Crain's Detroit Business, April 8, 2019 issue by Crain's Detroit Business

Autism Alliance turns focus to living options, jobs for adults Page 3

Lenny Kravitz firm to help design Temple Detroit hotel Page 7

APRIL 8 - 14, 2019 | crainsdetroit.com CANNABIS

AUTO SUPPLIERS

Legal pot vs. black market a balance By Dustin Walsh dwalsh@crain.com

Last week, a Michigan Court of Claims judge issued a temporary order to prevent the state from forcing roughly 52 unlicensed medical marijuana dispensaries to close. The judge gave those dispensaries another two weeks to obtain a license to sell the medical

cannabis in response to the state’s slow pace of approving licenses. Michigan regulators are battling to rally enough resources to approve the glut of new applicants — more than 140 medical dispensary applications are waiting for approval — at the same time the framework for recreational adult-use marijuana in-

dustry is being drafted. Four months ago, Michigan voters made recreational use of marijuana legal, and now regulators must tiptoe the line between strict regulation and economics to create a whole new market. The trick is keeping the barriers to entry low enough to dampen the illicit black market of drug deal-

ing, while making good on the promise of creating a robust new stream of tax revenues for the state. It’s a complicated balance. California allowed recreational marijuana sales on Jan. 1, 2018, with high hopes of filling tax coffers. Yet sales fell instead. SEE POT, PAGE 20

Lear’s acquisition of Xevo a bet against Google By Dustin Walsh dwalsh@crain.com

Lear Corp.’s planned $320 million acquisition of Seattle-based Xevo Inc. is a big bet the Southfield-based auto supplier can compete and win against Silicon Valley software giant Google. The deal, which is expected to be financed through debt financing and close in the second quarter of this year, follows several acquisitions by Lear to carve out significant market share in the automotive software space. Lear acquired GPS software maker EXO Technologies in 2017 and the intellectual property of cloudbased applications developer Autonet Mobile in 2015.

Need to know

 Deal follows several acquisitions by Lear to carve out market share in automotive software space  In-dash marketplaces seen as big growth in coming years  Automakers prefer Xevo to California’s tech giants

Jon Cannata, director of research at HistoSonics, positions the robotic arm of the system prior to test treatments in a research lab in Ann Arbor.

TECHNOLOGY

HISTOSONICS

HistoSonics’ tech attracts health care heavyweights By Tom Henderson | thenderson@crain.com

nn Arbor-based HistoSonics Inc. plans to announce Monday that it has closed on a venture-capital funding round of $54 million for its ultrasound therapy that destroys cancer tumors. The investment led by two health care heavyweights is believed to be the second-largest funding round for a medical-device company in state history. crainsdetroit.com

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NEWSPAPER

The two new investors who led the Series C funding may be as important as the size of the round — Varian Medical Systems of Palo Alto, Calif., the global leader in radiation therapy for treating cancer, and New Brunswick, N.J.-based Johnson & Johnson Innovation LLC, the investment arm of the health care giant.

Xevo operates as a built-in, in-vehicle connected marketplace for consumers. For example, Xevo announced in March it was working with another Michigan company, Ann Arbor Township-based Domino’s Pizza Inc., to launch an in-car pizza-ordering platform for connected vehicles later this year. Customers use touchscreens in their cars to locate stores, call and order and pay for the pizzas from the system. “Marketplaces (in cars) is the next big thing,” said Colin Bird-Martinez, a senior analyst of software and services for Southfield-based research firm IHS Markit. “Everyone is trying to do data monetization, so building these shopping spaces is a natural step to culling that data.” But consumers have largely turned to non-native solutions launched in the car’s in-dash system via a smartphone, such as Google’s Android Auto and Apple CarPlay.

SEE HISTOSONICS, PAGE 19

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SEE LEAR, PAGE 21 E S S // A P R I L 8 , 2 0 1 9 CRAIN’S DETROIT BUSIN

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CRAIN’S MICHIGAN BUSINESS:

FOOD ECONOMY

FOOD ECONOMY, Page 10 BROUGHT TO YOU BY:

THE CENTER OF THE PICKLEVERSE Michigan status as the nation’s top pickle producer is a glimpse into the state’s diverse food economy Special to Crain’s Detroit Business

By Nina Misuraca Ignaczak |

capitol of America, it was the ong before Michigan became the automotive economy: the cucumber pickle. And leader of another, perhaps more humble industry in Michigan has grown unlike the automotive industry, the pickle is the number one U.S. producer of cucumsteadily throughout the years. The state pickling cucumber crop reached Michigan’s of value the 2016, In bers for pickling. $47 million. demand converge in Michigan to produce Climate, soil, history, infrastructure, and arry Topor terms

From left: John Swanson with his children Katie Hensley, Wes Swanson and Matt Swanson among brine tanks used to pickle cucumbers at Swanson Pickle. STEPHEN KLOOSTERMAN/ VEGETABLE GROWERS NEWS

Pickle digits

$47 million

The value of Michigan’s pickling cucumber crop in 2016

231,168

Tons of pickling cucumbers harvested in Michigan in 2018

ent of the national pickling cucum-

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MICHIGAN BRIEFS

INSIDE

From staff and wire reports. Find the full stories at crainsdetroit.com

Kellogg to sell Keebler as part of $1.3 billion deal

Battle Creek-based Kellogg Co. has agreed to sell Keebler, Famous Amos and other cookie and fruit snack operations to the Italian confectionery giant Ferrero Group for $1.3 billion. The cereal and snack maker (NYSE: K) is refocusing on the fast-growing parts of its business. It expects the sale to close by the end of July, it announced in a news release. It’s selling to Ferrero, a global sweets operation that makes Ferrero Rocher chocolates, Nutella and Kinder Joy chocolate; and Ferrero’s related Chicago-based entity Ferrara Candy Co. The offloaded Kellogg brands and products are Keebler, Mother’s, Famous Amos, Murray’s and Murray’s Sugar Free, cookies manufactured for Girl Scouts of the U.S.A., fruit snacks, pie crusts and ice cream cones. These segments made $900 million in net sales and $75 million in operating profit in 2018, Kellogg said in the release. Kellogg, which reported $13.5 billion in 2018 net sales, plans to keep its other snacks such as Pringles, Cheez-It and Pop-Tarts. Ferrara Candy Co. will take over two of Kellogg’s production facilities on Chicago’s South Side. The pur-

chased Kellogg’s business will be run out of Ferrara’s Chicago offices. The transaction also includes assets such as production facilities in Georgia, Kentucky and Washington. In the release, Kellogg CEO Steve Cahillane described the decision as one that would narrow its portfolio, leading “to reduced complexity, more targeted investment and better growth.” Kellogg has been seeking to simplify its corporate structure as it struggles to ignite growth in its U.S. cereal and snacks businesses. “Divesting these great brands wasn’t an easy decision,” Cahillane said. Since Cahillane took Kellogg’s reins in 2017, the company has shifted its priority to increasing sales, instead of cutting costs. The goal has become tougher to achieve as consumers move away from packaged food and cereal has lost popularity with Americans. Kellogg bought Keebler in 2001 for more than $4 billion in cash and assumed debt.

State launches $1.5 million grant program for business attraction

Michigan community and economic development entities can now apply for up to $100,000 in new grant funding to make industrial sites more inviting for new business use.

CALENDAR CLASSIFIEDS

DEALS & DETAILS

KC CRAIN

OPINION

OTHER VOICES

DANIEL ACKER/BLOOMBERG

The state’s economic development agency announced last week that it created the Michigan Site Readiness Program. The Michigan Economic Development Corp. will award public entities portions of a $1.5 million total to help them make properties competitive for commercial projects such as expansions or for out-of-state companies looking to lay down Michigan roots, according to a news release. Applications launched Monday and can be found on the MEDC’s website. They’re due by May 1 and the MEDC expects to announce win-

ners June 1. Recipients can use the funding to study site development opportunities, for site implementation or land assembly, as well as other uses. Matching the grant with local funds is “strongly recommended,” the release said. Along the way, those developing sites for commercial use can refer to a new set of vetted site standards that the MEDC said serves as a guide to get property ready for groundbreaking. It includes information on zoning and environmental assessments, among other topics.

PEOPLE

RUMBLINGS

WEEK ON THE WEB

Flex-N-Gate unit expanding operations in Osceola County

Keebler brand Simply Made chocolate chip cookies are among those Kellogg is selling to Ferrero.

Ventra Evart LLC, a subsidiary of Illinois-based auto supplier Flex-NGate Corp., is purchasing a vacant 138,000-square-foot building about a mile from its Osceola County facility in Evart to accommodate growth. The project is a $3.75 million investment and would create 50 jobs within one year at the northern Michigan facility, according to a March 20 news release from the Michigan Economic Development Corp. The investment includes major renovations to the building, which sat vacant for six years and “was in disrepair,” Flex-N-Gate Director of Energy Mellissa Kendall said March 26 in emailed responses to Plastics News. Ventra Evart makes exterior automotive components such as tail lamps, fog lamps, fascias, rockers, spoilers and wheel flares. It supplies Ford Motor Co., General Motors Co., Fiat Chrysler Automobiles and Tesla Inc.

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HEALTH CARE

SPORTS BUSINESS

UM may hit pause on affiliation spree Stadium By Jay Greene jgreene@crain.com

Michigan Medicine, the clinical arm of the University of Michigan in Ann Arbor, over the past decade has expanded its base of three hospitals to encompass medical affiliations or ownership stakes in Midland, Grand Rapids, Chelsea and other Southeast Michigan locations, with the latest affiliation signed earlier this month with Sparrow Health System in Lansing. David Spahlinger, M.D., president of the University of Michigan Health System, said Sparrow might be the last major affiliation — at least for awhile. “That is enough bandwidth (to keep me busy). We need time now to

meet obligations to partners” along with improving and expanding on those hospital and medical partnerships, he said. UM’s last master affiliation agreement with Sparrow Health, which was signed in early April, includes UM making a 50 percent financial investment in Sparrow’s pediatric program and a minority investment into Sparrow’s profitable health plan, Spahlinger said. The size of the investments were not specified. The Sparrow pediatric services joint venture, which will begin in May, will integrate UM’s pediatric services at C.S. Mott Children’s Hospital with Sparrow Children’s Center in Lansing. The minority investment

in profitable Physicians Health Plan will most likely begin with UM’s employees and could expand from there depending how successful the plan is at reducing the university’s health care costs, he said. Besides hospitals wanting the Michigan brand, Spahlinger said there are two major reasons for UM expanding outside of Ann Arbor. First, UM’s three main hospitals, University Hospital, Mott Children’s and Von Voigtlander Women’s Hospital, are nearly full, with occupancy rates sometimes above 90 percent. Two, UM’s top doctors and sub-specialty services are in much demand across the state. SEE AFFILIATION, PAGE 21

Authority: New turf for Ford Field Retractable roof would cost $75 million By Bill Shea bshea@crain.com

MICHIGAN MEDICINE

David Spahlinger, M.D., president of the University of Michigan Health System.

NONPROFITS

Ford Field isn’t getting a retractable roof, and probably not a soccer team, but it is getting new artificial turf. The Lions have yet to publicly announce the field replacement, but meeting minutes of the Detroit-Wayne County Stadium Authority — it owns both Ford Field and Comerica Park — from its Nov. 14 annual meeting show that the NFL team intends to have new artificial grass laid sometime before the 2019 season begins in late summer. “We are considering — we are starting the process to replace the field turf that’s on the field, so we are researching all the different companies that are out there right now. Our turf is the second-oldest turf of artificial fields in the NFL. It was installed in 2013. So we will likely be replacing that as part of our off season in 2019,” said Todd Argust, the Lions’ vice president of operations since 2014, according to a transcript of the stadium authority’s meeting provided last week by Wayne County. Sources familiar with the situation say the new turf project is still a go and should be announced within a few weeks.

Need to know

 Ford Field artificial grass will be replaced over the summer  First replacement since 2002 stadium opening was 2013

Belle Meador (right), daughter of DTE Energy Co. executive David Meador, pictured with Mary Messana, director of communications and community at Strategic Staffing Solutions. Belle works part time at English Gardens and Strategic Staffing Solutions as caregiver of the dogs and cats that call its offices home.

It took months and months and months to line his daughter up with those jobs, because employers haven’t broadly opened their workplaces to people with autism and other developmental disabilities, said David Meador, co-founder of the Autism Alliance of Michigan. Stephen D’Arcy, who co-founded the alliance with Meador a decade ago, faced similar issues when his son Jay, who is also on the spectrum, left high school without a diploma at age 26 a decade ago. There was no process in place for finding work opportunities after high school for his son and others on the spectrum, he said. D’Arcy was able to secure volunteer work for his son with a local health care organization. “But that’s not fair; most people can’t get on the phone and get their child (work),” said D’Arcy, now a partner at Troy-based Quantum Group LLC.

Argust also updated the board on Detroit’s bid for a Major League Soccer expansion team, an initiative the football team joined in 2017 as the potential provider of a home field. The bid has stalled and other cities have been granted teams, mainly because MLS wants either an open-air soccer-specific stadium or it wants an retractable roof added to Ford Field. Last summer, the Lions hired Detroit-based architecture firm Rossetti Inc., the stadium’s original designer, to study how a retractable roof might work and what it might cost. The result confirmed the team’s worry that it would be too much of a headache and too expensive to try. In September, the Detroit MLS bid informed the league that it wasn’t going to pursue the retractable roof but still intends to seek an expansion club. Argust told the stadium authority such a project was estimated to cost $75 million. The estimate hadn’t been previously publicly disclosed. “There’s been a lot of back and forth between the Detroit ownership group and MLS, and what was reported to the media was true, that the MLS was making a requirement that we add a retractable roof in order for them to award us the team,” Argust said, according to the transcript.

SEE AUTISM, PAGE 20

SEE TURF, PAGE 17

STRATEGIC STAFFING SOLUTIONS

WORKFORCE DEVELOPMENT

Autism Alliance of Michigan ramps up focus on living options, jobs for adults “Just like anyone, you have something to look forward to with a job, you get out of the house (and) you’re with other people.” Dave Meador

By Sherri Welch swelch@crain.com

When Belle Meador finished her last year of high school without a diploma, local career technical education programs weren’t an option. Her parents, Peggy and David Meador, vice chairman and chief administrative officer at DTE Energy Co., didn’t accept that. They fought and got their daughter into an Oakland Schools career program focused on two things she loves: plants and animals. It was a good fit, considering Belle has a horse, snakes, a skink, a tortoise, a rabbit, koi, turtles and her constant companion, a golden retriever service dog named Magic, her dad said. Now 23, Belle works part time at English Gardens and Strategic Staffing Solutions as caregiver of the dogs and cats that call its offices home. And she’s working with the Michigan Department of Natural Resources on Belle Isle.

 Cost to open roof for potential MLS team would be $75 million

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KURT NAGL/CRAIN’S DETROIT BUSINESS

The Detroit Medical Center canceled its deal to sell outside lab operations to Laboratory Corp. of America.

