Crain's Detroit Business, June 24, 2019 issue by Crain's Detroit Business

Parade Co. seeking new building Page 3

Coalition demands road fund plan Page 3

JUNE 24 - 30, 2019 | crainsdetroit.com

SPORTS BUSINESS

THE FRAGILE STATE OF MICHIGAN GOLF

PGA debuts in Detroit, as industry finds itself at crossroads

Golf courses in Michigan 

Michigan has 830 golf courses, the fourth-most in the country. 650 are public, which is the most in the country 

By Kurt Nagl

More than 170 courses have closed since early 2000s Last acclaimed courses to open in the state were the Loop at Forest Dunes in 2016 and Stoatin Brae in 2017

knagl@crain.com



The golf business has never been easy in Michigan, where the golf season lasts five or six months in a good year. Still, the state established itself as a mecca for the game, a status threatened in the past decade by a decline in the sport’s popularity and a spate of golf course closings. There are signs of new life, though. Tiger Woods won the Masters. The Rocket Mortgage Classic will be played this week, the first PGA tour event ever in Detroit. People are excited about the game, and industry leaders are looking at ways to keep the energy going. It has been a mixed bag for those in the business who hung on through the last recession. Some course owners are enjoying record years, while others are going under.

 10 courses in Michigan are ranked in the top 100 public courses in the country  Threetops at Treetops Resort in Gaylord is the top-ranked Par 3 golf course in country

Sources: Michigan Golf Course Association and Golf Digest

The two sides of Michigan golf This season will likely be the last for Lilac Golf Course, a once-thriving track in Monroe County that opened in 1960. In the past three years, heavy spring rains have caused flooding and unruly rough at the 18-hole course, while revenue has gone dry and co-owner William Thorne, 54, watches the bills pile up. If he doesn’t sell the 147-acre property by December, it will go back to the bank. Thorne and his brother Daniel bought the course 13 years ago for just over $1 million in a short sale. The previous owner couldn’t keep it going, and the pair stepped in to be the saviors.

Michigan golf by the numbers $4.2 billion annual economic impact 60,000 people employed in the industry $1.4 billion in wages paid to course workers each year $118 million in charity donations annually from golf events 500,000 regular players 127,500 acres of professional-managed green space

SEE GOLF, PAGE 20

ISTOCK VIA GETTY IMAGES

Source: National Golf Foundation and state of Michigan

FOOD ECONOMY

Elusive profits push dairy farmers to find creative ways to survive By Dustin Walsh dwalsh@crain.com

LON HORWEDEL

Jeff Horning in front of the barn housing pregnant dairy cows at Horning Farms in Manchester. Horning Farms is home to more than 400 head of dairy cows. crainsdetroit.com

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Jeff Horning is an archetypal farmer — manure-stained jeans, a thousand-mile stare and hands seemingly crafted from boulders. His handshake is a vice grip, like he’s afraid to let go. His family has been tilling acreage 15 miles southwest of Ann Arbor in Manchester for 142 years and milking cows for near 50. But times are changing. Most dairy farms haven’t turned a profit in four years and a fifth surely is on the way. But Horning, a fifth-generation farmer,

has a son and daughter on the farm now. Horning Farms’ balance sheet continues to slip, but Horning, 52, is bent on clutching the farm and the farming lifestyle for the next generation. “Ninety-seven percent of farms are still family owned,” Horning said. “We’re supporting four family units now. That usually drives us to grow (the farm), because we have to. Growth is a natural instinct when you’re talking about the free market, but we’ve peaked out. No one is getting the signal to produce more milk.” SEE FARMERS, PAGE 20

INSIDE

Focus: Ann Arbor Real Estate << To avoid pricing working families out of the city, Ann Arbor needs affordable housing. Page 10 Q&A: Michael Jurgenson, Swisher Commercial Page 11

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MICHIGAN BRIEFS

INSIDE

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

Weather-weary Michigan farmers get federal, state relief The U.S. Department of Agriculture on Thursday approved a measure to help farmers stem losses amid one of the wettest seasons on record. The USDA said it will allow farmers to plant hay or graze cover crops on acreage they are claiming crop insurance on Sept. 1, moving the official date from Nov. 1. Under Federal Crop Insurance Program, farmers unable to plant crops for natural reasons such as rain are barred from planting and harvesting other crops on acreage covered by insurance until Nov. 1. Moving the date up two months allows farmers to grow crops for silage, haylage or baleage on currently unplanted acreage and remain eligible for full reimbursement of their crop insurance plan. Michigan Gov. Gretchen Whitmer sent a letter to the USDA Secretary Sonny Perdue on Wednesday asking for the flexibility under the program as well as a disaster designation due to historical rainfall in the state. The Michigan Legislature is also making $15 million available to farmers via a low-interest loan program. The legislation, which is awaiting Whitmer’s signature, would appropri-

ate funds into the Agricultural Disaster Loan Origination Program to be made available as 1 percent loans to farmers. The Michigan Corn Growers Associated applauded the legislation. “Michigan has been hit with unprecedented rainfall throughout this growing season that has prevented many farmers from planting and will have a negative impact on overall crop yields,” Matt Frostic, president of the association, said in a news release. “This assistance will help farmers weather the storm and make it through to next year’s planting season.” Michigan was hit with 37.9 inches of rain between May 1, 2018, and April 30, 2019, the third wettest year in state history, according to a release by the governor’s office. Michigan farmers had only 3 1/2 days of “proper conditions” for field work as of June 9, according to the governor’s office. “Michigan farmers are in a state of crisis right now because of extraordinary weather conditions, from historic rainfall, extreme cold, excessive snow, flash flooding and tornadoes,” Whitmer said in a news release. “Michigan has a rich history in agriculture, and on behalf of our farmers, our families and our economy, we need to take action now. I’m ready and eager to partner with the federal government to make sure Michigan farmers have the support they need

CALENDAR

MICHIGAN FARM BUREAU

Soggy or flooded ground has delayed planting for many Michigan farmers.

during this difficult time.” The unseasonably wet spring has many Michigan farmers relying on crop insurance to cover costs, though likely ending in losses. Some are making bets on their crops in the wet ground, hoping scarcity and a little luck drives a good yield and good market prices. Michigan’s crops are significantly underplanted with only 63 percent to 88 percent of the acreage dedicated to corn planted this year and soybeans at only 43 percent. As of Wednesday, 64 out of Michigan’s 83 counties had independently requested disaster designations from the USDA this year.

Kellogg cutting 150 jobs as part of Keebler sale

Kellogg Co. is cutting 150 salaried jobs across North America as part of the previously announced sale of its cookie and fruit snack businesses. That includes about 66 in Battle Creek, WWMT-TV reported. The action will result in pretax charges of approximately $35 million, including $20 million in severance and termination benefits, the Battle Creek-based company said Tuesday. In April, Kellogg announced that it was selling its Keebler and Famous Amos cookie brands — as

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well as its fruit snack, pie crust and ice cream cone businesses — to Italy’s Ferraro International for $1.3 billion. 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 The cereal and snack maker is refocusing on the fast-growing parts of its business. That sale is expected to close at the end of July. The company said its job cuts and staff reorganization will be complete by the end of 2020.

CORRECTION A figure in the graphic on Page 11 of this issue, which went to press early, is incorrect. The May 2019 figure in the chart for average average single-family home sale price in Ann Arbor should be $347,547.

Building relationships and building communities are what building business is all about. Goran Jurkovic, President and CEO, Delta Dental of Michigan, Ohio, and Indiana

Delta Dental helps organizations and businesses in Michigan succeed by supporting initiatives that attract and retain talent, grow business, and make our cities and neighborhoods better places to live. Learn more at www.buildingbrighterfutures.com.

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DETROIT

REAL ESTATE

When it rains it pours in the Parade Co. building

Fast-growing Roco Real Estate sells 10,000 apartments By Kirk Pinho kpinho@crain.com

Roco Real Estate LLC has unloaded more than 10,000 units from its apartment holdings to a group led by New York City real estate investor Joseph Chetrit. The result for the Bloomfield Hillsbased company, which quickly amassed more than 21,000 multifamily units since incorporating in 2011, will be a heavily pruned portfolio concentrated in Michigan, where at last count three years ago it had 28 apartment complexes with about 6,450 units. A source familiar with the deal with Chetrit, known as a secretive investor who is a big player in New York City real estate, said it was for more than $500 million.

Need to know

 Roco Real Estate LLC has unloaded more than 10,000 units in deal said to be worth more than $500 million

The Parade Co.’s famous hand-crafted big heads are stored in dry areas of its Mount Elliott Street warehouse where the roof doesn’t leak.

 Bloomfield Hills-based company had amassed more than 21,000 apartments since 2011 founding

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

Organization seeking new space as roof leaks at longtime Detroit HQ By Chad Livengood

Hear the interview

The persistent rainfall in Detroit this spring has been felt over at The Parade Co.’s east side headquarters — in bucket loads of water captured by a series of tarps lining the rafters of the special events company’s aging warehouse. The not-for-profit organization that puts on America’s Thanksgiving Parade and the Ford Fireworks has been managing an increasingly failing roof covering its parade float storage warehouse inside Chrysler’s one-time Lynch Road assembly plant that began pumping out Plymouth and DeSoto cars in 1928. “We need a new home. We have water coming in,” Parade Co. CEO Tony Michaels said in an interview for the Crain’s “Detroit Rising” podcast. “Our line is when it rains it pours — and it does pour.”

To hear the entire interview with Tony Michaels, listen to Crain’s “Detroit Rising” podcast, available through iTunes, Apple Podcasts, Soundcloud and other major podcast apps.

clivengood@crain.com

Michaels said the organization is actively pursuing a real estate deal for a 170,000-squarefoot building in Detroit — industrial warehouse space that’s not easy to come by inside the city limits these days. He declined to divulge details of where the organization is trying to move within the city. “If this were to happen, we could — and capital C — we could have shovels in the ground next spring,” Michaels said. “And there will be news out about that maybe in the next six to eight weeks. And we’ll see where it goes.”

 Buyer Joseph Chetrit owns slew of high-profile buildings in New York City

Past efforts to acquire new space have fizzled, Michaels said. The Parade Co., which is putting on Monday night’s annual Ford Fireworks over the Detroit River, has been managing its leaky roof with tarps that capture rain water and then funnel it into collection pipes and buckets. The organization has had to move its papier-mache big heads of cartoon characters and famous Detroiters to parts of the building where the roof isn’t leaking to protect its biggest assets, Michaels said. “(A new building is) very important because it’s embarrassing to have tours coming through, kids here — but not to mention our great team and the freelance sculpting artists we have here and it’s raining (inside),” Michaels said.

New York real estate publication The Real Deal reported it was for $573 million, based on a $481 million JPMorgan Chase loan at 84 percent loan-to-value. The originating firm was Iron Hound Management Co. LLC, based in New York. For some, given Roco’s substantial holdings, the sale comes as no surprise. “Anyone who plants a lot of seeds may want to harvest from time to time,” said Richard Broder, CEO of Detroit-based Broder & Sachse Real Estate Services Inc., which previously worked with Roco on property management before the latter brought management services inhouse.

SEE PARADE, PAGE 18

SEE APARTMENTS, PAGE 18

INFRASTRUCTURE

Coalition to Legislature: Fix roads funding before vacation By Chad Livengood

clivengood@crain.com

A coalition of Michigan business groups is stepping up pressure on the state Legislature to broker a deal with Gov. Gretchen Whitmer on investing at least $2 billion more annually into roads before the summer vacation season sets in. Business Leaders for Michigan, the Michigan Realtors Association, the Michigan Chamber of Commerce and local chambers of commerce in Detroit, Flint, Grand Rapids, Jackson, Lansing and Midland signed a joint statement Thursday calling for “a multi-year investment of billions of new dollars” for transportation infrastructure. “The window of opportunity that exists in this nonelection year must not be wasted, and we strongly believe mean-

Need to know

Coalition of Michigan business groups call for “multi-year investment of billions of new dollars” 

 Whitmer’s plan for 45-cents-per-gallon gas tax has failed to gain traction  House and Senate working on new plans, including allowing local governments to seek local taxes for fixed

ingful progress needs to be achieved prior to recessing for the summer,” the statement said. The Republican-controlled state Senate is scheduled to go on a twoweek recess starting Wednesday and be back in session July 10. However, House Republican leaders have scheduled the lower chamber to work in session just three days over the next three weeks —

June 26, July 2 and July 10. Given the calendar and waning sense of urgency on road funding in Lansing, the business groups felt “we’re at the natural point where negotiations” between the Legislature and governor should ramp up, said Brad Williams, vice president of government relations for the Detroit Regional Chamber. The Detroit chamber, BLM and the Michigan Chamber have all backed Whitmer’s call for up to $2.5 billion in new funding for roads and transportation infrastructure. But Whitmer’s plan to fund that goal — a 45-cents-per-gallon gas tax — has failed to gain any traction with the GOP majority in the Legislature or any of the governor’s fellow Democrats. SEE ROADS, PAGE 18

LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS

One Michigan roads funding plan being floated would let county and municipal governments seek voter approval for local taxes on fuel that would be dedicated solely to local roads.

