Crain's Detroit Business, Aug. 26, 2019 issue by Crain's Detroit Business

City explores new vision for Coleman A. Young International Airport Page 6

DivDat shreds paper billing in favor of 21st century tools Page 3

AUGUST 26 - SEPTEMBER 1, 2019 | crainsdetroit.com ENERGY

Solar panels could be cash crop for farmers Whitmer erased policy that took away agricultural tax breaks on solar developments By Jay Greene jgreene@crain.com

Two family farmers in Eaton County and Saginaw County jumped into the solar energy development business when they rented out parts of their land earlier this year to independent power producers. John Forell, who owns 5,000 acres and grows corn, soybeans and wheat in Eaton County, and Kent Kraynak, who runs a farm with 100

Farmer John Forell: “We chose solar because we believe it is less intrusive.”

acres and grows grains in Saginaw County, say they are pleased they will soon be able to generate revenue from their farms and produce clean electricity for their neighbors. Despite some criticism from some fellow farmers and massive red tape before power generation starts, Forell and Kraynak used a change in Public Act 116 that allows them to keep their long-term agricultural tax incentives while renting their land for solar power development under the state Farmland and Open Space Preservation program. “We chose solar because we believe it is less intrusive. For us, it is easier to buffer and hide it,” said Forell, who plans to lease 300 acres, or 6 percent, of his farmland to Geronimo Energy, a solar developer based in Edina, Minn. SEE SOLAR, PAGE 20

crainsdetroit.com

All tapped out?

By Dustin Walsh dwalsh@crain.com

arlier this summer, Axle Brewing Co. ceased operations at its Ferndale brewery. The 2-year-old craft beer maker and restaurant succumbed to financial pressures as the industry begins to contract under a saturated market. Axle joined 14 other breweries in Michigan that have closed since Aug. 20, 2018. Brewery closings are up across the U.S. and industry experts believe makers of craft beer now face the hangover of more than a decade of unparalleled rapid expansion. In short, the boom is over, but opportunity persists.

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Not so fast: New breweries, growing production push maturing industry forward despite tougher climate

“I think a lot of this boils down to basic economics,” said Bart Watson, chief economist for the Boulder, Colo.-based Brewers Association, a national advocacy group for craft brewers. “We had a decade of greater demand than supply and that resulted in more breweries than ever in the U.S. A de-

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cade ago, you could throw a dart at the market and likely succeed. That opportunity window has largely closed.” The number of breweries in the U.S. grew from just 1,653 in 2009 to 7,450 in 2018, according to data from the Brewers Association. That growth was fueled by unprecedented success. Between 2006 and 2015, breweries had the lowest default rate on Small Business Administration loans of any industry, according to SBA data reviewed by Nerdwallet.com. So while roughly only half of startup businesses survive into their sixth year, nearly 90 percent of breweries did during that time frame. SEE BREWERIES, PAGE 21

, 2019 S I N E S S // A U G U S T 2 6 CRAIN’S DETROIT BU

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Recession? Not in this year’s say forecast, financial advisers Local wealth managers remain sunny By Tom Henderson | thenderson@crain.com

about the economy, despite bumpy weather

advisers interyear ago, metro Detroit financial management viewed for Crain’s annual wealth end of a report were worried about the inevitable possible trade wars, long bull market, Chinese tariffs and Federal ReU.S. the by changes Brexit and interest-rate focused on the ineviserve. Today, financial advisers are tariffs and trade table end of a long bull market, Chinese

points before resuming its upward climb. Also contributing to market instability this month was a temporary negative yield curve, where 10fell year yields on U.S. Treasuries below yields on short-term treasuries. A similar short-term negative yield curve triggered a sell-off last December. But wealth advisers still like the fundamentals of the U.S. economy inand find plenty of good things to vest in (see sidebar, Page 11), and

“There have been a lot of headwinds over tariffs, but ultimately there will be a solution, which is in the self interest of China and the U.S. Each side will declare inner.”

on China trade war tinue into 2021 or even 2022, despite recent market volatility. Schwartz said he expects Trump to announce an agreement with the Chinese sooner rather than later. “It will be like the new trade agreement with Mexico and Canada, as which was basically the same be NAFTA. It’s NAFTA 2.0. This will alChina 2.0, something like they ready had agreed to,” Schwartz said. “Something to calm the markets and off let everyone know a trade war is the table.”

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MICHIGAN BRIEFS

INSIDE

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

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Domino’s delivers new tech hub Domino’s Pizza has delivered a new 33,000-square-foot “innovation garage” in Ann Arbor focused on cooking up cutting-edge pizza technology. The pizza company opened the new work facility at Domino’s Farms, the expansive office park where it is headquartered off U.S. 23 and M-14. Domino’s Innovation Garage houses 150 employees in an open, collaborative space, according to a news release. The main component of the building is the “pizza theater,” or a proving ground for pizza tech ranging from self-order kiosks and carry-out GPS trackers to autonomous delivery vehicles and robots such as Nuro’s R2 — an unmanned vehicle that will test pizza deliveries later this year. The two-story facility will house all of the company’s AnyWare ordering technology and in-store technology. “We’re proud to now have a space dedicated to learning, exploring, testing and launching new ideas in a way that only Domino’s can do,” Kelly Garcia, chief technology officer for the company, said in the release. As consumers increase demand for delivery and quick, hassle-free transactions, big pizza chains are also morphing into tech firms. Dom-

DOMINO’S PIZZA

The new Domino’s innovation hub at Domino’s Farm in Ann Arbor will house 150 employees working on pizza ordering and delivery technology.

ino’s has made no secret of its aggressive investment in technology. Competitors, such as Detroit-based Little Caesars and Sterling Heights-based Jet’s Pizza, are also shifting resources to meet consumer demand. Domino’s (NYSE: DPZ), the largest pizza company in the world based on retail sales, had revenue of $3.4 billion and profit of $362 million.

Michigan civil rights director on leave of absence

The embattled director of Michigan’s civil rights department has taken a leave of absence, weeks after he was reprimanded for making inappropriate remarks about the appear-

ance of a woman he saw outside a meeting. The state Civil Rights Commission last week gave no reason for 69-yearold Agustin Arbulu’s request for leave, which was made last Monday, nor did it say how long the leave will last or if he will continue to be paid. He earns approximately $159,000 a year. Department spokesperson Vicki Levengood said it was the “director’s decision to request a leave of absence,” but could not speak to the reason why or duration of time. Arbulu, a Republican, has faced calls to resign from Democratic Gov. Gretchen Whitmer and others after a male communications analyst for the agency complained that Arbulu re-

peatedly commented about the woman’s appearance during a break from a May listening session on the planned reconfiguration of the Grosse Pointe Public School System. The employee, who is gay, said he told Arbulu the statements were not OK and Arbulu responded that “he would not understand because he did not like women.”

DTE to return $333M to customers

DTE Gas Co. customers can expect a tiny monthly credit in their utility bills starting next month. The Michigan Public Service Commission last week green-lighted monthly decreases for DTE Gas cus-

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tomers to reflect the effect lower federal corporate tax rates have on the Detroit-based utility company’s long-term investments, the MSPC said in a news release. About $12.7 million per year — for a total of $333 million — will be returned to customers starting in September, the release said. DTE Gas residential customers who use 10,000 cubic feet of natural gas a month can expect a credit of 58 cents on their monthly bill. The adjustments will be in effect until the next time the utility applies new rates, according to the release. DTE has 1.2 million business and residential gas customers in Michigan, DTE spokeswoman RoNeisha Mullen said in an email. “The commission has been a strong advocate for utility ratepayer savings ever since the federal Tax Cuts and Jobs Act went into effect,” MPSC Chairman Sally Talberg said in a release. “Our staff continues its important lead role in making sure every dollar of savings from the tax law changes is passed on to ratepayers in a timely manner.”