DMC cancels plan to sell outreach lab business to N.C.-based LabCorp By Jay Greene jgreene@crain.com

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Detroit Medical Center has canceled the planned sale of its outreach lab and diagnostic testing operations to Laboratory Corp. of America, a Burlington, N.C.-based life sciences company, Crain’s has learned. The transaction was announced in early February and had been expected to close by April 1. It was canceled two weeks ago. A union representing workers at the operation said the cancellation was a result of union protests. DMC disputed that in a written statement. “We came to the conclusion that it was in DMC’s best interests for our outreach lab business to remain with DMC University Laboratories,” DMC spokeswoman Tonita Cheatham said

by email. “This was a business decision made in consideration of what’s best for DMC and not driven by the actions of the union. We will continue to provide our physicians and patients with quality care to meet their needs for these services.” Teamsters Local 283 President Steve Hicks told Crain’s last week that he was told by DMC officials that the lab sale was terminated because LabCorp “couldn’t get certified” in Michigan, and there were questions about whether claims would be paid by health insurers. “We think it is because we filed (unfair) labor board charges (with the National Labor Relations Board)” against DMC, Hicks said. “LabCorp is a national company that are certified to do that work across the country. We will

withdraw our charges now that the deal is off.” LabCorp officials did not respond to requests for comment. Hicks said the union believed DMC was seeking to replace the 86 to 90 union outreach lab and courier employees with lower-paid LabCorp workers. The deal with LabCorp would have affected only the lab business of DMC University Labs that provides testing services for outside physicians offices, known as outreach services, not lab services that serve DMC’s own six hospitals. DMC is owned by for-profit Tenet Healthcare Corp. of Dallas. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Former Dearborn Hyatt’s fate uncertain as city sees early development interest By Sherri Welch swelch@crain.com

It could be months or even years before the fate of the former Hyatt Regency hotel in Dearborn is known, as a legal case involving its owner plays out in Canada courts. But already a developer has met with Dearborn Mayor John “Jack” O’Reilly, Jr. to express preliminary interest in the prominent property near Ford Motor Co.’s world headquarters. Mary Laundroche, director of public information for Dearborn, declined to identify the developer or to comment on whether the group’s plans involve renovating the 772room hotel — something experts have estimated would run more than $50 million — or other plans such as converting the hotel into housing or razing it and building something new. The city is open to proposals for the property, Laundroche said. But the city doesn’t own The Edward Hotel & Convention Center, which it shut down in December for safety violations. “From the city’s point of view, it is obviously frustrating to have a landmark in limbo,” Laundroche said. Once the go-to spot for big meetings,

The former Hyatt Regency hotel in Dearborn.

the hotel has seen business fall and a series of owners and names since 2012 when Hyatt ended its management agreement. Ownership could shift once again. The Canadian government has secured a restraining order to freeze the property while it prosecutes the hotel’s current owner, Chinese-born businessman Xiao Hua “Edward” Gong, who lives in Toronto, on charges including fraud and money laundering. An October order issued by the U.S. District Court for the District of Columbia approved a request from the Ontario Superior Court of

Justice to freeze Gong’s assets in the hotel and other properties. If the Canadian government doesn’t take ownership of the property in Dearborn, the county might. Gong owes about $1.14 million in property taxes to Wayne County, along with about $55,000 to Dearborn in personal property taxes. Of that, $585,818 in taxes for 2017 are subject to foreclosure if they aren’t paid in the next year, the county says. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

LEGAL NOTICE

To merchants who have accepted Visa and Mastercard at any time from January 1, 2004 to January 25, 2019: Notice of a class action settlement of approximately $5.54-6.24 Billion. Si desea leer este aviso en español, llámenos o visite nuestro sitio web, www.PaymentCardSettlement.com. Notice of a class action settlement authorized by the U.S. District Court, Eastern District of New York. This notice is authorized by the Court to inform you about an agreement to settle a class action lawsuit that may affect you. The lawsuit claims that Visa and Mastercard, separately, and together with certain banks, violated antitrust laws and caused merchants to pay excessive fees for accepting Visa and Mastercard credit and debit cards, including by: • Agreeing to set, apply, and enforce rules about merchant fees (called default interchange fees); • Limiting what merchants could do to encourage their customers to use other forms of payment; and • Continuing that conduct after Visa and Mastercard changed their corporate structures. The defendants say they have done nothing wrong. They say that their business practices are legal and the result of competition, and have benefitted merchants and consumers. The Court has not decided who is right because the parties agreed to a settlement. The Court has given preliminary approval to this settlement.

THE SETTLEMENT Under the settlement, Visa, Mastercard, and the bank defendants have agreed to provide approximately $6.24 billion in class settlement funds. Those funds are subject to a deduction to account for certain merchants that exclude themselves from the Rule 23(b)(3) Settlement Class, but in no event will the deduction be greater than $700 million. The net class settlement fund will be used to pay valid claims of merchants that accepted Visa or Mastercard credit or debit cards at any time between January 1, 2004 and January 25, 2019. This settlement creates the following Rule 23(b)(3) Settlement Class: All persons, businesses, and other entities that have accepted any Visa-Branded Cards and/or Mastercard-Branded Cards in the United States at any time from January 1, 2004 to January 25, 2019, except that the Rule 23(b)(3) Settlement Class shall not include (a) the Dismissed Plaintiffs, (b) the United States government, (c) the named Defendants in this Action or their directors, officers, or members of their families, or (d) financial institutions that have issued Visa-Branded Cards or Mastercard-Branded Cards or acquired Visa-Branded Card transactions or Mastercard-Branded Card transactions at any time from January 1, 2004 to January 25, 2019. The Dismissed Plaintiffs are plaintiffs that previously settled and dismissed their own lawsuit against a Defendant, and entities related to those plaintiffs. If you are uncertain about whether you may be a Dismissed Plaintiff, you should call 1-800-625-6440 or visit www.PaymentCardSettlement.com for more information.

WHAT MERCHANTS WILL GET FROM THE SETTLEMENT Every merchant in the Rule 23(b)(3) Settlement Class that does not exclude itself from the class by the deadline described below and files a valid claim will get money from the class settlement fund. The value of each claim will be based on the actual or estimated interchange fees attributable to the merchant’s Mastercard and Visa payment card transactions from January 1, 2004 to January 25, 2019. Pro rata payments to merchants who file valid claims for a portion of the class settlement fund will be based on: • The amount in the class settlement fund after the deductions described below, • The deduction to account for certain merchants who exclude themselves from the class, • Deductions for the cost of settlement administration and notice, applicable taxes on the settlement fund and any other related tax expenses, money awarded to the Rule 23(b)(3) Class Plaintiffs for their service on behalf of the Class, and attorneys’ fees and expenses, all as approved by the Court, and • The total dollar value of all valid claims filed. Attorneys’ fees and expenses and service awards for the Rule 23(b)(3) Class Plaintiffs: For work done through final approval of the settlement by the district court, Rule 23(b) (3) Class Counsel will ask the Court for attorneys’ fees in an amount that is a reasonable proportion of the class settlement fund, not to exceed 10% of the class settlement fund, to compensate all of the lawyers and their law firms that have worked on the class case. For additional work to administer the settlement, distribute the funds, and litigate any appeals, Rule 23(b)(3) Class Counsel may seek reimbursement at their normal hourly rates. Rule 23(b)(3) Class Counsel will also request (i) an award of their litigation expenses (not including the administrative costs of settlement or notice), not to exceed

$40 million and (ii) up to $250,000 per each of the eight Rule 23(b)(3) Class Plaintiffs in service awards for their efforts on behalf of the Rule 23(b)(3) Settlement Class.

HOW

ASK

FOR

PAYMENT

To receive payment, merchants must fill out a claim form. If the Court finally approves the settlement, and you do not exclude yourself from the Rule 23(b)(3) Settlement Class, you will receive a claim form in the mail or by email. Or you may ask for one at: www.PaymentCardSettlement.com, or call: 1-800-625-6440.

LEGAL RIGHTS

AND

OPTIONS

Merchants who are included in this lawsuit have the legal rights and options explained below. You may: • File a claim to ask for payment. Once you receive a claim form, you can submit it via mail or email, or may file it online at www.PaymentCardSettlement.com. • Exclude yourself from the Rule 23(b)(3) Settlement Class. If you exclude yourself, you can individually sue the Defendants on your own at your own expense, if you want to. If you exclude yourself, you will not get any money from this settlement. If you are a merchant and wish to exclude yourself, you must make a written request, place it in an envelope, and mail it with postage prepaid and postmarked no later than July 23, 2019, or send it by overnight delivery shown as sent by July 23, 2019, to Class Administrator, Payment Card Interchange Fee Settlement, P.O. Box 2530, Portland, OR 97208-2530. Your written request must be signed by a person authorized to do so and provide all of the following information: (1) the words “In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation,” (2) your full name, address, telephone number, and taxpayer identification number, (3) the merchant that wishes to be excluded from the Rule 23(b) (3) Settlement Class, and what position or authority you have to exclude the merchant, and (4) the business names, brand names, “doing business as” names, taxpayer identification number(s), and addresses of any stores or sales locations whose sales the merchant desires to be excluded. You also are requested to provide for each such business or brand name, if reasonably available: the legal name of any parent (if applicable), dates Visa or Mastercard card acceptance began (if after January 1, 2004) and ended (if prior to January 25, 2019), names of all banks that acquired the Visa or Mastercard card transactions, and acquiring merchant ID(s). • Object to the settlement. The deadline to object is July 23, 2019. To learn how to object, visit www.PaymentCardSettlement.com or call 1-800-625-6440. Note: If you exclude yourself from the Rule 23(b)(3) Settlement Class you cannot object to the settlement. For more information about these rights and options, visit: www.PaymentCardSettlement.com.

COURT APPROVES FINAL SETTLEMENT

THE

Members of the Rule 23(b)(3) Settlement Class who do not exclude themselves by the deadline will be bound by the terms of this settlement, including the release of claims against the released parties provided in the settlement agreement, whether or not the members file a claim for payment. The settlement will resolve and release claims by class members for monetary compensation or injunctive relief against Visa, Mastercard, or other defendants. The release bars the following claims: • Claims based on conduct and rules that were alleged or raised in the litigation, or that could have been alleged or raised in the litigation relating to its subject matter. This includes any claims based on interchange fees, network fees, merchant discount fees, no-surcharge rules, nodiscounting rules, honor-all-cards rules, and certain other conduct and rules. These claims are released if they already have accrued or accrue in the future up to five years following the court’s approval of the settlement and the resolution of all appeals. • Claims based on rules in the future that are substantially similar to – i.e., do not change substantively the nature of – the above-mentioned rules as they existed as of preliminary approval of the settlement. These claims based on future substantially similar rules are released if they accrue up to five years following the court’s approval of the settlement and the resolution of all appeals. The settlement’s resolution and release of these claims is intended to be consistent with and no broader than federal law

on the identical factual predicate doctrine. The release does not extinguish the following claims: • Claims based on conduct or rules that could not have been alleged or raised in the litigation. • Claims based on future rules that are not substantially similar to rules that were or could have been alleged or raised in the litigation. • Any claims that accrue more than five years after the court’s approval of the settlement and the resolution of any appeals. The release also will have the effect of extinguishing all similar or overlapping claims in any other actions, including but not limited to the claims asserted in a California state court class action brought on behalf of California citizen merchants and captioned Nuts for Candy v. Visa, Inc., et al., No. 1701482 (San Mateo County Superior Court). Pursuant to an agreement between the parties in Nuts for Candy, subject to and upon final approval of the settlement of the Rule 23(b) (3) Settlement Class, the plaintiff in Nuts for Candy will request that the California state court dismiss the Nuts for Candy action. Plaintiff’s counsel in Nuts for Candy may seek an award in Nuts for Candy of attorneys’ fees not to exceed $6,226,640.00 and expenses not to exceed $493,697.56. Any fees or expenses awarded in Nuts for Candy will be separately funded and will not reduce the settlement funds available to members of the Rule 23(b)(3) Settlement Class. The release does not bar the injunctive relief claims or the declaratory relief claims that are a predicate for the injunctive relief claims asserted in the pending proposed Rule 23(b)(2) class action captioned Barry’s Cut Rate Stores, Inc., et. al. v. Visa, Inc., et al., MDL No. 1720, Docket No. 05-md-01720MKB-JO (“Barry’s”). Injunctive relief claims are claims to prohibit or require certain conduct. They do not include claims for payment of money, such as damages, restitution, or disgorgement. As to all such claims for declaratory or injunctive relief in Barry’s, merchants will retain all rights pursuant to Rule 23 of the Federal Rules of Civil Procedure which they have as a named representative plaintiff or absent class member in Barry’s, except that merchants remaining in the Rule 23(b)(3) Settlement Class will release their right to initiate a new and separate action for the period up to five (5) years following the court’s approval of the settlement and the exhaustion of appeals. The release also does not bar certain claims asserted in the class action captioned B&R Supermarket, Inc., et al. v. Visa, Inc., et al., No. 17-CV-02738 (E.D.N.Y.), or claims based on certain standard commercial disputes arising in the ordinary course of business. For more information on the release, see the full mailed Notice to Rule 23(b)(3) Settlement Class Members and the settlement agreement at: www.PaymentCardSettlement.com.

THE COURT HEARING ABOUT THIS SETTLEMENT On November 7, 2019, there will be a Court hearing to decide whether to approve the proposed settlement. The hearing also will address the Rule 23(b)(3) Class Counsel’s requests for attorneys’ fees and expenses, and awards for the Rule 23(b) (3) Class Plaintiffs for their representation of merchants in MDL 1720, which culminated in the settlement agreement. The hearing will take place at: United States District Court for the Eastern District of New York 225 Cadman Plaza Brooklyn, NY 11201 You do not have to go to the Court hearing or hire an attorney. But you can if you want to, at your own cost. The Court has appointed the law firms of Robins Kaplan LLP, Berger Montague PC, and Robbins Geller Rudman & Dowd LLP as Rule 23(b)(3) Class Counsel to represent the Rule 23(b)(3) Settlement Class.

QUESTIONS? For more information about this case (In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, MDL 1720), you may: Call toll-free: 1-800-625-6440 Visit: www.PaymentCardSettlement.com Write to the Class Administrator: Payment Card Interchange Fee Settlement P.O. Box 2530 Portland, OR 97208-2530 Email: info@PaymentCardSettlement.com Please check www.PaymentCardSettlement.com for any updates relating to the settlement or the settlement approval process.

www.PaymentCardSettlement.com • 1-800-625-6440 • info@PaymentCardSettlement.com

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 8 , 2 0 1 9

Hillcrest Capital Partners develops surgery center model Need to know

By Jay Greene

jgreene@crain.com

Michigan Blues. The Blues’ program and a similar one sponsored by Priority Health are designed to lower costs by encouraging outpatient surgeries.

Hillcrest begins development program to operate 15 ambulatory surgery centers by end of 2020 J

Hillcrest Capital Partners LLP, a Royal Oak-based health care development and management company that plans to develop and operate more than a dozen outpatient surgery centers with physician investors over the next 18 months, wants to capitalize on the fact that Michigan has fewer outpatient surgery centers than most states its size. With Medicare and private payers like Blue Cross Blue Shield of Michigan providing incentives for more surgery and other services to be performed in lower-cost outpatient centers, Hillcrest hopes to get ahead of the change curve. Founded in 2015, Hillcrest has grown to a company with a little more than $2.5 million in revenue in 2018, said Abe Baydoun, owner and co-founder. Hillcrest’s goal is to develop and operate 15 surgery centers with physicians by the end of 2020. So far, Hillcrest manages one surgery center in Flint, the Charter Endoscopy Center, that it is converting into a multi-specialty facility. It has three additional surgery centers planned in Rochester Hills, Royal Oak and Dearborn, Baydoun said.

J Provides funding, surgeons buy investment shares into practice

CON barriers in Michigan

J Outpatient services projected to explode over next decade as payers, employers and patients seek lower costs

One barrier to ambulatory surgery center development historically has been Michigan’s stringent certificate-of-need laws that have limited surgery center approvals to about an average of five or six per year over the past several years. “You need to show a particular area has a need for health care services,” Borrego said. “The only way to get it is by allowing surgeons to pledge those cases (in the CON application), where they can show they have enough cases to open an ambulatory surgery center.” Borrego said Hillcrest is in contact with a number of surgeons in Southeast Michigan that are “able to pledge their cases” in planned CON applications. As a result, CON approvals for surgery centers have increased dramatically during the past 18 months. From 2015 to 2017, the number of approved CON applications for surgery centers has averaged about five, said Beth Nagle, division director with the Michigan Department of Health and Human Services. However, in fiscal year 2018 that ended last Sept. 30, nine surgery centers were approved, Nagle said. A Crain’s analysis of fiscal 2019 from Oct. 1 through February showed an additional five surgery centers have been approved with three more pending. “We don’t know why there has been an increase. There have been no changes in the standards,” Nagle said. But Borrego said Hillcrest is banking on the belief there is a growing need for surgery centers based on patient and health insurer demands. Michigan has about 110 Medicare-certified ambulatory surgery centers, ranking 17th nationally, lower than any Midwest state other than 80 in Wisconsin, 72 in Minnesota and 24 in Iowa, according to the American Ambulatory Surgery Center Association. Neighboring Ohio has 181 and Indiana has 124. The top outpatient surgery states are California with 794, Florida with 426 and Texas with 391. Andrew Gwinnell, president of the Michigan Ambulatory Surgery Association, said ambulatory surgery center growth in Michigan is related to more procedures being authorized by Medicare, Medicaid and private payers, especially total joint replacements. “We expect there will be growth in Michigan for a variety of reasons. ... We are seeing more hospital partnerships now with orthopedic and spine surgeons,” said Gwinnell, administrator of Truvista Surgery Center, a physician-owned center in Troy that opened in 2007. “Hospitals are more protective of these services and want to work closely with surgeons.” But Gwinnell said neighboring Ohio has many more surgery centers than Michigan, partially due to Michigan’s CON law, but also because payer financial incentives are a little behind in Michigan compared with other states. “As more procedures are authorized to be done in ambulatory surgery settings, there will be more opportunities to build because surgeons will be able to show more need” to the CON Commission, Gwinnell said.

Ricardo Borrego, M.D., Hillcrest’s co-founder and manager, said Hillcrest is offering surgeons and related specialties a variety of investment opportunities. “We bring them turnkey operations. We cover expenses, overhead and equipment,” said Borrego, a practicing anesthesiologist. “We hire staff, do the accounting and manage it. They buy shares. It is the only out-ofpocket costs they have. We guarantee return of investment of $20 million to $30 million per project.” Borrego said Hillcrest estimates each surgery center will cost approximately $14 million to purchase, convert or build. “We are looking for spine, orthopedic, pain management and cardiovascular” specialists, Borrego said.

