

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Gibbs, managing principal of Birmingham-based Gibbs Planning Group Inc.

To create the Greektown at Sundown program, the Greektown Preservation Society — which spearheaded the summer event series — had to get city permits to close off Monroe from Beaubien Street to St. Antoine Street from car traffic during the evening hours (5 p.m. to 2 a.m. Fridays, Saturdays and Sundays) and cobble together funding. The funding will total between $100,000 and $120,000 and come from a variety of sources, said Tasso Teftsis, president of the preservation society. If the program is successful in the coming month, Greektown visitors can expect Teftsis and the roughly 25 business owners in the society to start working on an encore for Greektown at Sundown, perhaps making it an annual event series and expanding it west to Brush Street. Greektown is generally bounded by SEE GREEKTOWN, PAGE 20

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Do front office changes at the Detroit Tigers shift the bases of power?

DETROIT BUSINESS

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AUGUST 10-16, 2015

The Fast 50:

Hitting on all cylinders

Storms take toll on tourism Bad weather damages bottom line for lodging, retail, fruit crops By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

These are the companies that put the “rev” in revenue. This year’s list of Crain’s Fast 50 reflects an economy that’s well into recovery. Nearly all the Fast 50 companies, from auto suppliers to IT firms, said their growth stemmed from a stronger economy.

See Page 11.

Will more grads mean the doctor is in? By Jay Greene jgreene@crain.com

Will increasing the number of medical student graduates in Michigan by more than 535 a year by 2020 erase the state’s projected shortage of 4,500 physicians? The most direct answer is “not likely,” the deans of Michigan’s seven medical schools said in interviews with Crain’s. Easing the shortage was a justification given for opening medical schools at Central Michigan University, Western Michigan Uni-

Grad vs. grad. 75 percent increase in medical school graduates is making it harder to find training positions for students, Page 26 versity and Oakland University-Beaumont over the past four years, as well as expanding enrollment at existing schools at Wayne State University, Michigan State University and the University of Michigan. But increasing physician availability in the state is not simply a matter of supply. Most of

The Homestead resort and wedding venue near Glen Arbor was full of guests on the afternoon of Aug. 2. Then, the sky turned green. At about 4 p.m., a severe thunderstorm rolled off Lake Michigan onto the western shore of Leelanau County. Straight-line winds of up to 100 mph uprooted or felled so many trees along M-22 heading into town that roads became impassable. Glen Arbor was cut off — no power, no phone lines, no easy way in or out. For tourism-focused businesses like The Homestead, which depend on seasonal revenue, one bad storm can mean disaster for the bottom line — especially if it happens during the busiest weeks of the season. How much depends on the size of the business and length of its season. By 10:30 a.m. the day after the storm, The Homestead was nearly empty. Almost all of its guests packed up and left, said Bob Kuras, president of the high-end resort. Its pools, golf courses and restaurants were closed. Electricity wouldn’t be restored for three full days. The resort, which can do six figures in revenue per day during the summer on room rates that can top $700 a night, instead found itself calling guests who had booked trips last week to encourage them to stay home — not the kind of SEE STORM, PAGE 28

the shortages are a matter of distribution — too few physicians practice in rural, innercity and northern Michigan areas. Medical school deans think addressing the issue requires several solutions, including increasing residency opportunities, beefing up loan forgiveness programs, improving the quality of life and cultural opportunities in underserved areas, and recruiting more inner-city and rural medical SEE GRADS, PAGE 26 COURTESY OF U.S. COAST GUARD AIR STATION TRAVERSE CITY

The northern Michigan storm tossed trees over M-109 heading into Glen Arbor.

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Merging of the Minds We make M&A manageable

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DETROIT BUSINESS

Tiresome wait: Uniroyal site plans only a vision after three decades

Aircraft museum plans to fly higher with move to Oakland County

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AUGUST 17-23, 2015

Clean energy expected to power up more jobs But some say more rules, higher costs will result in net loss By Jay Greene jgreene@crain.com

The wind and solar energy industries in Michigan are expected to continue steady growth and add hundreds of jobs over the next decade — regardless of what state legislators and Gov. Rick Snyder come up with in a final energy bill package this year. That’s one belief shared by executives of utilities, renewable energy companies, and of environmental groups alike. Part of the optimism comes from a regulatory announcement earlier this month by the U.S. Envi ronmental Protection Agency , which issued final rules governing carbon dioxide emissions from power plants. The EPA’s Clean Power Plan requires states to reduce CO2 emissions 32 percent over the next 15

years from the baseline year of 2005. Michigan produced 188 metric tons of CO2 in 2005. By 2013, carbon emissions dropped to 70 tons with the EPA goal set at 47.5 tons in 2030. Energy experts say Michigan is in a good position to meet the emission reduction rules by developing more renewable energy resources, continuing efficiency programs — and by moving from coal to gas-fired plants. These green energy rules eventually lead to green energy jobs; in February, a Michigan Public Service Commission report said $2.9 billion of investments in renewable energy during the past five years created 8,300 jobs in Michigan. By 2020, energy jobs are expected to grow another 7.1 percent, the PSC report said. SEE JOBS, PAGE 20

Free Press future: Lean, digital New editor’s challenge: Quality journalism amid falling revenue By Bill Shea bshea@crain.com

Health Care Heroes From medical professionals on the front lines of care to teams working on prevention and cost-planning, Crain’s crop of 2015 Health Care Heroes demonstrates innovation and compassion. Page 11 © Entire contents copyright 2015 by Crain Communications Inc. All rights reserved.

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The Detroit Free Press that Robert Huschka took over as executive editor last week is a significantly different newspaper than the one his predecessor was hired to run a decade before. The newspaper is smaller, both physically and with fewer employees, and it operates out of a single floor of leased space in the former Federal Reserve Building downRobert Huschka: town rather than The 43-year-old has its old sprawling, design background. costly structure. Its circulation also has fallen by more than half in that time, and home delivery is limited to three days a week. But the Free Press has staked out significant territory online, claiming more than 10 million readers a month to make it one of the biggest-readership newspapers in the nation in the ever-expanding digital landscape.

The newspaper’s journalism trophy case also has impressive additions from the past decade: a pair of Pulitzer Prizes, two Edward R. Murrow awards and four Emmy awards. That happened under Paul Anger, who retired in May after a tenure that also included layoffs, furloughs and benefit and wage cuts or freezes — symptoms of the overall decline of the newspaper industry. In 2009, Anger also had to orchestrate the newspaper’s costsavings transition from a traditional daily home-delivered product to a hybrid print-digital product. It’s now Huschka’s job as executive editor to ensure the Free Press continues its history of awardwinning watchdog journalism while con-

fronting the stark realities of the 21st century newspaper business. While the online numbers at the Free Press are impressive, digital advertising revenue continues to lag a distant second behind the print advertising dollars that remain the financial lifeblood of legacy print media. Huschka, 43, was hired to run Michigan’s largest news-gathering organization from a design desk background rather than coming from the reporting ranks. He was Anger’s No. 2 for a time and interim editor after he left. His résumé includes involvement SEE FREE PRESS, PAGE 19 PHOTO BY NATALIE BRODA

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DETROIT BUSINESS

With football safety under examination, supplier seeks to make impact

Detroit’s boom in home sale prices isn’t being felt in all neighborhoods

PAGE 3

AUGUST 24-30, 2015

Online state games spark feud over funds Gun Lake revenue-sharing dispute exposes MEDC funding risk By Lindsay VanHulle

Crain’s Detroit Business/ Bridge Magazine

ANSING — A dispute between an American Indian tribe and the state over online lottery games has put a 21st-century twist on a decades-old debate over how much casino revenue tribes should share with the state. How it’s resolved will have financial consequences for Michigan, which has depended on tribal dollars to fund almost $60 million of statewide economic development efforts annually. What’s murky in making financial projections is whether the state can preserve revenue-sharing agreements with tribes in the long term; some tribes believe the expansion of Internet lotteries negates their obligation to share their gaming proceeds. And one Michigan tribe has already discontinued payments in protest.