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Immigration

HAP’s acquisition a path back to metro Detroit Medicaid market By Jay Greene jgreene@crain.com

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It took a little more than three years for Health Alliance Plan executives to come up with a new strategy to get back into Medicaid managed care in Southeast Michigan after the health insurer lost a controversial appeal of a lucrative state contract for HAP Midwest Health Plan in November 2015. That loss came with an annual financial hit of about $20 million in lost annual profits. Now, health system executives, who feel they have found the right health plan to purchase with Trusted Health Plan Michigan Inc., are back on track again to serve Southeast Michigan, which has the state’s largest concentration of Medicaid enrollees. Earlier this month, Henry Ford made a deal to purchase Trusted, a 9,000-member Medicaid HMO, for about $22.5 million, pending hitting capital and surplus targets at time of closing. The sale also is contingent on approval from the state Department of Insurance and Financial Services, which is expected this summer. “Because serving the Medicaid population is critical to HAP’s mission, we have been wanting to expand our Medicaid footprint, but the right opportunity has not presented itself until now,” said Michael Genord, M.D., HAP’s chief medical officer and CEO of HAP Midwest. “It was important to pick the plan that makes the most sense for HAP, for Henry Ford and for the members,” he said. “Trusted HP-Michigan is a much stronger plan than it was three years ago. We appreciate the job the Trusted team has done in making the plan stronger — both financially and operationally.” Wayne, Oakland and Macomb counties make up the state’s Medicaid Region 10. It includes 33 percent, or 760,000, of the state’s 2.3 million Medicaid enrollees. It is also the state’s most competitive region, with eight plans competing for patients. Besides Trusted, plans include Aetna Better Health of Michigan, Blue Cross Complete of Michigan, McLaren Health Plan, Meridian Health Plan of Michigan, Molina Healthcare of Michigan, Total Health Care and UnitedHealthcare Community Plan. Jon Cotton, president of ApexHealth, a Grosse Pointe Farms-based Medicare Advantage managed care startup, said Henry Ford Health has a natural advantage over other Medicaid health plans because it has a high-quality, built-in provider network that covers much of Southeast Michigan. “They will get to use their own Henry Ford network. Trusted was independent and had no power to negotiate. They took what they could get” in prices from hospitals and doctors in contracts, said Cotton, the former president of Meridian Health Plan. Last year, Meridian was sold to Wellcare Health Plans Inc. of Tampa in a $2.5 billion deal. Trusted has gone through two ownership changes since it was founded in 2002 as ProCare Health Plan by the late Augustine Kole-James, a pharmacist who graduated from Wayne State University. The estate of Kole-James sold ProCare in 2012 to Detroit Medical Center, which renamed it Harbor Health Plan, for $6 million. DMC then sold Harbor in late 2016 for $16 million to Trusted Health Care, a Washington, D.C.-based managed care company.

Henry Ford Health System, owner of Health Alliance Plan, has six hospitals and 29 medical centers as part of its provider network.

Genord

Cotton

Need to know

JJHenry Ford Health System seeks to jump back into the Southeast Michigan Medicaid market with a $22.5 million purchase of Trusted Health Plan JJTrusted has gone through two ownership changes since 2012 JJHAP plans to increase enrollment in the competitive metro Detroit market by fourfold to about 35,000 in the coming years

In 2015 and 2016, Harbor Health was profitable, recording $4.3 million in net income on total revenue of $36.6 million and net income of $2.5 million in 2016 on revenue of $51.8 million. In 2017, however, Trusted began to hit the wall and posted a net loss of $86,000 on $44.5 million revenue. Last year, Trusted reported a net loss of $3.6 million on revenue of $26.9 million in 2018. Genord said HAP expects to turn around Trusted and projects to increase its membership four-fold to 30,000 to 35,000 members over several years. He said long-term growth will come by providing high-quality care, using the resources of Henry Ford Health’s six hospitals, 29 medical centers, 1,600 employed and affiliated doctors as part of its provider network and tapping into HAP’s experienced management team. “Over the last six months our leadership have developed a plan to control quality and costs and address social determinants of health,” Genord said. Social determinants to health include such barriers as lack of transportation, access to health care services, healthy food, education and housing. “Henry Ford Health already services 35,000 Medicaid members” at its hospitals and medical centers. “We coordinate their care and offer more support (to address) social determinants of health.” Cotton said the key to increasing membership is having good quality scores and working closely with doctors and provider groups. The Medicaid population doesn’t respond to

marketing and advertising, he said. “Marketing in Medicaid is a waste. It doesn’t work. You need good quality scores to grow, and you need to treat providers right. If doctors support your plan, they can talk with members when they come in and ask them to be a part of the health plan,” Cotton said. People eligible for Medicaid usually either choose a plan recommended by their doctors, by word of mouth, reputation or by the Medicaid program automatically assigning them a plan if they don’t choose one on their own. Auto assignment is based on a formula that gives priority to plans with higher quality scores from the National Committee for Quality Assurance and the U.S. Agency For Healthcare Research and Quality. Genord said HAP’s plan this year is to keep all 22 current employees in place, integrate information systems with HAP and Henry Ford and take over support services Trusted used from its parent company’s home office. Trusted members will be able to keep the same doctors and use their current identification cards. In January, HAP will merge Trusted Health into HAP Midwest Health Plan and rename the combined company HAP Empowered Health Plan Inc. The aim is to gain economies of scale, reduce costs and present a united marketing front. HAP Midwest currently offers Medicaid products only in Region 6, which includes Genesee, Huron, Lapeer, Shiawassee, St. Clair and Tuscola counties in mid-Michigan and the Thumb, where it covers about 3,500 people. The company also said it participates in the MI Health Link Dual Demonstration Project, serving 4,500 people who are eligible for both Medicare and Medicaid in Wayne and Macomb counties. HAP Midwest started from scratch in Region 6 in 2015, Genord said. “We have been growing over the last few months and are very successful.” Cotton said the $22.5 million purchase price for Trusted is rather high for a 9,000-member plan, but said Henry Ford Health isn’t paying for members. “They are buying geography,” which is the populous Southeast Michigan region of more than 4.6 million people. “What HAP won in the last (state Medicaid contract in 2015) is not a Henry Ford region (Region 6). This is their sweet spot,” Cotton said. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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$33M campaign will expand tutoring in Detroit high schools By Sherri Welch swelch@crain.com

Beyond Basics has launched a $33 million campaign to take its literacy tutoring to 10,000 Detroit high school students who aren’t reading at grade level over the next three years. The move comes amid a Detroit Public Schools Community District review of student performance to inform decisions on which tutoring agencies it will ask to expand their efforts going forward and which will be eliminated. Beyond Basics launched the campaign, its first ever, this spring after Superintendent Nikolai Vitti asked it to expand Good its tutoring — which can increase a student’s reading by a grade level or higher in an average of six weeks — in the district’s high schools, said co-founder and CEO Pamela Good. It’s an ambitious target for a nonprofit that raises about $2 million each year from donors, corporations and foundations to fund its work. But it’s necessary, Good said, given the large number of students in the district who aren’t reading at grade level. “This problem has gone unaddressed for decades, leaving thousands of kids behind,” she said. “(The district) is trying to select research-based partners that are moving the needle ... that is one of the things they like about us.” The level of intervention, both in intensity and scope, that’s needed in the high schools and the district as a whole isn’t currently funded, she said. “Dr. Vitti has agreed to help us go out to the foundations and raise these dollars we need,” Good said. “He talks about how he doesn’t typically do this with partners. This is a different level of partnership.” The district’s focus this past year has been on improving core literacy competency and improving intervention for struggling readers in grades K-8, Vitti said in an emailed statement. In the coming year, the district will focus on expanding literacy intervention at the K-8 level, while also implementing a new core literacy curriculum at the high school level, he said. “We asked Beyond Basics to focus on high school literacy intervention to provide more support at the high school level as we focus more on the K-8 level,” Vitti said. “Over the years, we will take direct ownership of high school literacy intervention.”

District review The district’s request for Beyond Basics to expand work in the high schools comes as it assesses the impact tutoring agencies are having. This past academic year, DPSCD used three options to provide contracted tutoring support to students: partners paid at the school level through contracts; partners paid at the district level to be implemented at select schools; and volunteer partners, the district said in an early June response to a request for information on the tutoring agencies working with the dis-

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James Toles, a student at Mumford High School in Detroit, works on reading with Beyond Basics tutor Camille Stawicki.

Need to know

trict, made by Crain's in April through the Freedom of Information Act. The district said it eliminated a number of tutoring contractors during the 2018-19 school year, which ended last week, and shifted to using full-time school staff to provide daily support to struggling readers in small groups. Preliminary results indicate that reform is improving performance, the district said. “With the district’s implementation of a new data system to track student performance this year, we will be analyzing student achievement to make clear decisions on what partners will be expanded or eliminated to improve performance,” it said.

proficiency by a grade level or more within six weeks. In working with students, Beyond Basics determines how far behind they are in reading and gives them a reading “prescription,” Good said, for intervention ranging from 4-14 weeks, depending on their needs. “One size doesn’t fit all in literacy,” Good said. “Our (approach) is very personalized.” Beyond Basics’ trained, paid tutors work one-on-one with students for an hour each day. Its curriculum is multisensory, meaning it appeals to visual and auditory learners and can help both learn to read, Good said. Once students have come through intensive tutoring, they continue to work with volunteer reading and writing coaches. “We need a lot of people coming to the table to help teach kids to read right away, and we need funding,” she said. It costs an average of $3,000 per student for tutoring at the high school level to bring students to grade-level literacy, Good said.

Intensive intervention

The campaign

Beyond Basics estimates that about 10,000 of the 12,000 high school students in the district are not reading at grade level, Good said. That estimate is based on statistics, including the 2017 National Assessment of Educational Progress test which showed that just 7 percent of eighth-graders in Detroit were reading proficiently or better, and Beyond Basics’ own assessments, Good said. The majority of high school students in the district are two or more grade levels behind in reading, she said. “They aren’t able to participate in school because their reading level is getting in the way.” Beyond Basics is currently working in two DPSCD high schools and nine elementary and middle schools. The tutoring is done at no charge to the schools, Good said. DPSCD provides Beyond Basics with space and personnel to help coordinate its tutoring with staff and students. Occasionally, the district also provides $10,000-$20,000 to augment funding provided through donors, Good said. Today, 90 percent of the roughly 5,000 K-12 students it’s tutored have been able to increase their reading

Beyond Basics launched its campaign in May at a private gathering of about 40 supporters and representatives from corporate and family foundations, Good said, noting that Vitti spoke during the event. It’s set a goal to raise $6 million the first year to hire and train another 60 tutors, she said, adding to the 43 it now has. At that level, Beyond Basics would be able to tutor 2,000 DPSCD high schoolers, Good said. As it expands its tutoring in Detroit high schools, Beyond Basics is also looking for another 100 volunteers, Good said. Currently, it has fewer than 20. Since May, the nonprofit has raised $500,000, including a $250,000 matching grant from the Wayne and Joan Webber Foundation, $50,000 from the Aaron and Carolynn Frankel Foundation and $30,000 from the Ideal Group. With earlier gifts and commitments, Beyond Basics has $2.5 million toward its first-year goal, Good said. “As we raise the dollars, we’ll add kids,” she said, noting the nonprofit will look to be in a dozen Detroit high schools in the coming year, up from two last year.

JJCampaign is the nonprofit’s first-ever JJPartnership emerges as Detroit Public

Schools Community District requests expanded high school tutoring

JJBeyond Basics estimates about 10,000 of the 12,000 Detroit high school students are not reading at grade level

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Report: SE Michigan has hundreds of entrepreneur support groups, but collaboration needed Need to know

By Sherri Welch swelch@crain.com

There are more than 200 organizations providing support to entrepreneur-led companies in Southeast Michigan, according to a new report released Thursday afternoon by the New Economy Initiative. NEI, the economic development effort launched by 10 foundations in 2007, has made grants to a quarter of them, according to the study, “Community of Opportunity.”

JJNew Economy Initiative has funded a

quarter of 227 entrepreneur support organizations operating in region

JJStudy notes opportunities for high-level thinking about support system, collaboration, advocacy

The NEI-funded groups are highly collaborative and refer entrepreneurs among themselves to better meet entrepreneurs’ needs, but that type of col-

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laboration isn’t happening across all of the business support organizations, according to the study, which focused on Wayne, Oakland, Macomb, Washtenaw and Genesee counties but also identified resources for entrepreneurs in adjacent communities. “There is a broad network of support in Southeast Michigan, (with) many resources to help people start and grow businesses,” NEI Communications Director Matthew Lewis said. But “an opportunity that we’ve identified for the future is to figure out how to better connect these resources because that will create a more efficient experience for entrepreneurs,” he said. “When entrepreneurs succeed, so does the region.” The study was funded by NEI with additional support from the William Davidson Foundation, one of what has grown to 13 funders that have contributed a total of $159 million through three rounds of support over the last 12 years. Funding for NEI, which operates un-

der the umbrella of the Detroit-based Community Foundation for Southeast Michigan, runs out in 2021. NEI commissioned the study as part of a strategic look at the initiative’s future once funding runs out, Lewis said, noting that NEI has yet to determine if it will sunset after that happens. “This study shows that there is a role for high-level thinking about the entrepreneurship support system and advocacy” functions NEI currently provides, Lewis said. Among other findings, the study found: J There are 227 business support organizations in the region, supporting startup and growing companies led by entrepreneurs. J 69 percent of the resources are clustered in the region’s urban centers: Detroit, Ann Arbor and Flint. J Most entrepreneurs seek support, on average, within 14 miles from their home, but some will travel up to 150 miles to get it. J Entrepreneurship support in South-

east Michigan is largely generalized versus industry-specific. J 89 percent of the organizations that deliver entrepreneurship support resources are recipients of foundation grants or public funds. NEI Director Pamela Lewis unveiled last week the study’s findings and insights about how to strengthen the entrepreneurship support network to make resources more accessible as part of Detroit Startup Week, a regional entrepreneurship conference that’s supported by NEI. NEI operates with six full-time employees, Lewis said. Last year, it made $4.45 million in grants, following $7.35 million in grants in 2017. In all, it’s awarded 481 grants, totaling $120 million, since it began grantmaking in 2009. Those grants have enabled business support organizations to assist more than 12,000 companies, including 2,725 startups. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

$100M West Bloomfield residential community aims to emphasize nature By Annalise Frank

afrank@crain.com

Ivanhoe Cos. is looking to build a walkable living community in West Bloomfield Township with its $100 million, up to 249-unit Balmoral Park project. West Bloomfield-based real estate

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developer Ivanhoe plans to start work on the 93-acre community along Walnut Lake and Haggerty roads this year, it said in a news release. It expects homes to become available by late this year. Balmoral Park has received approval from the township and is slated for one of its few remaining big, vacant parcels, the release said. The developer is emphasizing its attention to environmental and “natural” details, with amenities including a boardwalk, 20 open spaces or parks, paths and trail connections, walking bridges, preserved wetland areas and trees. The company chose Horsham, Pa.based Toll Brothers as its builder. The developers deferred comment on other details and construction schedule to Toll Brothers. A representative was not available to comment Friday. Ivanhoe previously considered us-

ing the site for a 300,000-square-foot commercial center or light industrial or religious uses. “We’ve been developing in metro Detroit for 30 years, and we’ve always been known as environmentally sensitive developers,” Ivanhoe CEO Gary Shapiro said. “There’s a tremendous amount of wetlands and lakes and a small creek ... it took three years of creative design... things that had to be very creative to be able to provide housing on a very unique, sensitive site.” Ivanhoe has created $200 million in living communities in metro Detroit in the past four years, with substantial work in West Bloomfield, as well as projects in Novi and Rochester Hills. It’s planned and built more than 100 residential and mixed-use developments. Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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OPINION EDITORIAL