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Ricardo Borrego, M.D., and Abe Baydoun

“These are synergistic specialties that work well to have their own surgery center.” Spine surgeons historically have conducted more surgeries in hospitals. But the last several years with microinvasive, laminectomies (a surgical operation to remove the back of one or more vertebrae) and small spinal disk surgeries where no blood transfusion is needed, more outpatient surgeries are being done in ambulatory centers, Borrego said. “We offer a one-stop shop. We get doctors together, we put up all the money, and they buy shares and are investors in the centers,” he said. The traditional model doctors have used to open an independent surgery center is raise capital through a bank or on their own to build or buy a center. There are also more than a dozen large corporate ambulatory surgery chains, including American Surgery Centers, Surgical Care Affiliates and United Surgical Partners, which is owned by Tenet Healthcare Corp., the parent company of Detroit Medical Center. When surgeons seek to build on their own, Borrego said, “at the outset they are in a hole. Hillcrest offers the ability to carry out a dream without putting up the money. We will get our money back in the end. We want them to thrive and succeed.” Baydoun, who originally is from Michigan, said he previously worked in Dallas where we worked for a similar company called Pinecrest Capital Partners. Pinecrest developed 48 surgery centers in Texas using the same investment strategy. “We have access to capital through investors and our own resources,” Baydoun said. “We have already put money aside for our needs.” But because the certificate of need process in Michigan is cumbersome and sometimes difficult, Baydoun said the company first will identify existing surgery centers and develop them first. For example, two existing centers are expected to open this summer under the Hillcrest model, Baydoun said. They are the Spine and Joint Institute of Michigan, 5140 Coolidge Highway, Royal Oak; and the Insight Surgical Institute of Michigan, 5850 Mercury Drive, Dearborn. Borrego said conflict sometimes arises when surgeons at hospitals decided to open up their own surgery. “The hospital sees spine surgeons involved, and it will cause a rift among them. They can become involved in the financing, which eliminates a risk

HILLCREST CAPITAL PARTNERS

from them. But surgeons are finding they no longer need to depend on the hospital for inpatient care or services.”

Surgeon partnerships Some health systems, however, are seeing the handwriting on the wall. Instead of watching their surgeons take their inpatient business to other outpatient surgery settings, a growing number of hospitals are partnering with surgeons. Beaumont Health, an eight-hospital system based in Southfield, is developing a plan to build an outpatient surgery center on its Royal Oak campus in a partnership with Michigan Orthopaedic Surgeons PLLC, a 44-surgeon group based in Southfield. MOS is composed primarily of surgeons who practice at Beaumont Hospital in Royal Oak and Troy. Paul Fortin, M.D., MOS president, told Crain’s in a Dec. 9 article that Michigan payers, insurers and hospitals are behind in the movement to outpatient surgery, and MOS is trying to prepare for an explosion he believes will occur in Southeast Michigan in the coming years. MOS now does the bulk of its outpatient surgery at UnaSource Surgery Center in Troy, where it has a 40 percent ownership interest in the five-operating-room center. Carolyn Wilson, R.N., Beaumont’s COO, also told Crain’s that Beaumont’s strategy is to move more into outpatient orthopedics and build out a network of 30 urgent-care centers in metro Detroit in a joint venture with Atlanta-based WellStreet Urgent Care. Beaumont also recently completed construction of a $5.5 million, 10,000-square-foot outpatient orthopedic center on the campus of Beaumont Hospital in Taylor. Services in the 12-room facility include examinations, imaging, access to specialists, and treatment plans for injuries. Patients will continue to receive surgery in the hospital’s operating rooms. Over the past several years, Medicare and some private payers such as Blue Cross Blue Shield of Michigan have been testing bundled services payment programs for total joint replacements in outpatient settings. “This is a huge market for hospitals to lose and they are setting up partnerships with surgeons on their medical staffs,” Borrego said. While Beaumont or Hillcrest are not currently involved, MOS and Troybased Triarq Health are two physician organizations participating in a prepaid, or bundled, hip and knee replacement program offered by the

Jay Greene: (313) 446-0325 Twitter: @jaybgreene

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 8 , 2 0 1 9 The former Standard Accident Insurance Co. building at 640 Temple St. in Detroit is undergoing a $72 million renovation and being converted into the 100-room Temple Hotel along with 70 apartments. MCINTOSH PORIS ASSOCIATES

Lenny Kravitz firm to help design Temple Detroit hotel By Kirk Pinho kpinho@crain.com

The $72 million redevelopment of the former Standard Accident Insurance Co. building in downtown Detroit is slated to feature a new hotel called Temple Detroit and have an interior design by rock star Lenny Kravitz’s New York City-based Kravitz Design, the project backers announced Wednesday. The Albert Kahn-designed building at 640 Temple St., a block west of the historic Masonic Temple, is to have 100 rooms and 70 apartments, adding to a bevy of hotel space planned and under construction in and around Detroit’s central business district. There are more than 2,000 rooms recently built or in the pipeline to add to its existing 5,000 or so. Los Angeles-based sbe is the hospitality group behind Temple Hotel, part of the company’s House of Originals brand, according to a news release. That line of hotels has properties in London, Istanbul, Miami Beach and New York. It is anticipated to open in June 2020 along with the rental apartments, with 20 percent of those being deemed affordable for those making 80 percent of the area median income. Sbe is run by Sam Nazarian, who started his business career in telecommunications and then branched into entertainment and hospitality, according to a December profile in Hotel Management magazine. Men’s Journal called him “one of the premier leaders in the luxury lifestyle industry.” Sbe’s business portfolio includes hotel brands (SLS, Hudson, Originals, The Redbury, Hyde, Delano and Mondrian), restaurants (Katsuya, The Bazaar by Jose Andres, Fi Lia, Carna, Cleo Mediterraneo, Tres by Jose Andres, Umami Burger and K and Diez y Seis) and nightclubs (Hyde Lounge, Nightingale Plaza, Doheny Room, Skybar and others). Christos Moisides, a partner in the project’s Detroit-based developer Byzantine Holdings LLC, said he lived in Los Angeles for 11 years and was introduced to Kravitz by a mutual friend, and Kravitz’s company “has a great relationship with Sam Nazarian.” “It started with Lenny,” Moisides said Wednesday morning. Other partners in Byzantine Holdings along with Moisides are Gretchen Valade, granddaughter of Hamilton Carhartt, who founded Dearborn-based workwear brand Carhartt Inc. in 1889; and David Sutherland, partner with the Wakefield, Sutherland & Lubera PLC law firm in Grosse Pointe Farms. Moisides is also executive member of Detroit-based 400 Monroe Associates LLC. The hotel’s average daily rate is expected to be about $175 per night, while the apartments are penned to lease for $2-$2.25 per square foot, Moisides said. There are three studio apartments, 57 one-bedrooms and 10 two-bedroom units planned. Units range from 435 square feet for the studios to 957-1,909 square feet for the two-bedrooms units, according to Moisides. Eight one-bedrooms and the three studios are planned to be “affordable.” The project is expected to include a whiskey bar called the Vault Bar in the basement in what was the insurance company’s vault and a large 500-person capacity live music venue below in a “subterra-

Need to know

JJConstruction on the Temple Hotel project expected to be complete in June 2020 JJTo feature 100 hotel rooms by Los Angeles-based sbe and 70 apartments JJInterior design on $72 million project to be done by musician Lenny Kravitz’s design firm

nean” coal room with 20-foot ceilings. A yearround rooftop pool and lounge are also planned, as is a spa and two first-floor restaurants, Moisides said. The hotel space is planned for the 190,000-square-foot, eight-story building’s second, third and fourth floors, while residential space will be above that. Between six and 10 of the residential units could be for long-term corporate rentals, according to Moisides. Michele Caniato, chief branding officer for sbe, called the new Detroit hotel part of a “luxury brand” of hospitality outlets. “Detroit is an opportunity to increase and enlarge the brand, creating different opportunities around the world,” Caniato said in a Wednesday morning interview. “It’s a luxury brand trying to create a community of guests who will follow it around the world.” Birmingham-based McIntosh Poris Associates is the architecture firm on the project while the Detroit office of Grand Rapids-based Rockford Construction is the general contractor/project manager. Detroit-based Kraemer Design Group is the historic consultant on the project. “When you adapt a building it’s important to weave together its history and program to create a place that’s fitting for today,” Michael Poris said in a statement. “We’ve created a design to cohesively reflect the past, present and future for 640 Temple.” Kravitz said in a statement that his first tastes of Detroit came during his legendary more than three-decade music career. “Detroit is a special place with a fascinating history,” Kravitz said in a statement provided to Crain’s. “My connection with the city has been through the decades of music created there. In recent years, I have also become interested in Detroit as being a city being reborn. It’s very satisfying as a result for myself and the Kravitz Design team to offer our energy and ideas to the success of the Temple Hotel, as well as Detroit. We are excited to collaborate with both Christos Moisides and my good friend Sam Nazarian and his team at sbe on this project.” The project’s capital stack is as follows: J Chemical Bank loan ($32.25 million) J Brownfield incentives ($5.7 million) J Invest Detroit ($2.5 million) J Federal historic tax credits purchased by InSite Capital ($8.6 million) J Deferred developer fees ($2.8 million) J Developer equity ($16.15 million) J A supplemental loan of $4 million from the developers Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 8 , 2 0 1 9

OPINION COMMENTARY

How Dan Gilbert could lower his employees’ auto insurance D

an Gilbert has painted a bullseye on Michigan’s no-fault auto insurance law. The billionaire founder of Quicken Loans Inc. is one of the driving forces in Lansing behind a push to greatly reduce no-fault medical benefits for injured motorists, dispatching a team of lobbyists to the Capitol to argue that high premiums have become an economic albatross for Michigan and Detroit in particular. Egged on by Detroit Mayor Mike Duggan, Gilbert has been incensed by what he has called “the predatory plaintiff bar” of personal injury attorneys and “certain parts” of the medical industry that “profit enormously and unjustly from this crazy law.” Gilbert’s threat that he’ll bankroll a 2020 ballot campaign to repeal the nofault law looms over the Legislature and Gov. Gretchen Whitmer this year. But there’s something Gilbert could be doing voluntarily to lower the cost of auto insurance for his 17,000 employees in Detroit — and it wouldn’t necessarily require an act of the Legislature. Quicken Loans’ employee health insurance plans don’t allow coordination of medical benefits to pay for treatment of auto accident injuries, according to Howell-based Citizens Insurance Co. of America’s health insurance verification guide for agents. Motorists who elect to have their health insurance pay their auto-related medical bills first before their auto insurance policy kicks in are supposed to get “appropriately reduced premiums” under the no-fault law. Coordination of benefits is an aspect of auto insurance in Michigan that should, in theory, provide rate relief for drivers who use the networks and negotiated payment structure of health plans — something that’s largely absent in the litigation-infested no-fault system. But the state Department of Insurance and Financial Services doesn’t know how many auto policies are coordinated with health insurance plans because no-fault carriers aren’t required to report them, DIFS spokeswoman Andrea Miller said. That calls into question whether drivers actually realize any significant savings, because there’s no real enforcement by DIFS under Michigan’s

CHAD LIVENGOOD clivengood@crain.com

deregulated file-and-use system to ensure premiums are “appropriately reduced,” said Doug Heller, a California auto insurance industry researcher who has studied Michigan’s industry for the Coalition to Protect Auto No-Fault. In the case of Quicken Loans and hundreds of other companies in Michigan, their health plans “do not provide coverage for injuries resulting from an auto accident and do not qualify for the Coordinated PIP Medical ... discount,” according to the guide Citizens Insurance agents use to price premiums. Other big employers such as Consumers Energy Co., DTE Energy Co., Penske Corp. and Whirlpool Corp. do allow coordination of benefits and their health plans are the primary payer, according to the companies. Large corporations that exclude auto injuries from health plans may have federally regulated ERISA plans (Employee Retirement Income Security Act) that are not subject to oversight by the state insurance department. Self-funded ERISA plans are automatically excluded from being coordinated with no-fault insurance benefits unless the employer opts in, said Laura Appel, senior vice president and chief innovation officer at the Michigan Health & Hospital Association. A spokesman for Quicken Loans defended the company’s lack of a coordination of benefits clause. “Just like Medicare won’t step in front of the auto health coverage, the vast majority of Michigan employers don’t do so either,” Quicken Loans spokesman Aaron Emerson said in a statement to Crain’s. “Doing so would raise the costs (or reduce other benefits) for both employers and employees of their current health policies and would not result in a meaningful difference in the sky-high premiums that is

the result of the abusive provisions in Michigan’s current no-fault law.” But a large corporation like Quicken Loans has “a lot of market power” and could renegotiate its plans to cover auto accident injuries, Heller said. “If you as a big employer are not insisting that your health insurer offer coordinated benefits with health insurance, then you’re responsible, in part, for the high cost of auto insurance that your employees are paying,” Heller said. The statement from Quicken Loans’ spokesman said it would be “egregious” to mandate the online mortgage company’s employees “pay extremely high premiums for unlimited coverage and then not make any claims against those policies” by directing their health carrier to pay for medical bills. “Michigan needs real reform, driven by leaders dedicated to ending this nofault insurance scam once and for all,” Emerson said. But Gilbert could end up paying if he succeeds in getting the Legislature to

gut no-fault benefits or make Michigan a tort state like Ohio and Indiana where drivers go to court to recover property and bodily damages, Heller said. Ohio and Indiana have a “de facto coordination of benefits” because the cost of medical care from an auto accident falls back on private health plans or taxpayer-funded Medicaid or Medicare, Heller said. “If you throw out auto no-fault, you’re going to see those premiums increase on your health insurance side anyway,” Heller said. Employers with state-regulated health insurance plans may end up with the bills for auto accidents if the no-fault law is scrapped. But big employers with ERISA plans could continue to prohibit medical coverage of auto injuries, Appel said. “My question has always been to people who are so excited about limiting the benefits (of no-fault): How will you assure that these employers undo their polices? We can’t force them to

change,” said Appel, whose organization opposes ending the unlimited medical benefit of no-fault. It’s a question both Gilbert and lawmakers should consider before they upend Michigan’s 45-year-old auto insurance law, Appel said. “You can’t assume it’s just going to fall back on the private health insurer,” Appel said. “And you also can’t assume if the private health insurer or the employer-based coverage does take this back on that the premium’s going to stay the same.”

Film Theatre, another Detroit gem, within the Detroit Institute of Arts. Bill Davidson was a household name in Detroit. Not just for his success in sports but also his business acumen. His father was an immigrant store owner in Michigan. Bill had his own aspirations and quickly got to work after a stint in the Navy. He started his career as a lawyer but soon found he was more interested in operating businesses like the ones he represented. When his family purchased a stake in Guardian glass, it wasn’t long before they all knew Bill was the only one who could make it a success. After decades of massive interna-

tional growth for the company, Bill bought the Detroit Pistons on a handshake after a failed attempt to buy an NFL team. It was quite a week in Detroit: “Hamilton,” the Davidson documentary and the celebration last weekend of the 30th anniversary of the Bad Boys’ NBA championship, with events all over downtown. The Davidson documentary capped the weekend, and brought back a lot of great Detroit memories. It reminded everyone how important sports are to Detroit and how important people like Bill Davidson, the son of a Ukrainian immigrant, are to our community.

Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

MORE ON WJR Listen to Crain’s Group Publisher Mary Kramer and Managing Editor Michael Lee talk about the week’s stories every Monday morning at 6:15 a.m. Mondays on WJR 760 AM’s Paul W. Smith Show.

Two immigrant tales to inspire

ast week I was able to attend two great productions in Detroit. Amy Nederlander, one of our favorite Detroit “expats,” tied a performance of “Hamilton” with a fundraiser benefiting her L!fe Leaders charity. Jeffrey Seller, another Detroit Homecoming alum and producer of the wildly successful “Hamilton,” was on hand for a conversation with the audience after the show. It was the first time I had seen the show. I’m so glad I waited to experience it in the beautiful Fisher Theater, with a pre-show dinner in the building’s magnificent lobby. Peter Cummings and his team are doing a great job returning the Fisher Building to its original majesty.