Budget uncertainty Attorneys who specialize in tribal law say there’s no precedent to determine whether states or tribes are right in their interpretation of how online lotteries influence a key provision of gaming compacts that offers tribes exclusivity. In practice, that means allowing tribes to be the sole casino operator in a specified geographic area. That exclusivity is provided in exchange for paying a portion of electronic gaming revenue to the state. At stake is $7 million up to $60 million in funding toward state economic development efforts, depending on whether other tribes follow suit to the protest initiated by the Gun Lake Tribe. Gun Lake SEE MEDC, PAGE 18

Overtime: Nervous ticks How overtime is paid and employees are classified — already top topics in HR departments — are only going to get more involved thanks to two directives from the feds. Learn what it might mean for your business in this week’s special report on employment law, Page 9

Tax collection plan riles outside cities Some blame Detroit-centric legislation on politics

Michigan has depended on tribal dollars to fund almost $60 million of economic development efforts annually

cluded,” said Joseph Sobota, Pontiac city administrator. “We want to be alCrain’s Detroit Business lowed to collect city income taxes from people who live in A new bill in Lansing Pontiac but work in another would solve part of the ancommunity. nual collections conun“I can’t understand why drum for the city of Detroit other local communities by enforcing a mandate on — similar to Detroit in suburban employers that terms of financial chalthey collect city income lenges — would not be intaxes from workers who cluded in the legislation.” live in Detroit. The Republican-led But in an unexpected George Heartwell: Policy CommitHouse Tax Grand Rapids twist, the legislation that retee in Lansing on Wednesmayor “flummoxed” ceived a nod from a House day approved the bill that tax committee last week that bill would would require suburban was Detroit-centric. That’s collect taxes for employers to withhold DeDetroit but not in contrast to an anticipattroit city income taxes other cities. ed statewide plan that from residents’ paychecks. would have required income tax Grand Rapids Mayor George collections and distribution to all 22 Heartwell said Friday he was “flumcities in Michigan that levy such a moxed” that the other 21 commutax. “We are disappointed not to be inSEE INCOME TAX, PAGE 16 By Marti Benedetti and Dustin Walsh

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Private Exchanges Explained

FREE Webinar

Tuesday, Sept. 15 • Noon-1 p.m. To register, go to crainsdetroit.com/webinars Presented by

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DETROIT BUSINESS AUGUST 31-SEPTEMBER 6, 2015

China’s market crash sends U.S. stocks tumbling. See the toll on area companies,

Startup TV series covers metro Detroit startup scene, PAGE 17

PAGE 3

UAW health co-op idea earns support Experts: Bargaining power could cut benefits costs By Jay Greene

Dennis Williams: UAW president wants to form a health care cooperative.

jgreene@crain.com

UAW President Dennis Williams’ concept to form a health care cooperative that would collectively negotiate provider and health insurance company contracts for about 300,000 hourly and

salaried workers at the Detroit 3 automakers makes a lot of sense, say experts interviewed by Crain’s. While top Detroit 3 executives and the UAW declined interviews, officials close to the talks say both sides have a lot to gain by forming a cooperative that could

lower health care costs through enhanced contract leverage with providers because of its massive size. Experts said such a health care cooperative — using the model of the 775,000-member UAW Retiree Medical Benefits Trust — would help the bottom line for both sides because it would combine the co-op’s negotiating power while

Dig it! Arena excavation complete

helping OEMs stem an uptick in employer health care costs. How? Over the next several years, the Detroit 3 face average annual health care cost increases of 8 percent or more. That’s primarily because they have been prevented by labor contracts from taking SEE UAW CO-OP, PAGE 16

Face time Colleges and universities are fully plugged in to digital education. See what steps they are taking to improve the experience for students, Page 9

ERIC EDWARDS/LUNATECH 3D

An aerial look at the arena site from the corner of Cass and Temple.The lower bowl sits 40 feet below grade.The completed arena will be eight stories tall.

Olympia: $115M in contracts have gone to Detroit-based firms; ice time to arrive in 2017 By Bill Shea bshea@crain.com

he excavation is complete for the massive hole that will become the lower bowl and ice rink for the Detroit Red Wings’ new arena, and the steel and concrete skeleton of the facility is now beginning to take shape. Work on the $532 million arena and events center is on schedule and will continue through the winter to ensure the building opens by September 2017, according to Olympia Development of Michigan.

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Olympia is the real estate arm of Red Wings owner Mike and Marian Ilitch’s $3.3 billion business holdings that include the Red Wings, Detroit Tigers and the Little Caesars pizza chain. An estimated 488,000 cubic yards of soil was excavated in recent months for the below-grade bowl, and hundreds of deep pier foundations are being drilled and filled with concrete through September, Olympia said. The concrete walls for elevator shafts also are being erected, and installation of the foundation walls of the bowl perimeter will begin within days. The steel frame of the arena will begin to go up in late fall, Olympia said. So far, $200 million in contracts have been awarded for the project, according to the Detroit Downtown Development Authority, which will own the building. Of those, $98.5 million have been publicly announced this year. Olympia said $115 million in arena contracts have been awarded to Detroit-based or -headquartered companies. The most recent contracts, approved by the DDA on Aug. 26, totaled $13.5 million. The biggest contract was to Gary, Ind.-based Crown Corr Inc. for an arena bowl cladding system for $11.8 million. SEE ARENA, PAGE 18

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Power plant owners: Don’t let utilities water down payments,

Affiliation with OU helps Judson Center offer new services,

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As GM goes, so grows Warren Tech center expansion spurs development By Kirk Pinho kpinho@crain.com

When one of the largest companies in the world decides to invest $1 billion in your city, there are bound to be a few ripple effects. Some of those ripple effects: More than 200 high-end loft apartments around City Hall, a new Prestige Cadillac dealership and possibly a new five-star hotel across the street from General Mo tors Co.’s Warren Technical Center — all evidence that the automaker’s planned spending barrage at the tech center is a catalyst to a range of investment in Warren’s city square area. City officials estimate about $300 million in new development is planned in the Downtown Development Authority district alone, which is anchored around

the tech center on Van Dyke Avenue north of 12 Mile Road. This Wednesday, President Obama is schedule to speak in Warren, nearby at Macomb Community College , on the importance of investing in skills and growing the economy. Warren’s economy, meanwhile, is receiving an economic infusion from GM investment effect. PHOTO: ©2015 GOOGLE

Retail prospects

This aerial view of Warren’s city office complex (right center) is anchored by parks, Add to the mix for Warren a pos- courts and other buildings.The inset map (right) shows the sites for planned loft desible specialty grocery store like velopment to the east and south of the main city complex, and is among several new Whole Foods Inc. or Trader Joe’s in the hotel’s retail space, and you Michigan’s third-largest city also story former Campbell Ewald buildhave the makings of what Mayor includes a Menards home improve- ing. The CE building reinvestment Jim Fouts called a community that ment store, expected to open Sept. will bring another 800 white-collar is “a pretty hot commodity right 21 following an $8 million con- jobs to the Macomb County city of now” for new development and re- struction project at 14 Mile Road 135,000 residents. development. and Van Dyke; and another $35 SEE WARREN, PAGE 21 The development pipeline for million spent by GM on the 10-

Sastry’s Sakti3 energizes investors with battery tech By Tom Henderson thenderson@crain.com

James Dyson invented a better vacuum, and it made him rich. In March, he decided that Ann Marie Sastry, a former professor at the University of Michigan, is building a better rechargeable lithium-ion battery and invested $15 million in her company in the hopes of making her rich, too.

In August, Sastry, whose Ann Arbor-based Sakti3 Inc. was spun off from UM in 2008, got further validation she may be on the way to revolutionizing the way batteries are made. She was one of just 30 earlystage tech entrepreneurs from around the country invited to the first White House Demo Day in Washington to show off her technology to reporters and other

Women in Tech As connections build, so does support for growth and money

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would-be investors. Dyson got interested last year after articles in Fortune and Scientific American about leaps in energy density Sakti3 had made with its batteries. The Fortune article was headlined: “Will this battery change everything?” “Dyson is a scientist, and he reached out to us,” said Sastry. “He’s been very good at taking new technologies and integrating them into products, and they have a very strong need for better batteries.” Dyson’s investment, from a $2.3 billion fund he created last year to invest in emerging technologies, was part of a $20 million funding round that was joined by a heavyweight roster of former investors who wanted to increase their investment in Sakti3 — Detroit-based General Motors Ventures , the iconic Silicon Valley VC firm of Khosla Ven tures, Tokyo-based Itochu Technolo gy Ventures Inc. and Farmington Hills-based Beringea LLC. For Dyson, his investment wasn’t one of those high-risk, high-reward SEE SASTRY, PAGE 20

Ann Marie Sastry PHOTO: SAKTI3

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DETROIT BUSINESS

Michigan Business: The growing appetite for locally grown,

Second Stage: What local companies did when Plan B became Plan A,

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SEPTEMBER 14-20, 2015

Blue Cross settles suit over charges, another on way By Chad Halcom chalcom@crain.com

Blue Cross Blue Shield of Michigan

looming attrition wave of baby boomers and stands a real chance of losing the talent wars if it can’t figure out how to attract new younger workers to live there full time. Low-paying jobs and a lack of affordable housing are two of the culprits. Too few rental units in the city center have created a serious housing crunch — especially among millennials, the generation loosely defined as born between the early 1980s and early 2000s. That is driving up rent prices, lengthening waitlists and contributing to a labor shortage that worries employers.

has quietly settled one lawsuit from rival health insurer Aetna Inc. over its past charging agreements with various Michigan hospitals, but it must resolve one more from Health Alliance Plan of Michigan on the same issue. The litigation is over the so- Curing the called “most fa- code. Bill aims vored nation” to ‘level field’ of contracts Blue health insurance, Cross began Page 31 adopting with hospitals more than eight years ago. Those contracts called for hospitals to bill the insurer at a rate at least equal to any other insurer. Another form of contract, called “most favored nation plus,” also allegedly caused more than 20 of the state’s 131 hospitals to charge competing insurers at a premium. The practice was controversial and ultimately brought changes to

SEE TRAVERSE, PAGE 32

SEE BLUE CROSS, PAGE 31

Traverse City fears labor shortage as wage, housing issues keep millennials away COURTESY OF TRAVERSE CITY TOURISM

Traverse City is a magnet for tourists, but low-paying jobs and a lack of affordable housing make it hard to attract the younger workers who will replace baby boomers.