Time is now to make roads funding deal A

coalition of business advocates last week had a simple message for legislators: Fix the roads before you hit the road. The Michigan Chamber of Commerce, Business Leaders for Michigan, the Detroit Regional Chamber and numerous other groups all called on the Legislature to pass “a multi-year investment of billions of new dollars” and to make meaningful progress on a plan before recessing for the summer. They’re right. The time to move forward is now. Instead, various factions in the Capitol are busily working on their own plans. House Democrats came out with part of theirs last week — a misguided proposal to raise business taxes that has little in common with Gov. Gretchen Whitmer’s proposed increase in gas taxes. (The House Democrat proposal also would not raise the amount of money needed to address the problem.) Republicans, who control both chambers of the Legislature, say they intend to put out a counterproposal in July. And nobody seems to be advocating for Whitmer’s gas-tax increase, which at least has the virtue of placing the cost for road repairs on the heaviest users. Not only are the roads deteriorating further — and the eventual price tag going up — with every day that passes, but the political price lawmakers will pay for a tax increase is rising, too. The reality is that there will be financial pain for taxpayers in some form. It’s not realistic to expect to raise the $2.5 billion that’s said to be needed by putting a toll on out-of-state trucks. And that means there will be a political cost. That cost, as it always does, will shrink over time. The sooner lawmakers bite the bullet and make the change, the more time voters will have to forget a vote to raise taxes — and the more likely they will be to see the benefits from that spending in the form of smoother roads. Voters sent a clear message in last fall’s election that this is their priority. It’s incumbent on leaders in Lansing to make good on that promise, but the more time passes, the harder that will be to do. And if lawmakers don’t make good on the roads? Well, the political price then will be even higher. Avoiding that might be worth a delay in summer vacation.

Things are getting done — let’s hope roads are next C

ontrast what’s happening in Michigan vs. in Washington, D.C. In our nation’s capital, political leaders too often spend more time playing party politics than passing critical legislation that addresses the real issues faced by citizens. From immigration to infrastructure, America waits for answers while leaders too often jockey for who might get the credit. Now look at Lansing. In the past few weeks, the state negotiated a complicated deal that will bring more than 5,000 high-paying automotive jobs to our state. The deal cost a fraction of what similarly sized projects in other states cost and reinforces Michigan’s position as the leader of the industry’s radical transformation. And it was done without any political rancor. Our state policy makers also showed they could work together to solve one of our state’s long-standing problems — the highest automobile insurance rates in the nation. At a time when Michigan desperately needs to grow population, the cost of auto insurance discouraged people from living here — especially in our larger cities. The reforms passed with broad bipartisan support and within the first six months of a “divided” state government. Finally, we see growing consensus to address the state’s notoriously bad roads. If a meaningful deal can be struck that provides enough new and

OTHER VOICES Doug Rothwell

sustainable revenue to fix our roadways for good, Michigan will have solved a problem that has perplexed our leaders in Washington for decades. Momentum has grown here over the last several months, whereas division has grown in Washington. Our leaders in Lansing have taken meaningful action to solve real problems that stymie growth, meanwhile Washington is short on solutions and full of rhetoric. Government often gets a bad rap these days because of what is or isn’t happening in Washington. What’s getting done in Lansing should give us hope that Michigan can show the nation how to govern. Our “divided” government is united, and we’re optimistic that the next tough challenge to be solved is a long-term funding source for our terribly embarrassing roads. Doug Rothwell is president and CEO of Business Leaders for Michigan.

COMMENTARY

Hard to see EV tax credit benefit T

he largest incentive for the production of electric vehicles provided by the federal government is the tax credit for the purchase or lease of a new plug-in electric car. The amount of the credit depends upon the battery capacity of the vehicle, being larger the larger the battery capacity, and the amount of tax liability the individual purchaser has. The maximum credit is $7,500 and is non-refundable, meaning that the credit can only be used to reduce your tax liability. So if you have no tax liability you don’t get a credit. U.S. Sen. Debbie Stabenow recently introduced the Driving America Forward Act as a mechanism to extend the tax credits. Under current law the tax credit is available for the purchase or lease of a vehicle from a manufacturer until the manufacturer sells 200,000 vehicles. Once that target is met, the credit is phased out, basically over a one year period. Only July 1 the tax credits for Tesla will be reduced to $1,875 for the rest of the year and then ended. The credit for General Motors electric vehicles began phasing out on April 1. Nissan and Ford are more than halfway to the phase-out. There are a number of reasons to be opposed to the Driving America Forward Act. First is the question of whether electric vehicle use actually reduces greenhouse emissions compared to conventional vehicles. One has to account for what is known as the life emissions of vehicles, which includes, for example, the emissions from obtaining the gasoline for conventional cars and from powering the electrical plants that charge the electric vehicles.

OTHER VOICES Gary Wolfram

It is possible that electric vehicles have a lower carbon footprint, but how much depends upon the source of electricity and such things as the emissions from battery factories in China. Even if the use of an electric vehicle reduces greenhouse gases, it is clear that the use of electric vehicles has a very small effect on total carbon emissions. This is simply because such vehicles are a very small fraction of total vehicles. Jonathan Lesser, scholar at the Manhattan Institute, found that “based on the EIA’s projection of the number of new electric vehicles, the net reduction in CO2 emissions between 2018 and 2050 would be only about one-half of 1 percent of the total forecast U.S. energy-related carbon emissions.” Another question is whether the credit has been effective in expanding sales of electric vehicles. In October of 2018, 10 years after the credit began, total electric vehicle sales hit the 1 million mark. The number of cars registered in the U.S. in 2018 was 98.35 million. So if all the electric vehicles sold were still on the road in 2018 they would make up about 1 percent of all U.S. cars. In 2018 plugin electric vehicles sales were about 2

percent of the total of the light vehicle sales in the U.S. and it is possible that many of these sales would have occurred in the absence of the credit. The credit certainly hasn’t resulted in a surge in electric vehicle use. A number of presidential candidates have expressed concern about government programs that benefit the wealthy. The tax credit for electric vehicles is surely such a program. Since the credit is limited to the amount of your tax liability, and about 40 percent of U.S. households pay no income tax, clearly the vast majority of the credit will go to households that are relatively wealthy. The U.S. Department of Transportation 2017 National Household Travel Survey found that two-thirds of electric vehicle owners have an income above $100,000. A February 2018 Pacific Research Institute found that 79 percent of the tax credits are taken by people who make over $100,000 per year. A 2015 report from the Energy Institute at Haas found that Americans in the top 20 percent of income earners received about 90 percent of the federal tax credits for electric vehicles. The 2017 tax changes are likely to increase the share of credits going to upper-income households. Certainly there are more effective ways to address carbon dioxide emissions than the Driving America Forward Act, a piece of legislation that primarily serves to provide a tax reduction for those who are wealthy enough to own an electric vehicle. Gary Wolfram is William Simon professor of economics and public policy at Hillsdale College.

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 2 4 , 2 0 1 9

LETTERS

Manufacturing’s future must be government priority

Create some STEAM with art to set up students for success

U.S. Sen. Gary Peters’ call for a National Institute of Manufacturing is a welcome announcement in the Industry 4.0 era. Connected “smart” factories are creating new ways to design and produce products, changing the way companies operate and revolutionizing the role humans will play in the labor economy. The U.S. — and Michigan in particular — must maintain our manufacturing leadership in a time of dramatic technical and cultural disruption. A National Institute of Manufacturing could immediately address the glaring absence of a unified U.S. national policy aimed at Industry 4.0 integration, implementation and education. Meanwhile, Europe and Asia have well-entrenched, actionable Industry 4.0 agendas with metrics that should be alarming to all U.S. manufacturers and government leaders. Industrie 4.0 is the name of Germany’s strategic initiative to establish itself as a lead market and provider of advanced manufacturing solutions, technological leadership in industrial production and research and development. Made in China 2025 is China’s strategic plan, issued by Premier Li Keqiang and his cabinet in May 2015. Its goals include increasing the Chinese-domestic content of core materials to 40 percent by 2020 and 70 percent by 2025. Such global initiatives cannot be ignored. Automation Alley, Michigan’s Industry 4.0 Knowledge Center, supports a National Institute of Manufacturing and a national Industry 4.0 policy. Other countries have made it a priority and we must follow suit — it is necessary for our nation to remain globally competitive. Michigan and the U.S. have the potential to be a leader in Industry 4.0 implementation, but only if government makes it a priority. It’s a nonpartisan issue that must be addressed now. Tom Kelly Executive Director and CEO Automation Alley Troy

As director of the Detroit Institute of Arts, I see firsthand the value of STEM learning and was inspired by Crain’s recent recognition of notable women in STEM fields. At the DIA, we add an “A” to STEM for “Art.” Through our professional development programs, the DIA helps metro Detroit teachers think holistically about what STEAM — science, technology, engineering, art and mathematics — means for student learning. Our programs are free to teachers

Nominations open for Notable Women in Education Leadership, Law Crain’s Detroit Business is seeking nominations for notable women in law and education leadership. We will recognize Notable Women in Education Leadership in a special report on Sept. 23. If you know an outstanding woman superintendent, principal, administrator, board president or other leader, you can tell us about her at crainsdetroit.com/nominate. Higher education as well as K-12 leaders are eligible to apply. Nominations are due July 16. We will honor Notable Women in Law on Oct. 28. Nominations are due via crainsdetroit.com/nominate by Aug. 6. For questions about either program, contact special projects editor Amy Bragg: abragg@crain.com or (313) 446-1646.

The DIA helps metro Detroit teachers think holistically about what STEAM — science, technology, engineering, art and mathematics — means for student learning. in Macomb, Oakland and Wayne counties, and help them learn how to incorporate art and visual thinking strategies into their classrooms and lesson plans — whether they teach

math, social studies, science, English or art. We also host several educational events for students to highlight the benefits of STEAM learning. Throughout June, we are hosting several “Putting the STEAM in STEM” events in our iconic Rivera Court, which features the “Detroit Industry” murals created by renowned Mexican artist Diego Rivera. During these adventures, the DIA’s gallery teachers engage students in open-ended discussions using visual-thinking strategies. Following the discussion, a science educator leads student teams through a technology and engineering problem-solving adventure using the murals. The DIA is a leader in education,

ACCELERATING TOWARD A CLEANER FUTURE

and we are honored to play a role in encouraging metro Detroit students to engage in STEAM learning. We look forward to having you join us at the DIA for a tour, a free field trip with your child or one of our many educational programs and events. Salvador Salort-Pons Director Detroit Institute of Arts

SEND YOUR LETTERS J Crain’s Detroit Business will consider for publication all signed letters to the editor that do not defame individuals or organizations. Letters may be edited for length and clarity. Email: malee@crain.com

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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 // J U N E 2 4 , 2 0 1 9

FOCUS

ANN ARBOR REAL ESTATE

Ann Arbor needs more affordable housing, but how? By Kirk Pinho kpinho@crain.com

Perhaps the most consequential battle in Ann Arbor is taking place not on the gridiron or the hardwood, but at the city council dais. That’s where members of the progressive city’s 11-member governing body have been sparring over how to address a looming crisis: the need to create about 2,800 units of new, permanent affordable housing by 2035, or else risk economic stratification that one report warns could be irreversible. There isn’t much disagreement that the city needs more affordable housing. But meeting a goal of 140 new units per year seems far from grasp. The majority and minority factions on council can barely agree on the root cause of the shortage, never mind approve new housing. Over the course of two months, a pair of proposals that would have provided at least 81 affordable apartments for senior citizens were narrowly rejected: the Lockwood of Ann Arbor project at 3365 Jackson Road east of Wagner Road and the Brightdawn Village project at 2805 Burton Road north of Packard Street.

Need to know

JJA 2015 reports estimates Ann Arbor needs to create 140 new units of affordable housing every year until 2035 JJSince then Ann Arbor has created 50 new units at most JJCity Council, Mayor at an impasse over how to address the crisis and what is causing it

Lockwood was shot down in May, while Brightdawn was scuttled earlier this month. Zoning matters were at the forefront of concern for both projects. “This is a subject of community conversation,” said Mayor Christopher Taylor, who supported both projects. “There have been shifts on council that led us to where we are today. If these projects had come up a year ago, I believe they both would have passed. We had an election in 2018. Some people won, some people lost.” In the August primary election, Taylor allies Chuck Warpehoski, Kirk Westphal and Graydon Krapohl fell to challengers Ali Ramlawi, Kathy Griswold and Elizabeth Nelson, respectively, setting the stage for a series of battles that has the incumbent mayor in the minority on issues pertaining to affordable housing and growth. Three months later, a key ballot initiative was defeated that would have pumped $5 million into affordable housing. Ramlawi, who opposed the rezoning for the Lockwood project that is in his council ward, said he knows more affordable housing is needed but also views the problem as one

“The reality is too mind-blowing... We probably need 20,000 units for low and moderate income households. The demand is so high and it feels so out of reach.” Jennifer Hall, Ann Arbor Housing Commission executive director

Courthouse Square at 100 S. Fourth St. in Ann Arbor is one of the city’s larger affordable housing properties, with 116 units. COSTAR GROUP INC.

created by income inequality, an issue difficult for the city alone to tackle. “We have a council now that is made up of a lot of independent thinkers who represent their wards and constituents,” said Ramlawi, owner of the popular Jerusalem Garden restaurant downtown. “It becomes complicated quickly and controversial even faster when these zoning requests come up for a vote because now developers are using the affordable housing tool or label on these type of developments, developments that in many instances degrade the quality of life for the members of the community that live nearby. The infrastructure a lot of times cannot handle these new developments, the sewer, the water, the roads simply cannot handle them.” But if the council can’t reach a consensus, and if private developers don’t come to the table with projects that can garner the six votes necessary, the city faces an even greater problem in the years to come. “The reality is too mind-blowing,” Jennifer Hall, the Ann Arbor Housing Commission executive director, said of the city’s affordable housing crisis, which was detailed in a Washtenaw County Office of Community and Economic Development-commissioned 2015 report by Alexandria, Va.-based community planning company CZB LLC. Indeed, the report says that the number of people in Ann Arbor and Ypsilanti paying more than half of their income for housing more than doubled from 2,200 to 4,404 between 2000 and 2012, and it increased 74 percent for those paying more than 30 percent of their income, from 7,288 to 12,646. Experts generally say people should spend no more than 30 percent of their income on housing costs. Hall doesn’t sugar coat the challenge ahead. “We probably need 20,000 units for low and moderate income households. The demand is so high and it feels so out of reach,” she said, noting that the area median income in Ann Arbor is $102,000.