KC CRAIN Publisher

As most everyone knows by now, Alexander Hamilton was born in the Caribbean and came to Kings College in New York on a scholarship. The show outlines his rise to power through the

Revolutionary War, emphasizing his immigrant status and the important role immigrants have played throughout our history. Detroit has also prospered because of immigrants. I was reminded of that at the screening of the movie “Call Me Bill,” a documentary about the late Bill Davidson, produced by my dear friends Ethan and Gretchen Davidson. “A couple of weeks before he died, my dad said he wanted to make a 10-minute film just for his grandkids. He never got to do that, so we had to do it for him,” Ethan said. The premiere was held at the Detroit

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 8 , 2 0 1 9

The power of words and the value of listening

n Detroit we talk a lot about the critical value of residents’ voices in the region’s success. However, what we don’t talk nearly enough about is how transformative real listening can be when we’re willing to act on what we hear. At the Max M. and Marjorie S. Fisher Foundation, a lesson learned while listening to early childhood education leaders in Detroit’s Brightmoor neighborhood has deepened how we partner with the community toward the goal of improving kindergarten readiness. For 10 years, Fisher Foundation volunteer leaders and staff have walked alongside Brightmoor residents and the women who provide early childhood education in the neighborhood. We realized early, if children from Brightmoor are going to reach kindergarten ready to learn, it will be because of their families and these amazing teachers. Of the 13 early childhood programs in Detroit to have received Michigan’s Great Start to Quality highest fivestar rating, four are in Brightmoor. We’re proud of that result and the dedication it demonstrates. In the spirit of Mr. and Mrs. Fisher, we started our relationship with optimism and led with our hearts and minds. We asked first what was needed. Then we listened closely, over and over again. We’ve aligned strategies, we’ve shared lessons along the way, and we’ve acted together, putting our hands directly in the work. As we were finalizing plans, we asked: Is there anything else you need? The team of early childhood educators pointed at Fisher’s co-design facilitator Camarrah Morgan: “We want her!” They told us the value Camarrah brought to the table was essential to continue to strengthen the Brightmoor Quality Initiative and extend the lessons they learned into actionable program enhancements. Thanks to support from our board, we were able to act quickly to secure a portion of Camarrah’s time to respond to the need. Knowing her role would be different than traditional program officers who develop grantmaking strategies, vet proposals, track progress, evaluate results and share lessons learned along the way, we took a page from a peer foundation and gave Camarrah what seemed a fitting title: network officer. As Camarrah began her work back in Brightmoor, something unexpected happened. One of the BQI leaders asked, “Why are you called a ‘network officer?’ Can you explain that to me? Are you going to police our work?” In her usual thoughtful style, Camarrah shared the nature of a network and that the title reflected her role: to listen to organizational partners, the providers, the parents and the foundation to ensure the strength of the network and that all voices are reflected in the efforts. Different from her peers at the foundation who hold the “program officer” title, who are the chief stewards of the grant relationship between the foundation and those doing the work. Still her Brightmoor peer objected. “We’ve been working with you for several years, and ‘officer’ doesn’t seem to describe you, your approach or the way we work together.” Camarrah returned to the Fisher Foundation team to describe what she learned.

OTHER VOICES

Douglas Bitonti Stewart

We were shocked. Their feeling and interpretation of the word “officer” didn’t match how we worked or hoped we were perceived. We had a choice to make. This was a blind spot that we, and many of our peers, have.

Instead of simply sticking with the traditional title, we agreed to change. We asked the leaders of BQI what word made sense. Working with Brightmoor parents, they brainstormed 23 alternatives to “officer.” The group reconvened to determine the best word, sharing that “…you’ve always called us ‘partners,’ and more importantly you’ve treated us that way. The title should reflect our work together.” Then they decided to, as one leader said, “pull a Fisher on the Fishers.” Instead of picking the word for us, they returned with three alternatives and asked us to choose. If none of the top three worked in our peer group,

they promised to share the next three, and so on. Like BQI, we fell in love with the word we had used to describe our relationships all along — partner. We also fell in love with the resulting lesson and the way it reinforced the transformative nature of active listening and collaborative engagement. At Fisher, we’ve changed our titles for good, and the word “partner” has never meant more to our work. We hope peer foundations will hear this voice and consider changing their titles to better reflect the role of their professional teams and project our collaborative intentions

to sincerely partner alongside our neighbors and our professional partners in the field. It’s not enough to ask residents to raise their voices in the shared work of strengthening our region; we have to train ourselves to hear and to change. Listening and learning from each other — sometimes through mistakes made via good intentions — is the surest road we can take to the durable positive impact and progress we all want. Douglas Bitonti Stewart is executive director of the Max M. and Marjorie S. Fisher Foundation.

THE BRAINPOWER BEHIND BETTER BATTERY POWER. If you own something that’s powered by batteries — and who doesn’t — you should know about Dr. Leela Arava. The associate professor at Wayne State University is driven by an unstoppable passion to uncover new, inventive ways to make batteries more efficient, more powerful and more sustainable. And that starts with turning obstacles into opportunities. For Arava, his first obstacle was growing up with a scientific mind in a remote village in India. He didn’t have access to a research laboratory until he was 22 years old, but when he got his chance, he took full advantage of it. Arava developed a passion for batteries that he turned into a career as a researcher in the United States. And because his struggles weren’t so long ago, today Arava offers to middle school and high school students something he never had — an open door to learn in his lab. His journey eventually led to an opportunity — a grant from the National Science Foundation to develop the next generation of batteries. Ones that offer better performance for consumers and cost-effectiveness for manufacturers, leaving as little of an environmental footprint as possible. The ubiquitous lithium-ion batteries were just too expensive. And with 52 percent of the budget-draining cost coming from cathode recycling, they were not as safe, nor efficient.

WARRIOR STRONG

Arava knew the importance of an economical battery went well beyond the boardroom. So he set to work to find the perfect material. And with sulfur, Arava smelled an opportunity. A waste product in the petroleum industry, sulfur could be used in lithium-sulfur batteries as a plentiful, cost-efficient, environmentally friendly power source. But Arava was still faced with his biggest barrier: Sulfur transforms from solid to liquid and then back to solid, and that chemical reaction clogs up lithium-sulfur batteries, preventing them from completing a single charge cycle. Arava knew creating a change required a catalyst. He saw one of lithium-sulfur’s unique traits as an opportunity, where others didn’t. Arava developed a catalyst to speed up the chemical transformation and stabilize it. This breakthrough created the first rechargeable lithium-sulfur battery. The boy from a one-room schoolhouse in India had created an innovation that will resonate from Wall Street to the most remote corners of the world. Arava turned an obstacle into a lasting impact. And that’s Warrior Strong.

TO LEARN MORE ABOUT OUR ENGINEERING RESEARCH, VISIT ENGINEERING.WAYNE.EDU

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FOCUS

CRAIN’S MICHIGAN BUSINESS: FOOD ECONOMY

THE CENTER OF THE PICKLEVERSE

Michigan status as the nation’s top pickle producer is a glimpse into the state’s diverse food economy

From left: John Swanson with his children Katie Hensley, Wes Swanson and Matt Swanson among brine tanks used to pickle cucumbers at Swanson Pickle. STEPHEN KLOOSTERMAN/ VEGETABLE GROWERS NEWS

By Nina Misuraca Ignaczak |Special to Crain’s Detroit Business

Pickle digits

$47 million

ong before Michigan became the automotive capitol of America, it was the leader of another, perhaps more humble economy: the cucumber pickle. And unlike the automotive industry, the pickle industry in Michigan has grown steadily throughout the years. The state is the number one U.S. producer of cucumbers for pickling. In 2016, the value of Michigan’s pickling cucumber crop reached $47 million. Climate, soil, history, infrastructure, and demand converge in Michigan to produce optimal conditions for what metro Detroit pickle manufacturer Larry Topor terms the “PickleVerse.” It’s a constellation of growers, manufacturers, processors and sellers — a cosmos that comes together to produce those crunchy green flavor-bombs served with your overstuffed deli sandwich or topping your hot dog.

The value of Michigan’s pickling cucumber crop in 2016

231,168 Tons of pickling cucumbers harvested in Michigan in 2018

27 Percent of the national pickling cucumber market those tons made up

24,900

34,400

Acres of pickling cucumbers harvested in the nation’s secondmost pickle-growing state, Florida, which is 28 percent fewer acres than Michigan

Acres of pickling cucumbers harvested in Michigan in 2018

The cucumber pickle economy in Michigan provides a peek into the state’s diverse and massive 10-million-acre agricultural industry, second only to California in crop In this package diversity. More than 300 crops are grown here, according to the Michigan Farm Bu-  Michigan status as the nation’s top reau. The cucumber pickle tells a story about how just one of those items can spin off pickle producer is a glimpse into the state’s diverse food economy. an entire industry and tradition. This Page SEE PICKLES, PAGE 12



Michigan Farm to Freezer offers

year-round fresh local produce. Page 11 How Michigan’s food distributors play in the local food game. Page 14 

Michigan brewers turning to homegrown hops. Page 15 

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SPECIAL REPORT: FOOD ECONOMY

Corporate Law Experience

In Your Corner.

Contact Mallory Field at mafield@varnumlaw.com n n

Nino Salvaggio’s has created a special frozen display for Farm to Freezer in its produce section.

Corporate transactions and financial matters Business formations, mergers and acquisitions, trademark applications Regulatory compliance on environmental matters Tier 1 Metropolitan Ranking in Commercial Litigation and Corporate Law

BRANDON SENG

2019

Michigan Farm to Freezer offers year-round fresh local produce By Nina Misuraca Ignaczak Special to Crain’s Detroit Business

When Brandon Seng launched Michigan Farm to Freezer in 2014 with partner Mark Coe, he felt a little lonely; the company was the only food processor in a rural industrial park on the fringes of Traverse City. But since the pair opened their Detroit facility in 2018 in the former Cattleman’s Meat facility at 1820 Mack Ave., Seng and Coe, both northern Michigan natives, have become immersed in metro Detroit and the Eastern Market community. “I didn’t know much about the Eastern Market district,” said Seng. “Up north, you would drive a half hour from our facility and pass maybe a dozen houses. You drive that distance here, and it’s just solid houses. There are so many people; the market’s so much bigger.” Still, as a newcomer, he was a bit timid at first to approach Eastern Market vendors who had been there for generations. “They’ve been in the market for 30 or 40 years, and they’ve got a ton of experience. I was nervous to make that first phone call to one of our neighbors and say ‘I’m Brandon, we’re opening the facility next door,’” Seng recalled. But he quickly found the neighbors were happy to have them in the district and more than willing to lend advice and assistance. “Being part of that community of businesses has been incredibly helpful,” said Seng. Eastern Market Corp. recruited Michigan Farm to Freezer to Detroit in 2017 as part of an effort to add to its portfolio of food processors and distributors, in line with its 2025 strategic plan. It also contributed $400,000 to the $1 million facility renovation. That contribution came in the form of pass-through funding secured from a U.S. Department of Health and Human Services grant to support local food-based economic development. Seng and Coe turned on the freezer in Detroit in February 2018 after a

nine-month buildout period. The temperature in the 14,000 square-foot facility is maintained at a chilly minus 10 degrees Fahrenheit. Since its launch, the company has hired 10 new employees and anticipates hiring five more for the 2019 growing season. Seng projects Michigan Farm to Freezer will freeze close to two million pounds of Michigan produce this year. The synergies created by having a processor for fresh freezing in the market helps strengthen Eastern Market Corp. in two key areas, according to Dan Carmody, president of Eastern Market Corp. “First, they provide another market channel for our wholesale growers, which helps improve the financial outlook for farmers,” Carmody said. “Second, consumers now have access to nutrient-dense, locally grown crops without chemical preservatives all year. The added convenience and reduced food waste address issues important to consumers.” It’s also a boon to area restaurants. Sean Mohan, executive chef at the 5ive Steakhouse at The Inn at St. John’s in Plymouth, said having consistent access to a wholesaler with a yearround supply of local Michigan produce is a blessing. Mohan had been sourcing Michigan Farm to Freezer’s frozen cherries from a local supermarket. “As the food culture has been growing more local-centric, everyone got very excited and started doing their own thing,” said Mohan. “So we have all of these fractured small projects, and there wasn’t really an umbrella to bring it all together.” With Michigan Farm to Freezer’s expansion into the Detroit market, the company’s frozen cherries and a wide array of other items are now accessible through Mohan’s regular local distributor. “Instead of having to scramble around between five distributors, now I can make one call,” says Mohan. “Michigan Farm to Freezer is giving me

24/7/365 access to Michigan produce. It’s not the same as eating the peach right off the tree, but it’s still that good, ripe, local flavor.” And while the company will continue to maintain its relationships with farmers in west Michigan’s fruit belt, it is taking advantage of being so close to the wholesalers right in Eastern Market. That proximity allows Michigan Farm to Freezer to jump on opportunities. Seng estimated that about 80 percent of the produce is generated from long-term contracts, with the remainder coming from spur-of-the-moment opportunities. For example, Michigan Farm to Freezer recently offloaded 5,000 pounds of excess green peppers from Kalamazoo College that might have gone to waste otherwise. Michigan Farm to Freezer is also expanding into the metro Detroit retail landscape; its products can now be found in Busch’s, Plum Market, Hollywood Market, Holiday Market and Papa Joe’s. Nino Salvaggio’s has even created a special frozen display for Farm to Freezer right in its produce section. Putting frozen produce next to fresh adds a bit of flair, according to Seng. “When you’re walking past the pizza rolls to get to our product, it loses a little bit of its cachet,” he said. The company is also increasing its inventory of specialty products for retail, like frozen lemon-infused olive oil with asparagus and rosemary-infused olive oil with root vegetable mixes. Seng and Coe design the products, and Seng admits that not every concoction has worked out. When the kale in a kale-and-cherry mix didn’t quite hold up to freezing last year, Seng and his family found themselves eating it for dinner every night for a few months. Despite that small miscalculation, Seng sees a huge upside to being located in Eastern Market. “We’re seeing there’s a ton of opportunity that exists down here.”

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COM M U N IT Y We travel your roads and live on your streets so we know well what is important to your community. Local knowledge and personal understanding – it’s all connected.

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SPECIAL REPORT: FOOD ECONOMY FROM PAGE 10

A pickled history No discussion of cucumber pickles can commence without a mention of the origins of this spoil-resistant snack. According to the NY Food Museum’s Pickle History Timeline, pickles date back to ancient Mesopotamia and are mentioned twice in the Bible. By 1659, they were grown and processed by Dutch farmers in what is now Brooklyn. Between 1870 and 1900, large numbers of Eastern Europeans, including Jews escaping religious persecution, began emigrating to the United States. With them, they brought recipes used to preserve vegetables for the long, harsh winters of Eastern Europe. In Michigan, the pickle industry started growing before World War I. In 1907, the Detroit Free Press reported that Detroit pickle processors were paying hundreds of thousands of dollars annually to pickle farmers, who were growing 5,000 acres of pickles at the time. (Today that number is closer to 35,000.) The report describes how pickles were placed in large salt brine vats and sent by special tank car to Detroit, where they were washed and machine sorted into six sizes, much as they are today. Many of Michigan’s venerable pickle names herald from this era. Heinz opened a pickle factory in Holland, Mich., in 1897, the Freestone Pickle Company opened in 1903 in Bangor and Benton Harbor, and Hausbeck Pickles launched near Bay City in 1923. Later-comers include Vlasic, which opened its pickle plant in Imlay City during World War II, Bay View Foods, which opened in Pinconning in 1946, Swanson Pickle Co., which opened in Ravenna (near Muskegon) in the 1960s, and Topor’s, which launched from its Detroit deli in the 1970s. Topor’s was acquired in 2018 by corned beef maker E.W. Grobbel. Owner Jason Grobbel, who also acquired the Sy Ginsberg brand of corned beef from United Meat and Deli in 2017, is hoping to keep history and traditions alive by combining the two esteemed brands under one roof. “This region has a wide array of European immigrants that brought many different recipes and profiles for pickle produce here,” said Grobbel. “We’re passionate about taking these great old traditions, which otherwise might fade away, and keeping them alive and vibrant.”

Michigan Pickle Processors 1 – Bay View Food Products

5,000+

2 – Freestone Pickle Co

3,000-4,999

3 – Gielow Pickles

1,000-2,999

4 – Hausbeck Pickle Co

500-999

5 – McClure’s Pickles

100-499

6 – Swanson Pickle Co

1-99

7 – Topor’s Pickle Co

8 – Vlasic Pickles

1 4

6 8

The process of pickling

Processing and pickling

Pickles can be processed in several ways. Example brands

Shelfstable?

Process

Method

Cured (Naturally fermented)

Cured by fermentation in a salt brine and dill solution and may be further processed by addition of vinegar. Preserved by acidification. May also contain spices, flavorings and preserving agents.

Topor’s Natural Barrel

No (keep refrigerated)

Fresh-pack (Shelf-stable)

Uncured, unfermented cucumbers are packed in a vinegar solution with other ingredients. Preserved by acidification and heat to assure preservation.

Safie McClure’s Vlasic

Yes

Refrigerated

Fresh cucumbers are packed in a vinegar solution with other ingredients and are then preserved by acidification. May not Topor’s Golden Dill contain chemical Claussen preservatives.

ready at eight o’clock that night,” said Dyk. That’s one reason why Michigan’s pickles are almost exclusively harvested mechanically. Farmers need to be ready to harvest at a moment’s notice, and they have to do so quickly, which leaves no opportunity

LARRY PEPLIN FOR CRAIN’S

Larry Topor of Topor’s and Jason Grobbel, owner of Topor’s and corned beef maker E.W. Grobbel.

Other large cucumber-producing states include North Carolina, Georgia, Alabama, California and Wisconsin. The 2018 Michigan harvest yielded 231,168 tons of cucumbers, accounting for 27 percent of the national market.