By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

TRAVERSE CITY — During the summer, Traverse City can feel like a crowded metropolis, with traffic jams and lines for restaurant seats and parking spaces downtown — just the sort of place said to attract the younger workers critical to future growth. The crowds, though, are largely tourists. The city itself has just 15,000 permanent residents. Grand Traverse County, as a whole, has not quite 90,000, roughly the same number who live in Canton Township. And although the local economy is thriving in many ways, the county faces a

JOHN RUSSELL

Allison Beers of Traverse CityYoung Professionals knows of people who move 15 minutes from downtown Traverse City because that’s the closest they can afford to live. Advertisement

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Ann Arbor-based Arboretum Ventures LLC has finished raising the largest venture capital fund in state history, closing Arboretum Ventures IV LP at $220 million. On June 18, Arboretum filed a form with the U.S. Securities and Exchange Commission saying it intended to raise $215 million for its fourth Ultrasound investment. fund. In less than three months, the firm surpassed Delphinus Medical that total. Technologies raises $39.5 Its previous fund, raised million in VC, Page 34 in 2011, also was oversubscribed. It had been targeted at $125 million and closed at $138 million. The previous largest fund in state history was the $180 million Michigan Growth Capital Partners II, raised in 2013 by Farmington Hills-based Beringea LLC. Managing Director Tim Petersen said Arboretum will continue to concentrate on medical devices, diagnostics health care IT and health care service companies. “We’ll continue to invest in companies that address the SEE ARBORETUM, PAGE 34

CARTER SHERLINE

Arboretum Ventures Managing Directors Paul McCreadie (from left), Jan Garfinkle and Tim Petersen can celebrate the record raising of the Ann Arbor venture capital firm’s fourth fund.

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A trend reset puts new spin on bowling alleys, PAGE 3

SEPTEMBER 21-27, 2015

“There are plenty of opportunities; it’s picking the right ones.”

Agent for change Arn Tellem powered up to be Gores’ point man for expansion By Bill Shea bshea@crain.com

GLENN TRIEST

Haifa Fakhouri sees opportunity for NorthTown as Syrian refugees relocate.“We believe in this revitalization project,” she says.

One square mile, thousands of lives Local activists want to rebuild NorthTown with help of Syrian refugees By Dustin Walsh dwalsh@crain.com

aifa Fakhouri, president and CEO of the Arab American and Chaldean Council, has a vision for Detroit — specifically, one square mile of the city. A nearly 20-year-old plan to redevelop an area on Seven Mile Road, now known as NorthTown and formerly called Chaldean Town, was stalled several years ago after the first phases were completed. Now, Fakhouri and the ACC see opportunity coming from war-torn Syria, where millions have fled seeking asylum across the eurozone to realize the NorthTown project, including new multifamily Section 8 housing. She believes as many 5,000 Syrian families seeking refugee status could call NorthTown home and revitalize the blighted neighborhood. Fakhouri said the placement of refugees will jumpstart the local economy and create a vibrant

district, much like Greektown or Mexicantown, but roadblocks remain. “We’ve met with several organizations and leaders, but it’s moving slowly,” Fakhouri said. “We can turn the city around and repopulate that area as more and more Syrian refugees need a place to go. We believe in this revitalization project; it will add to the social mosaic of Detroit.” Tom Kelly, director of government affairs for law firm Clark Hill PLC in Washington, D.C., and adviser to the ACC, said refugees can stabilize the neighborhood while offsetting population losses in the city. “That stretch of Seven Mile could be used as an anchor to build up the neighborhood,” Kelly said. “The wave of immigrants coming into the region stopped 30 years ago and these neighborhoods desperately need attention. This isn’t reinventing the wheel but something other major cities have done SEE SYRIA, PAGE 28

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Detroit Pistons owner Tom Gores wants to get into the Detroit real estate market as part of his still-evolving plan to carve out a larger role for himself, the basketball team and his businesses locally and statewide. What that involvement downtown looks like is unknown for now, but it will take shape in coming months after talks with Dan Gilbert, the Ilitch family and others. “We will look at real estate downtown,” confirmed Arn Tellem, the longtime sports dealmaker Gores hired in June to orchestrate his expansion plans, in a wide-ranging interview with Crain’s on Wednesday. Tellem, 61, spent 30 years as one of the most influential agents in American sports, primarily doing billions of dollars in deals for players in the National Basketball Associ ation and Major League Baseball. Now, he’s the powerful vice president of Gores’ Palace Sports & Enter-

PAGE 11

tainment LLC, the umbrella management company for the Pistons, the Palace of Auburn Hills and other venues. Last week was his first operSEE AGENT, PAGE 29

Taubman CFO leaves to pursue COO or CEO job By Dustin Walsh dwalsh@crain.com

Lisa Payne is stepping aside as CFO of Taubman Centers Inc. at the end of the year. But she’s not retiring. The longtime confidante to the Taubman family wants another challenge — specifically, to be the top leader of another organization. “My plan is to think about a leadership role,” said Payne, 56. “I’ve loved every year I’ve worked

SPECIAL REPORT: HEALTH CARE Area hospitals work to staunch the revenue bleeding from cuts to Medicare,

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Arn Tellem: “We will look at real estate downtown.”

for Taubman. … I have a lot of Lisa Payne passion for managing people, making a company better, and I’m interested in doing that as a CEO or COO.” Payne has been CFO since 1997 and has seen the total return on investment in shares of Taubman Centers (NYSE: TCO) rise 1,254 percent in that time, the company said in a release last week. But she was never going to be CEO there because it’s run by the Taubman family. Moving on was the best decision at this stage in her career. And Robert Taubman, chairman, president and CEO of Taubman Centers, understood it, she said. Eric Hohauser, vice president of SEE PAYNE, PAGE 25

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The X’s and O’s of XPO’s 18-wheel deal to acquire Con-way,

Lear to buy Gilbert building for downtown innovation center,

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SEPTEMBER 28-OCTOBER 4, 2015

Homecoming spurs expats to give back, invest in city Invitees to return to Detroit this week for second event By Dustin Walsh dwalsh@crain.com

Soon after Thomas Tierney graduated from Wayne State University in 1960 and became an officer in the U.S. Air Force, he left Detroit — and didn’t

Hudson’s, Monroe Block plans on deck? Gilbert controls two coveted downtown parcels By Kirk Pinho kpinho@crain.com

By the time Dan Gilbert moved his online mortgage company downtown in 2010, he had sewn up the rights to develop three prime pieces of central business district land as part of the incentive package to lure Quicken Loans Inc. to Detroit from Livonia. Although one of the projects, The Z

garage, has been completed, the founder and chairman of Quicken and Rock Ven tures LLC and now downtown’s most prolific real estate buyer, still has the development rights to the other two: The 2-acre former site of the Hudson’s department store and a 1.96-acre site known in development circles as the Monroe Block. What’s next for these two properties, considered by many to be the two most

desirable in downtown Detroit, is expected to be determined soon. Development plans for the Hudson’s site on Woodward Avenue between State Street and East Grand River Avenue are expected this year, and plans for the Monroe Block — bounded by Monroe, Farmer and Bates streets, Woodward and Cadillac Square east of the Compuware building — are due next year.

look back. That’s until his alma mater came calling. Last year, Wayne State persuaded Tierney, president of Tustin, Calif.-based VitaTech Nutritional Sciences Inc., to attend the inaugural Detroit Homecoming event. This year, Tierney will return to his hometown, as among more than 170 “Detroit expats” who will descend on the Motor Thomas Tierney: City from Wednesday through Hecker Smilely Friday for the invitation-only mansion renamed Detroit Homecoming. Last after his $2M gift. year’s event attracted about 160. Also this week, the university will dedicate the former Hecker Smiley mansion property on Woodward Avenue to Tierney, thanks to a $2 million gift. The mansion, now owned by Wayne State, has been renamed the Tierney Alumni House. SEE HOMECOMING, PAGE 31

DETROIT HOMECOMING

SEE DEVELOPMENT, PAGE 32

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Detroit’s RFPs: A status report on Brewster Wheeler, other developments in city, Page 32

■ Author and Homecoming attendee David Maraniss dishes on how the All-American Mustang was almost “Imported From Detroit.” Page 31. ■ Follow all the Homecoming events and attendees online at detroithomecoming.com and by following the Twitter hashtag #dethomecoming. ■ See live streams of select Homecoming events provided by WXYZ-Channel 7 by visiting crainsdetroit.com.