The coming crisis At least as of now, that sentiment is not unfounded. The CZB report recommends 140 new affordable units every year until 2035. At most, about 50 units have been developed in the four years since the report was released. It says Ann Arbor’s housing market is currently fundamentally strong but threatens to become “considerably out of balance.” In addition, neighboring Ypsilanti, home of Eastern Michigan University, has a housing market that is “fundamentally weak and in some respects in abject distress.” SEE HOUSING, PAGE 11

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 2 4 , 2 0 1 9

SPECIAL REPORT: ANN ARBOR REAL ESTATE

What’s driving demand in Ann Arbor?

Q&A: Michael Jurgenson, president and managing broker, Swisher Commercial By Kirk Pinho

of new companies, startups, a lot of companies that are interested or that have landed in Ann Arbor or are starting in Ann Arbor that are either entrepreneurial-driven or technology-driven in a lot of ways. Obviously the University of Michigan had a lot to do with that, historically, and I think we’ll continue to be a catalyst for new entrepreneurs and new businesses that are looking to evolve and stay in the area.

kpinho@crain.com

remain optimistic, both on the shortterm future as well as out there a couple years. There continues to be pretty solid demand for commercial properties in the Ann Arbor/greater Washtenaw area, and we really don’t see any change in that forthcoming. I would say that as we look at the market here, we continue to see a lot

HOUSING FROM PAGE 10

The result is very much a tale of two cities, the report says. “Ann Arbor and those with Ann Arbor addresses are at one end of the spectrum where property values are increasing and that appears likely to continue, while Ypsilanti (city and township) is at the other and in real trouble,” the report says. “At this unblended scale, these are two markets going in opposite directions with three very probable outcomes, barring a significant change in policy at the local jurisdictional or countywide level.” The scenario is unsettling: An Ann Arbor that is increasingly unaffordable for non-student renters and eventually prospective buyers and Ypsilanti becoming “more distressed and thus more affordable, especially to at-risk households.” Families working in Ann Arbor will continue to be priced out of the city, prompting them to move to Ypsilanti and other areas that are more affordable, the report says. “The result will be a county decreasingly affordable and out of balance and, eventually, unsustainable, as some parts of the county possibly degrade beyond a point of no return, and others grow in value beyond a point that’s ever again affordable,” the report reads. The Ann Arbor Board of Realtors says that the average single-family home listing price shot up 7.4 percent to $350,178 in May from $326,126 in May 2018, while the average sale price climbed 6.9 percent from $325,151 to $347,547 in that time period. Condo list prices have surged 15.9 percent from $234,480 to $271,762 from May 2018 to last month, while the sale prices rose 14 percent from $235,548 to $268,542.

“I would say that Ann Arbor continues to be probably one of the most sought-after locations for investors because of its reputation both nationally and internationally.” Michael Jurgenson

I think Google has had good success since locating here and their recent expansion is clear evidence of that. I think it continues to capitalize on a lot of the employees they can find in this region with a lot of the technology-driven backgrounds that are available here. You say that the vacancy rate for office/flex space in Ann Arbor has fallen from 7.2 percent at the end of 2017 to 6.4 percent at the end of last year. Why is that happening?

A couple things. Part of it is demand. Companies continue to grow and when you couple that with the lack of new product, new projects that have come on board, you see vacancies decreasing. Right now, downtown

Rising costs

The average single-family home sale price in Ann Arbor has increased 28 percent in five years, from $271,285 in May 2014 to $347,547 in May 2019. $350K 10% $325,151 $300K 8.50% 8 $250K

$271,285

6.90%

$200K 5.20%

$150K

3.50%

$100K

$50K 0

1.50% ’14

’15

’16

’17

’18

May ’19

Average increase over previous year

Crain’s Detroit Business: What’s your outlook for the commercial real estate market the next 12-24 months or so? Michael Jurgenson: I would say we

What does Google’s recent announcement of an expanded campus there mean for Ann Arbor?

Average residential sales price

Michael Jurgenson became president and managing broker of Ann Arbor-based Swisher Commercial real estate brokerage firm about six years ago after being the managing partner of a northwest Ohio firm, Michael Realty, that sold to CBRE Inc. in 2008. But the transition to the Wolverine country wasn’t as tricky as you might expect for the former Ohio resident: His bachelor’s degree is from the University of Michigan. He spoke with Crain’s Detroit Business about the state of the Ann Arbor commercial real estate market and what Google’s recent announcement of an expanded footprint there means for the region.

has probably less than a 5 percent vacancy and the overall market for office is 6-7 percent. That’s something a lot of areas do not have. We would kill for that in some of our suburbs.

It’s nice for landlords that have properties in the area, but it can reach a point where it is somewhat detrimental in that you don’t have the kind of vacant space companies need for future expansion. We are at a point where we really need to see some new speculative-type space to come onto the market so we have the opportunity to provide new space for companies to continue to grow. Why hasn’t there been new product?

The underwriting standards have changed somewhat since the last building boom. It’s tougher to get things financed today than it was six, seven or eight years ago. A lot of banks or lenders are requiring pre-commitments for a portion of the space. One of the biggest detriments to that is the lead time required. A lot of companies are ready to move and need the space within three months to a year out, and it may take a minimum of two years for a building from start to finish to be ready, so there is a gap there and that’s an issue.

A $1B problem That’s not surprising to Albert Berriz, the CEO of the Ann Arbor-based real estate investment giant McKinley Inc., which develops and owns affordable workforce housing for those generally making between 50 and 80 percent of the area median income. There are a host of reasons for that — in fact, there are close to a billion of them, said Berriz, whose company is one of the largest owners/operators of such housing in the country, and has 60 percent of Washtenaw’s stock. Berriz estimates that it costs about $325,000 to build an affordable unit. At that rate, building 2,800 units is about $910 million. “You are trying to put $1 billion in

I would say that Ann Arbor continues to be probably one of the most sought-after locations for investors because of its reputation both nationally and internationally. With that, you have seen (capitalization) rates for properties that are in a lot of ways significantly less than what investors might find in other metropolitan areas. So it’s very competitive and there is a lot of demand and not a lot of supply. How have rents been performing?

We have seen gradual increases in rents over the past couple years as the market has firmed up. But at the same time, I think there are still pretty attractive rates in the suburbs for both office space and flex space. Rents in the suburban office market generally would range from $20 to the low to mid $20s as an average per square foot, and for downtown office, most of the higher-end offices would be in the mid $20s to low $30s per square foot. Suburban flex would be probably in the range of high single-digits to maybe $14-$15 per square foot. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

Intellectual Property Experience

In Your Corner.

SOURCE: Ann Arbor Area Board of Realtors

Since the CZB report’s release four years ago, city leaders have been scrambling to find solutions, resulting in a hodgepodge of ideas, but not a lot of results.

What’s driving the drop you’re noticing in building sales?

capital through a straw because the nonprofits and the city have to stand in line in Lansing to get capital,” in the form of low-income housing tax credits and other financing, he said. “Even if Ann Arbor got all the allocation, it wouldn’t be enough.” He said the idea that the city and nonprofits like Avalon Housing and a handful of others could build the needed affordable housing supply by 2035 is “a fantasy.” It comes down to local politics, which are dysfunctional, Berriz said. “The mayor and all the people involved are married to the community nonprofits. The real solution to this problem is being done by public-private partnerships ... You can’t expect the mayor and these community nonprofits to raise the capital and have the expertise to execute at that level. They can’t. I run a $4 billion business. It’s not chopped liver to raise $1 billion. It’s a big deal.” SEE HOUSING, PAGE 12

Contact Erin Klug at emklug@varnumlaw.com

Domestic and international intellectual property strategy development Patent, trademark and copyright procurement for companies and entrepreneurs Mechanical and electrical arts focus with experience in automotive, medical devices, consumer goods, mobile applications and sensor technology

Metropolitan Ranking Intellectual Property

2019

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 2 4 , 2 0 1 9

18 more months sought for JLA redevelopment plan By Kirk Pinho

kpinho@crain.com

A delay in Joe Louis Arena demolition getting underway is prompting a bankruptcy-era holdout creditor responsible for the property’s redevelopment and the city to seek yet another 18 months to produce a redevelopment plan. Gotham Motown Recovery LLC, which is a subsidiary of New York City-based Financial Guaranty Insurance Corp., and the city are asking City Council to approve giving Gotham Motown until June 15, 2021, to submit a plan for the 9-acre JLA property. The current deadline is 5 p.m. Jan. 15, 2020, under terms of a mediated settlement reached between the two parties in July 2018 after Gotham Motown sued in federal court in February 2018 for more time. The original deadline was Nov. 21, 2017, under terms of a settlement of Detroit debts reached in federal bankruptcy court in October 2014 when the city was under emergency management. An extension agreement to be considered by City Council says that although demolition of Joe Louis Arena is now underway, that and environmental remediation won’t be complete within a required one-year time period, necessitating the need for the extension. Chuck Raimi, deputy corporation counsel for the city, said in an emailed statement to Crain’s that the development agreement between FGIC and the city said demolition was to begin before Sept. 15, 2017,

KIRK PINHO/CRAIN’S DETROIT BUSINESS

Demolition is underway on the Joe Louis Arena, which is coming down to make way for a future development.

Need to know

JJCity, creditor to ask City Council for

extension of “unrealistic timeline”

JJDemolition underway but won’t be complete by current Jan. 15, 2020, deadline JJCost of demolition estimated at $13.2 million

and be complete within a year from then. “Over the last several years, it has become apparent that the development agreement as negotiated by the

emergency manager (Kevyn Orr) provided a completely unrealistic timeline for the demolition of the arena,” Raimi said in the statement. “The city first had to secure the funding, which included state approvals that didn’t take place until last year. Since that time the DBA (Detroit Building Authority) has moved quickly to move through the various stages of demolition, including asbestos surveys and abatement, with the demolition process now under way. Because of the change in the demolition timeline, we feel that this extension is appropriate

HOUSING FROM PAGE 11

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The city lives and dies with the University of Michigan, by far its top employer with nearly 31,000 employees between UM itself and its health system. That’s more than four times as many as the next-highest employer, Trinity Health, with about 7,200 employees. The city says UM’s annual enrollment has increased by about 7,100 since 1990, a jump of 17.88 percent from 39,631 to 46,716. However, the university has not developed new housing to accommodate its increasing student body, instead deferring to the private sector to produce more off-campus housing. “Their expectation is that the private market will provide housing, which is fine, and they see it as a positive thing that they are not providing tax-exempt real estate,” Hall said. “The issue is, if they keep adding students over the years, they have to live somewhere, and we haven’t built any type of housing to absorb all those students.” Kim Broekhuizen, associate director of public affairs for the university, said in a statement that the university has added 1,080 student beds in recent years between the North Quad complex and the Munger Residence. “We value our partnership with the city of Ann Arbor on many initiatives that help to support the quality of life for residents,” she said in a statement emailed to Crain’s. Taylor said he hopes UM becomes more active in the affordable housing space. “They have land and resources,” Taylor said. “The quality of life in Ann Ar-

and necessary.” The proposed new agreement calls for demolition and remediation to be complete by June 15, 2020. The demolition cost is estimated at $13.2 million and has received brownfield financing. Exterior work began earlier this week, with panels being stripped from the 40-year-old arena. A message was left with Derek Donnelly, senior managing director for FGIC, on Wednesday morning. Bankruptcy court documents in 2014 said that the property was to be redeveloped with a hotel with at least bor is of critical importance to the university, and this is a substantial threat to the quality of life in Ann Arbor: the lack of affordability, what it means for economic stratification, what it means for racial segregation and separation, other forms of demographic separation, what it means for increased transit into the community, the quality of life for people who are just trying to get around to their jobs.” In an interview in his downtown Ann Arbor law office, he paused. “It’s a big deal, and they are a player that hasn’t played.”

Rejected plans The city has made a few efforts to get more affordable housing in Ann Arbor. One was to funnel revenue from a 2017 countywide public safety and mental health millage to an affordable housing trust fund to the tune of about $880,000, which would be used to leverage additional public and private financing for projects. Another idea was selling off cityowned land such as the so-called library lot, Taylor said. That idea has been politically contentious. In addition to overhauling City Council in 2018, voters approved Proposal A, which prevents the city from selling the lot to Chicago-based Core Spaces for $10 million, with half of that money going toward affordable housing. The developer wanted to build a 17-story project that would have had among its uses 360 apartments and 131 hotel rooms, according to MLive.com. Proposal A keeps the 0.8-acre property in the city’s hands and mandates it become a public park downtown. The city is also considering using other public property for affordable housing, although that has been a slow slog. Berriz said that’s not surprising.