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HEALTH CARE

21st Century Oncology making comeback By Jay Greene jgreene@crain.com

21st Century Oncology, one of the nation’s largest investor-owned cancer treatment companies, based in Fort Myers, Fla., is seeking to expand its decade-long involvement in Michigan over the next several years as it continues its turnaround plan after emerging from bankruptcy in early 2018. Kim Commins-Tzoumakas, its CEO since January 2018 who also lives in Birmingham, said 21st Century is talking with additional oncologists and groups in Michigan and hopes to sign affiliation agreements in the near future. “We are looking at partnerships in other areas of Michigan,” Comminsshe told Crain’s. Tzoumakas A company official later added: Need “The timing and to know nature of those  National cancer discussions recare provider has main confidenpartnered with tial at this time as Michigan they are in early Healthcare stages.” Professionals 21st Century multispecialty now operates in group since 2012 15 states with 129 clinic loca 21st Century in tions, including talks with six freestanding oncologists radiation oncoloutside of ogy centers with Southeast Michigan and plans eight specialists, one nurse and to expand about 30 emoperations ployees in South New owners east Michigan. and management The invesstructure stresses tor-owned comvalues-oriented pany also opercare ates 26 other centers in eight countries in Latin America. Nearly 1,000 doctors are affiliated with the company. In 2006, 21st Century broke into Michigan when, under its previous name of Radiation Therapy Service Inc., it acquired MIRO Cancer Centers and Michigan Comprehensive Cancer Institute. At its height in 2011, 21st Century had affiliation agreements with 250 doctors in Michigan, said a company spokesman. Radiation therapy is one method of treating cancer because it can kill cells in highly targeted areas. Radiation can be given alone or used with other treatments such as surgery or chemotherapy. “We have a real fantastic group in Southeast Michigan,” Commins-Tzoumakas said. “Our radiation oncologists lead the nation in research. They lead my national physician quality committee.” SEE COMEBACK, PAGE 19

TECHNOLOGY

BANKING ON THE UNBANKED

Jason Bierkle, president of DivDat KURT NAGL/ CRAIN’S DETROIT BUSINESS

DivDat ditches paper billing in bid for reinvention By Kurt Nagl knagl@crain.com

After a half century in business, Diversified Data and Communications Inc. is back in startup mode. The Royal Oak Township-based company known better as DivDat is shedding the remnants of its traditional billing business — its core operation since Al Bierkle started it in 1971 — after selling its last book of contracts to a New Jersey company late last year. The family-owned company has bet its future on digital kiosks that let customers who don’t have bank accounts pay bills. Over the past couple of years, the company has rolled out 75 bill-payment kiosks in Detroit and a few suburbs that can be used fee-free to pay essential bills, such as property taxes, water and electricity. As the company prepares to move its headquarters to Detroit later this year, management is working to revamp its identity and re-establish its viability. In the early 1980s, the company peaked in size

with 120 employees and annual revenue around $50 million from sending paper bills on behalf of automakers, airlines and other clients. Since then, print mail services have turned into a commodity, digitization has eaten away at the bottom line and once-strong profit margins have become negligible. Jason Bierkle, president of DivDat, thinks he’s found a way to keep his father’s business going. The clean-shaven, energetic 48-year-old envisions a company capable of growing quickly while helping an underserved population pay bills more easily and helping clients collect money they didn’t expect to see. “What got us to the point that we were gonna sell the legacy business so that we could focus on this is a social mission to bring technology to the 25 percent of the country that needs it the most, so that they can stay in their homes, keep their heat on, keep their kids in school,” he said. “We can help, and we can make some money doing it.” SEE DIVDAT, PAGE 18

“What got us to the point that we were gonna sell the legacy business so that we could focus on this is a social mission to bring technology to the 25 percent of the country that needs it the most, so that they can stay in their homes, keep their heat on, keep their kids in school.” Jason Bierkle

SPORTS BUSINESS

Detroit hosts its largest esports event yet

By Timothy Seppala

Special to Crain's Detroit Business

This weekend the $865 million global esports industry came to Detroit in a big way. Riot Games brought its League of Legends Championship Series (LCS) summer finals to over 10,000 expected fans at Little Caesars Arena with a $100,000 prize pot. Viewership on Twitch, Amazon’s live-streaming platform, eclipsed that by orders of magnitude. Typically esports — professional competitive video gaming — tournaments stick to the coasts, but lately Riot has been looking to expand its footprint and take its biggest shows

to new markets. Motown’s turn in the esports spotlight has the potential to make it more of a hub for the genre. “It’s a big score,” said High Score Esports lounge owner Nathaniel McClure. “To have an event of that caliber here is incredibly exciting, especially when Michigan and Detroit

aren’t known for it.” Last year’s LCS world championship in South Korea had over 100 million viewers online. In 2017, the event was held at Beijing’s Olympic stadium and sold out 40,000 seats. Last year the global esports market was valued at almost $865 million, and Statista forecasts that number will almost double by 2022. It begs the question, why Detroit? “We try to make sure we’re being diverse in the cities we bring our show to, quarter over quarter,” LCS commissioner Chris Greeley said. “We want to make sure that if you’re a fan of League of Legends in North America, there’s a shot that a show is coming toward you.”

He said Detroit is in a great spot to help that happen. The city is quickly becoming a regional tech hub with Google and Microsoft offices downtown, plus it has the ability to draw in attendees from Canada and the East Coast in addition to Illinois, Indiana and Ohio. The upswing is getting young visitors from the surrounding region who typically wouldn’t consider Detroit as a travel destination while passively courting them for potential relocation. The scouting process for host cities started earlier this year — and it might remind you of bidding for a Super Bowl. SEE ESPORTS, PAGE 18

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Developer builds on campus in Detroitâ&#x20AC;&#x2122;s Core City, branches out

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Detroit-based developer Prince Concepts built a park geared toward public use on a former parking lot in the cityâ&#x20AC;&#x2122;s Core City neighborhood west of Midtown. The park is 8,000 square feet, bordered by Ochre Bakery and the incoming Magnet restaurant.

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Developer Prince Concepts is building on a growing collection of renovated buildings and semicircular huts in Detroitâ&#x20AC;&#x2122;s Core City neighborhood, while distilling plans for other tenanted properties across the city on the east side. The multifaceted Core City project clustered at Warren and Grand River avenues was announced in June 2018 with 50,000 square feet of retail, office and residential space, north across Grand River from Prince Conceptsâ&#x20AC;&#x2122; existing Quonset hut apartment development, True North. They are west of Midtown near the intersection of I-96 and I-94. One of the most recognizable pieces, a new wood-fired, plant-centric restaurant called Magnet in the old Magnet Radiator Works building, is expected to open the first week of September, said Prince Concepts owner Philip Kafka. Kafka and chef Brad Greenhill are partners on Magnet; they are also owners in Corktown Thai restaurant Takoi. Astro Coffeeâ&#x20AC;&#x2122;s previously announced Ochre Bakery and roasting facility opened this spring. It sits in a hulking former factory building separated from Magnet by an approximately $230,000 park that replaced a parking lot. Kafka calls that building the â&#x20AC;&#x153;Sawtooth.â&#x20AC;? 313 Brazilian Jiu-Jitsu is set to replace a previous tenant there, Underdog Boxing Gym; and the Pantry, a 3,000-square-foot combined event space and commercial kitchen for Takoi and Magnet parent company Top Young Hospitality, has been completed. Ad agency Lafayette American moved into a pieshaped building also clustered around the park. Prince Concepts has also expanded its property holdings to the other side of the city. It is building out space at the northern edge of the near-east Villages neighborhoods for a yoga studio and Detroit Body Garage, a membership gym in West Village that plans to move from its current building late this year, according to owner Terra Castro. Prince Concepts would own the 1,000-square-foot yoga studio set to

Need to know

Philip Kafkaâ&#x20AC;&#x2122;s Prince Concepts is branching out from Core City neighborhood with yoga studio, gym on east side ď §

ď § Work progresses on a swath of industrial buildings near Kafkaâ&#x20AC;&#x2122;s unconventional Quonset hut apartments ď § Opening expected early next month for Magnet, a follow-up restaurant from chef of Takoi in Corktown

â&#x20AC;&#x153;It canâ&#x20AC;&#x2122;t be totally alien and exotic to what exists. Everything we do, we must emerge. We canâ&#x20AC;&#x2122;t descend. When developers descend upon an area, nobodyâ&#x20AC;&#x2122;s happy.â&#x20AC;? Philip Kafka

open Nov. 1, called Santo Santo, with yoga instructor Samantha Jameson. Santo Santo and the 2,200-squarefoot former auto shop that would house Detroit Body Garage are at Mack Avenue and Fischer Street. Kafka also said he doesnâ&#x20AC;&#x2122;t have plans yet for a former engine factory he bought in October at Algonquin Street and Kercheval Avenue. Detroit property records list the purchase price as $208,000.