Source: USDA

To grow a pickle It all starts in the ground — in Michigan’s well-drained, sandy soils, to be exact. Michigan’s two main pickle-growing belts run through the Saginaw Bay region (Saginaw, Bay, Gratiot, Allegan, Tuscola and Midland counties) and west Michigan (Berrien, Arenac, St. Joseph and Montcalm counties). “Our climate is very conducive for growing cucumbers,” said Chris Dyk, a crop specialist with Nunhems, a seed brand of BASF. “The warmer days with a little bit of a cooler night and the high humidities are very conducive.” Cucumbers are easy to grow, Dyk said, but difficult to harvest, with a very short harvest window. “Your window can be as short as eight hours. You can be in a field in the morning and you’re like, ‘Hey, they’re just not ready yet’. But they could be

2012 Acres Harvested by County

No (keep refrigerated)

to organize farm labor. Michigan leads in cucumber production by a hefty margin; in 2018, the state harvested 34,400 acres of cucumbers, 28 percent more than the next highest state, Florida, which clocked in at 24,900, according to USDA statistics.

Michigan is clearly a great place to grow pickles. But why exactly is Michigan cucumber pickle central? “It’s a chicken or the egg thing,” Grobbel said. “Michigan has ideal growing conditions. But then once those major operations build their silos, then obviously it became more profitable for the farmer to grow nearby because transportation costs are very low.” Those silos are actually massive wood or fiberglass vats, either half-underground or above-ground, expressly designed for preserving the fruit. Over the years, major pickle companies like Vlasic, Bay View and Swanson’s invested capital to store and process the bounty of cukes. Meanwhile, Michigan’s cucumber growers responded to the demand for their crops by locating close to the processors’ facilities. This symbiosis is what keeps Michigan’s blockbuster cucumber economy running. Growers must harvest the pickles during a short 6-8 week period in late summer, delivering them to processors like Vlasic or Swanson’s. During peak season, silos might receive a new truckload every 15 minutes. Once they arrive at the storage facilities, sorting machines grade them into a range of size classes. Finally, the processor stores the pickles in a super-saturated salt brining solution, which preserves them and begins the initial fermentation process. Once ready for use, processors ship out the brined pickles to manufacturers, who soak them in fresh water to

remove the salt and then process them into dill, bread-and-butter, hamburger stackers, sweet, kosher or any of a number of pickle varieties. Katie Hensley is a fourth generation pickle processor; her great-grandfather, Wesley Swanson, founded Swanson Pickle Co., in Ravenna. The company both grows pickles and brines them in massive fiberglass tanks. “The size of our workforce very much changes as we go from around 80 employees during harvest to 20 employees during the winter,” said Hensley. “We’re shipping out every week of the year. We supply manufacturers with a product that goes directly out to their line, and into jars or into pouches where it gets the final flavor.” About half of Swanson’s brined pickles supply the Kraft Heinz plant in Holland; the other half goes to TreeHouse Foods in Green Bay, Wis. A small amount of fresh produce is sold to customers for fresh pack applications. Very little of the crop is discarded, according to Hensley. That’s because ugly pickles make a perfectly fine relish. Most pickles you find in a grocery store are pasteurized, making the product shelf stable without refrigeration for up to two years. Exceptions include fermented pickles, which are soaked in barrels, often in strict accordance with recipes brought over from Europe by grandmothers like Lillie Topor. Refrigerated fresh-pack pickles are packed directly from the field with vinegar and spices and are then vacuum-sealed with no pasteurization. These varieties have a shorter shelf life than pasteurized pickles; fermented pickles are truly perishable, lasting only weeks or months, while refrigerated vinegar pickles can last 18 months. Manufacturers that specialize in using fresh pickles, like Topor’s and McClure’s, cannot rely on Michigan

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Acres Cucumber Harvested 2018 40,000 30,000 20,000

growers year-round. They must follow the cucumber harvest south through the winter months, all the way to Mexico, to secure a constant supply of fresh cucumbers. “We’re not adding anything to extend the shelf life or make it crunchy other than the great quality fresh fruit that is the cucumber,” said Bob McClure, co-founder of McClure’s Pickles. “So we have to find a year-round supply. We have direct relationships with growers no matter where it’s coming from because it’s very important that we understand how and what they’re producing for us so that we can get the best quality produce. Because you can’t take a bad cucumber and make it into a good pickle.”

Pickles of the future The growth of the craft and artisanal food movement is bringing about a new era in Michigan’s pickle economy, according to Grobbel. “There’s a huge proliferation in the business right now. Just go to the supermarket, and you see this huge amount of shelf space with all the different brands,” said Grobbel. “Because of this craft foods movement, people are interested in it and they recognize pickles are a fun snack and at the same time, they are healthy.”

OHIO

NEW JERSEY

TEXAS

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OTHER STATES

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CALIFORNIA

GEORGIA

NORTH CAROLINA

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C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 8 , 2 0 1 9

McClure’s, launched in Detroit in 2006 by brothers Bob and Joe McClure, specializes in a hand-crafted spicy pickle recipe created by their grandmother. McClure’s pickles and Bloody Mary mix can be found in Whole Foods, Meijer, Kroger, Cost Plus and specialty stores across the globe. “We think there’s a great opportunity to really help tell the story of the process so that we can reconnect people to what it really means to have food and not to take it for granted,” said McClure. “We’re so easily persuaded that at a click of a button we can get anything we want. But we forget the amount of time and care and resources that it goes into creating it.” And that’s why Grobbel is so passionate about preserving the legacy of Lillie Topor’s pickle recipe. “People don’t realize that in many businesses, and especially in the food business, making the products to be the same as you have over your life requires a massive amount of effort,” said Grobbel. “The old-time businesses are finding it hard. They’re not easy businesses to run and the younger generations don’t necessarily find it appealing. That’s our goal, to reinvigorate a passion, find the nobility in what you do and to understand how important it is and how many people are affected by it.”

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SQUARE ROOTS

Gordon Food Service will partner with Square Roots, a Brooklyn-based urban farm technology provider, to create ten hydroponic shipping container farms that will produce more than 50,000 pounds of herbs annually, which will be made available to GFS customers in retail centers.

How Michigan’s food distributors play in the local food game By Nina Misuraca Ignaczak Special to Crain’s Detroit Business

RACHEL BAUER REGIONAL DIRECTOR SOUND PHYSICIANS EMBA, CLASS OF 2013

For John Kohl, the CEO of Detroit-based, family-owned regional food distributor Atlas Wholesale Foods, buying and selling local has always been business as usual. “There’s a certain Michigan pride that we all have when we know there’s a local vendor we can purchase from,” said Kohl. “There’s a strong community on the food manufacturing side in this area, and we all share customers and relationships within that ecosystem.” Because Atlas, which was founded by Kohl’s grandfather in 1939, has always procured local foods, it’s been in a good position to meet the rise in demand for local products. The last decade has seen a swift rise in the local food movement across the nation and in Michigan. And while much of that growth has happened in the direct-to-consumer arena, more food distributors are getting on board with the local movement. In 2015, Kohl received a $100,000 USDA grant to help build up his company’s capacity to increase sales and consumption of local food. The project focused on building systems for transparency and tracking, streamlining logistics and improving marketing. At the end of the two-year project, Kohl reported a 55 percent increase in the number of Atlas customers buying local products. Local food sales in Michigan were valued at $459 million in 2015, according to USDA. That represented 5 percent of the total local food sales market nationwide, second only to California. The trend is projected to grow. Market research firm Packaged Facts predicts local food sales will jump from $12 billion in 2014 to $20 billion in 2019. This means big food companies are finding themselves in a new food marketing landscape. ”People want healthy, clean food, and they want local,” said Dan Carmody, president of Eastern Market Corpo-

ration. “When Kraft Heinz sells off $15 billion worth of their market valuation because the brands are worth less than they used to be, it’s a recognition of a fundamental shift in consumer demand.”

Growing their own Grand Rapids-based food distributor Gordon Food Service is responding to local food demand on several fronts. “We’re getting more and more demand from our customers for local food,” said Jane Feenstra, stewardship specialist at Gordon Food Service. Feenstra points to GFS’ NearBuy solution, which it launched nearly a decade ago. The database allows local buyers to identify and track local purchases using a variety of definitions for local (e.g. mileage radius, within-state, or within-region). The tool helps customers connect with local sources, Feenstra noted, but it also helps with documentation required for GFS’ customer participation in sustainability certification programs like Health Care Without Harm or AASHE STARS. In late March, GFS announced its first urban farming campus in Wyoming, Mich., in partnership with Square Roots, a Brooklyn-based urban farm technology provider. Ten hydroponic shipping container farms are projected to produce more than 50,000 pounds of herbs annually, which GFS customers will be able to buy in retail centers such as the new GFS Detroit grocery store. “We’re really excited about it because this partnership is unique in scale and size,” said Feenstra. “It brings technology, agriculture and an entrepreneurship model together.”

Larger distributors Larger distributors are getting in the game as well. Byron Center, Mich.based grocery wholesaler SpartanNash supplies more than 2,100 grocery

retail sites throughout the U.S. and runs 155 corporate supermarkets in nine states. The company started ramping up its local procurement program in 2016. Lori Raya, chief merchandising and marketing officer for SpartanNash, said the company has seen annual growth in local product sales of around 2.5 percent and has shipped approximately 3.5 billion pounds of local product to stores across the state. (SpartanNash counts as “local” any product that was grown or produced in the same state as the retail store, or within 100 miles of the store if it crosses over the border into another state.) Shifting to more local sourcing is not without challenges for a large distributor like SpartanNash. “One of the biggest challenges when working with emerging local food entrepreneurs — which is where many of the newest and most exciting items are found — is that they may not be at full production yet and find it difficult to scale to the size of our retail demand,” Raya said. “We have worked through this by piloting new products or companies in a few stores, and then growing with them as their manufacturing capacity rises.” And while local products may command a small price premium, SpartanNash has not seen this as an obstacle. “Often, the pricing is higher due to economies of scale versus national companies, but this hasn’t been a deterrent for most of our customers,” said Raya. “They will pay a little more to support local companies.” Raya sees a significant role for large distributors like SpartanNash in the growth of the local food economy into the future. “Cutting out the middle man can reduce cost on a small scale, but simple dynamics dictate that as the product spreads beyond its home neighborhood or town, it actually saves money to distribute on a larger scale distribution platform,” she said.

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 8 , 2 0 1 9

SPECIAL REPORT: FOOD ECONOMY “If you look at total U.S. hop production, Michigan is a little blip, but we’d be in the top 12 if Michigan were its own country. We almost grow what New Zealand grows as a country. It’s small but it’s not insignificant on the world stage.” Rob Sirrine, senior extension educator with Michigan State University’s Extension Service

Michigan brewers turning to homegrown hops By Greg Tasker | Special to Crain’s Detroit Business

decade ago, beer enthusiasts would have been hard-pressed to find locally grown hops — one of the essential ingredients in making beer — in their favorite Michigan craft brews.

Today, however, Michigan-grown hops are as common in craft beers as locally sourced herbs and fruit. Brewers large and small, everyone from Bell’s Brewery in Kalamazoo to Founders Brewing Co. in Grand Rapids to countless smaller operations, are using hop varieties grown on farms in the Great Lakes State.

Hops, cone-shaped flowers that add bitterness, aromatics and flavor complexity to beer, have become a profitable slice of Michigan’s diverse agricultural pie. The state has gone from zero commercial acres planted in hops in 2007 to about 800 acres today. Hop farms can be found across the state but most of the output comes from the southwestern and northwestern corners of the Lower Peninsula. “Michigan has gone from nonexistent in the industry to now the fourth largest hops state in the country, and the only state outside the Pacific Northwest that is producing high-quality and commercial-scale hops,” said John Mallett, director of operations at Bell’s Brewing Co., Michigan’s second-largest craft brewer. Bell’s buys Centennial hops from Michigan farmers, used in its Two Hearted Ale. With about 350 craft breweries, microbreweries and brewpubs, Michigan ranks fourth in the nation, behind California, Washington and Colorado. There were 7,346 craft breweries in the United States in 2018, according to a report released

this month by the Brewers Association. American craft brewers produced more than 25.9 million barrels of beer in 2018, with a 13.9 percent share of the U.S. beer market. Last year Michigan hops farmers harvested around 350,000 tons of hops. Michigan trails only the big growers in the Northwest: Washington, Oregon and Idaho. The United States is the world’s largest producer of hops, and 70 percent of the crop comes from Washington, home to more than 32,000 acres of hops. “If you look at total U.S. hop production, Michigan is a little blip, but we’d be in the top 12 if Michigan were its own country,” said Rob Sirrine, senior extension educator with Michigan State University’s Extension Service. “We almost grow what New Zealand grows as a country. It’s small but it’s not insignificant on the world stage.” The emergence of hop farming in Michigan has occurred alongside the explosion of craft brewing in the state, as well as the buy-local food movement. More than a decade ago, dozens of Michigan craft brewers expressed interest in sourcing local hops for their products in a survey

conducted by Michigan State University Extensions. “I think almost every brewer in Michigan has been interested in using locally grown hops since they started making beer,” said Scott Graham, executive director of the Michigan Brewers Guild, which represents small and independent brewers. “If there were no Michigan hops or malted barley available, they were using Michigan herbs, spices, fruit and honey. They’re excited about the opportunities to use Michigan products.” The Michigan craft brewing industry has experienced exponential growth in the last three decades. That growth has helped the hops industry get off the ground and flourish. “Without Michigan being the great beer state, who knows if hops would have taken off as quickly as it has,” Sirrine said. A few years ago, Michigan hop producers could not grow enough hops to serve the microbrewery industry’s needs; today, they’re selling hops outside the state and the country. “The hop industry has come a long way from something that sounded cute and charming to a real industry,”

Michigan Hop Alliance hopyards near Omena on the Leelanau Peninsula. MICHIGAN HOP ALLIANCE

Graham said. “Michigan hop producers have crossed the quality threshold. They make good quality hops. If you can’t meet quality, it doesn’t matter what else they do.” Michigan, it turns out, has an ideal climate for growing hops, with the right mix of warm days and cool nights. The state’s well-drained soil also is beneficial. The 45th parallel, which cuts an invisible line across the northern part of the Lower Peninsula, is particularly conducive. The 45th parallel also runs through the Pacific Northwest and Germany, a traditional hop-growing region. It’s that same combination of climate and soil that also makes parts of Michigan ripe for growing wine grapes, another of the state’s rich agricultural industries. Among those growing hops along Michigan’s share of the 45th is Brian Tennis, who was one of the first hop farmers in the state. He planted his first acre on the Leelanau Peninsula in 2008. His company has evolved to become the Michigan Hop Alliance, cultivating about 30 acres of hops, as well as contracting with other farmers. Tennis grows 15 varieties, including Cashmere, Centennial and Triple Pearl hops, and also has expanded to include processing facilities. His long list of customers includes well-known Michigan brewers such as Short’s Brewing Co. in Bellaire and Brewery Vivant in Grand Rapids. “We sell to just about everybody in Michigan,” Tennis said. “We’re now starting to explore Mexico and South America. We had to expand outside Michigan. You can’t keep bugging the same breweries over and over.” The industry’s success has not

been without overcoming a few hurdles. Popular hops varieties like Cascade dropped in prices significantly in 2016-2017, largely because of oversaturation in the market. Some farmers in Michigan and elsewhere abandoned the industry. “Cascade had been the backbone of the hops industry for a long time,” Tennis said, who still grows Cascade hops. “Unfortunately, some of the people in Michigan were given some bad information. They planted the wrong variety and it wasn’t marketable.” The state also faces some disadvantages. The Northwest has a lock on many of the more profitable proprietary hops varieties in demand by brewers. Tennis and others in the industry said Michigan hops farmers have made progress in production, marketing and more, becoming more competitive in the industry. They’ve also diversified with more varieties and the hope is they will continue to do so, knowing the beer industry is always looking something new. “We’re really producing worldclass hops right now,” Tennis said. And there’s room for growth. The Brewers Guild noted that Michigan-made beer accounts for just 10 percent of the state’s market, leaving ample room for more locally made brew — and the use of Michigan-grown hops. “As long as we continue to develop new varieties of hops to keep brewers interested, we’ll be in great shape,” Tennis said. “The industry is robust. It’s never been better.” Greg Tasker is a Traverse City-based freelance writer.

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 8 , 2 0 1 9

DEALS & DETAILS CONTRACTS  Yottabyte LLC, Bloomfield Township, a software data center, has a contract with DS Tech, Escanaba, a managed service provider, to offer managed cloud services to DS Tech’s customer base. Websites: yottabyte. com, dstech.net  Near Perfect Media, Bloomfield Hills, a public relations firm, has been named the agency of record for BESA, Detroit, and Pernoi, Birmingham. Website: nearperfectmedia.com  LIFT — Lightweight Innovations

For Tomorrow, Detroit, a research institute operated by the American Lightweight Materials Innovation Institute, has partnered with Michigan Technological University, Houghton, on an advanced metalworks research project and a materials science summer youth program. Websites: lift. technology, mtu.edu

EXPANSIONS Cleveland, Ohio-based trucking company Savage Services’ environmental service companies, EnviroS-

CALENDAR

erve and Sunpro, are combining under the EnviroServe brand and adding three new regional offices in the areas of Detroit, Columbus, Ohio, and Minneapolis-St. Paul, Minn. EnviroServe provides services to remediate and prevent environmental releases, manage waste and respond to emergency and catastrophic events. The Detroit regional office is at 24307 Telegraph Road, Southfield. Websites: savageservices.com, enviroserve.com

THURSDAY, APRIL 11

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Professional Development Seminar: Manage Conflict & Deal with



The Rapid Innovation of Marketing. 6-8 p.m. April 11. American Marketing Association Detroit. Event features Casey Hurbis, CMO of Quicken Loans. The Madison Building, Detroit. $50 members; $60 nonmembers. Contact: Whitney Swistock, email: connect@ amadetroit.org; phone: (248) 797-1976.