300 rooms and standing no more than 30 stories and a mix of office, retail, recreation and residential space. Gotham was working with Detroit-based architecture firm SmithGroupJJR, which in September 2016 prepared a 29-page outline for what could be done with the Joe Louis Arena property. It calls for re-establishing the street grid and creating a landmark development that connects with the Detroit riverfront. It also suggests ending the two northsouth freeways through downtown, M-10 and I-375, farther north, either at Howard and Larned streets or about at I-75. Several development mixtures are contemplated in the outline, including a 24-story residential tower, an expansion of Cobo Center and parking with about 2,000-4,000 spaces. Today, it’s not known what precisely is being contemplated for the property. The property’s complex nature and an evolving commercial real estate market have made it difficult to submit a redevelopment proposal, Gotham Motown has argued in the past. One city official has called what surrounds the arena “an absolutely wicked entanglement of infrastructure” that makes redevelopment difficult. The arena hosted its last Detroit Red Wings game on April 9, 2017. The team now plays at Little Caesars Arena along with the Detroit Pistons. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB “Ann Arbor kills deals,” he said. “There is no question about that. We all know that ... Take those (city-owned) parcels and plan those with one or many developers. You are probably going to have to get into the neighborhoods. If you are ever going to get past the NIMBY (Not in My Backyard) thing in Ann Arbor, you have to go where people don’t live.”

Ideological differences Ramlawi rejects the assertion that the new council majority is stonewalling projects to keep them out of their respective neighborhoods. “Proponents of affordable housing often criticize council for not approving developments because their argument is that adding supply will lower the cost of housing,” Ramlawi said. “That’s been Ann Arbor’s approach up until this council. Prior council focused solely on adding more supply at all expense. Now we are taking a new look at that. By simply adding more market-rate housing supply, it isn’t going to bring down the cost of housing for folks.” (He also characterized some affordable housing proponents as “zealots.”) Hall, the housing commission director, said there has not been an existing affordable housing measure before council that hasn’t had unanimous support. But when it comes to new affordable housing, that’s a different story. “It’s easy to support something that was already there,” she said. “To the neighbors, we were already there. To them, it’s not bringing in new different and low-income people. Until you actually have a project that is in the council member’s ward, building something that was never there before, we don’t know how they feel about affordable housing.”

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 2 4 , 2 0 1 9

Detroit, Lansing to join $12M initiative to boost economic mobility By Sherri Welch swelch@crain.com

Volkswagen of America Inc. occupies this 365,000-square-foot building at 3800 Hamlin Rd. in Auburn Hills.

COSTAR GROUP INC.

Volkswagen explores move By Kirk Pinho

Crain’s Detroit Business

and Larry Vellequette Automotive News

Volkswagen of America Inc. is considering a move from its longtime local hub in Auburn Hills, according to two sources familiar with the matter. A decision is not final, said the sources, who spoke on the condition of anonymity because they are not allowed to talk to the media. The German automaker is exploring not only a lease elsewhere in Oakland County, but also developing a large new building. It could also remain in its existing property or move elsewhere in Auburn Hills. At stake for the city is 1,000 or more jobs in customer relations and after-sales support, as well as engineering and environmental functions. It is also home to the automaker’s interface

with U.S. regulators through its Engineering and Environmental Office. The company occupies all of the roughly 365,000-square-foot building at 3800 Hamlin Road, formerly the company’s North American headquarters, which moved to Herndon, Va., in 2008. A spokesman for Volkswagen of America said the company was in the preliminary stages of exploring its options on the leased facility in Auburn Hills. Auburn Hills Mayor Kevin McDaniel said he is confident the automaker will stay in his city. “We are aware that Volkswagen has experienced impressive growth that may require them to expand their current operations here in Auburn Hills,” McDaniel said in a statement to Crain’s. “Volkswagen has been in our community for nearly 30 years and it is cer-

tainly our goal for them to remain here among all of the automotive industry giants. We stand ready to assist them at their current location or to help them grow at one of the readily available high-profile sites in our community that will continue to provide them with easy access to all of southeast Michigan. Considering our long-standing cooperative relationship with the company, we have no reason to believe they would choose anywhere but Auburn Hills.” Crain’s reported in 2011 that VW was renewing its lease in the building and putting $19.4 million in capital improvements into it. The property is owned by MAK Real Estate Investment Inc., which is controlled by Kuwaiti billionaire Fawzi Mohammed Al-Kharafi. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

Three prominent national funders have selected Detroit and Lansing as two of 10 cities across the country to take part in a $12 million initiative aimed at identifying, piloting and measuring the success of interventions to improve income levels and wealth for residents. Bloomberg Philanthropies, the Bill & Melinda Gates Foundation and the Ballmer Group launched the initiative in November. New data from Opportunity Insights at Harvard University shows the current generation’s chances of earning more than their parents are declining, according to Bloomberg. In many communities, young people and families face significant barriers to climbing the economic ladder based on their neighborhoods. One of Detroit’s top priorities is to develop and preserve affordable housing across the city, Mayor Mike Duggan said in a release. Last year, Detroit announced the creation of a $250 million affordable housing fund to preserve 10,000 affordable housing units with expiring low-income housing tax credits and to create 2,000 new ones by 2023. “Now we’re going to take a closer

Need to know

J $12 million, 18-month initiative will identify barriers, ways to increase wealth, income levels J Funded by Bloomberg Philanthropies, Bill & Melinda Gates Foundation, Ballmer Group J Cities will work closely with other participants to share lessons learned

look at best ways to connect residents in these units to the services Detroit has to offer, such as job training through Detroit at Work,” Duggan said. The city’s increased capacity to use data will be one measure of success of the overall project, said Keegan Mahoney, program director for the city of Detroit Housing and Revitalization Department. Led by the city of Lansing Office of Financial Empowerment, Michigan’s capital city will focus on increasing residents’ access to financial empowerment tools. Its efforts will build on programs and advocacy the city office has already put in place, Lansing Mayor Andy Schor said in a news release. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

EVERY PERSON, COMPANY AND BRAND HAS A STORY. Born out of Crain’s Detroit Business award-winning newsroom, the Content Studio specializes in telling

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DEALS & DETAILS MERGERS & ACQUISITIONS J Stefanini, with North American headquarters in Southfield, an IT provider, has acquired 60 percent of TecCloud Serviços de Tecnologia AHU Ltda, Brazil, part of the Correa da Silva group, Brazil, a data center company. The Correa da Silva group includes companies such as Embratec/Goodcard, Topazio Bank, Intercity Hotels, Sack & Pay and GetNet. The new company of the Stefanini Group has three data centers located in Porto Alegre and Campo Bom, Brazil. Website: stefanini. com

CONTRACTS Cooper-Standard Automotive Inc., Novi, an automotive supplier, has contracted with Peak Sport Products Co. Ltd., Quanzhou, China, a sportswear and sports equipment company, to use Cooper Standard’s Fortrex technology platform in developing and commercializing foamed midsoles in athletic shoes. Website: cooperstandard.com J Ottaway Digital Communications Inc., Troy, a web design and marketing agency, has recently designed and launched websites for Industrial Process Piping, Troy, a mechanical engineering firm; Cold Forming Technology, Sterling Heights, a spline and thread rolling tool manufacturer; Stevens International Forwarding, Fort Wayne, Ind., a moving company, and Gold Medal Moving & Storage, Santa Ana, Calif., a moving company. Websites: ottawaydigital. com, industrialprocesspiping.net, coldformingtechnology.com, stevensinternationalforwarding.com, goldJ

medalmovingca.com J Kirco Manix, Troy, a construction firm, has a contract with Webasto Roof Systems Inc., Rochester Hills, supplier of roof systems to automotive manufacturers, to renovate and expand a building at 2500 Executive Hills Blvd., Auburn Hills, which will be the site of its new Americas headquarters. Websites: kirco.com/kircomanix, webasto-comfort.com J Benzinga, Detroit, provider of financial news for traders and investors, has expanded a partnership with Turnkey Broker Solutions, New York, N.Y., provider of stock trading software, by providing its newswires for their TradeZero platforms. Websites: benzinga.com

EXPANSIONS J LogiGo Automotive, Sao Paulo, Brazil, maker of connected mobility products for the automotive market in Brazil and Latin America, is launching operations in North America with an office in Grand Circus, Detroit. Website: logigo.com.br J Total Security Solutions Inc., Fowlerville, manufacturer of bullet resistant glass and barrier systems, has opened a new facility at 935 Garden Lane, Fowlerville. The new facility doubles TSS’s manufacturing and administrative capabilities. Website: tssbulletproof.com J LimeTray, New Delhi, India, a restaurant manager, has started U.S. operations at 26420 Island Lake Drive, Novi. Website: limetray.com/ usa

NEW PRODUCTS

its Full Swing technology, designed to give a better range of movement. Website: carhartt.com J ProQuest LLC, Ann Arbor, an information and technology company, has introduced virtual reality and 360-degree viewing functionality for select videos on the ProQuest search platform, as well as in ProQuest One Academic and on the newly redesigned Alexander Street video interface. Website: proquest.com

NEW SERVICES J The Wayne County Airport Authority, Detroit, operator and manager of Detroit Metropolitan Airport, Romulus, has redeveloped the public recycling program in the airport’s North Terminal, including adding 45 colored recycling receptacles to the North Terminal. The recyclable contents placed in the bins will be brought to an in-terminal recycling compactor before being transported to a local recycling facility. Website: metroairport.com J Northwood University, Midland, will be offering an automotive aftermarket executive MBA beginning in August to serve professionals employed by aftermarket organizations including manufacturing, retail distribution, wholesale distribution, service and repair. Website: northwood.edu J The Michigan Land Bank Fast Track Authority, Lansing, has launched a new website to increase efficiency and improve the user experience for those searching for property in Michigan. Website: Michigan.gov/LandBank

J Carhartt Inc., Dearborn, a workwear brand, has received a patent for

Submit Deals & Details items to cdbdepartments@crain.com

Baruah

director, Michigan Department of Corrections; Brian Jones, student, Eastern Michigan University; Barbara McQuade, former U.S. Attorney, Eastern District of Michigan; professor from practice, University of Michigan, legal analyst for NBC News and MSNBC; Robert Riney, president, health care operations and chief operating officer, Henry Ford Health System; Rebecca Silbert, senior fellow and director of Corrections to College, Opportunity Institute and Beverly Walker-Griffea, president, Mott Community College. Detroit Golf Club. Free. Website: eventbrite.com/e/ investing-in-futures-the-economic-and-business-benefits-of-making-postsecondary-education-available-tickets-62608132610

CALENDAR CONNECTION TO

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.

WEDNESDAY, JUNE 26 Medical Main Street: Cyber Security Hacks in Health Care — Protecting Your Health Data. 8:3011:30 a.m. June 26. Oakland County Department of Economic Development & Community Affairs. Cyber security experts discuss how to mitigate security threats to an organization’s medical information, defend a network perimeter and keep cybercriminals away. Speakers include: FBI Special Agent Benjamin Simon and FBI Intelligence Analyst Matthew Schwieger, who are members of the FBI Detroit Cyber Task Force responsible for criminal and national security computer intrusion investigations in Michigan. Continental Breakfast will be served. Velocity Collaboration Center, Sterling Heights. Free. Contact: Chelsea Schutz, email: schutzc@oakgov.com; phone: (248) 858-0978; website: eventbrite. com/e/medical-main-street-cybersecurity-hacks-in-health-care-prot e c t i ng - you r- h e a l t h - d at a - t i ckets-61601669251

UPCOMING EVENTS FISHBECK , THOMPSON, CARR & HUBER engineers | scientists | architects | constructors

Investing in Futures: The economic and business benefits of making postsecondary education available for incarcerated

McQuade

and formerly incarcerated students. 8-10:30 a.m. July 10. Detroit Regional Chamber. The discussion will frame the national and local conversations on this issue. Panelists will delve into findings from the Investing in Futures report and the Don’t Stop Now report, focusing on the established economic benefits of higher education in prison—in areas such as public safety, employment, and state economy. Panelists include: Sandy Baruah, president and CEO, Detroit Regional Chamber; Laura Tatum, director of Jobs and Education, Economic Security & Opportunity Initiative, Georgetown Center on Poverty and Inequality; Margaret diZerega, project director, Vera Institute of Justice; Matt Elliott, Michigan Market president and region executive, Bank of America; Heather Gay, education

Government Contracting 101. 9-11:30 a.m. July 18. Schoolcraft College. The class outlines the first steps for entrepreneurs and businesses wishing to gain access to government contracting. Topics include how to set up, find opportunities, market, explore small business benefits and sell to the U.S. government. Restricted to businesses located in Wayne, Oakland, Monroe, Washtenaw and Livingston counties. Schoolcraft College. $45. Email: ptac@schoolcraft.edu

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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 // J U N E 2 4 , 2 0 1 9

SPOTLIGHT ONL Therapeutics names new CEO

ONL Therapeutics Inc. has selected David Esposito to take the helm as its new president and CEO as the Ann Arbor-based pharmaceutical company prepares to enter its first human clinical trial testing its lead compound, ONL1204, for the treatment of retinal detachment. David Esposito, 51, started his new role last Monday, he confirmed in an email. Esposito was also appointed

as a member of the company’s board of directors, according to a news release. Esposito replaces David Zacks, M.D., who served in an interim capacity, the release said, and is listed Esposito on the company’s website as the co-founder and chief

science officer. Former president and CEO John Freshley remains “a strong champion of the technology and the team” and a “significant and engaged investor,” he said in an email. “After 6 years and a new phase launching for the company with entry into clinical trials, it was simply time for me to step aside to allow someone with fresh energy and a new set of skills to lead the company forward,” Freshley said.

United Road Services hires new COO

United Road Services Inc., a Romulus-based vehicle transporter, has hired a new chief operating officer. Jason Walker succeeds Mark Anderson, who was promoted to CEO in January, according to a news release. Walker’s first day was June 3. Walker, 45, has more than 20 years of experience in the transportation industry, including leadership positions in freight and fleet manage-

Walker

ment, global compliance and international partnerships, the release said. Prior to joining United Road, Walker was vice president and general manager of Transportation Services and

Truckload at UPS.

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PEOPLE ON THE MOVE

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. ACCOUNTING

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Jamie Allen joins Siegfried as a Senior Associate. She displays her strong confidence and passion for each new endeavor and provides unwavering reliability to each project. Jamie, who earned both her Bachelor of Business Administration and Master of Science in accounting from Grand Valley State University, was most recently an External Audit Senior at Deloitte.

Adrienne Carter, CPA, recently joined Siegfried’s Detroit Market as an Associate Manager. Selfmotivated and passionate, she possesses the mental agility and courage to overcome any obstacle in her way. Carter, who was most recently an Assistant Controller at Pulte Homes, earned a Bachelor of Science in accounting from Tuskegee University, and her Master of Science in accounting from Alabama State University.