More in pipeline During a tour of his network of Core City properties, Kafka discussed two other renovations near the anchor park with shipping containers, trees and its ground decorated with salvaged slices of an old fire house. The 13,500-square-foot â&#x20AC;&#x153;5Kâ&#x20AC;? building, originally a 1950s super market, has been gutted and sections of its ceiling carved out to create enclosed courtyards. The structure would house eight apartments of 700-1,600 square feet renting for $1,350-$2,500, as well as around three commercial spaces and a small retail section. And what he dubs the Power Plant,

formerly the Architectural Salvage Warehouse, is a 10,000-square-foot site with a two-story, triangular building that Kafka wants to transform into an indoor market and bookstore, with cage-style fencing separating six retailers that would sell chess boards, spices and other wares. Kafka would be a partner in the chess and spice businesses. He expects renovation work on 5K and the Power Plant to finish around December. Kafka said his development company owns more than 15 acres of property in three Detroit neighborhoods, has reactivated 50,000 square feet of building space and has 30,000 more square feet in design or construction. Prince Concepts has spent $3 million renovating and $2.5 million in new construction and green space geared toward public use. The Sawtooth, the Pie building, the park, the Quonset apartments shaped like greenhouses and other developments are Kafkaâ&#x20AC;&#x2122;s vision, working alongside designers including Ishtiaq Rafiuddin of Detroit-based Undecorated. Other contractors include architecture firms Et Al Detroit and Bigg Designs. Kafka, a Texas native, said some of his financing comes from selling his New York billboard business, Prince Media Co., as well as from Takoi and his other business operations. He said he tends to take on business partners, such as Greenhill, but has no investors or partners in his overarching development company. The Northwestern University philosophy graduate bought his first Detroit building in 2012 â&#x20AC;&#x201D; now home to Takoi. He said he sees his design and planning in Core City as â&#x20AC;&#x153;exoticâ&#x20AC;? enough to attract curious suburbanites and natural enough to fit in with its Detroit surroundings in a neighborhood thatâ&#x20AC;&#x2122;s â&#x20AC;&#x153;undervalued.â&#x20AC;? â&#x20AC;&#x153;It canâ&#x20AC;&#x2122;t be totally alien and exotic to what exists,â&#x20AC;? Kafka said. â&#x20AC;&#x153;Everything we do, we must emerge. We canâ&#x20AC;&#x2122;t descend. When developers descend upon an area, nobodyâ&#x20AC;&#x2122;s happy.â&#x20AC;? Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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The Coleman A. Young International Airport, formerly Detroit City Airport, has evolved over the decades.

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City exploring more corporate aviation, industrial use for Detroit airport’s future By Annalise Frank afrank@crain.com

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The city of Detroit is considering a plan that would transform the underused Coleman A. Young International Airport property for more than $100 million. A report by city contractor Avion Solutions Group LLC obtained by Crain’s describes a series of proposals the city wants to further explore that are aimed at making the airport that has been plagued by disrepair and operational losses into a revenue-generating airport shifted more toward corporate use. Ideas include redeveloping a portion of the property for separate industrial use, getting rid of a smaller runway and absorbing vacant land for construction of new airport infrastructure. The Detroit News first reported on the potential plan. The concepts in Avion’s report are part of a multiphase planning process under Federal Aviation Administration reporting requirements, said Bryan Amann, chief legal counsel in capital and infrastructure for the city of Detroit. Amann called the report a “first blush” that could be part of an airport layout plan expected to be submitted this fall to the FAA and Michigan Department of Transportation. The plan establishes a “spectrum of undertakings” the airport could feasibly implement on a “five-year road map,” he said. Mayor Mike Duggan was present at a January meeting where Avion presented its Redevelopment and Modernization Program report to MDOT and regional FAA officials, Amann said. “We’ve looked at an awful lot of options, but I’m not gonna comment on anything until we have a plan and the FAA obviously can’t react to anything until the plan is formally submitted,” Duggan said during an event last week at Rouge Park to announce a $5 million investment by Huntington Bank. “If we’re gonna operate this as an airport, we’re gonna need a huge amount of improvement, but the FAA can’t fund the improvements until there’s an approved plan. So our next step is to get the city and the FAA in agreement on the future use of that airport and then that could potentially unlock several million dollars in funds to build the airport in the long term.”

Need to know

JJReport by city contractor floats ideas

including building aviation infrastructure on 196 acres JJCity wants to include plan as part of a “five-year road map” to submit to federal government this fall JJReport also recommends closing shorter runway to reuse land for industrial development

The city would then give the airport 196 acres to the west — mostly vacant residential — in exchange, possibly for a new taxiway, corporate terminal complex and aeronautic training center. Development of that acreage over eight years or so could cost as much as $123 million and could employ 1,605, according to estimates in the report. The airport would likely seek FAA Airport Improvement Program grants to fund part of the work.

Yearslong process

What are best uses?

If the city submits the next section of its yearslong airport layout plan this fall, as expected, that could move along a process that’s been years in the making at the 92-year-old city airport. In 2017, the city solicited ideas from developers about how the 264-acre airfield could be used for nonaviation purposes. But in a move that signaled a commitment to the property as an airport, the city said in March that it planned to invest $4 million to replace the main runway. Avion’s report throws a vision into the ring that would try to do both. It would grow the east-side airport to 374 acres, positioning it to meet increasing needs for business and corporate aviation amid Detroit’s nascent revitalization. But it would mean ridding the airfield of its shorter runway. The plan proposes closing the 3,700-foot-long Runway 7/25 to make 86 acres of airport property available

Beverly Kindle-Walker, executive director of the nonprofit Friends of Detroit City Airport, said she wanted to see a finalized plan before commenting on specifics. But she said she is “definitely not in support of this land being used for anything other than direct, aviation-related. If it’s a company that’s aviation-related (using some of the repurposed 86 acres), that would make sense.” She also said the airport still has a strong base of small-scale users, and doesn’t want to see individual airplane owners or associations such as the nonprofit Black Pilots of America “edged out” in favor of corporate users. The city of Detroit has been studying for years how to best use the site that hasn’t had commercial passenger airline service since 2000 and has been operating in the red. Its total number of yearly aircraft operations dropped around 70 percent between 1998 and 2017, according to FAA data included in the Avion report. And a critical audit report released in June revealed past failures in lease management and facility maintenance at the airport, as well as lost leasing revenue. The Airport Department that operates Detroit’s aviation facilities, with the city airport as its main holding, recorded revenue of $1,559,811 in fiscal 2018 on expenditures of $2,276,671 for a loss of $716,861. Also, under FAA rules that limit consultant contracts to five years, the city had to seek another consultant after Avion’s contract expired in June. The request for bids turned up six candidates and the city has selected a finalist that still needs to be approved by City Council when it returns from recess the first week of September.

“A lot of things get thrown on walls and many of them don’t survive. They’re simply in the scope of things we want to explore.” Bryan Amann

for transfer to the city for industrial development. That runway’s setup means it isn’t likely to be extended, and with its current length it serves smaller aircrafts and is used about 10 percent of available time. Parts of the airport property are “high priority” for industrial reuse because of their position next to the airport and rail lines, the report said, especially amid Detroit’s increasing need for industrial land.

Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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Private equity firms Bain and AIP among bidders for Masco’s cabinet-making unit By Kiel Porter Bloomberg

Private equity firms Bain Capital and American Industrial Partners are among bidders for Livonia-based Masco Corp.’s cabinetry business, according to people with knowledge of the matter. Clearlake Capital Group LP and W.W. Grainger Inc. also have made it to the second round of bidding for the Masco unit, which is expected to fetch about $1.2 billion, said the people, who asked not to be identified because they weren’t authorized to speak publicly. Masco’s cabinetry unit, Ann Arbor-based Masco Cabinetry, reported $488 million in sales and $63 million in earnings before interest, taxes, depreciation and amortization for the first half of the year, according to company reports.

Masco Corp. offers 300 styles of kitchen and bath cabinets under four brands: Cardell, KraftMaid, Merillat and QualityCabinets, according to its website. An agreement on a sale might not be reached, and Masco could decide to keep the business, the people said. Shares of Masco rose as much as 3 percent in New York trading Tuesday upon news of the bids. They closed up 2.1 percent at $39.64, giving the company a market value of $11.47 billion. By Thursday, shares were trading at $40.64. Representatives for Bain, Grainger and Clearlake declined to comment. Representatives for Masco and AIP didn’t respond to requests for comment. Masco, whose origins date back to 1929, announced in March that it had hired advisers to look at strategic options for its cabinet and windows division. Out of that review, it planned to sell Masco Cabinetry and its window businesses Milgard Windows and Doors of Tacoma, Wash., and United Kingdom-based UK Window Group in three separate transactions. After selling several business lines over a seven-year period, the company began adding to its product lines through acquisitions in 2015, according to data compiled by Bloomberg. It bought plumbing products maker Mercury Plastics Inc. in 2017, followed by ceiling fan manufacturer L.D. Kichler Co. in 2018 for about $550 million, according to its website and the Bloomberg data. Masco Corp. offers 300 styles of kitchen and bath cabinets under four brands: Cardell, KraftMaid, Merillat and QualityCabinets, according to its website. Its products also include Behr paints, as well as lighting and hardware. —Crain’s Detroit Business contributed to this report.

Need to know

JJUnit of Livonia-based Masco Corp. expected to fetch $1.2 billion JJMasco hired advisers to look at strategic options for its cabinet, windows divisions

MASCO CABINETRY

Livonia-based Masco Corp.’s cabinetry unit, Ann Arbor-based Masco Cabinetry, sells four cabinet brands: Cardell, KraftMaid, Merillat and QualityCabinets.

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OPINION COMMENTARY

Bad roads a problem in rural Republican districts, too T

he prevailing wisdom among Republican state legislators dead set against raising taxes to fund infrastructure is that poor roads are a problem for Democrats from urban and suburban areas of Michigan, not the largely outstate rural areas they represent. But this line of thinking is not actually supported by facts. Not even close. New data on road conditions made public last week shows House Republicans’ have 2.6 times as many lanemiles of roads in poor condition in their districts than Democrats do in theirs. For perspective, the 59 House Republicans have 26,385 lane-miles of state and local roads in poor condition, compared with 10,043 miles for the 51 House Democrats, a Crain’s analysis of this data shows. In Republican districts, 40.4 percent of the roads were in poor condition in 2018 and 41.8 percent of roads in Democratic districts are in poor condition, according to Pavement Surface Evaluation and Rating (PASER) data compiled by the Michigan Transportation Asset Management Council. In the Senate, Republicans have nearly four times as many lane-miles in their districts in poor condition as Democrats, while the percentage of lanemiles in poor condition is marginally the same — 41.4 percent for the GOP and 40.4 percent for the Democrats. In other words, Republicans and Democrats have a nearly equal share of poor roads. But the GOP — which has controlled the state’s pursue strings since 2011 — has way more bad roads than the minority party. And yet the reflexive rhetoric from House Speaker Lee Chatfield’s caucus is the roads are generally acceptable where they live and that the residents and businesses in their districts won’t support even a slight gas tax increase, much less the whopping 45-cents-pergallon Democratic Gov. Gretchen Whitmer has been advocating for. Leading business groups in Michigan have spent the past six months nodding in agreement with Whitmer that Michigan needs to be spending $2.5 billion more annually on roads, while not specifically backing Whitmer’s proposed solution. They know that the roads, particularly in Southeast Michigan, are an albatross on economic growth for Michigan. But what’s been lacking in the press statements and reports from the Michigan Chamber of Commerce, Business Leaders for Michigan and the Detroit Regional Chamber is any sort of framing of why crumbling roads is a problem for Republicans. So I’ll attempt to do it for them here with a rundown of three legislators in both the House and Senate with the most miles of bad roads. J The winner, of sorts, in the House

CHAD LIVENGOOD clivengood@crain.com

Republican caucus with the most bad roads is Rep. Sue Allor of the 106th District in the northeast Lower Peninsula (Alcona, Alpena, Cheboygan and Iosco and Presque Isle counties). She’s got 1,265 lane-miles of state and local roads rated by civil engineers as in poor condition, amounting to 43 percent of all roads in her district. J In Rep. Daire Rendon’s five-county 103rd District of Crawford, Kalkaska, Missaukee, Ogemaw and Roscommon, there are 1,232 lane-miles of bad roads, comprising of 43.5 percent of all roads. Nearly 37 percent of the roads in her Up North district are rated in fair condition, trending toward the poor column. J In the 100th District of Lake, Newaygo and Oceana counties, 54.6 percent of the roads (1,200 miles) that Rep. Scott VanSingel’s constituents drive on are rated in poor condition. For senators with geographically larger districts, the number of lanemiles that need to be repaved or rebuilt is even more daunting. J Sen. Curt VanderWall’s 12-county 35th District has 3,310 lane miles in poor condition — 45 percent of all roads in a district that includes the bucolic M-22 running through Manistee, Benzie and Leelanau counties. J In Sen. Ed McBroom’s 12-county 38th District in the Upper Peninsula, there are 2,810 lane-miles of roads rated in poor condition, 36 percent of all roads. J Senate Appropriations Committee Chairman Jim Stamas, a senator who could play a crucial role in a road-funding deal, has 2,117 lane-miles of bad roads in his sprawling 36th District, which stretches from his hometown of Midland to Presque Isle County on the shores of Lake Huron. Since Whitmer took office, Republicans have framed crumbling roads as Whitmer’s issue because she campaigned on it. In other words, they don’t want to give her a political win to claim in 2022 that she fixed the damn roads. But the data doesn’t lie. Voters in Republican districts are driving on more bad roads than voters in Democratic districts. Now it’s just a question of what the Legislature’s majority party is going to do about it. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

UAW needs to face up to scandal

as anybody at the United Auto Workers HQ heard the phrase “crisis management”? After the first couple of indictments of UAW executives on kickback/corruption charges, the smart thing would have been to appoint a squeaky clean Big Name to do an internal investigation, complete with forensic accountants, make recommendations and change practices, building firewalls to prevent misdeeds. And be public about it. But the UAW is keeping with its own time-honored traditions. It operates more like the Russian politburo than a socially progressive, leftist labor organization. Last week’s report by The Detroit News of bad deeds keeps inching further into the upper echelons of the organization. And as the contract talks begin with the Detroit Three automakers, you have to wonder what the rank-and-file membership really thinks. Of course, it takes two to tango, and the indictments and convictions have also hit auto company management. But the union chicanery is really disturbing because of the UAW’s historic roots in social justice. You just can’t imagine such scandals during the tenure, say, of Walter Reuther or Doug Fraser. You have to wonder

MARY KRAMER Group Publisher

when — and under whose tenure — bad behavior took root. Marick Masters, who runs the labor relations programs at Wayne State University, offers some advice: Get in front of this. Invite an independent commission to come in and look at everything — flower funds, charities associated with key UAW officials, alleged threats to send union managers “back to the line” if they didn’t get with the dubious program. In other words: Follow the money. In the last century, you could find corruption and investigations in Teamsters pension funds, building trades, the maritime unions (think “On the Waterfront”) and other much-publicized scandals. But the UAW was untainted. Until now. Masters also runs the Doug Fraser

Center for Workplace Issues at Wayne State. In full disclosure, he notes that he has received some funding from the joint training funds for his programs. And Alfons Iacobelli, the disgraced FCA exec who was sentenced last year for his part in the training funds scandal, is a graduate and had served on Masters’ advisory board. “The training fund — it should have sent shock waves,” Masters said. “The UAW should have gotten independent, highly reputable experts in for an objective look.” Masters is writing a book on union finances. Recently, he decided to add a chapter on union corruption. He’ll have plenty of modern illustrations, courtesy of the UAW. “It does nobody any good, especially the labor movement, to try and sugar coat and play it down,” Masters told me. “This is corruption at the highest level. The only question is how widespread it is. I’m not sure the last shoe has dropped.”