UPCOMING EVENTS

Difficult Issues. 7:30-10:15 a.m. April 16. Detroit Economic Club. Topics include: How to create a climate where healthy, productive conflict exists; how to deal with disruptive conflict in a timely and effective manner; recognizing strengths and areas for improvement around tackling difficult issues; building a climate for productive conflict and strategies, tactics and actions to encourage healthy conflict to obtain better team results. Lawrence Technological University. $45 members, $55 guests of members. Website: econclub.org

Advertising Section

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To place your listing, visit www.crainsdetroit.com/people-on-the-move or for more information, please call Debora Stein at (917) 226-5470 or email dstein@crain.com. REAL ESTATE

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David Dismondy has joined District Capital as a Managing Director. David has originated over a billion dollars of commercial real estate loans. He feels the most gratifying aspect of his career has been the close personal relationships that he has developed with lenders and borrowers. His focus is on growing District Capital into the preeminent commercial mortgage banking firm in the state over the next 20+ years. Prior to District Capital, David spent 10 years at Bernard Financial.

Crystal Kalinowski has joined District Capital as a Managing Director. Crystal has over 20 years’ experience in the mortgage banking field, most recently with Bernard Financial where she was the Senior Vice President of the Closing and Servicing Department for over 17 years. During her career, she has focused on closing and has serviced extremely complex loans. She graduated from Texas A&M with a BBA, currently holds a CCMS Designation, and is very active with the Mortgage Bankers Association.

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Michael Lemon has joined District Capital as a Director. Michael previously worked as a Director at Lutz Financial where he procured debt and equity financing. Michael will transfer those skills to his new position at District Capital, where he will be focused on analyzing and procuring commercial real estate loans. Michael graduated from MSU with a BBA and from Georgetown University with a master’s degree in real estate and is a member of the Urban Land Institute (ULI).

INTERNET SECURITY

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Strategic Energy Solutions, Inc. Strategic Energy Solutions, Inc. is pleased to announce the recent addition of Andrea Burg as Healthcare Market Leader. She possesses a strong background in project and program management, having led teams for clients such as the Detroit Medical Center, Beaumont Hospitals, and UnitedHealth Group. She’ll be helping to build and maintain relationships with healthcare customers and project partners, ensuring that project goals and delivery expectations are in alignment.

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April 8, 2019

Advertising CRAIN ’S DETROIT Section BUSINESS

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JOB FRONT POSITIONS AVAILABLE

There have been 60 Lions games played on the turf at Ford Field, plus college and high school games, along with concerts and events.

TURF

FROM PAGE 3

“After much discussion, research, and cost analysis, the Detroit ownership group reported back to MLS that adding a retractable roof was not going to be part of our bid and that we would still like to be considered for the next round of expansion, but that would not be a part of our bid to be included in this round. And so the discussions are ongoing, but the franchises were awarded to Sacramento — or, I’m sorry — Cincinnati and Nashville since we met last.” Austin subsequently also been awarded a team, and one market remains in MLS’ current four-city expansion round. Detroit’s bid is led by billionaire businessmen and sports team owners Tom Gores and Dan Gilbert, with Lions owner Martha Firestone Ford providing the venue along with possibly taking an ownership stake. Argust went into some detail about why the roof project wasn’t realistic. “The initial quote that we got was $75,000,000. And when I say retractable roof, that’s more like putting a sunroof in your car,” he said. “If you were sitting in the seating bowl and that was open, it would not feel like you were outside, and we just didn’t feel that it was, you know — it was a good expense to take that on, and it also would have impacted our ability to host events for several months — the construction in order to put that in. And, you know, the building was not designed to have wind blowing into it, precipitation coming into it. There’s no way for water to drain if it gets to the field, so there were just a lot of complications that we determined it just wasn’t — it didn’t make sense to us. And we made a case to MLS, that they played a full season in Atlanta without opening the roof and that Ford Field would be a similar facility to that, but they did not waver on the requirement.” MLS has said Detroit was a frontrunner for a team, but expressed displeasure that the bid switched in 2017 from building a soccer stadium. “I’ve been in regular conversations with them,” MLS Commissioner Dan Garber said about the Detroit bid as quoted last month by the St. Louis Post-Dispatch. “And we still struggle with their stadium plan.” Also part of Detroit’s pitch was to spend $50 million to build a soccer training and academy facility at the corner of Woodward Avenue and Seven Mile Road and an additional $20 million to create 100 youth soccer fields across the city in their bid to land an expansion team. Ford Field’s retrofit was estimated at $25 million. That wasn’t enough to sway MLS. “I was in the meeting when the mayor gave a very impressive presentation to MLS about all the ancillary things, the investments that could be made in the Detroit neighborhoods to promote

soccer and promote the team, and that was — as far as I know, the dollars that were going to be allocated for that were related to city and private investment,” Argust said. The Lions did spend $100 million in privately financed stadium renovations and upgrades in 2016-17. The turf was last replaced in 2013, which was the first time the original field had been changed. The Lions have not commented on the latest turf replacements, and it’s unclear why the FieldTurf Classic HD is being removed after six seasons instead of the 10 to 12 predicted by its maker, Montreal-based FieldTurf. There have been 60 Lions games played on the turf, plus college and high school games, along with concerts and events. It’s unclear what the cost will be, but it’s believed such a surface would be priced at about $600,000 to $1 million. However, it’s unknown if the team will be offered a discount or if the price would be lower because it’s a replacement field with infrastructure in place. The artificial grass uses an infill mix of silica sand and rubber and is intended to be cheaper to maintain than natural grass. FieldTurf manufactures its football field surfaces in Calhoun, Ga. The company has been owned by French flooring giant Tarkett Group Inc. since 2005. The Ford Field roof and turf briefings happened because the stadium authority is the venue’s owner. The stadium authority meets once a year, and additional meetings are scheduled if there are major problems or capital projects for the two stadiums. The authority was created in 1996 to oversee ownership of the ballparks, and it issued $85.9 million in bonds for construction of Comerica Park. As of April 4, $34.4 million is remaining on that bond debt, the county said, and it’s scheduled to be paid off by 2027. The stadium authority board is six members appointed to four-year terms by the Wayne County executive. Three members are recommended by the mayor of Detroit. The board’s co-chairmen are former Detroit police Chief Isaiah McKinnon and Brian Mosallam, a Michigan State University trustee and founding partner of Birmingham-based Spartan Wealth Management. The other members are Bryan Barnhill II, a Ford Motor Co. employee and Wayne State University board member who was a Duggan staffer; Gus Andreasen, an attorney with Royal Oak-based Howard & Howard; and Mary Martin, formerly with Detroit Medical Center, University of Michigan Health System, and the city of Detroit who is now COO at Duke University Hospital. The stadium authority board’s next scheduled meeting is Sept. 20. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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MARKET PLACE BUSINESSES FOR SALE MEDICAL MARIJUANA GROW AND PROCESSING FACILITY Approximate 20,000 sq. ft building with municipal license Downriver, Michigan Email: fsn6277@gmail.com

POSITIONS AVAILABLE MOLEX, LLC SEEKS SIGNAL & POWER INTEGRITY ENGINEERS Molex, LLC seeks Signal & Power Integrity Engineers for Rochester Hills, MI to perform characterization of full channel of high-speed electronic solutions & PCB systems. Master’s in Electronics or Electrical Eng or related Eng field+2yrs exp or Bachelor’s in Electronics or Electrical Eng or related Eng field+5yrs exp req’d. Req’d Skills: exp in manu env for automotive industry: designing, testing & conducting EMI/EMC simulations of high-speed electronic solutions & connectors for in-vehicle networks using high-speed digital & electromagnetic measurements & modeling techniques; designing multilayer high speed PCBs to support apps over 10Gbps; conducting DC & AC PI simulations on automotive networking electronic solutions; performing high frequency (10Gbps+) design, simulation & testing of automotive grade networking modules; designing & analyzing high speed channels for electronic networking products for automotive Ethernet 10Gbps+, USB & LVDS protocols; VNA, TDR, Oscilloscope, Matlab, Ansys, measurement chambers, tube in tube testers; HFSS, Designer, SI Wave, NX, Altium DXP. Send resume to: MLXjobs@kochind.com, Ref: YS

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C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // A P R I L 8 , 2 0 1 9

CRAIN'S LIST: MICHIGAN'S LARGEST EMPLOYERS

Ranked by full-time employees January 2019 Rank

Company Address Phone; website

Top executive

Michigan employees 2019/2018

Worldwide employees 2019/2018

Type of business

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

Mary Barra chairman and CEO

52,027 52,113

167,440 180,000

Automobile manufacturer

Ford Motor Co. 1 American Road; Dearborn 48126 (313) 322-3000; www.ford.com

Jim Hackett president and CEO

46,000 48,000 B

NA NA

Automobile manufacturer

State of Michigan 3042 W. Grand Blvd., Cadillac Place, Suite 4-400; Detroit 48202 (313) 456-4400; www.michigan.gov

Gretchen Whitmer governor

45,093 44,680

NA NA

State government

FCA US LLC 1000 Chrysler Drive; Auburn Hills 48326-2766 (248) 576-5741; www.fcagroup.com

Michael Manley C CEO

36,835 33,863

95,619 80,865

University of Michigan Ann Arbor 48109 (734) 764-1817; umich.edu

Mark Schlissel president

36,148 34,904

51,203 D 49,797 D

Public university and health system

U.S. government 477 Michigan Ave.; Detroit 48226 (313) 226-4910; www.usa.gov

29,244 28,782

2,002,363 2,085,449

Federal government

Beaumont Health 2000 Town Center, Suite 1200; Southfield 48075 (248) 213-3333; www.beaumont.org

John Fox president and CEO

27,587 28,038

27,591 28,055

Health care system

Henry Ford Health System 1 Ford Place; Detroit 48202 (800) 436-7936; www.henryford.com

Wright Lassiter III president and CEO

26,017 25,514

NA 25,554

Health care system

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

Richard Gilfillan E, CEO, Trinity Health; Robert Casalou, president and CEO, Mercy Health and Saint Joseph Mercy Health System Philip Incarnati president and CEO

24,304 23,063

NA 131,000

Health care system

22,613 22,850

NA 23,201

Health care system

22,282 H 21,480

22,282 H NA

Health care system

Automobile manufacturer

McLaren Health Care Corp. One McLaren Parkway; Grand Blanc 48439 (810) 342-1100; www.mclaren.org

Spectrum Health System F 100 Michigan St. NE; Grand Rapids 49503 (616) 391-1382; www.spectrumhealth.org

Tina Freese Decker G president and CEO

Ascension Michigan 28000 Dequindre Road; Warren 48092 NA; www.ascension.org/michigan

Joseph Cacchione, M.D. ministry market executive

21,190 26,222

21,190 22,709

Health care system

Rock Ventures I 1050 Woodward Ave.; Detroit 48226 (800) 251-9080

Dan Gilbert chairman and founder

17,887 17,819

30,008 29,835

Organization that connects and serves a portfolio of companies, investments and real estate

U.S. Postal Service 1401 W. Fort St.; Detroit 48233-9998 (313) 226-8678; www.usps.com

Karlett Gilbert district manager

17,500 18,204

500,000 503,103

Postal service

Michigan State University 426 Auditorium Road; East Lansing 48824 (517) 355-1855; www.msu.edu

Satish Udpa J acting president

11,850 K 11,738

11,893 K 11,764

Public university

Magna International of America Inc. 750 Tower Drive; Troy 48098 (248) 631-1100; www.magna.com

Jim Tobin CMO and president of Magna Asia

10,716 10,328

174,000 163,000

Mobility technology company and one of the world's largest automotive suppliers

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

Gerard Anderson chairman and CEO

9,998 10,051

10,526 10,623

Energy company

Detroit Medical Center 3990 John R; Detroit 48201 (313) 745-5146; www.dmc.org

Anthony Tedeschi group CEO

9,802 10,153

9,802 10,050

Health care system

Mike Duggan mayor

9,457 9,440

City government

City of Detroit 2 Woodward Ave. Coleman A. Young Municipal Center; Detroit 48226 (313) 224-3700; www.detroitmi.gov

Blue Cross Blue Shield of Michigan/ Blue Care Network

Daniel Loepp president and CEO

8,845 8,891

10,177 10,096

Nonprofit mutual insurance company and subsidiary companies

600 E. Lafayette Blvd.; Detroit 48226 (313) 225-9000; www.bcbsm.com

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

Patti Poppe president and CEO

8,121 7,496

8,625 7,952

Energy company

Bronson Healthcare Group Inc. L 301 John St.; Kalamazoo 49007 (269) 341-6000; www.bronsonhealth.com

Frank Sardone president and CEO

7,511 7,329

9,133 7,329

Regional health system

This list of Michigan employers encompasses companies with headquarters in the state. Number of full-time employees may include full-time equivalents. It is not a complete listing but the most comprehensive available. Crain's estimates are based on industry analyses and benchmarks, news reports and a wide range of other sources. Unless otherwise noted, information was provided by the companies. NA = not available.

B Company estimate. C Succeeded Sergio Marchionne as CEO on July 21, 2018. D Includes approximately 15,000 in-state part-time employees. E To step down in June and will be succeeded by Michael Slubowski on July 1. F Spectrum and Lakeland Health merged Oct. 1. G Succeeded Richard Breon effective Sept. 1. H Figures are FTE counts. I Sold Greektown Casino-Hotel to Wyomissing, Pa.-based gaming conglomerate Penn National Gaming Inc. and Vici Properties Inc. on Nov. 13. J Succeeded John Engler as interim president, effective Jan. 17. K Employee counts are as of Oct. 1, 2018. L Bronson Healthcare Group Inc. is the sole member of Bronson Lakeview Hospital. LIST RESEARCHED BY SONYA D. HILL

An expanded version of this list is available with a Crainâ&#x20AC;&#x2122;s Enhanced Membership at crainsdetroit.com/lists

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 8 , 2 0 1 9

HISTOSONICS

50 Years Serving the Healthcare Community ...Because We Care Too!

FROM PAGE 1

Their involvement will give HistoSonics instant credibility to potential end users as it begins sales, possibly late this year or early next. Joining the round were Madison-Wis.-based Venture Investors LLC, which first invested in the company when it was spun off from the University of Michigan in 2010, Boston-based Lumira Ventures and the State of Wisconsin Investment Board. Mike Blue, HistoSonics’ president and CEO, said the company will use the funding to complete regulatory requirements, hire a sales and marketing team, open a second office in Minneapolis, find bigger space in Ann Arbor by the end of the year and begin making and selling devices. “As the company plans to grow from 20 people today to eventually hundreds, we feel it’s important to have a presence in Minneapolis, one of the largest U.S. markets for medical device companies and a very deep talent pool to recruit from,” said Blue. Minneapolis is home to Medtronic Inc., the world’s largest medical device maker. When asked about the possible timing of an initial public offering, Blue said: “We see an IPO as a very realistic and appealing path forward and will be discussing potential timing with the new board.” HistoSonics, which has been granted 44 patents worldwide with about 20 more applied for, will market its system as Robotically Assisted Sonic Therapy, which combines advanced robotics, sensing and imaging to use sound energy to liquefy and destroy tumors without harming surrounding tissue, with far fewer side effects than radiation or surgery. Blue said the technology can be used to attack tumors of any organ or tissue type, with a likely focus by health care providers on cancers of the liver, pancreas and kidney. Liver cancer and pancreatic cancer are the two deadliest forms of cancer, with liver cancer’s five-year survival rate at just 17 percent and pancreatic cancer’s at 7 percent. Blue said the pressure created by the RAST system affects microscopic bubbles of air that naturally exist in tissue. “We use focused sound energy to create pressures great enough to rapidly expand and collapse these microbubbles, which liquefy tissue and create sub-cellular destruction at a very focused point,” he said. “Only the microbubbles at the focal point of our targeted sound energy are activated or excited and destroy tissue. The others in surrounding tissue are unaffected and unchanged.” “We believe that the HistoSonics’ platform offers a unique solution and significant promise to treat patients with a number of different diseases across global markets and care settings,” Greg Sorensen, Varian’s vice president of strategy and business development, said in a press release. He will join HistoSonics’ board of directors. HistoSonics’ technology has performed well in ongoing small and large animal tests both at UM and at the University of Wisconsin. “We demonstrated safety and effectiveness. We have compelling data,” said Blue, who said the results show RAST works better than other forms of treatment of tumors, including radiation, cryoablation (using extreme cold) and heat ablation.