Sharif Tai, Transaction Advisory Services manager, has joined the growing RSM Detroit office. Sharif will provide IT diligence services for publicly-held and Private Equity clients, specializing in high-tech transactions. He has extensive experience with software development processes, systems implementation, as well as program and project management.

As the chief human resources officer and assistant general counsel, labor and employment (CHRO), Susan Benedict will lead Stoneridge’s global human resources team to develop and deliver global talent and organizational strategies to drive the company’s operations and growth, as well as provide legal advice and counsel on global labor and employment matters.

Paradigm, the industry leader in solving catastrophic and complex health care challenges and improving lives, promotes Kevin Turner to CEO of the Catastrophic Care Management division. As CEO of Catastrophic Care Management, Kevin Turner will oversee Paradigm’s longest standing division, ensuring that its human-centered, outcomesdriven solution continues to be the vanguard for the worker’s compensation industry and lead the industry’s preeminent solution for workers with catastrophic injuries.

HEALTHCARE / INSURANCE

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Baker Tilly, a leading advisory, tax & assurance firm, congratulates Yunis Altahami on becoming our newest partner in Southfield. Prior to joining our firm in 2009, Yunis spent four years with PwC. He specializes in auditing publicly & privately held manufacturing clients and serves on the firm’s Diversity, Inclusion, & Belonging for all (DIBS) steering committee. Yunis also plays a role in the community, his most recent position being Treasurer and board member of the DEC Young Leader program.

REDICO is pleased to announce Doug Van Noord has joined the organization as vice president of leasing. Van Noord is responsible for the planning and execution of the leasing strategy for REDICO’s commercial and mixed-use developments in Michigan. In addition, he will conduct market research, site evaluation/ programming and oversee the commercial leasing process. Van Noord is an active member of ULI and received a Bachelor of Business Administration in Finance from Western Michigan University.

Nathan Cornett, CPA, joins Siegfried as a Senior Associate. His disciplined approach and recognized leadership abilities have earned the trust of his colleagues. He earned his master’s in accounting from the University of Pittsburgh and his Bachelor of Science in economics / political science from Eastern Michigan University. Most recently, he was an Audit Senior Associate at KMPG.

KNOW SOMEONE ON THE MOVE?

For more information or questions regarding advertising in this section, please call Debora Stein at (917) 226-5470 or email: dstein@crain.com

Seth Crawford has been named vice president of Underwriting at Health Alliance Plan (HAP). With nearly 30 years of experience in the health care industry, Crawford brings a wealth of actuarial and underwriting expertise to HAP and its members. The addition of Crawford in this role is key as HAP continues to expand its reach in all lines of business throughout Michigan, positioning itself for long-term growth.

NEW GIG?

Integrated Fiduciary Advisory Services is proud to welcome Chad Petherick as the company’s Director of Manager Research and Portfolio Management. Chad is responsible for the construction and management of investment portfolios for our clients, ongoing review and oversight of investment managers, and analysis of prospective investments. These investments include a full range of asset classes including fixed income, public equities, real estate, natural resources, private equity, and hedge funds.

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June 17, 2019

Page 17 1

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Southfield-based Altimetrik Corp. is opening an innovation hub in the Wright Kay Building owned by Bedrock LLC at 1500 Woodward Ave. in downtown Detroit.

Southfield tech company opens downtown Detroit center to nurture startups By Annalise Frank afrank@crain.com

Altimetrik Corp., a Southfield-based technology services company founded by longtime metro Detroit entrepreneur Raj Vattikuti, has opened a startup support center in downtown Detroit. Called the Altimetrik Collider, it’s in 3,000 square feet of the Bedrock LLC-owned Wright Kay Building on Woodward Avenue, above upscale retailer John Varvatos. It opened June 10 and a bigger kickoff is planned Thursday. Altimetrik software engineers will be stationed at the workspace to help companies invent, work on ideas for products or services and create product prototypes, a news release said. The center will host meetups, hackathons and panels as well, aiming to bump participating tech enterprises and other software engineers to their Abhinav next level of Vattikuti growth. “We chose Detroit as our first collider location given the immense talent potential in this market,” Abhinav Vattikuti, manager of Altimetrik Collider, said in the release. “My focus is on making this space as exciting and engaging as possible for the local software engineering community. ... The goal is to enable creative collisions around the tech and entrepreneur community here in Detroit.” The tech company plans to open more colliders in the U.S., South America and South Asia, the release said. Altimetrik will have a mix of South-

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 Altimetrik Corp.’s Collider Detroit opens in Woodward Avenue building  Company to station software engineers at the workspace to help companies invent, workshop ideas  Location chosen “given the immense talent potential in this market”

field staff and new Detroit hires at the collider — around 20-30 staff on a “weekly basis,” Abhinav Vattikuti said in an emailed statement. It’s aiming to see 50-300 visitors per week. The company spent $100,000$150,000 to renovate the fourth-floor space. Detroit Mayor Mike Duggan and Altimetrik’s community partners in Detroit are scheduled to speak at a grand opening event next week with Altimetrik’s executive team. Altimetrik helps customers in banking and financial services, payments, health care and automotive more fully leverage advanced technologies. The 2,000-employee company’s home base is Southfield, but it has a presence in India, Uruguay, Singapore and the United Arab Emirates. It was founded in 2012. Altimetrik uses a digital methodology it calls Playground that’s “designed to envision, prototype and deliver ideas with speed and agility,” according to its website. It can plug various components into companies’ existing platforms, simplifying operations or assisting with employee learning or a variety of other kinds of assistance. Raj Vattikuti is best known as the founder of Covansys Corp., a pioneer in IT outsourcing that was sold to Computer Sciences Corp. in 2007 for $1.3 billion. Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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ROADS FROM PAGE 3

The House passed a transportation budget plan last week that would increase overall road funding by $867.5 million in the 2020 fiscal year and that doesn’t raise the overall tax burden on motorists. The plan calls for removing the sales tax on gasoline and diesel fuel — which doesn’t go to roads — and replacing it with a fuel tax of equal value that’s dedicated to roads. That would generate $542.5 million in new funding for roads, according to the nonpartisan House Fiscal Agency. The remaining $325 million would come from an earmark of the state’s individual income tax as prescribed under the Legislature’s 2015 road-funding plan, which set a goal of spending $1.2 billion more annually on Michigan’s deteriorating roads by 2021. Whitmer’s $2.5 billion tax increase would generate a net increase of $1.9 billion because it seeks to remove the Legislature’s $600 million earmark of income tax revenue for roads and replace it with the additional fuel tax revenue. Williams said the House plan falls short of the state’s needs for fixing roads that are projected to continue to deteriorate based on current spending at the state and local levels. “They took a stab at it, but they didn’t come up with the solution that’s going to fix the problem,” Williams said of the House plan. In the Senate, Majority Leader Mike Shirkey has a work group that’s still crafting a plan that he says will be rolled out publicly in July. The Senate work group is considering letting county and municipal governments seek voter approval for local taxes on fuel that would be dedicated solely to local roads, Shirkey said. “We have to, I think, provide more options for locals,” Shirkey said in an interview Wednesday with Crain’s. On Thursday, House Democrats

rolled out a road-funding proposal that would raise the corporate income tax from 6 percent to 8.5 percent and impose a new 4.25 percent pass-through tax on limited liability corporations, s-corps and sole proprietorships that are not subject to the CIT. Small business owners are not subject to CIT and pay the 4.25 percent income tax for their business profits. The House Democratic caucus plan also would create a 6-cents-permile Vehicle Miles Traveled tax on commercial trucks weighing more than 26,000 pounds. House Democratic Leader Christine Greig, D-Farmington Hills, said the proposal was crafted after Democrats got input from their constituents. “They want accountability for those that cause the most damage to our roads,” Greig said of heavy trucks. Greig added: “They want businesses that benefit from good roads to contribute directly to repairs.” Whitmer said Thursday that she’s still waiting for the Legislature to come up with a plan that generates the amount of tax revenue for roads the her plan would raise. “No one has presented me with any sort of a real alternative to the plan I put on the table,” Whitmer said after speaking at a Small Business Association of Michigan event in Lansing. SBAM was not among the business groups that signed the joint statement Thursday. But former Lt. Gov. Brian Calley, now the president of SBAM, slammed the House Democratic plan Thursday in social media posts on Twitter and Facebook. “House Democrats’ new roads plan calls for a 42 percent tax increase on bigger businesses and a 100 percent increase on small businesses,” Calley wrote. “I guess they’re trying to solve the talent shortage by reducing the demand for employees and killing jobs.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

Tarps line the rafters of The Parade Co.’s east side Detroit warehouse and production facility to catch rain water that trickles through the roof of the building, a 1930s-era Plymouth car assembly plant. The not-for-profit organization is actively searching for a new building in Detroit.

PARADE FROM PAGE 3

Since the early 1990s, Parade Co. has housed its floats and year-round design studio for building new parade floats inside a 200,000-squarefoot building at 9500 Mt. Elliott St. in a predominately industrial area on Detroit’s east side that Michaels describes as the city’s “logistics capital” because of the heavy truck traffic. The building was once part of Chrysler’s sprawling Lynch Road Assembly, which closed in 1981 after 53

APARTMENTS FROM PAGE 3

Roco sold Chetrit its properties in Illinois, Indiana, Ohio, New York, Texas, Arkansas, Louisiana, Mississippi and Florida, according to a source familiar with the deal who requested anonymity. It is expected to retain ownership of its Michigan portfolio and is in the process of selling off its properties in Alabama and Georgia, the source said. According to Roco’s website, its Michigan properties are in Jackson, Melvindale, Wayne, Kalamazoo, Westland, Southfield, Warren, South Lyon, Roseville, Clinton Township, New Baltimore, Chesterfield Township, Lansing, Grand Rapids, Flint, Davison, Mount Morris, Saginaw and Traverse City. Three years ago, David Colman, one of the company’s founders, said what at the time was its 16,000-unit portfolio had a market value of $750 million. “The Roco team had exceptional timing,” Kevin Dillon, senior managing director in the Southfield office of Berkadia Real Estate Advisors LLC, said in an email. “It was a smart move to get into the market coming out of the downturn and realizing their gains, selling at the top of the market. It was a great execution.” Messages left with Roco Real Estate and Chetrit’s Chetrit Group went

years of producing Plymouth, Chrysler and Dodge cars. For a new building, Michaels envisions a multi-use storage, production, e nt e r t a i n m e nt and museMichaels um-like venue for schoolchildren tours, summer camps for Detroit kids, wedding rentals and blacktie events surrounded by The Parade Co.’s handcrafted Thanksgiving pa-

rade floats. “We have good scenery,” Michaels said. “It’s just not in a good spot right now.” Michaels said Parade Co. has been looking for a new location that’s closer to downtown to make it more accessible to the general public than its current headquarters, where visitors have to drive down an alleyway off Huber Street to get to a back-door entrance. “We should be a tourist destination in the city of Detroit,” he added.

But we don’t have that philosophy.” In 2016, it formally started a property management branch, Roco Management LLC, which swelled its payroll from 10 people to about 400. The company is run by David Colman; his brother, Michael; and another pair of brothers, Tyler and Evan Ross.

Northeast, but since he acquired the (that) portfolio, going into the multifamily space, this presented a very good opportunity.” Still, however, Chetrit remains most comfortable operating in the background. “Mr. Chetrit has more in common with men like Lloyd Goldman, perhaps the (New York City’s) biggest individual private landlord, who takes the subway to inspect his dozens of buildings, and Ruby Schron, who controls his estimated 15 million-square-foot empire from Brooklyn, with the help of several sons,” Observer reporter Tom Acitelli wrote at the time. “They deal in the shadows, content to cultivate auras of savviness and even fear, emerging only reluctantly.” Chetrit was sentenced to three years of probation for running afoul of customs laws in 1990. Since then, however, he has been focused on real estate, taking ownership of properties around the country. His wallet grew as his real estate portfolio did, according to the Commercial Observer, which recounted a broker working with Chetrit being shown a $100 million checking account balance. “Mr. Chetrit bought low, sold high and repeatedly made a killing,” Acitelli wrote.

‘Bought low, sold high’

VENTURE PHOTOGRAPHY

From left: Roco Real Estate partners David Colman, Michael Colman and Tyler Ross.

unreturned. Farmington Hills-based Friedman Real Estate brokered the sale.

Rapid growth Roco’s growth trajectory has been steep. Within a short period, it had amassed about 1,800 units, then 5,000, then 16,000, and up until a few days ago, more than 21,000. Just seven years after being founded in June 2011, it found itself on the coveted National Multifamily Housing Council’s Top 50 list of apartment owners, ranked 48th this year, up two

slots from No. 50 in 2018. Roco’s business strategy had been about long-term asset holdings in 2016, when Crain’s last wrote a detailed look at the company and its portfolio. It sought to purchase off-market properties that it considered undervalued. “We want to invest in our communities and people,” David Colman, one of the company’s founders, said at the time. “Our investors and us want consistent quarterly cash flow from these properties with a longterm capital appreciation. The shortterm flip model is dangerous a lot of times. People do it right, absolutely.

The deal to buy a far-flung apartment building portfolio might seem unusual for Chetrit, who owns a slew of high-profile New York City buildings as well as a stake in Chicago’s Willis Tower (formerly known as the Sears Tower), according to The Real Deal. He has also owned properties in Philadelphia, according to the Commercial Observer, another commercial real estate publication that profiled Chetrit in 2011. But he has been diversifying his portfolio in recent years, said John Wood, managing director and COO of Iron Hound Management, which arranged the debt on the Roco deal. Chetrit bought a 56-complex, 5,400unit portfolio in 2015 with units in Florida, Indiana, Kentucky, Ohio and Pennsylvania. That deal was refinanced with a $280 million Arbor Realty loan by Iron Hound. “He has multiple holdings all over the country,” Wood said. “There is a concentration in New York and the

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

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FARMERS FROM PAGE 1

Since 2014, milk prices have plummeted. Fueled by technological advancements and declining export markets, the overproduction of milk has soured the dairy business across the entire U.S. Barns are quiet now with hundreds of milking machines powered down, thousands of cows sold off or slaughtered. Last year alone, 154 Michigan dairy farms shuttered, nearly three every week, according to data from the Michigan Department of Agriculture and Rural Development. Another 41 dissolved between December 2018 and January this year. Many of the farms that remain, like Horning and 1,262 of its peers, have burned through their farm equity and credit to remain in business. Often at least one member of the family works an off-farm job to pay bills or buy groceries to effectively preserve the way of life. But Michigan’s dairy farmers are now looking beyond the age-old model of farming to new niche areas to thwart insolvency.