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

LETTERS

On school start date, what do parents, kids think? To the Editor: The Crain’s Forum columns on the state’s post-Labor Day school start (Aug. 19) did not touch on the question of how students and parents feel about this.

I have two kids ages 12 and 13 and am glad their school starts after Labor Day. It makes them feel they had enough of summer activities and usually are by then eager to go back to school. Some of their friends and relatives whose schools start in August instead often feel something is wrong with their early start. Michigan is a cold-weather state, and our summer is short; let’s not

make it even shorter. If more school time is needed, end it later in June or add to the school day, but don’t ruin late summer and Labor Day activities and vacations with an early start. My kids’ school is one of the best-performing in the state; accordingly, it does not appear a late start affects their students’ performance. N. Peter Antone Bloomfield Hills

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Varnum Law opens Birmingham office as part of expansion By Kurt Nagl knagl@crain.com

Varnum LLP has opened a new office in Birmingham as part of a plan to expand its Southeast Michigan presence as large as its base in West Michigan. The firm, headquartered in Grand Rapids, last week opened an 8,000-square-foot office off Brown Street in the city’s central business district, said Ron DeWaard, chair of the law firm. Eight attorneys moved there from its Detroit and Novi locations, and DeWaard plans to fill it out with seven more new attorneys in the next year. The firm is tapping into the region’s large automotive supplier DeWaard base for growth and sees potential new business in autonomous vehicles. “There’s so many regulatory issues and emerging legal issues in terms of technology, data and privacy issues,” DeWaard said of the industry. “That kind of specialty area gives us capabilities that I don’t know any other firms can claim to have.” In a generally stagnant legal industry, local law firms are facing stiff competition, with many diversifying their areas of practice to generate more revenue. Honigman Miller Schwartz and Cohn LLP formed in 2017 a team of attorneys to focus on the autonomous vehicle industry. Other firms such as Dickinson Wright and Dykema have similar units. Varnum entered the metro Detroit market in 2005 with an office in Novi and opened one in Detroit about 10 years later. Most of the firm’s 50 lawyers in Southeast Michigan, which also includes an office in Ann Arbor, were hired in the past five years — 15 in the past two years, DeWaard said. In total, Varnum has 189 lawyers across eight offices in the state. In the next couple of months, it will move its Ann Arbor location to a Main Street office downtown that is twice the size. DeWaard said he plans to expand that office from six to 12 attorneys in the next year. “What’s driving it is we’re able to take market share from other firms by developing a client-centric culture,” DeWaard said. By number of attorneys, Varnum ranked 21st on Crain’s 2019 list of largest law firms in Southeast Michigan. It ranked as the second-largest law firm for number of attorneys in Greater Michigan, behind just Warner Norcross + Judd LLP. Most of Varnum’s business comes from auto suppliers, including 22 tier-one suppliers, nine of which are among the 100 largest globally, DeWaard said. He declined to offer names, citing confidentiality agreements. Another large area of focus is estate planning. The Birmingham office, led by senior attorney Mike Romaya, will build off a “significant client base” there and focus on estate planning, finance, litigation, labor and employment, trusts and corporate services.

DeWaard said there’s been talk of expanding the firm outside the state — to the greater Midwest and Florida — but the immediate goal is to build up its Southeast Michigan presence. “We are ready, willing and able to expand the offices we have to accommodate growth, and we think right now, we are in the right locations.” Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

Varnum Law opened a new 8,000-square-foot office in Birmingham, marking its fourth in Southeast Michigan.

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FOCUS

WEALTH MANAGEMENT

ISTOCKPHOTO/GETTY IMAGES

Recession? Not in this year’s forecast, financial advisers say

Local wealth managers remain sunny about the economy, despite bumpy weather on China trade war By Tom Henderson | thenderson@crain.com

year ago, metro Detroit financial advisers interviewed for Crain’s annual wealth management report were worried about the inevitable end of a long bull market, Chinese tariffs and possible trade wars, Brexit and interest-rate changes by the U.S. Federal Reserve. Today, financial advisers are focused on the inevitable end of a long bull market, Chinese tariffs and trade wars, Brexit and interest-rate changes by the Fed.

“It’s Groundhog Day,” said Anne MacIntyre, a financial adviser based in Sterling Heights, referring to the movie where Bill Murray kept living the same day over and over. But instead of a TV weatherman experiencing deja vu, financial advisers feel like they are living a familiar set of concerns and issues. Even recent turmoil on the market has triggered a sense of history repeating. On Aug. 1, President Donald Trump shocked markets with the surprise announcement that he would hit Chinese goods with another $300 million in tariffs in September, causing the market to swing

In this package J Recession? Not in this year’s forecast. Local wealth managers remain sunny about the economy, despite bumpy weather on China trade war. This Page J 17 investment advisers offer likes, dislikes and insights. Page 11

wildly. The Dow lost 300 points on Aug. 1, 760 points on Aug. 5 and 800 points on Aug. 14 — losses that were sandwiched around big climbs on hopes a trade war would be averted. It brought back memories of last Oct. 10, when, after threats of Chinese tariffs, the Dow lost more than 800 points, and the next day lost 546

points before resuming its upward climb. Also contributing to market instability this month was a temporary negative yield curve, where 10year yields on U.S. Treasuries fell below yields on short-term treasuries. A similar short-term negative yield curve triggered a sell-off last December. But wealth advisers still like the fundamentals of the U.S. economy and find plenty of good things to invest in (see sidebar, Page 11), and they still think an all-out trade war with China will be averted, with Trump needing a strong domestic economy to win reelection in 2020. They also tend to agree that the economic expansion that hit 122 months in August has at least another year to go. “We’ll have economic growth for the next 12 months and potentially 18 months,” said David Sowerby, managing director and portfolio manager in the Bloomfield Hills office of Ancora Advisers LLC. While he said he didn’t think saber-rattling over trade would lead to a recession, it has had a detrimental effect on stock prices for the last year and a half. “The trade issue has been lingering

“There have been a lot of headwinds over tariffs, but ultimately there will be a solution, which is in the self interest of China and the U.S. Each side will declare itself the winner.” — Anne MacIntyre, financial adviser based in Sterling Heights

since March of 2018,” Sowerby said. “It has been an on-and-off issue that has prompted uncertainty in the market. In that 18 months, the median stock in the S&P 500 is flat because of the uncertainty.” Peter Schwartz, a principal in the Bloomfield Hills firm of Gregory J. Schwartz & Co., describes himself as “a short-term skeptic and a longterm optimist.” While he said fears of tariffs and actual tariffs have created economic headwinds, he said a recession is very unlikely next year and a restrained bull market could con-

tinue into 2021 or even 2022, despite recent market volatility. Schwartz said he expects Trump to announce an agreement with the Chinese sooner rather than later. “It will be like the new trade agreement with Mexico and Canada, which was basically the same as NAFTA. It’s NAFTA 2.0. This will be China 2.0, something like they already had agreed to,” Schwartz said. “Something to calm the markets and let everyone know a trade war is off the table.” He said his prediction for growth hasn’t changed in recent weeks. “It’s not a feeling of euphoria, no one is going to be spiking the ball or taking a victory lap. There’s not a go-go feel to this economy like in the 1980s or 1990s, but given regulatory relief, tax reform and lower interest rates, we ought to be in an awfully good stretch.” Anne MacIntyre also expects a resolution to the situation with China. “There have been a lot of headwinds over tariffs, but ultimately there will be a solution, which is in the self interest of China and the U.S. Each side will declare itself the winner,” said MacIntyre. SEE FORECAST, PAGE 12

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SPECIAL REPORT: WEALTH MANAGEMENT

17 investment advisers offer likes, dislikes and insights Dislikes: Too much exposure to large-cap U.S. stocks; underweighting growth stocks compared to value stocks

Crain’s interviewed 17 investment advisers, many based locally, as well as others at national banks with a large local presence. Here are the investments they currently like, those they don’t and their insights into the marketplace.