Assisted Living Behavioral Health Construction/Real Estate EMTALA Healthcare Business Fraud Payment HIPAA/Confidentiality Home Health/Hospice Hospital Operations Immigration Insurance Licensing Managed Care Marijuana Medical Staff Litigation Post-Acute Care Audits Skilled Nursing Facilities Birth Trauma Dental Malpractice EHR Medical Malpractice Pharmacy Malpractice Employment/Labor

TOM HENDERSON

Mike Blue, HistoSonics’ president and CEO, said the company will use the funding to complete regulatory requirements, hire a sales and marketing team, open a second office in Minneapolis, find bigger space in Ann Arbor by the end of the year and begin making and selling devices

“Of great interest to researchers and the company is the apparent immunotherapeutic response observed when applying RAST in small animal cancer models, which could be incredibly significant and meaningful if it translates to a human response,” Blue said. The technology also did well in a small human trial involving 10 cancer patients in Spain last year. Blue said he submitted an application for approval for a Class 2 medical device to the U.S. Food and Drug Administration earlier this year and anticipates approval by the end of the year. “We have submitted a tremendous amount of data demonstrating safety and efficacy,” he said. He said the company would begin commercialization here and in Europe when approval is granted and has been in discussions with cancer centers in the U.S. and Europe about becoming customers. Blue said that while HistoSonics has been working with contract research organizations about incorporating imaging and robotics technologies into a commercial medical device, the plan is for the company to eventually build the devices inhouse. He said he expects them to retail for about $1 million each. Because ultrasound is well-understood and considered safe, the path to FDA approval is easier and shorter than for other experimental therapies. While Blue expects FDA approval based on data already submitted, he said it is possible the FDA could require further testing.

A string of big VC rounds HistoSonics’ funding follows on the heels of what is believed to be the largest funding round ever for a state company, a $77 million round announced by Kalamazoo-based Ablative Solutions Inc. in January for its medical device, which reduces hypertension by injecting alcohol into nerves in the renal system of certain patients with hypertension. Though they have high blood pressure, the renal nerves of those patients send signals from the kidney to the brain with the false message that their blood pressure is low, which causes the brain to release chemicals to constrict blood vessels, raising blood pressures to dangerous levels. The funding for HistoSonics and Ablative continues a trend of large funding rounds for state companies. In October 2017, Ann Arbor-based

Duo Security Inc., a provider of a two-factor system to provide internet security for companies, announced what had up to then been the largest round in Jim Adox: state history, $70 Investors million, which enthusiastic. last August led to the company’s $2.35 billion acquisition by Cisco Systems Inc. In 2016, Ann Arbor-based Millendo Therapeutics Inc. raised what was then the VC record of $62 million to commercialize a drug it had developed to fight polycystic ovary syndrome, the most common endocrine disease in women. That topped the previous funding record set in 2014 by Plymouth Township-based ProNAi Therapeutics Inc. when it raised a round of $59.5 million. The Millendo deal led to it going public last December on Nasdaq through a reverse takeover of publicly traded OvaScience Inc., and the ProNAi deal led to its initial public offering of $158 million in 2015. Just as the Millendo and ProNAi fundraisings led directly to going public, HistoSonic investors and management hope this funding round will also lead to its IPO in the not-too-distant future. In 2010, HistoSonics got a funding round of $12.5 million and it raised $9 million in 2017. “We led the Series A round way back when. It took us 10 years to become an overnight success,” joked Jim Adox, who runs the Ann Arbor office of Venture Investors. He said investor enthusiasm was so high for this round, “We’ve literally been turning people away.” “It’s simply incredible, this round of funding,” said Chris Rizik, CEO of Ann Arbor-based Renaissance Venture Capital Fund, a fund of funds that invests both in Michigan VC firms and out-of-state firms willing to look at deals here. “HistoSonics has been around a decade and it took them awhile to find the right direction to go in. Investors believe in them. When you are trying to attract capital to Michigan, every story like Duo or Ablative or Millendo or HistoSonics makes it easier to attract people to the state to look at investments.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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POT

Marijuana taxes by state

FROM PAGE 1

A look at what taxes states levy on recreational adult-use marijuana

5.5% sales tax; 8% prepared food tax on edibles

Roughly $2.5 billion of legal cannabis was sold in California in 2018, down from $3 billion in 2017 when only medical marijuana was legal, according to sales tracking firm GreenEdge. Getting residents to vote for legal recreation weed proved easy in Michigan, California, Colorado and seven other states, but getting users to stop buying from the black market is proving difficult. In Michigan, the gray area between legal and illegal sales since the November vote is causing police to largely turn a blind eye, said Stuart Carter, owner of medical marijuana dispensary Utopia Gardens on East Lafayette in Detroit. It has also applied for its recreational license. Marijuana is legal to use in the state now, but the state’s regulatory framework for recreational sales won’t be fully baked until later this year and illegal sales are plentiful, Carter said. “There’s still a lot of unlicensed dispensaries and they are advertising online to the public,” Carter said. “It’s questionable whether they are paying taxes and they certainly aren’t being held to the same regulatory environment as we are. They are stealing business from the licensed dispensaries.” A medical marijuana dispensary license costs $66,000 and the dispensary must pay for regular testing of its product as well as maintaining a state-regulated sales tracking system. Carter said he’s counted 151 illegal

Alaska: $50/ounce on retail flower; $15/ ounce on stems and leaves; $25/ounce for immature flowers/buds; 0-7.5% local tax option

Massachusetts: 10.75% excise tax; 6.25% sales tax; up to 3% local tax option

California: 15% marijuana-specific sales tax; $9.25/ounce on retail flower; $2.75/ounce on cultivation of plants; 7.25% state sales; up to 2.5% local tax option Colorado: 15% excise tax; 15% sales tax; up to 6.5% local tax option Maine: 10% excise tax; $335/pound on flower and mature plants; $94/pound on trim; $1.50/pound on seedling or immature plants; $0.30/pound for seeds;

delivery services and dispensaries advertising on websites like Weedmaps.com and says they are cutting into his bottom line. He estimates the state is losing upward of $80 million annually in tax revenue from these services, though there’s no official count on that figure. At issue is the enforcement of these businesses. Because recreational use of marijuana became legal with the passing of Proposal 1 in November, state and local prosecutors are not interested in entertaining cases involving the legal gray area of marijuana sales. In Colorado, which legalized recreational use in 2014, the illegal black market is now a larger problem than before legalization, according to a December article in the Coloradoan. Felony charges for cultivation and possession of large amounts of mari-

AUTISM FROM PAGE 3

After spending much of its first 10 years focused largely on improving diagnosis, coverage and other supports for children on the spectrum, the Autism Alliance is taking aim at change that will help adults living with developmental disabilities get into jobs and supported or independent living. It’s ramping up its efforts to expand workforce development for all people with disabilities through advocacy with employers and support for the accommodations needed to create those jobs. It’s also pushing for equal access to vocational training for people with disabilities who have not earned a high school diploma or GED. Late last month, the alliance met with Henry Ford College in Dearborn to broker a pilot program that will enable those affected by autism to earn a vocational certificate, even if they don’t hold a high school diploma. “This is really a civil rights issue, whether it’s health care, employment (or) education,” D’Arcy said.

Early success A decade ago, families faced waits of up to two years to meet with medical experts in autism disorders to even get a diagnosis. Autism therapies in Michigan weren’t covered by insurance, and at a cost of more than $50,000, they were out of reach of most families. Given that, the state had just 30 therapists who practiced the treatment regimen known as applied behavior analysis, often called ABA. Families would track Meador, D’Arcy and others down to ask where to turn for help at every juncture, given the lack of information in navigating the complex landscape of care for autism spectrum disorders.

Stephen D’Arcy: It’s really a civil rights issue.

Colleen Allen: Early diagnosis helps long term.

The alliance advocated for new laws ensuring insurance coverage for autism therapies, convinced employers that were self-insured to cover treatments and launched a navigation program to connect those with autism to free lifelong support and resources. It’s also trained first responders to recognize people who are on the spectrum and signs of abuse for those who can’t speak. Today, the average age of diagnosis has dropped to 4 years old from 7, and more than 15,000 children are receiving therapies covered by insurance and will help them assimilate in schools and jobs, according to the alliance. “These are going to be kids who will need fewer special education services,” said Colleen Allen, president and CEO of the Autism Alliance. “They’ll be more independent, and they’ll hold jobs.”

The next 10 years The alliance is continuing to support children through efforts such as advocacy for changes in special education. But it’s now shifting a big part of its focus to the living and work options for adults on the spectrum. “It was a great surprise to us, but children grow up,” D’Arcy joked. So do caregivers. That’s got parents like D’Arcy and Meador and others on the alliance

Michigan: 10% excise tax; 6% sales tax (expected) Nevada: 10% retail excise tax; 15% excise wholesale tax; 6.85% sales tax; up to 1.25% local tax option Oregon: 17% sales tax; up to 3% local tax option Washington: 37% excise tax; 6.5% sales tax; 0.5%-3.1% local tax option; 0.484% gross receipts tax Sources: Institute on Taxation and Economic Policy and state websites

juana rose by seven-fold between 2014 and 2017. That points to a robust underground market for illegal marijuana, grown in Colorado and transported to other states, the article says. The same happened in California, which grows more marijuana than its wholesale market can support. Regulators ignored the fact that a high-tax, strict-regulatory environment deincentivizes the public to stop buying from the black market, said Caroline Weber, assistant professor of public policy and governance at the University of Washington. “Most of the conversation about legalization now is about marijuana being taken from the state in which it is legally grown and transported into another state (which is illegal) to be sold,” Weber said. “Estimates say 85 percent to 95 percent of marijuana board thinking about what the future holds for their adult children. There are 1.4 million adults with developmental disabilities, including autism, in Michigan, Allen said, pointing to state data from 2017. That population is expected to increase by more than 200,000 people by 2030. Of those, 38,000, or just 2.7 percent, are receiving vocational rehabilitation support services through Michigan Rehabilitation Services, which works with them and employers to place them in jobs. It’s not clear exactly how many people with disabilities are employed in Michigan, Allen said. But for some comparison, nationally, 16.8 percent of adults with disabilities are employed, according to data from the U.S. Bureau of Labor Statistics. As it puts more emphasis behind services for adults on the spectrum, the alliance is looking to ensure they have options for supported or independent living in their communities. “There are no housing options, period, unless you just buy a house and pay for caregivers to come in,” Meador said. The alliance is in Lansing, advocating for reimbursement rates of $2 above minimum wage for caregivers, Allen said, to help improve the quality of care, increase retention and help address caregiver shortages. “The ironic thing about this is that from a public policy point of view, it is almost certainly less expensive to the taxpayer to do all this stuff right than to do it wrong and have so many people totally dependent on Medicaid and Social Security,” D’Arcy said. That said, job arrangements for adults with disabilities must be considered case by case, depending on abilities and the pay rate a person can earn, given that money earned impacts disability benefits, he said. But for anyone with disabilities, “the work is more important than the mon-

grown in California is sold illegally in another state. That’s because the price of legal marijuana is much lower, so it’s attractive to ship it east where prices are two to three times higher.” Washington state, which legalized recreational use in 2014, combats this with frequent audits, said Weber. Retail shops are audited eight times a year, she said, with stores that have a violation on record being audited up to 30 times per year. Another wrinkle playing into the hands of the illegal market is the availability of legal marijuana. In California, just 89 of California’s 482 cities were allowing recreational dispensaries as of Dec. 25 last year, according to the Los Angeles Times. With demand high and the availability curtailed by store locations, consumers turn to the illegal market. In Michigan, 322 of 533 total municipalities have opted out of allowing recreational marijuana facilities, including Shelby Township, Sterling Heights, Novi, Rochester Hills, West Bloomfield, Dearborn, Livonia, the Grosse Pointes, Canton Township and Saline, among others, according to the Michigan Department of Licensing and Regulatory Affairs. The remaining 111 communities either will allow the facilities or are waiting for the legal framework before making a decision, said David Harns, communications manager for LARA. “When you have so many communities opting out, you could have less quantity being sold in the legal market,” said Carl Davis, research director for Washington D.C.-based Institute on Taxation and Economic Policy. “They either have to drive a

long way to buy legal or turn to the illicit market, which in turn hurts the state’s tax base.” Whether taxes play a role in stymieing the black market is up for debate. Michigan’s 10 percent excise tax received plenty of ink as it’s the lowest marijuana tax in the nation. Michigan is also likely to implement the 6 percent sales tax like it already does for medical marijuana, which does not have an excise tax, for a total of a 16 percent tax. But a question is whether high taxes would drive a wedge between the legal and black markets, said June Haas, partner and co-leader of the state and local tax practice at Detroit-based law firm Honigman LLP. “The goal of legalization is to pull marijuana out of the black market into a regulated and taxed market,” Haas said. “The lower taxes alleviate some of the barriers to market. If you have a lower entry level, you invite people into the legalized market of marijuana, helping it compete with the black market.” Carter agrees that exorbitant taxes would do nothing to eradicate black market sales. “Since when is a 16 percent tax on something not enough?” Carter said. “Raising the taxes too high will only move people away from buying legal. It drives commerce underground and defeats the whole purpose of allowing the product to become legal and regulated in the first place. There’s a fine line between taxation and the black market.”

ey,” D’Arcy said. On the job front, a growing number of companies are showing interest in hiring highly functioning adults affected by autism and other disabilities. The challenge now is getting more companies to give all adults with disabilities a chance, Meador said. It’s also ensuring everyone, regardless of their abilities, has access to vocational programs that put them on a path to a job. “Steve and I both see that the parttime jobs that we have for our adult children (on the spectrum), those are their best days,” he said. “Just like anyone, you have something to look forward to with a job, you get out of the house (and) you’re with other people. “Sitting at home every day all alone for 70 years is a prison sentence.”

“Everyone benefits when we open our doors to students of all abilities and talents.” The college is in the early stages of determining how it can best enhance its support for students with autism spectrum disorder and is considering accreditation and program requirements as it decides how it will do that, Kavalhuna said. “We are committed to providing access to high-quality education and services, and to ensuring success for all students. Those factors will guide any decisions we make.”

Expanding opportunities Last summer, the alliance used a $50,000 grant from United Way for Southeastern Michigan to help six entrepreneurs who are on the spectrum create financial and business plans for products they’d created and market and sell them at the Tuesday markets at Eastern Market. It’s seeking grant funding to continue those efforts, Allen said. It’s also seeking to open doors for those interested in or better suited for more traditional job paths. “What we started talking about is, let’s go see who does this the best in the country like we do with everything else. And let’s work with willing partners like Henry Ford to make them the best at doing this in the country,” Meador said. Community colleges like Henry Ford could help recruit students with disabilities and train them and be a source of job candidates for businesses, he said. Henry Ford is interested in expanding opportunities, President Russell Kavalhuna said in an emailed statement.

Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

Engaging employers But those efforts won’t mean anything if employers aren’t open to hiring people with disabilities. The alliance is expanding its outreach to employers, starting with those represented on the Detroit Workforce Development Board, which Meador co-chairs with Strategic Staffing Solutions President and CEO Cindy Pasky. The Autism Alliance is working to bring here the Home Depot program called Ken’s Krew through which the retailer employs eight adults with disabilities per store. That could add up to 550 jobs for the region, Meador said. To support those efforts and others, the alliance is stepping up fundraising. About a third of its $4 million budget comes from the state and the rest from donations and grants. It has set a goal to raise $1 million at its annual gala on April 13, Meador said. The autism insurance coverage the alliance secured for Michigan families during its first decade was a big win, he said. “If we can get the education and workforce systems to change over time, it will drive dramatic change.” Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 8 , 2 0 1 9

LEAR

FROM PAGE 1

Factory-installed navigation systems are no longer popular among consumers, according to a 2018 survey by J.D. Power & Associates. Only 19 percent of new vehicle owners use the factory-installed navigation systems, according to the survey. This would seemingly give the big tech companies an advantage in the race to integrate a marketplace into the car, particularly Google because it now has a built-in operating system in car brands. Google is launching its native car software system in Volvo Cars’ plug-in hybrid performance coupe Polestar 2 in 2020. But most automakers have worked to keep Google and Apple out of the dash, Bird-Martinez said. “Automakers can’t control what comes into the car with CarPlay and Android Auto, so they are trying to block the idea of their marketplace,” Bird-Martinez said. “They are scared of Google coming into the car, but it’s not a done deal they will lose out to them yet. This is the first time I’ve seen automakers move more aggressively than Google and Apple.” The result has been the rise of Xevo. The software has been available on all General Motors vehicles since 2017 and Fiat-Chrysler Automobiles recently did a retroactive over-the-air update to add it to several of their models. Xevo has not released how many users the system has, but said more than 25 million vehicles are enabled with the software. Lear declined to comment beyond last week’s press release on the deal. Automakers are keen on Xevo over

AFFILIATION FROM PAGE 3

“We need more beds for adults, women and children,” Spahlinger said. “We are trying to make sure patients are receiving services at the right place and the right time. Having extra beds (in other hospital locations) frees up our beds for higher-acuity patients who need longer lengths of stays. We have to close our neonatal ICUs sometimes and can’t accept transfers.” Overall, Michigan Medicine owns or is affiliated with 15 hospitals in Ann Arbor, Midland, Chelsea, Wyoming and Lansing. It also operates 40 outpatient locations and home care operations that handle more than 2.1 million outpatient visits a year. In early 2018, UMHS signed a master affiliation agreement with 14-hospital Trinity Health Michigan and acquired a 49 percent interest in its Chelsea Community Hospital. In 2013, UM Health System signed a master affiliation agreement and a minority investment of up to 20 percent with the four-hospital MidMichigan Health in Midland. The partnership includes working together on oncology, heart and vascular, telemedicine, neurology, obstetrics and other subspecialties. UMHS also has a longstanding relationship with the VA Ann Arbor Healthcare System. In 2017, UM acquired 203-bed Metro Health Hospital in Wyoming, a suburb of Grand Rapids. With $40 million in investments and locating specialists at the hospital, Spahlinger said Metro has had significant growth. “We had 11 percent revenue growth each year. We expanded obstetric units and have up to 2,500 deliveries. Before it was 1,500. We have a compre-

XEVO INC.