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For Ambassador Bridge owners, legal options to fight rival span have slowed to a trickle PAGE 3

Lesson from Homecoming: Reinvest in education By Dustin Walsh dwalsh@crain.com

MotorCity Sound Board was the setting for Day 3 of Detroit Homecoming, where expats had a chance to network in between panel discussions. Photos by Aaron Eckels

3 pages of coverage inside 䡲 Stephen Ross announces the kickoff of the New York City-based Ross Initiative for Sports and Equality, aimed at combating racism through sports by creating a grassroots campaign on racial equality and civility for youth, Page 20. For a video on the effort and Crain’s interview with Ross on other topics, ranging from football to philanthropy, see detroithomecoming.com.

䡲 News highlights and photos from three days of speakers, panel discussions, tours and entertainment, Pages 20-22

䡲 More coverage online: Videos of Homecoming sessions; more stories, blogs and photos, detroithomecoming.com

䡲 Twitter: #dethomecoming

ll other things being equal, rebuilding a city is first and foremost about the talent pool.Detroit students, who may now be working their way through middle school math, or trying their hand at app development — or even dreaming big dreams about sports success — are at the center of it all. Those students, their big dreams, and the education they will need to get there emerged as the topic that resonated loudest among the many speakers and 350 attendees at the 2015 Detroit Homecoming. During event sessions last week, which sought to re-engage “expats,” many of whom grew up in the city or Detroit suburbs, through philanthropy, real estate investment or other tangible contributions to their hometowns, education took center stage. Detroit Homecoming is convened by Crain’s Detroit Business, but local civic and business leaders comprise a host committee to organize the event. The Downtown De troit Partnership is a nonprofit fiduciary partner. During a Friday’s session, Mark Reuss, executive vice president of global product development, purchasing and supply chain for General Motors Co., told attendees that Detroit’s recovery is doomed without a drastically improved

Jules Pieri, CEO and Co-founder of The Grommet, and Warren Ligan, CFO of eSilicon Corp., were among the expats who attended the second Detroit Homecoming.

SEE EDUCATION, PAGE 20

DDA aims to reclaim Paradise RFP plans test waters for redevelopment of former cultural district By Kirk Pinho kpinho@crain.com

Paradise Valley, downtown Detroit’s lower-east-side jazz hot spot and thriving commercial enclave for the city’s black community, played its last notes in the late 1950s and early 1960s. The sounds of pianos and up-

right bass guitars, of Duke Ellington and Ella Fitzgerald, were replaced by those of bulldozers clearing land for the construction of I-75. But the new Paradise Valley, a tree-lined pocket of downtown formerly known as Harmonie Park, could become a fresh cultural hot spot in the core of the central busi-

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ness district. In the 11 years since the Down town Development Authority started spending $14.4 million on infrastructure improvements and buying property in the area — officially known as the Paradise Valley Enter tainment and Cultural District — investor and developer interest in Detroit real estate has spiked, particularly in the past three or four years. Now, the DDA is putting seven properties — five buildings totaling about 94,000 square feet and two surface parking lots — through the request-for-proposal process to test the waters for mixed-use redevelopment. In those buildings already are businesses such as La Casa de La Habana , a cigar and martini bar; the Arts League of Michigan; the Harmonie

NATALIE BRODA

Rodrick Miller, CEO of the Detroit Economic Growth Corp., said he was on the job just two weeks last year when he took his first call inquiring about redevelopment in Paradise Valley; that interest has remained steady. Park Studios recording studio; and a pair of architecture firms, Hamilton Anderson Associates and Spalding DeDecker. “It already has a foundation and a pulse that can be further enhanced by a variety of additional artistic venues, including space for

exhibits, performing arts, art studios, galleries, etc. sprinkled amongst coffee shops, eateries and a mixture of all different kinds of residential experiences,” said Matt Lester, founder and CEO of BloomSEE PARADISE, PAGE 19

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Michigan Business Although the grape harvest is unpredictable due to the weather, Michigan tasting rooms are trying new tactics PAGE 35

Focus: Hope loses funds, idles training By Sherri Welch swelch@crain.com

Focus: Hope is suspending new enrollment in its workforce training programs until it secures funding for them, following employee pay cuts and reduced workweeks instituted over the summer. Nearly $3.2 million total in workforce training and related grants from William Jones: the Michigan Economic Development As- CEO says funds not sociation and Detroit Employment Solu - secured for new tions Corp. were not renewed or ex- classes. pired this year. Sources with knowledge of the situation say Focus: Hope did not hit the metrics for at least one state grant that it was awarded through the MEDC’s Community Ventures program for 2014 but lost this year. However, the program’s director, James Durian, said Focus: Hope hit the minimum metrics for the program. But that grant was awarded to two other groups deemed more capable for those programs. The Detroit nonprofit also received extensions on two other grants, one from the MEDC and the other from DESC, to complete the requirements of the grants, those agencies said. “If extensions were granted, both parties agreed extensions were appropriate,” Focus: Hope CEO William Jones SEE FOCUS: HOPE, PAGE 53

State may pull plug on renewable energy mandates Green groups, some businesses opposed By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

LANSING — Since Michigan’s energy law was adopted in 2008, billions of dollars have been spent in the state’s emerging renewable energy industry — building infrastructure, adding jobs and lowering costs. With the help of the state’s two

largest utilities, which are required under state law to generate electricity from renewable sources, nearly $3 billion has been invested on wind, solar, biomass and other clean power sources across the state. Now, the utilities want state lawmakers to end the standards that contributed to those results —

A look at DTE Energy and Consumers Energy solar, wind projects. Page 51

mandates that governed the amount of electricity they produce from renewable sources. Detroit’s DTE Energy Co. and Jackson-based Consumers Energy say they don’t need mandates to expand their investment in solar and

wind power. Rather, they believe new rules from the federal Environ mental Protection Agency requiring utilities to reduce their carbon emissions by 32 percent by 2030 will ensure further investments in alternative energy. Their position has changed in seven years: Both companies supported including renewable standards when the Legislature approved the first energy law.

“There are some who believe that we won’t do it unless we’re forced to do it. I don’t agree,” said Irene Dimitry, DTE’s business planning and development vice president. “It’s the right thing to do.” Not everyone is convinced. Groups from the Sierra Club to some large industrial corporations — led by Benton Harbor-based appliance

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Merging of the Minds We make M&A manageable

SEE ENERGY, PAGE 51

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DETROIT BUSINESS

Not scared of the big pumpkins Independent costume shops dress up in their own way, PAGE 3

OCTOBER 19-25, 2015

Medicaid change may rock insurers

Housing market HEATS UP

HAP Midwest among those taking a hit By Jay Greene jgreene@crain.com

The financial impact from the potential loss of Medicaid contract business in Michigan could be massive next year for Detroit-based Henry Ford Health System and its 100,000-member HAP Midwest Health Plan, which accounts for half of the five-hospital system’s profits. Lansing-based Sparrow Health System, which owns Sparrow PHP, a 20,000-member Medicaid HMO, also could take a hit, though much smaller than what’s expected for Henry Ford, based on Medicaid contract recommendations issued last week by the state Department of Health and Human Services. Unless the recommendations are overturned in November in a hearing before the State Administrative Board, Henry Ford Health and Sparrow will lose out as the state converts from a county-based Medicaid approach to a 10-region system. At stake for all 11 of the state’s Medicaid HMOs are six-year contracts worth a total of $42 billion for the 1.7 million Medicaid members. Officials for HAP Midwest and Sparrow PHP, which have scored high marks in national quality ratings, declined to comment. State Medicaid Director Chris Priest told Crain’s the state will review decisions with Medicaid HMOs that have appealed, including HAP Midwest. But he said the recommendations were based on a comprehensive review. SEE MEDICAID, PAGE 21

Sales, prices hit 10-year highs; experts don’t see a cooldown soon By Chad Halcom

LON HORWEDEL

Already sold is this home (top) in Hunter Pasteur Homes’ StoneLeigh development in Lyon Township; (bottom) HQ Exteriors employee Jim Daniels works on a StoneLeigh home.