John Augustine

Chief investment officer, Huntington Bank, Columbus

Insight: “We want to be cautious. We want to limit the downside. Our clients have made a lot of money, and they want to keep it.” Augustine

Dzialo

Bork

Jeffrey Fratarcangeli

Principal, Fratarcangeli Wealth Management of Wells Fargo Advisors, Birmingham

Granger

Likes: U.S. blue-chip stocks with overseas markets; dividend paying stocks; aerospace and defense; technology; health care; emerging markets

Likes: Emerging markets, including China; dividend-paying U.S. stocks; global Real Estate Investment Trusts; McDonald’s; Johnson & Johnson; Chevron Dislikes: High-yield corporate bonds; U.S. industrials like Boeing and Caterpillar Insight: “It’s surprising to have the Federal Reserve be accommodative, again, after 2018, when they were aggressively being anti-accommodative. But the Fed is aligning itself with other central banks. Sixteen central banks have lowered their interest rates this year and only five have raised them.”

LaBrecque

Lee

Insight: “A good portion of the world has negative interest rates. If that doesn’t define insanity, I don’t know what does. If you buy a 20-year Swiss bond today, it’s paying a negative rate. Australia just sold 100-year bonds at one percent.”

the problems, it’s the overreactions.”

Mike Dzialo

President and chief investment officer, Managed Asset Portfolios LLC, Rochester Likes: Food and beverage (including Imperial Brands in the UK and Campbell Soup); health care; technology, including Nokia and Teradyne Inc.; First Pacific Co. Ltd., a Hong Kong-based holding company in telecommunications, consumer food products and infrastructure

Scott Bork

Senior vice president and director of investments, Chemical Bank, Detroit Likes: Government fixed income; U.S. equities, particularly large cap; international developed Dislikes: High-yield corporate bonds Insight: “Slowing economies don’t cause

Insight: “Longer term, money you don’t need for 10 years, emerging markets is where you need to be.”

MacIntyre

Leon LaBrecque CEO, LJPR LLC, Troy

Likes: Large cap U.S. value stocks; consumer staples; commercial real estate; non-Chinese emerging markets like Vietnam, Malaysia and the Philippines

Kevin Granger

Senior vice president and senior investment adviser, PNC Wealth Management, Troy

Dislikes: Infrastructure; FANG stocks (Facebook, Apple, Netflix, Google); Europe

Likes: Established and emerging international stocks; small- and mid-cap U.S. stocks; infrastructure

Dislikes: Manufacturing; industrials; chemicals; financials; materials

Senior partner of Merrill Lynch’s Aubrey Lee Jr. and Julius Readus Group, Farmington Hills; first vice president, Merrill Lynch Wealth Management/Bank of America Likes: U.S. small-cap growth stocks; consumer discretionary; financials; IT; U.S. municipals; investment grade U.S. corporate bonds Dislikes: International developed stocks; real estate; utilities; communication services; U.S. high-yield corporates Insight: “There are investment opportunities both in China and in the U.S. in technology, because of A.I. and 5G telecommunications.”

Dislikes: Financials; international stocks, including Europe and Japan Fratarcangeli

Aubrey Lee Jr.

Insight: “Recessions are opportunities for investors. They are opportunities to buy things. It’s buying your snowblower in July.”

Anne MacIntyre

President and CEO, Annie Mac Financial LLC, Sterling Heights Likes: Large-cap U.S. stocks, mortgage-backed securities, investment grade corporate bonds Dislikes: Utilities, consumer staples, long-term bonds, developed international stocks, financial stocks, industrials Insight: “Tariffs have been a weight. They are unnerving, but you have to consider the fundamentals, and the fundamentals of the economy are still very strong.“ SEE ADVISERS, PAGE 12

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SPECIAL REPORT: WEALTH MANAGEMENT

FORECAST FROM PAGE 10

“Keep politics and all the noise out of it and focus on the fundamentals,” said Reuben Rashty, managing director and head of private banking in Michigan in the Birmingham office of Fifth Third Bank. When he does that, what does he see? “We’re talking 12-18 months of economic growth.” “There will be a resolution of the trade issues with China. Both countries have too much to lose in an allout trade war,” said Michael Dzialo, president and chief investment officer of Rochester-based Managed Asset Portfolios LLC. “Donald Trump is looking at 2020, and the best argument to get reelected is the economy. If we get into an all-out trade war, that pushes the economy into recession, and the Trump administration wants to avoid that.” Leon LaBrecque, the CEO of LJPR LLC in Troy, says it’s a case of when, not if, a recession comes, China or no China. But even when it does, the sky won’t be falling. “A recession is going to happen sooner or later, probably sooner,” he said, “sooner” meaning probably at least 12 months out. “That we are going to have a recession is the bad news. The good news? It’s probably not going to be a bad one.” Wealth managers didn’t like Trump resuming his fighting words this month, but they liked that the Fed cut the prime interest rate by 25 basis points the day before and hinted more cuts were to come, mostly as a way to help support other central banks, who have been cutting rates. “Cuts in interest rates by the Fed will be a boost to markets,” said Lyle Wolberg, a partner in Telemus Capital LLC of Southfield. “Assuming no major surprises or geopolitical events, I don’t see financial instability on the horizon.”

ISTOCKPHOTO/GETTY IMAGES

John Augustine, the Columbus, Ohio-based chief investment officer for Huntington Bank, said one major reason for his relatively rosy economic outlook is Congress agreeing to a two-year deal to lift the U.S. debt

ceiling, a deal Trump signed in July. Had partisan politics made that more of a bargaining chip to negotiate other political issues, all bets would have been off, he said. Now? “A lot of risk went away. They

took it off the table as an issue before they went on recess and the markets responded,” said Augustine, who rates the chances of the U.S. entering a recession in the next 12 months at 30 percent.

ADVISERS

Dislikes: Developed international stocks; utilities; FANG stocks

Howard Margolis

Senior vice president and Midwest market leader, Citizens Bank Private Wealth Management, Southfield Margolis

Meconi

Rashty

Robinson

Schwartz

Dislikes: Technology; emerging markets

Wolberg

biotech; two exchange-traded funds (ETFs) — XBI, which invests in biotech, and MJ, which holds marijuana related companies; precious metals; cryptocurrencies

Dislikes: Small-cap U.S. stocks; high-yield fixed income; consumer discretionary; health care Insight: “In a low-interest environment, investors reach for yields, and the only thing producing yields are junk bonds. When the economy slows, those are the first thing to get hit.”

Nancy Meconi

Sowerby

Spickler

Partner, Plante Moran Financial Advisors LLC, Auburn Hills

Likes: U.S. equities; dividend-paying stocks; real estate investment trusts; financials; industrials; health care

Dislikes: Long-term U.S. treasuries; big social media techs

Likes: International equities; emerging markets; U.S. large-cap stocks; master limited partnerships in energy

Dislikes: Developed international; emerging markets; fixed income securities

Insight: “I like biotech a lot; 5G will bring a lot of high-speed computation, and that’s what’s been lacking in solving a lot of biotech problems. We’ll be seeing cures coming out eventually for cancer, for Alzheimer’s, for everything.”

Insight: “I’m cautiously optimistic on the economy and the market, but I don’t see any fat pitches coming.”

Insight: “Interest rates are negative in Europe, so there’s a lot of money still coming here. In Europe, they’ve gotten used to negative yields and are willing to buy a bond and pay people to keep their money safe. It’s crazy.”