Seattle-based Xevo Inc., to be acquired by Southfield-based Lear Corp., in March announced it is working to launch in-car pizza ordering software with Domino’s Pizza later this this year.

Lear’s acquisition binge Lear has made several acquisitions in recent years to boost both its seating and electrical infrastructure business. Many of the acquisitions have been focused in areas generally considered outside of the auto supplier’s core competencies as it seeks to be on the forefront of automotive technology. JJIntellectual property rights of Autonet

Mobile Inc., Santa Rosa, Calif: Undisclosed price in 2015. Autonet is an internet-based telematics and app service provider for the auto industry. JJArada Systems, San Francisco: Undisclosed price in 2015. Arada develops hardware and software for vehicle-to-vehicle and vehicle-to-infrastructure

consumers’ preference of Android Auto or CarPlay as Xevo offers a 50/50 revenue split to the automakers on incar purchases. Historically, Google and Apple have not been as accomhensive stroke center there and stabilized subspecialty services. It is going well,” Spahlinger said. UMHS also has 15 primary care health centers and medical specialty facilities in 26 cities across the state that include five Southeast Michigan locations. In metro Detroit, they are multispecialty clinics Northville Health Center, Livonia Health Center and Brighton Health Center, and two outpatient cancer centers: UM Radiation Oncology at Providence Cancer Center in Southfield and the UM Radiation Oncology at Assarian Cancer Center in Novi. Spahlinger said UM has no current plans to enter downtown Detroit. “Not that I am aware of,” he said. Last year, UM considered an affiliation with University Pediatricians, the private clinical group affiliated with DMC Children's Hospital of Michigan. UP now has affiliated with Central Michigan University after a dispute with its former affiliate, Wayne State University. Spahlinger suggested that the possible affiliation with UP would have been too controversial and political for UM for a variety of reasons. He added this is his personal opinion, not that of the UM board of regents. “We want to serve underserved populations. It is the reason we reached out to Detroit, like we have outreaches in Flint with UM Flint downtown, services at Hurley (Medical Center) and at Hamilton federally qualified health center,” he said. Spahlinger said Wayne State has served downtown Detroit well for a long time, along with Henry Ford Health System. “Wayne State has had a falling out with Detroit Medical Center (and its owner for-profit Tenet Healthcare Corp.) They need each other,” he said.

communication technology that performs such tasks as collision avoidance, platooning, train crossing notification and traffic signal notifications. JJAutomotive seating business of Grupo Antolin, France: $307 million in 2017. The seating operations included 12 manufacturing facilities, two technological centers with 2,273 employees. JJXO Technologies, Tel Aviv, Israel:

Undisclosed price in 2017. EXO develops high-accuracy GPS technology for autonomous and connected vehicles. JJXevo Inc., Seattle: $320 million in 2019. Xevo develops a marketplace framework for drivers to interact with cars and mobile applications through the cloud.

modating. “Xevo is going to expand dramatically because automakers don’t want to give that space to Google or Apple,” Bird-Martinez said. “They are making UM also has previously talked with Henry Ford about an affiliation that would have allowed it to enter the Detroit market and conduct research on minority populations. “We talked six or seven years ago, (around the time) when Henry Ford and Beaumont talked,” Spahlinger said. “Historically we had relationships. Before 1994, one-third of our third-year medical students went to Henry Ford Hospital to do rotations.” The affiliation with Sparrow, said Spahlinger, is similar to the Mid-Michigan and Trinity arrangements because UM can provide services the health systems want. With Trinity, UM has agreed to provide additional clinical services in cardiothoracic surgery, radiation oncology and graduate medical education services at Trinity’s Mercy Health Saint Mary’s in Grand Rapids and Mercy Health Muskegon. At St. Joseph Mercy Hospital in Chelsea, a Trinity hospital, it has a 26bed unit full of UM patients, Spahlinger said. “We have moved some urology and bariatric surgery patients to Chelsea. We have been working together on multiple different programs and that has been going well,” he said.

Sparrow affiliation For 20 years, UMHS has had an affiliation with five-hospital Sparrow Health for pediatric and medical helicopter services. Talks on the master affiliation began with Sparrow about a year ago, but a merger or acquisition never was on the table, Spahlinger said. “We wanted to do something more together, but we weren’t sure on the final approach. It crystallized the later half of the year and we tried to get it done before Denny (Swan, former

a wager, really, that they can succeed faster at this than Google and can mature and establish this market without them.” For Lear, the acquisition could be a boon. This is evident by how much Lear paid for the startup, which had only raised $56.9 million in five rounds of funding since its founding in 2000. Xevo is the first major acquisition for Lear Innovation Ventures Possibilities, which the company unveiled in January. LIV Possibilities operates as a startup investment division for Lear, led by John Absmeier, its chief technology officer. The division is expected to work with incubators and accelerators like Detroit’s Techstars and venture capital firms to invest in startups and internal company initiatives. “(Lear CEO) Ray (Scott) has a big vision for the company, but he needs help getting there,” Absmeier told Crain’s at the North American International Auto Show in January. “That’s why I’m here, to help identify the right business models and right places to invest.” Lear is seeking to grow its $5.5 billion electronics business because of slower growth in its larger, traditional $15 billion automotive seating business. Commodities and competition significantly limit margins in the seating business. But electronics systems are growing quickly thanks to electrification, autonomous systems and overall more electronics in vehicles. Lear forecasts growing its e-systems business to $8 billion by 2025, a 45 percent increase, with big potential upside from acquisitions like Xevo. Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh Sparrow CEO) retired” on Oct. 1, Spahlinger told Crain’s in a wide-ranging interview about the growth of UM Health. “We have been up there 20 years” in Lansing “and have a long-standing relationship with pediatric surgery services,” Spahlinger said. “When they have a need for something, we would provide it.” Spahlinger said UM is taking an ownership interest in Sparrow’s pediatric service line and will jointly manage it for the patients and needs of the community. “We will jointly bear the costs and the returns. It aligns us a little better (than before).” Once the evaluation of Sparrow’s pediatric program is completed, UM will invest 50 percent, Spahlinger said. UM will appoint a co-director to join Sparrow’s Stephen Guertin, M.D., who is currently director of pediatrics. “There will be additional benefits to Mott (Children’s Hospital), maybe some referrals, but there may be offloading as well,” Spahlinger said. “We built a new women’s and children’s hospital in 2012, but we have 88 percent, sometimes 90 to 92 percent occupancy rate and sometimes we can’t accept transfers. We need more beds, especially critical care beds.” John Truscott, a spokesman for Sparrow with Truscott Rossman, said Sparrow realized it needed UM and its specialists in 2017 to fill out some subspecialty gaps in coverage for patients. “They (Sparrow) are about providing the best care locally, so families don’t have to travel to Ann Arbor because they can provide treatment in Lansing,” Truscott said. “UM will have specialists here, depending on what needs to be done here.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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MEDC seeks hawker for Pure Michigan swag

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he Kresge Foundation has pledged to place one-quarter of its U.S. assets or roughly $462.5 million under the management of women- and minority-owned firms by 2025. Currently, about 15 percent of its $1.85 billion in domestic assets is managed by firms led by women or with minority ownership, senior communications officer W. Kim Heron said. With the commitment, the Troybased foundation is the first private foundation to sign onto the Association of Black Foundation Executives’ “Diversity in Foundation Asset Management Pledge.” New York-based ABFE, which hosted its annual conference in Detroit last week, is issuing a challenge for 50 foundations to commit to the same by the end of 2021. “This is about equity. It’s about accountability. And it’s about better economic outcomes,” said Kresge Vice President and Chief Investment Officer Robert Manilla in a Wednesday announcement of the commitment. Most foundation investments haven’t earned their spending plus inflation in recent years, he said. Diversity of thought, background and beliefs leads to better investment decisions and returns by bringing different perspectives to problems and challenges, Manilla said. “When I think about all the asset classifications we could invest in, it’s massively dominated by whites,” he said. Manilla said his job is to ensure Kresge’s assets, which currently total $3.7 billion including international investments, exist into perpetuity. “We truly believe this is the way to do it,” he said, noting that Kresge is bringing the same focus on diversity to its internal investment team. Asset management firms owned and operated by diverse teams make more accurate decisions and demonstrate equal or better performance than their peers. Yet these firms represent just 1.1 percent of the financial industry’s $71 trillion of assets under management, according to a 2016 report from Bella Research Group and the Knight Foundation, Kresge said in a news release. “If we can get enough folks to buy in to engaging diverse asset managers because it matters because of (better) performance,” it will serve as a way to foster conversation about diversification in the larger financial services industry, said ABFE President and CEO Susan Taylor Batten. “The reluctance to face the finance industry’s demographic has stifled its growth and impact,” she said. Diverse asset managers are very philanthropic themselves, Batten said, noting that engaging them will also help build their wealth and their philanthropy. Kresge hopes the commitment will encourage other foundations to follow suit, President and CEO Rip Rapson said.

BUSINESS NEWS J Holland-based Coppercraft Distillery LLC has entered into a threeyear sponsorship deal with the Detroit Tigers starting this season,

KRESGE FOUNDATION

From left: Robert Manilla, vice president and chief investment officer, Kresge Foundation; Susan Taylor Batten, president and CEO, Association of Black Foundation Executives; and Kresge President and CEO Rip Rapson at Wednesday’s “25 by ‘25” announcement.

Detroit digits A numbers-focused look at last week’s headlines:

$320M

Value of deal for Lear Corp. to acquire Seattle-based automotive software company Xevo Inc.

700

Number of spaces in the new parking deck the Ilitches are considering for MotorCity Casino Hotel

$218,000

Amount the UAW paid in legal fees for disgraced ex-VP Norwood Jewell

taking over the New Amsterdam 614 bar space in Comerica Park. The deal includes branding of the Pepsi Porch bar and Coppercraft Distillery signs at the ballpark’s Bourbon Bar, according to a news release. J The former Embassy Suites by Hilton hotel in Southfield closed without warning and is expected to reopen under another brand. It lost its Hilton branding in September, and then stopped taking reservations three weeks ago, said Dan Steines, its general manager. J University of Detroit Jesuit High School plans to buy a former recreation center from the city of Detroit for $625,000, renovate it and add athletic fields to its grounds. The private, college-preparatory school for boys would make building improvements at the vacant, 20,500-square-foot Johnson Recreation Center near the intersection of Eight Mile Road and Wyoming Avenue in northwest Detroit. It’s about a half mile north of the University of Detroit Jesuit campus. J The Michigan Economic Development Corp. is looking for a retail partner to help peddle some Pure Michigan swag. The public-private job development agency, which also operates the state’s tourism division, announced Tuesday a request for proposals that would give the lowest bidder a license to use the Pure Michigan label on merchandise in exchange for royalties paid to the state, according to an MEDC news release. J Former United Auto Workers Vice President Norwood Jewell pleaded guilty last Tuesday in U.S. District

Court to violating labor law while helming the union. Federal prosecutors charged Jewell last month with one count of conspiracy to violate the Labor Management Relations Act for receiving more than $40,000 worth of travel, lodging and meals from people acting on behalf of Fiat Chrysler Automobiles from at least 2014 to 2016. J Following executive changes among its top operating executives early this year, Ascension Health is searching for a single vice president to oversee all four of its Michigan foundations. The health system is looking to fill the new position by the end of June when its fiscal year closes, said Renee Peck, chief development officer of the Ascension St. John Foundation.

he Michigan Economic Development Corp. is looking for a retail partner to help peddle some Pure Michigan swag. The public-private job development agency, which also operates the state’s tourism division, announced Tuesday a request for proposals that would give the best bidder a license to use the Pure Michigan label on merchandise in exchange for royalties paid to the state, according to an MEDC news release. The winning vendor would be responsible for designing, producing and selling branded apparel and merchandise, according to a copy of the RFP. It would also design, build, host and manage a website to sell the Pure Michigan products. According to the MEDC, freshening and expanding the Pure Michigan product offering builds off the 13-year-old brand’s success and ties into the MEDC’s ubiquitous, Tim Allen-narrated tourism commercials. The MEDC hatched the Pure Michigan brand in 2006 and launched the online Pure Michigan store in 2010, with some of its products also sold in brick-and-mortar stores. Products include shirts, hats, mugs, glasses

PURE MICHIGAN STORE

The MEDC issued an RFP on a contract that would give the winning vendor a license to use the Pure Michigan label and require it to pay royalties on products sold.

and magnets priced anywhere from $1 to $80. Electronic proposals are due May 6, with other supplementary materials due as early as April 8. Bidders must have the capacity to produce apparel in bulk, fulfill and ship orders, as well as the ability to build and secure an e-commerce site. More information can be found on the MEDC’s website.

FOOD & DRINK NEWS J The Clarkston-based restaurant group known for opening its eateries in unique locations such as a former Hooters, car repair shop and church is coming to downtown Detroit. Union Joints plans a large, two-story American food restaurant in the under-construction Little Caesars headquarters building next to the Fox Theatre, according to a news release. J Mawby, a popular winery and vineyard based in Suttons Bay in northern Michigan, is finalizing a rebranding effort after its founder and longtime leader stepped away from daily operations. The company condensed its multiple brands, including L. Mawby and M. Lawrence, into just one, Mawby Sparkling Wines, following 69-year-old Larry Mawby’s decision to step back from the company and leave management to a pair of familiar faces at the winery. J Panera Bread Co. is planning to pack it up in downtown Birmingham and move to a new location in Royal Oak. The bakery-cafe will close its 100 N. Old Woodward Ave. shop “sometime in June or July” and move to the new Woodward Corners development at 13 Mile Road and Woodward Avenue headed by Beaumont Health. J A new training program in Eastern Market is scheduled to start May 1 with a goal of preparing participants for stable careers in the food and agriculture business. The Food Industry Jobs program is being backed by Eastern Market Corp. and three businesses based in the market: Wolverine Packing Co., E.W. Grobbel and Germack.

BILL SHEA/CRAIN’S DETROIT BUSINESS

New Kentucky bluegass, from a Wisconsin sod farm, made its debut at Comerica Park for the Detroit Tigers’ Opening Day game against the Royals on Thursday.

Tigers unveil acquisition: New Comerica Park turf T

he newest addition to the Detroit Tigers made its Opening Day debut on Thursday at Comerica Park: a fresh field of new Kentucky bluegrass. The new turf was installed in November and came from a Wisconsin sod farm, the team said. It got its first official use Thursday when the Tigers hosted the Kansas City Royals in the first of what will be 81 regular-season home games in 2019. The outfield warning track also is new. This is the stadium’s first full-field sod replacement since 2014. Prior to that, Comerica’s turf had been first replaced entirely in 2007. The Tigers didn’t disclose a cost of the new grass, which was paid by the team. The turf was delivered in refrigerated trucks from Central Wisconsin Sod & Landscaping Inc. owned by turf specialist Bob Heath in Coloma, Wis. The company says it has also done grass work for the Chicago Cubs and

Major League Soccer’s Minnesota United FC. Depending on the thickness of the custom turf, how much is needed and how quickly it’s needed, the cost to resod a baseball field ranges from $100,000 to more than $250,000, according to industry sources. For example, the natural installed grass at MSU’s Spartan Stadium cost $253,000 following a U2 concert on the football field in June 2011. In addition to normal game wear, the Tigers have replaced or repaired sections of turf after concerts by Kid Rock, Paul McCartney and Jimmy Buffett in recent years — which had given the field a splotchy, patched look. After a Rolling Stones concert in September 2005, Tigers head groundskeeper Heather Nabozny and her crew had to immediately replace 22,500 square feet of outfield grass.

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