ummer has flown by, but a gathering heat in the Southeast Michigan housing market is unlikely to cool soon, now that the backlog of foreclosed homes is nearly gone and buyers are looking to beat a creep in interest rates. Home sales across much of the area hit 10-year highs in three of the past five months, according to Realcomp II Ltd . The Farmington Hills listing service reports that home sales in a four-county region of metro Detroit rose 8.4 percent for 26,174 sales for May through September, compared with 24,156 sales in the same period of 2014. Median sale prices for a larger region of

Southeast Michigan were at 10-year highs for each of those five months, soaring even in markets where total sales volume was weak. Experts say the tide is rising on several factors: pent-up demand from buyers who sat out the last recession, sellers who also waited and are no longer underwater on mortgages, and a clearing inventory of bank-owned homes. Realcomp reports that foreclosure properties in the greater region decreased more or less steadily from 6.4 percent of sales in May to 5 percent in September figures released last week. “That’s almost back to normal,” said Dan SEE HOMES, PAGE 24

Analysis: Why Tigers might be sold – and why they might not With a disappointing Detroit Tigers season now in the history books, talk has turned to potential free-agent player signings and lineup changes for next year. There also are whispers — mostly bar talk and Internet chatter, but

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also some scuttlebutt in the business community — that team owner Mike Ilitch or his heirs could sell the baseball club he bought for $85 million in August 1992. The Ilitch family says it intends to keep the team: “None of our businesses or teams are for sale. Careful planning has been done over many years by Mike and Marian Ilitch to ensure the Detroit Tigers, the Detroit Red Wings and our entire family of businesses remain under ongoing and long-term Ilitch ownership,” said son Chris Ilitch, CEO and president of Ilitch Holdings Inc. However, plans can change and there are compelling reasons to sell, despite the patriarch’s financial and emotional investment.

BILL SHEA bshea@crain.com Twitter: @bill_shea19 At age 86, Mike Ilitch appeared in good health Oct. 2 at the annual Goodfellows Breakfast, which honored Chris. But his health — and intentions — often are a topic of speculation among fans and pundits. Publicly, Mike Ilitch has been outspoken about his hunger to win a World Series with the team that

employed him as a minor-leaguer in the early 1950s. Since 2006, he’s spent $1.5 billion on players to get that elusive championship. The club’s front office in recent weeks has said such spending, rather than significant cutbacks, will continue next season. So why sell? Sports industry insiders estimate the Tigers could fetch more than $800 million on the open market. That could be a strategy to offset what might be an enormous estate tax bill, and to provide cash for the family’s wave of new investments in Detroit. Conversely, those investments are a major reason to keep the SEE TIGERS, PAGE 25

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DETROIT BUSINESS

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OCTOBER 26-NOVEMBER 1, 2015

HENRY FORD HEALTH SYSTEM

Could there be a Henry Ford-Kaiser deal? By Jay Greene jgreene@crain.com

Could there be some sort of affiliation deal underway between Detroit-based Henry Ford Health System and Kaiser Permanente , the nation’s largest nonprofit group health plan? Talk is circulating in health care circles in Southeast Michigan and nationally that the two systems are discussing a business arrangement. Several sources told Crain’s the affiliation could range from a nonasset transfer joint venture involving managed care and population health management services to a full merger with Henry Ford becoming Oakland,

Health care experts say a merger makes sense for both systems Calif.-based Kaiser’s eighth regional market. Based on conversations with knowledgeable officials connected with Kaiser and Henry Ford, the talks began earlier this year. Henry Ford officials, who have acknowledged they have been seeking a partner since a proposed merger with Beaumont Health System collapsed in 2013 because of cultural differences, are mum on whether they are talking with Kaiser or other systems.

Metro Detroit’s superstars of community service and philanthropy – Gail and Lois Warden, Paul and Carol Schaap and Betty Brooks – are among those to be honored Nov. 12 at Cobo Center at the National Philanthropy Day Dinner. For more details, see this week’s special Giving Guide supplement, polybagged with this issue. You’ll also find stories on highprofile entertainers and their giving strategies as well as profiles of 56 area nonprofits.

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Requests for interviews with Henry Ford CEO Nancy Schlichting and President Wright Lassiter III have been unsuccessful. Henry Ford officials issued a statement to Crain’s through Brenda Craig, the system’s director of media relations. “Henry Ford is continually engaged in discussions with health systems locally and nationally regarding opportunities to partner to improve quality, efficiency and the overall ex-

perience for our patients and members,” said the statement. “A major focus of our discussions is on learning, benchmarking and sharing best practices. We do not comment on specific organizations or rumors.” Kaiser spokesman Marc Brown declined an interview request. “A Kaiser partnership with Henry Ford would not surprise me,” said one of Crain’s sources. “It does seem like a natural fit compared to the other options that have been previously explored.” Sources told Crain’s a merger or business SEE MERGER, PAGE 21

“Many people say this is another Detroit bailout. ... I prefer to say this is the state actually bailing out the state.” John Rakolta Jr.,CEO ofDetroit-based Walbridge and co-chairman ofthe Coalition forthe Future ofDetroit Schoolchildren

Pension debt load could give DPS successor failing grades from start By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

LANSING — Even if Gov. Rick Snyder succeeds with his plan to spin off a new school district from the debt-laden Detroit Public Schools, the new district would have a structural funding problem before its first school bell rings. The new district, to be called De troit Community School District , would start operating as early as July 2016. But it would open its doors nearly $100 million in the red due to employee pensions. That’s because DPS has fallen behind in making payments to the Michigan Public School Employees Re tirement System — by a combined

$99.6 million since mid-2010, according to the state Office of Retire ment Services.

MPSERS, as it’s known, is the state’s pension plan for employees of K-12 schools, intermediate school districts, colleges, universities and some public libraries. The new Detroit school system also would have to assume declining student enrollment trends, at least in the near term. Snyder has proposed to give it $200 million in startup funding, half of which would be used to offset any perpupil revenue losses tied to fewer students. The district has lost nearly 100,000 students in the past decade, Snyder said. Enrollment was an estimated 47,000 students last year. DPS has not released its corrected fall student count numbers for this school year; those counts are due Nov. 18.

Taken together, the enrollment trends and the pension debt set the Detroit Community School District on a tenuous path. But Snyder and other restructuring advocates warn the problem will only get more expensive if the Legislature doesn’t approve the split.

Call for action Under Snyder’s plan, Detroit’s teachers, their contracts and all of their post-employment benefits — including any balances — would move to the new district. School reform advocates say taking action — soon — is key. “To do nothing is going to further encumber the state,” said John Rakolta Jr., CEO of Detroit construcSEE SCHOOLS, PAGE 19

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Detroit musicians giving back in their hometown, Page 4 How many fundraising staffers are ideal? Page 12 Crainâ&#x20AC;&#x2122;s list: Largest Capital Campaigns, Page 145

The best fundraisers excel at matchmaking, Page 148

Promotional section featuring 56 nonprofits sponsored by:

R&B artist Kem, once homeless himself, rethinks best ways to help the homeless now

PAL scores in Detroit Homecoming Crowdrise competition, Page 3

Cracking the code to engage millennials, Page 11

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McLaren proton center stalled

Health care leaders debate transparency, change at Crain’s Health Care Summit, PAGE 17 Richard Murdock, executive director of the Michigan Association of Health Plans, leads a panel discussion.

“Detroit is becoming a destination. Finally our location isn’t working against us.” Wayne State business school Dean Robert Forsythe

Problems with former JV partner cited By Jay Greene jgreene@crain.com

McLaren Health Care Corp.’s grand opening for its new proton beam cancer treatment center in Flint is expected to be delayed at least until next spring because of problems with its former joint venture partner, ProTom International Inc. The delay is a setback for McLaren as it and Beaumont Health each push to open the state’s first centers for the highly contentious cancer therapy, which has faced nagging questions about its cost and effectiveness. Officials for McLaren had expected the center to begin treating patients in May or June, as the compa-

ny had already received approval from the U.S. Food and Drug Adminis tration to use the $50 million McLaren Proton Therapy Center. In May, ProTom, based in Flower Mound, Texas, filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Northern District of Texas . ProTom officials were un-

available for comment. But about a month before ProTom filed for bankruptcy, McLaren took over project management of the proton beam center, which is next to the 458-bed McLaren Regional Medical Center in Flint, said Greg Lane, McLaren’s COO. SEE PROTON, PAGE 18

Special report: University Research

Troy firm gets license for pathogenidentifying device

By Chad Halcom chalcom@crain.com

Talk about a beer nut: A Michigan State University startup makes chestnut chips used in craft beer. It’s among the university spinoffs profiled on Pages 9-13