Perfect storm, flooded market Industry experts blame the drop in farm milk prices on a variety of issues, including increased competition from alternative milks — such as

GOLF FROM PAGE 1

It was profitable for a while. In fact, it did well enough to help fund the purchase of the nearby Old Town Golf and Sportland, which includes a Par 3 course, driving range, miniature golf and batting cages. While it does better than a traditional golf course, they are still trying to sell that business as well. This year is pacing to be Lilac’s worst by far — at least $100,000 down from a dismal 2018. The course opened for the season just a few weeks ago after Thorne, who handles groundskeeping mostly by himself these days, finally got the grass short enough for play. He developed a love for the game from his father, who he helped to build another course in town 40 years ago — Thorne Hills — whose future is also in jeopardy. Exiting the golf businesses is a painful last resort. “Land developer — that’s the only hope I have to sell Lilac, I think,” Thorne said. “Nobody wants to touch a golf course.” At the opposite end of the state, the golf business has never been better for Boyne Falls-based Boyne Resorts, despite the rain. Golf revenue grew 7 percent year-over-year in 2018 to a company high, and it just bought another course in Maine last month, said Bernie Friedrich, senior vice president of golf operations for the resort. The previous three years each set records, and Friedrichs hopes for another jump this year. “Golf is doing well for us,” he said. “We had a terrible spring this year, so we’re behind pace a little bit. We hope to catch up. We’re bullish on golf — we think it’s growing,” Friedrichs said. The plight of the Thorne brothers and healthy business at Boyne draw contrasting images of golf’s future in Michigan. As far as failing courses go, the Thornes are in plentiful company. Michigan became a destination for

LON HORWEDEL

Katelyn Packard checks on one of the calves Tuesday morning at Horning Farms in Manchester, which houses more than 400 head of dairy cows, not counting the several hundred calves.

almond milk — as well as consolidation that leads to mega-dairy operations that, thanks to advancements in technology, can milk thousands of cows each day. golf when its popularity peaked in tandem with the rise of Tiger Woods in the late 1990s. By the turn of the century, Michigan had at least 1,000 courses. There are now 830, according to the Michigan Golf Course Association, with further decline likely, experts say. That’s because there are still too many courses and fewer people playing today than during golf’s heyday from the late 1980s to late 2000s. During that period, the number of golfers in the U.S. grew 50 percent to 30 million. That number has steadily declined this decade. Millennials — often blamed for the demise of traditions ranging from bowling to brick-and-mortar retail — are also being charged with killing golf. As they turn to unique, experiential activities for leisure, the sport of so many of their fathers and grandfathers is falling out of favor. But, as Boyne and other course managers indicate, golf is far from dead — many even consider the sport’s contraction to just be necessary growing pains. Golf has a massive economic impact in Michigan, but it has slipped. The state estimates it to be a $4.2 billion-a-year industry, down from $4.6 billion a decade ago. Michigan is home to 500,000 regular players and 60,000 golf course workers. There have been some bright spots suggesting the sport’s decline could be reversing. Total rounds played in Michigan are up 9.2 percent from the same time last year, even with the rain, according to the National Golf Foundation. Spring rounds have generally been down the past few years. Last spring was one of the wettest on record, the foundation said. The Rocket Mortgage Classic has sparked new excitement for the game while luring large sponsors, bolstering play in the area and increasing participation in nonprofits such as First Tee of Greater Detroit and Midnight Golf. And, while millennials are complaining, leaders of the game are lis-

Milk production per cow has increased steadily for a generation. Last year, cows in Michigan produced 71.1 pounds of milk per cow per day, compared to 70.3 pounds of

milk per cow per day in 2017. So despite the culling of herds — the state had 6,000 fewer milk cows last year than the year prior — Michigan dairy farmers produced 931 million

KURT NAGL/CRAIN’S DETROIT BUSINESS

Hundreds of new homes have been built around Glacier Club golf course in Washington Township as developers work to finish up more this summer.

tening. Nationally, the United States Golf Association instituted new rules this year designed to speed up the game. Local courses are coming up with ways to make golf more accessible and enjoyable to the public. At Chandler Park Golf Course in Detroit, for example, crews have set up tees 150 yards out for every hole to make the game quicker and less intimidating. A developer in Sterling Heights is planning to bring Maple Lane Golf Club back to “new glory” with a ninehole, lighted practice course to complement a new championship course and 810 housing units planned there. Meanwhile, TopGolf — the glitzy, new driving range meets bar and restaurant made for millennials in Auburn Hills — is “exceeding expectations” in terms of number of customers, according to the company. That’s all to say that the game is not going away, but it is changing. “Closings have slowed because we’ve had a pretty good weeding out,” Dave Richards, owner of Bloomfield Hills-based Resort & Golf Marketing, said. “It’s been a slow build in confidence in the economy, and people are getting back to doing things they were used to doing all the time.”

Who survives oversaturation The number of courses in Michigan grew at a faster clip than nearly any other state since 1986 when there were just 572 golf facilities in the state. Developers raced to build resorts up north and new courses in gated communities in the outer suburbs. While generational trends have turned formerly prosperous golf courses into overgrown green space or shopping centers and subdivisions, Michigan still ranks fourth in the nation for total number of courses and first for public courses with 650. There are around 15,000 golf courses in the country, down 5.6 percent from 2006, according to the National Golf Foundation. More than 4,000 new golf facilities opened from 1986 to 2005. Now, post-recession, around 150 courses will close per year until supply and demand balance out, experts predict. Closures are not necessarily a bad thing for the game, though, said Kevin Frisch, a 25-year veteran of the golf industry and specialist in golf and resort public relations and marketing. “While some golf courses may be

pounds of milk in 2018, compared to 933 million pounds in 2017. On top of the industry efficiencies, the European Union ended its longrun milk quota in 2015, allowing farmers to produce without restrictions leading to a flooding of the global market with milk product. This left farmers in a predicament as milk prices were decreasing while input costs, such as seed, feed, fuel and fertilizer, were rising, said Ernie Birchmeier, livestock and dairy specialist at industry trade group Lansing-based Michigan Farm Bureau. “One of the quickest ways to increase income was to increase production,” Birchmeier said. “We continued to increase production as prices were falling and that led to prices falling even further. It was a perfect storm for negative prices.” Most Michigan dairy farmers are members of a dairy cooperative, an organization owned by groups of dairy farmers to supply large milk distributors or sellers. Horning’s 400 cows generate around 3,500 pounds of milk per day, which is picked up by its co-op and distributed to Michigan Dairy in Livonia. The facility bottles 100,000 gallons of fluid milk daily and distributes to more than 150 Kroger stores in Michigan and Ohio. Horning only makes around $16 per 100 pounds of milk, or about $560 per day. “Corporate America is taking over,” closing due to operational reasons, a lot of it is for better use of the land — a natural business evolution,” Frisch said. Take Maple Lane. Auburn Hillsbased developer Moceri Cos. bought it in 2015 from the Roehl family, who owned it for 90 years. The 293-acre property is home to 54 run-of-the-mill holes of golf in the middle of a dense neighborhood. Moceri plans to redevelop the land into 810 luxury housing units as part of a $1.2 billion investment into senior living communities throughout metro Detroit. The company plans to keep and improve 18 holes for a championship course as well as lighted practice facility. Work is anticipated to start after the 2020 golf season and be done by 2022-23, said Dominic Moceri, partner of Moceris Cos. “It’s something we’re gonna bring to new glory and bring to where people live,” he said. Courses throughout metro Detroit continue to be targeted for development. New homes and construction line the fairways at Glacier Club in Macomb County’s Washington Township, where hundreds of new residential units have been built by Bloomfield Hills-based Pinnacle Homes of Michigan LLC. In Wayne County, there are discussions involving Pennsylvania-based home builder Toll Bros. to build 170 townhouses at The Inn at St. John’s in Plymouth, reducing the 27hole course to 18 holes, although the plans have been put on hold. Oakland County has seen similar activity, with new housing communities cropping up in fast-growing places like South Lyon, around some of the area’s best golf courses, such as Tanglewood, Cattails and Moose Ridge. Rather than bulldoze the greens for more homes, developers are marketing the courses as a key amenity for the communities.

Management makes the difference Like virtually any other retail business, the location of a golf course is a

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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 // J U N E 2 4 , 2 0 1 9 Horning said. “That’s bad for the little guy like me.” Cathy McCune of McCune Centennial Farm in Jasper Township near Mount Pleasant said the farm was making the same in 2018 as it was in the 1970s. “We are seeing farms close up all the time,” McCune said. “When we lose a dairy farm in a community, it hurts everyone from the seed guy to the schools to the churches. It’s a ripple effect and it’s getting bad. (When) our co-op sends a check it asks to check on your neighbors for suicide. That’s how scary it’s become.”

Niche nourishment The low prices and high inputs were just too much to bear for McCune Centennial Farm. The 129-yearold farm sold off its 70 dairy cows in June 2018 after sustaining several years of losses. “We could see the writing on the wall,” said McCune. “We had too many bad years. We had to ask ourselves whether we wanted to work that hard and not get a paycheck. The bigger guys keep getting bigger and now we have technology and robots to milk 3,000 cows. The times have changed and we just felt we couldn’t keep up anymore. The bankers weren’t knocking down our door but something had to change.” That change came from one of those growing dairies that were putbig factor in its success. Healthy courses are either in high-density areas, such as Maple Lane, or are a destination, such as Boyne properties. The next most important factor is management, Richards said. Prospects for course owners are “totally based on management practices.” “The well-run ones are looking really good, minus the spring weather,” he said. “And going forward, you’re gonna see more bad ones close.” Also like other retail businesses, many courses that are strong today invested in technology years ago. More than GPS-installed golf carts and range finders, digital reservations have changed the way players interact with courses. For courses without their own booking system, there is a glut of third-party reservation services selling discounted golf, with platforms such as GolfNow and TeeOff leading the way. Courses contract with tee time providers and offer lower prices to stay competitive — a big mistake in most cases, Richards said. Boyne was a pioneer in dynamic pricing, building out its own reservation system more than a decade ago. Booking is done online. Rounds cost more on high-demand days and less during the off-season. “Selling cheap golf is not the way to make money,” Richards said. “Boyne took the opposite approach, and they basically rebuilt their whole website based on availability.” Friedrich said Boyne has about 75 percent of its total rounds for the season booked before April 1. “That gives us a real leg up with having people commit to us to play,” he said.

ting the financial strains on the smaller farms like the McCunes. A neighboring farm had approached the McCunes a few years earlier about selling their dairy operations. They weren’t ready. Then they returned last year with another proposition — care for the farm’s pregnant cows and newborn calves until they could resume milking. The neighboring farm now pays for

“When we lose a dairy farm in a community, it hurts everyone from the seed guy to the schools to the churches. Our co-op sends a check that asks to check on your neighbors for suicide. That’s how scary it’s become.” — Cathy McCune of McCune Centennial Farm

the feed, the bedding and all the other inputs the cows need at McCune Centennial Farm. The family is now a service provider, currently caring for 140 cows. “This is a good transition for us,” McCune said. “We’re not getting up

and milking cows anymore. They have all the financial risk. They put their trust in us, and we’re going to do right by them. It’s a godsend, really.” Selling the farm was never an option for the McCunes because their son, Chase, also works on the farm and keeping the farm in the family is as important to them today as it was 100 years ago, McCune said. “He’s been on the farm all his life,” McCune said. “This is his passion.” Horning is faced with the same dilemma as the sixth generation, daughter Katelyn Packard, 26, and son Mason, 20, work on the farm as well. Finding a way to cut out the middleman and keep more of the profit potential from their dairy cows is now a daily conversation among the family. Horning is urging his daughter and son to find ways to capitalize on the expanding suburbanization of their area as the region around Ann Arbor continues to grow. “My business plan is to capitalize on this farm to table movement,” Horning said. “Expansion keeps coming from Ann Arbor, so I’m thinking something in agritourism might work.” Agritourism is loosely defined as any agricultural operation that brings visitors to the farm. Around Southeast Michigan that usually means pumpkin patches and U-pick apple orchards in the fall. For the Horning family, there is potential to turn a barn into a bed

Rocket Mortgage Classic: Need to know Some of the world’s best golfers are scheduled to tee it up in Detroit this week for the Rocket Mortgage Classic. Detroit’s first-ever PGA Tour tournament will be played Thursday-Sunday at Detroit Golf Club in the northwest part of the city. Crews have been working for months to ready the grounds and erect grandstands and tents around the Donald Ross-designed golf course. Leading up to the Quicken Loans-backed tournament, there will be a celebrity scramble Tuesday featuring the tournament’s most popular talents and local celebrities and sports stars, including Kid Rock, Tom Izzo and Detroit Red Wings stars. The tournament will boast a strong field, including tournament ambassador Rickie Fowler, likeable lefty Bubba Watson, world No. 2 Dustin Johnson and U.S. Open champion Gary Woodland. Despite organizers’ best efforts, Tiger Woods has signaled he won’t play. Alas, the party will go on. There is live music planned for the weekend. Country singer Willie Jones and local bluesman Laith Al Saadi will perform Friday, and Morris Day and the Time will perform Saturday, according to a news release from event organizers. Face painting, pizza making, miniature golf and other kids activities will take place on the grounds throughout the tournament. — Kurt Nagl

Tickets

Grounds passes are still available for the tournament, except Saturday, which is sold out. Private hospitality space has also sold out. Tickets for practice rounds on Tuesday and Wednesday cost $10 and $15, respectively. Thursday tickets are $45, Friday is $50 and Sunday is $55. Grounds admission is complimentary for kids 15 and under with a ticketed adult. Verified active-duty and retired military members are admitted free. Tickets can be purchased online at rocketmortgageclassic.com.