Reuben Rashty

Jim Robinson

Dislikes: Long-duration bonds; high-yield corporates

Managing director, head of private banking in Michigan for Fifth Third Bank, Birmingham

Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2 stock over small caps; growth stocks over value

FROM PAGE 11

Likes: Precious metals; high-grade corporate bonds; commodities; utilities; financials

But he said that he is advising clients to take some gains by selling off some of their better-performing stocks. “The S&P 500 is up 50 percent in the last four years. Take some profits from those gains and put them into dividend paying stocks,” he said. “We feel really good about the economy. There is still some room to run, and that’s coming off the best first half since 1997,” said Aubrey Lee Jr., a first vice president of Merrill Lynch Wealth Management in Farmington Hills. Jeffrey Fratarcangeli, principal of Fratarcangeli Wealth Management in Birmingham, agrees with Schwartz that this bull market can go on a long time, yet. He said there isn’t any law of economics dictating when it must stop. “This economy can continue to expand for years to come. Just because the economy has expanded for 10 years doesn’t mean we have to have a recession,” he said, citing strong consumer sentiment, record low unemployment and wage inflation for the first time in years. Buttressing those bullet points, he said, is the decision by the Fed to cut rates. “Our view is we don’t expect a recession. Our probability doesn’t cross 50 percent until we get out three years,” said Peter Sorrentino, the chief investment officer of Comerica Asset Management in Dallas. “For years people have been saying, ‘It’s time for a recession, it’s time for a recession.’ This bull market has a way to run,” said Kevin Granger,senior investment adviser of PNC Wealth Management in Troy. “Personally, I think as Trump looks to the 2020 election, he’ll be doing everything he can to keep this market going.” “I don’t see a recession coming any time soon,” said Jim Robinson, CEO of Robinson Capital LLC of Grosse Pointe.

CEO, Robinson Capital LLC, Grosse Pointe Likes: Long-term municipal bonds;

Sorrentino

Insight: “The November-December sell off last year was fast money chasing performance. Smart money didn’t sell. It’s not too surprising there was a big bounce-back this year.”

Peter Sorrentino

Chief investment officer and senior vice president, Comerica Inc., Dallas Likes: Developed international markets; small- and mid-sized U.S. stocks; energy Dislikes: Utilities; real estate investment trusts; corporate high-yield bonds Insight: “Every time in my career, when people started pushing for high yields, it ended badly.”

David Sowerby

Principal, Gregory J. Schwartz & Co., Bloomfield Hills

Managing director and portfolio manager, Ancora Advisers LLC, Bloomfield Hills; co-manager of the Ancora Dividend Value Equity Fund

Likes: U.S. small-cap stocks with little debt; established international markets; financials

Likes: Ancora’s ADETX mutual fund, which buys undervalued stocks of large-cap dividend-paying companies; U.S large-cap

Peter Schwartz

Insight: “A 4-5 percent hiccup in the market (because of Trump’s tariff announcement on Aug. 1) doesn’t change my investing thesis, nor should it. A 15-20 percent decline? Probably, but not 4-5 percent.”

Melissa Spickler

Managing director, Merrill Lynch’s Spickler Wealth Management Group, Bloomfield Hills Likes: U.S. large-cap stocks; technology; financials; health care; high-quality industrials; utilities; municipal bonds Dislikes: International developed; emerging markets Insight: “I like anything that pays a dividend. I liked to get paid while I wait.”

Lyle Wolberg

Partner, Telemus Capital LLC, Southfield Likes: U.S. stocks; the ETF of USMV, which trades in stocks with a low volatility; the mutual fund index IQDNX as a hedge against volatility Dislikes: International stocks; corporate bonds, especially junk or high-yield bonds Insight: “Valuations are more attractive in international markets than U.S. markets, but I don’t have a lot of conviction Japan and Europe can sustain their growth.”

— Tom Henderson

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 2 6 , 2 0 1 9

Union vote set for Aug. 28 at McLaren Macomb By Jay Greene jgreene@crain.com

Workers at McLaren Macomb Hospital are set to vote Aug. 28 on whether to unionize after the OPEIU Local 40 health care union won a federal hearing on worker eligibility to establish a nonprofessional service unit at the Mount Clemens hospital. On Aug. 8, a regional hearing officer with the National Labor Relations Board in Detroit ruled that the proposed service unit of nonprofessional workers proposed by Office and Professional Employees International Union, or OPEIU, will be allowed to be voted on by permitted workers at McLaren Macomb. But Terry Morgan, the NLRB hearing officer, said the OPEIU’s original petition of a service unit composed of 187 workers was too small and left out a range of job categories that should be in a new union group. Morgan agreed with McLaren’s contention that the eligible service group should cover a broader range of classifications totaling about 360 workers in more than two dozen job categories. Last month, Crain’s reported that some of metro Detroit’s hospitals, including McLaren, are facing tough union negotiations and other related labor issues. Detroit Medical Center has been negotiating contracts with Teamsters Local 283 the past two years. Ascension Crittenton Hospital in Rochester has been negotiating for more than a year with OPEIU Local 40. Three Beaumont Health hospitals have been negotiating a contract with the Service Employees International Union Healthcare of Michigan for more than a year. In late April, the Michigan Nurses Association started a union drive at Beaumont Hospital in Royal Oak. Jeff Morawski, R.N., president of the staff council of OPEIU Local 40 at McLaren Macomb, said the union was happy with the NLRB’s decision. He said union organizers plan to rally workers over the next couple weeks to vote for representation. Morawski said OPEIU has notified the eligible 360 McLaren Macomb hospital employees through fliers, emails, social media and phone calls about the vote. “They have a right to have their voices heard. We already knew a majority of the workers support of the unit. We are getting more supporters each day,” Morawski said. Shela Khan-Monroe, McLaren’s vice president of labor relations, said McLaren has notified all eligible and permitted voters about the election. The hospital also has been conducting employee education meetings to present the process and answer questions. She said only hospital employees are involved, no third-party educators. Khan-Monroe said that while McLaren prefers not to have to negotiate with a third-party entity like a union, the 14-hospital health system understands the process. She said the health system hasn’t yet decided whether to appeal the decision, which can do until Aug. 22. “We are not disappointed,” Khan-Monroe said. “The board made a fairly good decision.” Khan-Monroe said OPEIU’s proposed service group was much smaller, at about 187 workers, than what the NLRB approved. She said

Need to know

OPEIU Local 40 won recognition of roughly 360-member service unit by the National Labor Relations Board J

J Unit includes patient service reps, clerical associates, couriers, schedulers and technicians

McLaren objected because the unit did not include enough nonprofessional job categories, including patient access representatives. “The (NLRB) ruled if the election was to go forward it had to include all classifications,” which amounted to about 180 more employees than what OPEIU originally proposed, she

said. “The union did not agree to add all (360) all classifications. They stuck to their original petition” for a limited number of eligible workers. Khan-Monroe said the union “cherry-picked classifications where they had support and excluded where they didn’t have support.” Morawski said the union agreed to add another 63 workers beyond its original 187. Despite having more than it originally wanted, he said the union believes it still will have majority support of permitted workers to approve the service unit. After a five-day hearing, the NLRB issued its ruling that excluded some biomedical technical workers and

“They have a right to have their voices heard. We already knew a majority of the workers support of the unit. We are getting more supporters each day.” Jeff Morawski

challenged 27 proposed voters, mostly anesthesia and endoscopy technicians. Fewer than 10 workers

were excluded, including biomedical tech-1s, biomedical tech-2s and biomedical tech-3s. Those 27 technicians and others who were challenged by the NLRB will be allowed to vote, but can be excluded or included later, pending an appeal by either the hospital or union. The NLRB would rule on the appeal after the election. Several McLaren hospitals already have similar nonprofessional service units, including McLaren Flint, McLaren Greater Lansing and McLaren Bay Region, Khan-Monroe said. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // A U G U S T 2 6 , 2 0 1 9

CRAIN'S LIST: LARGEST SE MICHIGAN EMPLOYERS

Ranked by full-time employees July 2019 Rank

Company Address Phone; website

Top local executive(s)

Full-time employees in Southeast Michigan July 2019

Full-time employees in Southeast Worldwide Worldwide Michigan employees employees July 2018 July 2019 July 2018 Type of business

46,000 B

48,000

Mark Schlissel president

35,350

34,067

51,203

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

Michael Manley CEO

34,452

35,399

90,000

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

Mary Barra chairman and CEO

32,770

37,400

167,865

172,533 Automobile manufacturer

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

John Fox president and CEO

27,492

28,012

27,530

28,045

Health care system

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

Wright Lassiter III president and CEO

26,929

23,724

25,554

Health care system

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

18,893

18,817

Rock Ventures D 1050 Woodward Ave., Detroit 48226 (800) 251-9080

Dan Gilbert chairman and founder

17,887

17,819

30,008

29,835

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

Robert Casalou, president and CEO, Mercy Health and Saint Joseph Mercy Health System; Mike Slubowski, president and CEO Tim Stover, interim ministry market executive

16,403

15,899

130,100

131,000 Health care system

12,616

11,893

20,018

23,103

503,103 Postal service

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

Jim Hackett president and CEO

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

Automobile manufacturer

49,797 C Public university and health system

Automobile manufacturer

1,997,242 2,075,006 Federal government

Umbrella entity managing a portfolio of companies, investments and real estate, including Quicken Loans.