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fter sealing a $40 million donation from the Ilitch family for its new business school, Wayne State University has more work remaining to make the downtown building a reality. Wayne State will immediately begin seeking about $15 million likely still needed for construction of the $50 million Mike Ilitch School of Business project in The District Detroit, and could narrow its search for a contractor later this week. The donation, formally announced Friday, promises new technology and 21st-century design for business school students. For the Ilitch family, the school promises to provide a daily flow of foot traffic into the area around the $532.5 million arena being built for the Ilitch-owned Detroit Red Wings, offering a ready-made group of customers for

thenderson@crain.com

SEE PATHOGEN, PAGE 18

Down to business Next step for new WSU building: Raising funds

By Tom Henderson

Quick diagnostics on whether a patient’s illness is caused by a virus or bacteria — or what chemicals are involved in an industrial spill — are among the applications for the technology being brought to the marketplace by Troybased Medical Engineering Partners LLC. Medical Engineering Partners has built a luggage-sized prototype of its device for use in the field and a hardened portable prototype for military use. It’s also developing a handheld device for use in a clinical setting. The company has been granted an exclusive worldwide license by Wayne State Univer sity to sell the devices, which could be used for many other functions, ranging from identifying chemicals in a war zone to alerting officials

OLYMPIA DEVELOPMENT OF MICHIGAN

The Mike Ilitch School of Business, expected to cost $50 million to construct, will require an additional $15 million in fundraising beyond the Ilitch family’s $35 million donation.

surrounding restaurants, retail and other business. The $40 million donation, which comprises $35 million toward development costs and a $5 million endowment for the school itself, wraps a courtship between the school and the family going back at least 15 years. Business school Dean Robert Forsythe said the university’s agreement with the Ilitches includes a deal to lease property on the southwest corner of Woodward Avenue and Temple Street for $1 per year for the business school, with options that can continue the lease up to 90 years. The Mike Ilitch School of Business project cost could run as high as $50 million, Forsythe said, as one building west of the intersection will need to be razed, and the school hopes to seek a silver certification under the Leadership in Energy and Environmental Design standards of the U.S. Green Business SEE BUILDING, PAGE 21

What it means to add a business school to a sports-themed entertainment district, Page 20

$2 a copy. $59 a year.

Are you managing your entire databerg? (see the back cover of this Crain’s edition)

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Crain’s Michigan Business

West Michigan struggles to recruit IT workers, PAGE 9

NOVEMBER 9-15, 2015

Dice roll on sports betting

GAINING ALTITUDE

State floats rules changes; will they score in courts, Congress? By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

turmoil and fallout from the recession, when jets became a symbol of corporate greed, but is now gaining altitude while adjusting to the new normal. The value of new corporate jets to U.S. businesses and operators, an indicator of industry health, peaked in 2008 at $14.5 billion before plummeting to $7.1 billion in 2009, according to aviation analysis firm Teal Group Corp . But the industry is hitting the runway again,

LANSING — Will changes to Michigan sports betting rules be tied to a new round of state regulations, forthcoming case law decisions or a federal overhaul of the industry? So far, the answer to that question is a political roll of the dice. Partly to keep up with changing technology, Michigan lawmakers are floating bills that would update gaming laws — some of which are decades old — and give casinos, horse tracks and millions of fantasy sports players in Michigan more control over sports gambling. Yet some of the changes lawmakers and the gaming industry want to see — allowing Michigan casinos to operate sports books and codifying legal status for fantasy sports players, among them — are either forbidden in Michigan under federal law or operating in a gray area without consistent state regulations. That means, barring any court ruling or vote by Congress to update federal gaming laws, the bills

SEE AVIATION, PAGE 21

SEE BETTING, PAGE 24

OAKLAND COUNTY

Oakland County International Airport has seen tentative growth in corporate jet traffic after the industry fell to Earth in the Great Recession.

Corporate aviation taking off again; advantages rise above past scorn By Dustin Walsh dwalsh@crain.com

The $40 million Magnolia by the Lakes senior living center nestled between Cass and Sylvan lakes in Keego Harbor is preparing to open next spring, but its management is looking to the skies. With plans to open six more “luxury European style” senior centers across the U.S., President and CEO Farideh Bagne is weighing financial options for owning a corporate jet.

“In order to utilize our staff in a costeffective manner, we really need to make sure their time is not spent at the airport in lines and waiting on planes,” Bagne said. “Commercial planes are often late, and delays cost us a great deal of money.” Bagne and her company are looking to enter corporate aviation only a few years after many local companies abandoned the practice. Southeast Michigan’s industry has faced seven years of

VisionIT has its head in ‘cloud’ on health care New lab’s first project to improve medical communications By Tom Henderson thenderson@crain.com

Vision Information Technologies Inc.

is cooking up a new tech laboratory, and its first project is intended to help doctors, nurses and others in health care solve a knotty problem — communication.

Microsoft Inc. , Henry Ford Health System and Detroit-based Vision In-

formation are collaborating on a cloud-based system called StatChat to let health care professionals track patient care remotely — whether they’re on a desktop computer, iPad or smartphone.

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$2 a copy. $59 a year.

It will be the first product developed by the new VisionIT Innovation Center that Vision Information plans for its New Center headquarters. Vision Information has hired Detroit-based firm dPop! to design the center. Though the build-out hasn’t started, David Segura, Vision Information’s founder and CEO, said he has hired 25 employees already working on projects, and he will hire 125 more over the next year. The innovation center will work on a wide variety of projects. Some will be owned by Segura’s company, some will be joint ventures with other large tech companies, and some will be stand-alone businesses for which he will seek venture capital funding.

LARRY PEPLIN

Vision Information Technologies CEO David Segura (left) and Henry Ford Health ’s Ward Detwiler are working on a new health care communications system.

VisionIT was one of the first institutional investors in Michigan eLab, an Ann Arbor-based VC firm founded in 2012 by four Silicon Valley veterans. Segura said eLab would be a

natural fit if he needs capital to grow a business, including StatChat if it has the kind of growth he anticipates. SEE TECH , PAGE 23

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New ways of getting paid have outpatient centers on a building kick, PAGE 11

NOVEMBER 16-22, 2015

Allegiance, Henry Ford say merger right fit

GENERATION NEXT? In a downtown with fewer and fewer empty buildings, which stand out as candidates for another wave of development? See our 64-page Detroit 2.0 report bundled with this issue.

Sources: Kaiser Permanente talks likely catalyst for pact By Jay Greene jgreene@crain.com

Jackson-based Allegiance Health may have found the right partner with Henry Ford Health System after proposed deals went south with University of Michigan Health System

last year and more recently with Toledo-based ProMedica. Last week, Allegiance signed a letter of intent to become Henry Ford’s sixth — and most distant — hospital. Allegiance’s hospital, west of Ann Arbor in Jackson, is 76 miles from Henry Ford’s flagship hospital in downtown Detroit. The westward expansion also might make Henry Ford Health more attractive to a potential partnership suitor like Oakland, Calif.based Kaiser Permanente. Bob Riney, Henry Ford’s COO, said the five-hospital system has been “looking for partners that share the same history and commitment to community.” Georgia Fojtasek, CEO of Allegiance, said Allegiance shares “a great deal of alignment of mission and vision on community health.” Under the proposal, Henry Ford Health would replace Allegiance Health’s corporate parent as the sole member of Allegiance, which includes a 480-bed hospital, a 100physician medical group and 40 outpatient medical and diagnostic centers. Two Henry Ford trustees will join Allegiance’s 16-member board. No cash will be exchanged, but Henry Ford has agreed to an unSEE MERGER, PAGE 29

PLUS: DETROIT HOMECOMING RECAP | MORE AT CRAINSDETROIT.COM/DETROIT2.0 ANDREW POTTER

Zoned out? Marijuana dispensaries fear future legal restrictions By Marti Benedetti mbenedetti@crain.com

Joe Brennan faces a lot of the same worries as all businesspeople — sourcing inventory, regulatory headaches, competitors popping up like weeds. But those weeds give Brennan a whole new set of worries. His business? Mindright, a medical marijuana dispensary in Detroit. Brennan said he has tried to do everything legitimately. But he is in

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$2 a copy. $59 a year.