Parking

General parking will be at the Michigan State Fairgrounds. The entrance is off West State Fair Avenue between Woodward Avenue and John R Road. A free shuttle will take fans the two miles to and from the Detroit Golf Club. Parking for VIP ticket holders, vendors and select sponsors will also be at the fairgrounds. It is being moved from the grounds of the former Palmer Park Golf Course due to flooding there. Parking for people with disabilities is at the University of Detroit Mercy, with ADA-accessible shuttles to and from the course. Parking areas will be open 9:30 a.m.-8 p.m. Tuesday; 6:30 a.m.-8 p.m. Wednesday through Friday; and 7:30 a.m.-8 p.m. Saturday and Sunday.

Fate of municipal golf

For ride-sharers, the designated dropoff area is the Palmer Park Community Building, across from the course, at 1121 Merrill Plaisance St.

Municipal golf courses are among those most vulnerable to the weeding out, Richards said. While municipal golf is widely considered to be a good entry point for players, some experts contend that it has been a drag on the game.

During the golf construction boom, architects and builders aggressively courted local officials and convinced them that golf courses were a necessary community asset. A significant number of the state’s public courses

are owned by cities and counties. An abundance of municipal courses has worsened the state’s oversupply and created unfair competition for private owners by offering cheap rounds, Richards said. Even though discount-

and breakfast or produce their own branded cheese or raise more beef cattle for local restaurants or general consumers. “That’s the direction the market is going,” Packard said. “We need to find that niche. We are producing a commodity product, but we think we could move that out to a specialized product like cheese.” The concern, however, is whether the family’s long history of working the farm lends itself to the skills required to run and market an agritourism business. “When we discuss it, we’re asking ourselves, ‘Do we have the talent in our family or current workforce to manage something like that?’” Packard said. “(Horning) raised kids that loved to work with cows, not people. He’d love if we took the (agritourism) idea and ran with it, but once you start to sunset like that, you’re running a whole other type of business.” But Packard knows her father is right and that finding that niche and getting it right may be the only way the family holds on to the farm. “I do plan to have kids in the future and, for me, it’s creating that opportunity to be part of the farming lifestyle,” Packard said. “Growing up on a farm teaches you a lot of lessons about hard work and responsibility. I’d hate to see that go away.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh ing rounds is not a viable business practice, municipal courses get away with it because operations are often subsidized by taxpayer revenue. Tight budgets have increased scrutiny over recreational spending, and people are seeing that municipal golf is often a money loser. Still, communities are reluctant to let go. Wayne County Executive Warren Evans had advocated selling Warren Valley Golf Course to developers, arguing that it would replace an insolvent business with needed property tax revenue. Following public outcry, the course was sold to the city of Dearborn Heights last year and will remain a golf course. Detroit has considered abandoning golf for years due to losing money on its courses. In 2007, it sold Rogell Golf Course, which closed a few years later, and it also closed Palmer Park, across from Detroit Golf Club, a couple of years ago. Last year, it signaled a commitment to its three remaining courses with $2.5 million in improvements. Detroit’s course revenue so far this year totals $270,382, up about 12 percent from the same time last year, according to Brad Dick, general services director for the city. Rounds played total 10,570, up 11 percent from the year before. “What I’m seeing is positive in terms of interest in the game — women, kids,” said Karen Peek, director of operations for Detroit’s courses. “I’m seeing kind of that renewed spirit in the game.” That new energy is getting a boost from the Rocket Mortgage Classic and comeback of Tiger Woods, Peek said. Even though Woods likely will not play in Detroit, tournament organizers say tickets have sold more quickly than expected, with Saturday grounds passes sold out and hospitality areas virtually sold out as well. “I think the fact that Detroit is hosting a PGA event for the first time, I think there’s a buzz, an undercurrent of interest,” Peek said. Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

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REPORTERS Annalise Frank, breaking news. (313) 446-0416 or afrank@crain.com Jay Greene, senior reporter, health care. (313) 446-0325 or jgreene@crain.com Anisa Jibrell, breaking news. (313) 446-1612 or ajibrell@crain.com Chad Livengood, senior reporter, Detroit rising. (313) 446-1654 or clivengood@crain.com Kurt Nagl, breaking news. (313) 446-0337 or knagl@crain.com Kirk Pinho, real estate. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor, the business of sports. (313) 446-1626 or bshea@crain.com Dustin Walsh, senior reporter, economic issues. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter, nonprofits and philanthropy. (313) 446-1694 or swelch@crain.com

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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 // J U N E 2 4 , 2 0 1 9

THE WEEK ON THE WEB

RUMBLINGS

Dan Gilbert discharged from hospital

Trump to award Penske Medal of Freedom

JUNE 14-20 | For more, visit crainsdetroit.com

an Gilbert has been released from the hospital nearly a month after suffering a stroke. “Yesterday, Dan Gilbert was discharged from the hospital and will now continue focusing on his recovery at an in-patient rehabilitation center,” Jay Farner, CEO of Gilbert’s Quicken Loans Inc., said in a statement emailed to media Thursday morning. “The entire family is incredibly grateful for the world-class care Dan received from the entire staff of Beaumont Hospital,” Farner said. “Dan is looking forward to beginning an intensive rehabilitation program and is eager to continue the progress he has made over the last several weeks.” Deadline Detroit first reported the discharge late Wednesday morning. A spokesperson for Gilbert did not return a message at the time, and Beaumont Health declined to comment. Farner said two weeks ago that Gilbert’s in a recovery process “that will take time” but that “he maintains his strong sense of humor and focus on constant improvement.” Gilbert has been a key catalyst in a resurgent downtown core the last several years as his companies have brought 17,000 employees to Detroit’s central business district and he has amassed a downtown real estate portfolio of more than 100 properties including buildings, parking decks and others. Forbes estimates Gilbert’s fortune at $6.8 billion as of early Wednesday afternoon. The 57-year-old billionaire founder and chairman of Quicken Loans and Rock Ventures LLC was taken to the hospital by a family friend on May 26 after falling ill earlier in the day, and he suffered a stroke there, Farner said late last month. Gilbert underwent a catheter-based procedure and was moved to the intensive care unit. Quicken Loans Vice Chairman Bill Emerson sought to assure Detroit business leaders during the Mackinac Policy Conference late last month that Gilbert’s family of companies are running smoothly while the online mortgage mogul recovers. “There’s two things I know about Dan: One is he is one tough human being — and he will come back as fast and as strong as anybody can in this particular situation,” Emerson said at the conference. “So if there’s anybody out there concerned that business isn’t going to happen as usual, they should stop being concerned about that. And when he comes back, things are going to be as good as ever as they were when he left.”

BUSINESS NEWS J The Michigan Department of Transportation is nearing a request for proposals for the Amtrak station, a key property in Detroit’s TechTown area. The end result would be a new intermodal transportation facility, the department said, and developers have long salivated over tacking some mixed use on the property along with it across its 3.1 acres.

The Anna Scripps Whitcomb Conservatory on Belle Isle reopened to the public following completion of the first phase of a $2.5 million revitalization project. Renovations on the 115-year-old conservatory, home to a trove of rare and exotic plants from across the world, were completed a month ahead of schedule.

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

10,000

Pyrotechnic effects planned for the Ford Fireworks in Detroit tonight

$1.36M

Sale price for the original Buddy’s Pizza building in Detroit, which will continue to house the restaurant

$250,000

Money from Ford, PlanetM, other sponsors that will support ideas to improve mobility in Corktown

Challenge is part of its community benefits agreement relating to its $740 million investment in Corktown. J Plum Market says it will open its new downtown Detroit location July 3. The 8,000-square-foot store on the first floor of the Ally Detroit Center at 500 Woodward Ave. will have fast casual dining with beer and wine, event space, a patio, and of course, a market. J Fast-casual concept Rush Bowls will open its first Michigan location along Columbia Street in the planned promenade and entertainment block in The District Detroit, the first of five scheduled to open in the state. The restaurant will take a 1,000-squarefoot street-level space along the south end of the Fox Theatre.

resident Donald Trump will award longtime Detroit businessman and billionaire Roger Penske the country’s highest civilian award, the Presidential Medal of Freedom. Trump made the announcement Thursday during a news conference in the Oval Office. “He’s very deserving,” Trump said. “He’s a great gentleman. I’ve known him a long time.” Penske, 82, is chairman of Bloomfield Hills-based Penske Corp., which operates the country’s second largest auto dealership group, and the owner of motorsports racing organization Team Penske. Earlier this month, Penske attended an event at the White House honoring Simon Pagenaud, Indianapolis 500 winner and Team Penske driver. Penske also visited in April as Trump celebrated Joey Lagano’s NASCAR championship. Trump has previously given the award to Tiger Woods, Elvis Presley, former Sen. Orrin Hatch (R-Utah), Babe Ruth and economist Arthur Laffer, among others. Penske has a long history of supporting presidential candidates and

members of Congress, but did not financially support Trump’s campaign for president. During the lead-up to the 2016 presidential election, Penske donated more than $220,000 to Penske the Right to Rise USA Super PAC created to help elect then Republican candidate Jeb Bush. He also donated $2,700 directly to Jeb Bush’s campaign in 2016. Penske also donated $50,000 to the National Republican Congressional Committee and $15,000 to the Democratic Senatorial Campaign Committee in 2017, according to political donor tracking site Open Secrets. Penske Corp. generated revenue of $31.8 billion in 2017 with nearly 60,000 employees worldwide and is Southeast Michigan’s largest privately held company, according to Crain’s data. Penske himself has a net worth of $1.5 billion, according to Forbes magazine.

HEALTH CARE NEWS That’s about 50 percent larger than the Hudson’s site downtown. J Jewel Commerce LLC, a Detroit-based startup that offers rebates to online customers of luxury retailers, has been acquired by Capital One Financial Corp. just two years after launching. Co-founder Andrew Landau remains CEO of the company and co-founder Dushan Shimko keeps the role of chief technology officer. J Federal officials are reviewing Detroit’s Motor City Match program’s record keeping and whether federal funds were used properly as change is on the horizon next year for the initiative aimed at building entrepreneurship. The review comes out of the U.S. Housing and Urban Development Department’s routine monitoring of Detroit’s grantmaking program for new and existing small businesses. J The Anna Scripps Whitcomb Conservatory on Belle Isle reopened to the public following completion of the first phase of a $2.5 million revitalization project. Renovations on the 115-year-old conservatory, home to a trove of rare and exotic plants from across the world, were completed a month ahead of schedule. J Ford Motor Co. is bringing its mobility challenge to Detroit’s Corktown neighborhood, offering $250,000 plus stipends to those with winning ideas to make the neighborhood more walkable and bikeable. The City:One Michigan Central Station

J Legacy DMC, the 16-member board responsible for overseeing compliance with the 2011 sale agreement of Detroit Medical Center, said in its eighth annual report that DMC has “not complied with its commitment to support its historic research mission.” The conclusion is a change from previous annual reports by Legacy DMC to the Michigan attorney general’s office. J Southfield-based Beaumont Health and Munson Medical Center in northern Michigan are getting more than $1.3 million in grants to combat the opioid epidemic, and county jails are in line to get similar funding in the future. The “no wrong door approach” was announced last Monday by Gov. Gretchen Whitmer and the Michigan Opioid Partnership. J Six Beaumont Health-affiliated rehabilitation centers managed by Premier Healthcare Management Inc. have been ordered by the federal government to make payments of $915,223 to 1,389 employees for withheld pay after an investigation found violations of the Fair Labor Standards Act, according to the U.S. Department of Labor. J Three Michigan children’s hospitals — University of Michigan’s C.S. Mott Children’s, DMC Children’s Hospital and Spectrum Health’s Helen DeVos Children’s — were recognized by U.S. News & World Report as top children’s hospitals for 2019-20.

ANISA JIBRELL/CRAIN’S DETROIT BUSINESS

For the Eat Detroit event Wednesday evening, Lumen served mac and cheese, pretzels with beer cheese and Dijon mustard and seared tuna with a Thai peanut sauce.

Eat Detroit restaurant crawl draws more than 1,200 M

ore than 1,200 people bounced between restaurants in Detroit’s downtown and Midtown for the first Eat Detroit event last Wednesday, helping to raise about $150,000 for Detroit’s neediest residents. Twenty buses dedicated to the event transported food lovers around the city. “Our biggest challenge was trying to distribute a crowd of this size equally so all the restaurants had a fair shot of having an equal number of people,” said Marc Rosenthal, who helped organize the event and serves as the executive director of the nonprofit SAY Detroit. At each restaurant, participants received up to three small servings of the restaurant’s best dishes along with one “signature” drink. Participating restaurants — including Grey Ghost Detroit, Parc, Lumen and The Whitney — re-

ceived $5,000 to pay for their participation in the event, he said. “Some of the restaurants, given their size, closed (to the public) completely,” Rosenthal said. “Some of them partitioned part of the restaurant off for the Eat Detroit event.” The money raised will go toward SAY Detroit, the nonprofit tied to Detroit Free Press columnist Mitch Albom aimed at helping Detroit residents with housing, health care and education, Rosenthal said. Warren-based Art Van Furniture Inc. was the presenting sponsor of the event, hosted by Albom. Additional administrative costs were covered by private donations. Total event costs were a little less than $120,000, Rosenthal said. Albom modeled the event after chef Jose Andres’ annual Dine-N-Dash charity event in Washington, D.C.

A COMMUNITY BUILT ON CARE

Serving the City of Detroit with Excellence Congratulations, Anthony Tedeschi, M.D. Recognized as One of Modern Healthcare Magazine’s 50 Most Influential Clinical Executives With more than 20 years experience in clinical and operational leadership, Dr. Tedeschi leads by example, inspiring the DMC team every day, doing what’s right for the patients and families DMC serves.

Congratulations, Children’s Hospital of Michigan Named One of America’s Best Children’s Hospitals by U.S. News and World Report

We are proud to consistently earn a spot on U.S. News and World Report’s Best Children’s hospitals list. Our entire health care team is committed to pediatric quality, safety, innovation and research for our patients and families throughout Michigan and beyond.

Learn more at ChildrensDMC.org One Focus, One Purpose, Your Child.

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