Licensed to light up. The number of Michigan’s active, registered medical marijuana patients is up more than 18,000 from three years ago, Page 26

an industry that is known for angering neighbors, accused of promoting drug abuse and inviting heavy scrutiny as dispensaries proliferate in the city. Before opening earlier this year, he obtained a city license for a retailmedical sales business, bought inMARTI BENEDETTI surance, hired a security guard and made sure his marijuana products Some Detroit dispensaries have professional-looking storefronts and many have were tested for purity. “We want to slang-derived names such as The Reef, the House of Dank or the Grass Station. be completely professional,” he said. Now the U.S. Marines veteran fears marijuana dispensaries. (See box, zoned out,” he said. “My employees his dispensary, across from the Page 27.) left their jobs to work for me. PeoGrosse Pointe border, might be One of the restrictions is that a ple like me who are (running their shuttered because of a proposed dispensary cannot be within 1,000 business) right should get a fair Detroit zoning ordinance that feet of a liquor store; Mindright is shake.” would impose specific regulations next door to one. SEE MARIJUANA, PAGE 26 on the city’s more than 150 medical “We’re finding we might get

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FALL 2015 WWW. CRAINSDETROIT.COM

Downtown resurgence: What gaps are left to fill? Page 6 Historic preservation: How tax credits help the dollars make sense. Page 10

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7 6 5

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DETROIT HOMECOMING REPORT: Expats take action in ‘America’s Comeback City.’ Page 59

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Pie makers rev up for crimp-a-thon to make their holiday dough,

NOVEMBER 23-29, 2015

PAGE 3

Campbell Ewald maps future Paper and digital strategy helps agency win clients, reverse declines By Bill Shea bshea@crain.com

LARRY PEPLIN

Campbell Ewald CEO Jim Palmer (left) and Kevin Wertz,president of its Detroit, Los Angeles and San Antonio offices,are winning business with a customer“map” tool.

City pension funds to resume investing New rules aim to prevent bribery, kickbacks of old vestment portfolios and changes made in asset allocation. Detroit’s two multibillion-dollar The post-bankruptcy landscape pension funds for city workers are includes pension fund babysitters poised to invest money for the first and new investment rules aimed at time since the city preventing the sort emerged from bankof bribery and kickPension facts ruptcy and a public back scandals that corruption scandal Detroit General saw five former pencost retirees more than Retirement System sion officials and ■ Assets: $2 billion $97 million. businesspeople conThe funds control ■ Liabilities: $3.2 billion victed of federal $5 billion in assets and crimes this fall. ■ Active members: 5,389 are at a pivotal moAll investments ment to pick new in- ■ Retirees: 9,737 are being overseen vestments designed to Detroit Police & Fire by independent reap returns for more Retirement System committees poputhan 25,000 retirees, lated by people with ■ Assets: $3.3 billion active workers and finance and investbeneficiaries reeling ■ Liabilities: $4 billion ment backgrounds, from pension and ■ Active members: 3,164 including members benefit cuts that ■ Retirees: 9,228 appointed by Gov. helped Detroit exit the Rick Snyder. That’s a largest municipal new level of overbankruptcy in U.S. history almost sight and replaces the old system of one year ago. pension fund boards approving inThe pending investments follow SEE PENSIONS, PAGE 24 a lengthy review of the funds’ inBy Robert Snell

Leaders at Detroit-based marketer Campbell Ewald sought a map to guide a restructuring at the beleaguered agency, and it turned out to be a literal type of map that is helping the firm adapt to a changing advertising world. The firm in the past year has begun using a heavily customized paper and digital system to map customer relationships for their clients, and management has said it is part of the path to reverse five

years of flagship client losses and financial declines. The agency developed what it calls the Consumer Experience Journey Map last year, and Campbell Ewald CEO Jim Palmer said it has been used in pitches to six new client wins in the past five months and to manage current clients more effectively. “This is one of the main reasons why we’re winning what we’re winning,” Palmer said. The client management system, which is similar to project management tools used by computer pro-

TOWER

ambitions N

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SEE AGENCY, PAGE 24

Hotel rooms, offices, restaurant among plans for the Cadillac

rsnell@crain.com

crainsdetroit.com Vol. 31 No 48

grammers, is part of Palmer’s business strategy to reshape the agency into what he calls “Campbell Ewald 2.0” as it adapts to the changing demands of modern advertising. Other elements of the strategy include new senior management hires and refocusing the agency on doing more quick-turn digital content while focusing on social media and real-time analytics, and applying the brakes to the old-school (and expensive) advertising habits of monthslong TV commercial shoots.

$2 a copy. $59 a year.

JOHN D’ANGELO

The revamp of the Cadillac Tower includes plans for a totally new lobby, already underway, along with talks for a substantial conversion of floors to hotel space.

By Kirk Pinho kpinho@crain.com

early 100 years ago, the 40story Cadillac Tower in downtown Detroit was one of the tallest buildings in North America. Today, it is trying to regain its place among giants. With a $4 million lobby renovation nearing completion in January, the owners of the 88-year-old building on Cadillac Square just a stone’s throw from Campus Martius Park have broader ambitions. Discussions between the owners, Brooklyn-based Capital Invest Al liance, and several undisclosed hotel brands are underway for a possible conversion of up to nine floors into hotel space, said Paul DeBono, vice president of Southfield-based Farb man Group, which leases the property to tenants and manages it. That could mean the first hotel rooms that close to Campus Martius, DeBono said. He envisions a boutique hotel, along the lines of what’s proposed for the former Wurlitzer Co. building on Broadway Street downtown by New York Citybased Ash NYC , which is underway with a $20 million conversion of the building into a 97-room hotel. Residential space is also being considered, but there are no active plans for it, he said. Then, of course, there is the dearth of large blocks of quality office space in the central business district. With the city of Detroit formally vacating its 172,000 square feet in the building just over a month ago, Farbman is now marSEE CADILLAC, PAGE 23

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New industrial, warehouse construction looms on large sites in metro Detroit, PAGE 11

DETROIT BUSINESS NOVEMBER 30-DECEMBER 6, 2015

The not-so-sweet story of rival fountain drink sellers — and the lessons learned

Soda war ends with settlement, new plans for Leonard’s By Robert Snell rsnell@crain.com

An expensive three-year legal battle over the metro Detroit soft drink syrup market has left one firm standing and an upstart rival crushed like a pop can. The battle — and allegations of spies, lies and even mob-style

business tactics — offers a glimpse into the local portion of an $11 billion industry providing soft drink syrups to bars, nightclubs and restaurants. Federal court records and interviews chronicle a David-versus-Goliath battle between the upstart, Detroit’s National Beverage Systems Inc. , and Leonard’s Syrups , the Detroit-based company

Crittenton shores up finances,invests jgreene@crain.com

Bleeding red ink most of the past five years, Crittenton Hospital and Medical Center, now under the management of Warren-based Ascension Health Michigan, expects to turn the financial tide yet this year and embark on an ambitious capital improvement plan. A third-party analysis shows a tidy operating profit for Crittenton for 2015 – while hospital officials are making plans to expand services Gwen MacKenzie: and make im- Ascension leader provements to says renovating the north Oak- Crittenton ER a land County priority. hospital. On Oct. 1, Ascension Health closed on the noncash deal that transferred Rochester Hills-based Crittenton’s estimated net assets of $166.2 million in 2014 to the Roman Catholic system, the nation’s largest nonprofit group with 129 hospitals and $31 billion in assets. The financial data, which is based on Medicare

cost reports, was provided by Cost Report Data , a Louisville, Ky.-based consulting firm. During the next several months, Ascension and Crittenton will finalize a list of the capital and clinical service improvement projects on deck. Hospital officials say the muchneeded investments will well exceed $6 million for six major projects. Officials declined to state total capital spending, but experts estimate, based on the described projects, spending is likely to total more than $25 million. The infusion of upgrades is expected to immediately make the 330-bed hospital more competitive, and profitable; it competes with such nearby rivals as Beaumont Hospital Troy. Beaumont officials in Troy declined to comment on Ascension’s acquisition of Crittenton and potential competitive responses. Areas of expansion at Crittenton will be focused on adding more employed physicians, beefing up primary care, oncology, women’s and children’s services, emergency, surgery, oncology and cardiac care, SEE CRITTENTON, PAGE 17

Team chefs cater to changing appetites By Bill Shea

DETROIT PISTONS CHEF LAMAR NOLDEN

DETROIT TIGERS CHEF MARK SZUBECZAK (LEFT) DETROIT RED WINGS CHEF JOHN BORSO

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SEE SYRUP, PAGE 20

SPORT ORDER COOKS

Hospital buoyed by Ascension’s capital, expertise By Jay Greene

known for its rainbow-logo laden delivery trucks providing discounted syrup. In an interview last week, Leonard Bugajewski Jr., CEO of Leonard’s Syrups, reflected on the legal battle with National owner and President Eric Weiss that roiled an industry built on knockoff soft drink syrups. Think Red Baron, not Red

$2 a copy. $59 a year.

bshea@crain.com

oe Nader had to feed 65,000 people for Thanksgiving. He’s spent the past 10 years as executive chef at Ford Field for the Detroit Lions, and the team’s annual tradition of playing at home on Thanksgiving means some extra duties. He oversees not only the usual concessionaire operations for fans at the game, but also the menus for ownership, the suites, media members, staff, coaches and players. Among his Thanksgiving highlights for this season of eating: locally sourced heirloom carrots. “It sounds like a little thing to someone else — but to me it’s a big deal,” Nader said. Nader is one of four executive chefs employed directly, or by the concessionaires, for Detroit’s four pro sports franchises. From the traditional hot dogs and beer on the concourse up to elaborate specialty menus for team owners and executives, food is an important aspect of the business operations for sports teams. Nachos and Bud Light sales generate millions in revenue, and fancy fare adds a bit more as the public’s gameday palate grows increasingly sophisticated. The four chefs shared with Crain’s some of their culinary philosophies and details about their backgrounds. READ THEIR STORIES, PAGES 18-19

DETROIT LIONS CHEF JOE NADER

PHOTOS BY ANDREW POTTER (TOP); LARRY PEPLIN (LEFT)

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New look at downtown Dearborn

Tens of millions in projects target city’s two downtowns, PAGE 3

DECEMBER 7-13, 2015

Blue Cross sets plan to trim $300M by 2018 Cost cuts could include layoffs, insurer says cuts over the next several weeks. Blue Cross officials confirmed Blue Cross Blue Shield of Michigan that the initiative could lead to plans to cut $300 million in expens- more layoffs and staff reductions es by 2018, which could lead to an from attrition. unspecified reduction in employees Andy Hetzel, vice president of and contractors, according to corporate communications with records obtained by Crain’s. Blue Cross, said the comLayoffs of 25 employees pany is conducting an onand three contractors last going business review of month in the Detroit-based operations, as it has done company’s health care regularly since Dan Loepp value division were just the became CEO in 2006. first part of what it is calling “We are at the starting a “strategic business transgate of the process to beformation” as customers come more efficient,” HetAndy Hetzel: “We zel said. “Dan Loepp has push it to lower costs. Documents shown to are at the starting been very transparent employees and obtained by gate” of a push to about what that includes, Crain’s show that the Blue be more efficient. where the best people Cross plan targets rising need to be and where our administrative costs — costs up to strategy needs to be in three years.” 30 percent higher than those at naMath points to staff cuts tional insurers and other competing Outside experts told Crain’s that plans in Michigan, according to one it is highly unlikely Blue Cross can Blue Cross report. Sources inside Blue Cross told cut $300 million in costs, which Crain’s that more layoffs are coming would amount to about 10 percent as division department heads review SEE BLUES, PAGE 26 employee needs and potential cost By Jay Greene jgreene@crain.com

AUTO SHOW BY THE NUMBERS DUSTIN WALSH

Workers discuss plans for Ford Motor Co’s nearly 50,000-square-foot displays at the North American International Auto Show in Cobo Center.

Talk of the show As car connectivity evolves, NAIAS wants attendees to get interactive By Dustin Walsh dwalsh@crain.com

s cars edge ever closer to talking and even thinking for themselves, the North American International Auto Show is evolving to match. Technologies such as autonomous driving and connectivity are playing a more critical role in the auto show itself. Exhibitors, booth builders, media companies and show organizers say this year’s event, the 28th since the NAIAS became an international showcase, is designed to give attendees the “experiential” treatment. The new additions for 2016 even include a relationship with social media giant Twitter Inc. and coverage by tech website CNET.

“We realized with cars now being synonymous with technology, and connectivity, we had to get in that game, too,” said Rod Alberts, executive director of NAIAS and the Detroit Auto Dealers Association. “Everything we’ve done this year, and it’s a lot, is changing with the times.” With roughly 70 percent of the automaker displays newly designed for NAIAS 2016, the technology efforts are critical additions, Alberts said. Auburn Hills-based event and brand marketing firm George P. Johnson Co. designed roughly 40 percent of the displays for NAIAS 2016. Paul Hemsworth, vice president and executive creative direc-

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䡲 $425 million to $430 million in economic impact

䡲 More than 40 worldwide car debuts

䡲 More than 400,000 square feet of raised flooring

䡲 Show takes 12 weeks to install and two weeks to break down 䡲 More than 5,000 credentialed members of the media from 60 countries to attend

䡲 More than 750 vehicles will see the show floor

䡲 Total weight of attendees at the Charity Preview =

8.4 million pounds

tor at GPJ, said the concept of brand awareness has transformed and tech trends have changed the way companies interact with auto show attendees. “Everyone (clients) has different requirements and budgets, but what they all want is to create an intimate level of interaction with the nearly million visitors at the show,” Hemsworth said. “Technology has been a big aid in meeting those demands and creating something that goes beyond brand awareness to some$2 a copy. $59 a year. thing experiential for the show attendees.” For GPJ’s largest client, Fiat Chrysler Automobiles NV, the firm created specialized media content as well as a significant investment to turn the automakSEE AUTO, PAGE 28

Crain’s Best-Managed Nonprofit

The Detroit Zoological Society‘s commitment to green initiatives made it the winner of this year’s Crain’s Best-Managed Nonprofit contest. Pictured is zoo Director Ron Kagan outside the new, sustainably designed Cotton Family Wolf Wilderness. For more about the winner and finalists, see Pages 11-15.

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Creating a winter wonderland also creates big businesses, PAGE 8

DECEMBER 14-20, 2015

Wilbur Ross: The king of fixing distressed companies will speak Feb. 16 at Crain’s Biggest Deals event.

Ross molds trash into treasure

When ALICE’s problems become your problem Daily struggles of low-wage workers turn into headaches — and costs — for employers

By Tom Henderson thenderson@crain.com

By Lindsay VanHulle

Wilbur Ross Jr. buys failing companies in failing industries in failing locations — and he comes naturally by his success in doing so. Beginning in 1976, Ross spent 24 years at Chicago-based Rothschild Investment Corp., a worldwide investment bank, first running its bankruptcy business and then running that firm’s private equity fund, which he bought in 2000 to launch New York Citybased W.L. Ross & Co. LLC with $440 million in assets under management. Wilbur Ross Jr. will be In 2010, dekeynote speaker for the spite having Crain’s Biggest Deals event, proved his a showcase of the biggest contrarian M&A deals of 2015. model, Ross When: 5-9 p.m. Feb. 16 raised eyebrows, if not Where: The Roostertail, 100 Marquette Drive, Detroit derisive chortling, Cost: $125 when, with the Register: www.crainsdetroit. Great Recescom/events sion’s effects still reverberating, he became the biggest investor in a single-branch bank in Troy called, grandly enough, First Michigan Bank. “Is Wilbur Ross crazy?” read the headline of an article in BusinessWeek in 2003, just after he had bought a sprawling, nearly idled steel plant in Cleveland and longstruggling Bethlehem Steel.

Crain’s Detroit Business/Bridge Magazine

t a car wash this past summer, a young man noticed Tanya Allen’s hat bearing the LongHorn Steakhouse logo and asked her if she knew anyone who worked at the restaurant chain. She told him she owned one. Allen is a partner with a joint venture between Atlanta-based Hojeij Branded Foods and its Detroit partner, AP United LLC. The venture owns nine restaurants inside the McNamara Terminal at Detroit Metropolitan Airport. “I’d like to work,” Allen recalls the man saying. But once she told him where the restaurant was located, she said, he dropped his head. He didn’t have transportation to get there.

Where is ALICE? Where the working poor live, Page 18 The high cost of employee turnover, Page 18 Income-constrained workers “make it stretch,” Page 19 Supplier aims to give parolees new opportunities, Page 20

Detroit Chassis helps pay for Goodwill caseworker Keith Bennett to help workers like Randy Baker.

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SEE ALICE, PAGE 18

INSIDE:

SEE ROSS, PAGE 22

crainsdetroit.com Vol. 31 No 51

Reliable transportation. Medical challenges. Child care gaps. These are some of the barriers that separate low-income workers from opportunities to move forward in career paths and ultimately increase their incomes. Nearly 1 million households in Michigan fit this profile. What does it mean for employers? Rampant turnover by this workforce population gets expensive — and quickly, to the tune of $3,400 or more per position. The challenges posed by this group of workers, nicknamed ALICE (for “asset-limited, income-constrained, employed”), even have caused some Michigan companies to rethink their recruitment and retention strategies. In some cases, employers are offering community resource-type services, all part of an

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GR firm helped create employer resource network By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

In the early 1990s, Fred Keller asked a machine operator at his Grand Rapids-area engineering firm who had a background in social work if it was possible to hire local homeless residents or welfare recipients. At the time, Cascade Engineering Inc. wasn’t facing a labor shortage. Keller, the company’s founder and chairman, says he was motivated more by a desire to demonstrate that business could be part of a solution to lift people out of poverty. A van pool was deployed to pick up a half dozen people from Grand Rapids’ Heartside neighborhood, just south of downtown, and bring them to Keller’s firm several miles away in Kent County’s Cascade Township. But within a few months, virtually all of the new hires were gone. “We weren’t prepared to receive them,” Keller says, “and they weren’t prepared to work.” In some ways, Keller’s early vision laid the foundation for what today is called an employer resource network, a regional partnership of companies that provides wraparound services to vulnerable workSEE RESOURCE, PAGE 20

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