Health care system

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

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

Karlett Gilbert district manager

10,900

11,805

497,197

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

Anthony Tedeschi group CEO

9,947

10,047

9,947

10,050

Health care system

9,749

9,565

9,749

9,565

City government

9,532

9,458

State government

7,431

7,266

10,452

10,236

Nonprofit mutual insurance company

7,009

7,032

10,586

10,975

Energy and energy-technology company

6,680

6,740

25,126

13 14 15 16 17

Mike Duggan City of Detroit 2 Woodward Ave., Coleman A. Young Municipal Center, mayor Detroit 48226 (313) 224-3700; www.detroitmi.gov Gretchen Whitmer State of Michigan 3042 W. Grand Blvd., Cadillac Place, Suite 4-400, Detroit governor 48202 (313) 456-4400; www.michigan.gov Daniel Loepp Blue Cross Blue Shield of Michigan/ president and CEO Blue Care Network 600 E. Lafayette Blvd., Detroit 48226 (313) 225-9000; www.bcbsm.com Jerry Norcia E DTE Energy Co. president and CEO 1 Energy Plaza, Detroit 48226 (313) 235-4000; www.dteenergy.com Christopher Ilitch Ilitch companies president and CEO, Ilitch 2211 Woodward Ave., Detroit 48201 Holdings Inc. (313) 471-6600; www.ilitchcompanies.com

24,920 F Food, sports and entertainment organization. Businesses include: Little Caesars Pizza, Blue Line Distribution, the Detroit Red Wings, Olympia Entertainment, the Detroit Tigers, Olympia Development of Michigan, Little Caesars Pizza Kit Fundraising Program and Champion Foods. The organization also has a joint venture interest in 313 Presents. Additionally, Marian Ilitch owns MotorCity Casino Hotel 5,910 Public university

Wayne State University 42 W. Warren, Detroit 48202 (313) 577-2424; www.wayne.edu

M. Roy Wilson president

5,913 G

5,910

5,913 G

Detroit Public Schools Community District 3011 W. Grand Blvd., Fisher Building, Detroit 48202 (313) 240-4377; www.detroitk12.org

Nikolai Vitti superintendent

5,850

5,700

5,850

5,700

Public school system

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

Philip Incarnati president and CEO

5,621

5,551

23,389

23,172

Health care system

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

Jim Tobin, CMO and president of Magna Asia

4,818

5,095

169,000

172,000 Automotive parts supplier

Comerica Bank 411 W. Lafayette, Detroit 48226 (248) 371-5000; www.comerica.com

Michael Ritchie Michigan market president

4,321 F

4,486

7,720 F

7,867

Financial services provider

Want the full Excel version of this list â&#x20AC;&#x201D; and every Crain's list? Become a Data Member: CrainsDetroit.com/data This list of Southeast Michigan employers encompasses companies with locations in Wayne, Oakland, Macomb, Washtenaw or Livingston counties. Number of full-time employees may include fulltime equivalents. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the companies. Companies with headquarters elsewhere are listed with the address and top executive of their main Detroit-area office. Actual figures may vary. NA = not available.

B Crain's estimate. C Includes approximately 15,000 in-state part-time employees. D Sold Greektown Casino-Hotel to Wyomissing, Pa.-based gaming conglomerate Penn National Gaming Inc. and Vici Properties Inc. on Nov. 13, 2018. E Succeeded Gerry Anderson as CEO on July 1. F Figures are FTE counts. G As of Jan. 1, 2019.

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Phase one of Karmanos center in Farmington Hills completed By Jay Greene jgreene@crain.com

The Barbara Ann Karmanos Cancer Institute has become the first cancer center in Michigan to treat patients with the Leksell Gamma Knife Icon, an advanced radiosurgery technology that treats patients who have very small brain tumors with radiation, company officials said Monday. Hospitals and cancer centers offer many different types of treatments to patients that use precise radiation beams to destroy tumors. The selection of each type of radiation treatment depends on the type, size and location of the tumor, oncology experts say. Radiosurgery treatment includes medical linear a c c e l e r a tor-based therapies that use photon beams such as those in use at the University of Michigan and Henry Ford Health System. It also includes, broadly, Klamerus proton beam therapy that can be delivered to a tumor and adjusted for the depth of penetration desired. Proton therapy is offered at Beaumont Hospital in Royal Oak and at the newly opened McLaren Proton Therapy Center in Flint. Karmanos’ new Gamma Knife Icon is located at its Lawrence and Idell Weisberg Cancer Treatment Center, an outpatient center in Farmington Hills that is undergoing a $47.5 million, 64,000 square-foot expansion. The $16 million Gamma Knife program is part of the recently completed phase one of the three-year project that added 15,000 square feet to the outpatient center, effectively doubling its size. It also includes three procedure rooms, new imaging bays and research space and an interventional radiology suite. “We have new services here like anesthesia we didn’t have before. As we build out the facility, we will hire more doctors. We plan to add another 10 doctors to cover programs and another 12 or so more staff,” said Justin Klamerus, M.D., president of Karmanos Cancer Hospital and Network. Phase two of the project, which is expected to begin this year and be completed in 2022, will include an additional 31,300 square feet to house new clinic and research space, bone marrow transplant assessments, laboratory and pharmacy areas, infusion and advanced diagnostic services, Klamerus said. Karmanos Cancer Institute, which is based in Detroit and part of 14-hospital McLaren Health Corp. in Grand Blanc, has 16 locations throughout Michigan. It is one of the National Cancer Institute-designated comprehensive cancer centers. When Karmanos joined McLaren Healthcare Corp in 2013, McLaren promised to spend at least $80 million on overall Karmanos improvements, including expansion of the Farmington Hills center. One of the unique aspects of the

Norman A. Yatooma ATTORNEY AT LAW

LEKSELL GAMMA KNIFE

A Gamma Knife Icon treatment machine that’s used at Karmanos outpatient center in Farmington Hills.

Need to know

JJGamma Knife Icon brain radiosurgery

procedures underway at Lawrence and Idell Weisberg Cancer Treatment Center in Farmington Hills JJPhase one completed, $16 million of $47.5 million three-year renovation project JJExpansion to quadruple the size of the center, expand services and treat 70 percent more patients

outpatient Gamma Knife program “is the way we are collaborating in a multi-disciplinary fashion” with neurosurgeons, neuroradiologists and radiation oncologists, Klamerus said. “It is similar to downtown (at the Barbara Ann Karmanos Cancer Center) but a little different. All patients present to a multispecialty tumor board” two days before the procedure where cases are discussed and best treatment approach agreed upon, Klamerus said. “When a patient was transferred to McLaren’s inpatient bay (located on the campus of the Detroit Medical Center), we get all the (doctors) on the phone to discuss” final procedure approaches. But at the Weisberg outpatient center, all the specialists will be located together to discuss treatment plans and possible changes the day of the radiation procedure, Klamerus said. For example, MRIs can be repeated during the day of the procedure to detect possible spread of the cancers or if the tumor has changed shape. “There are lots of moving pieces. We will all review the MRI and plans together,” Klamerus said. “It feels great to walk down the hall and have all those members of the team there to review the plan. Most Gamma Knife centers don’t have that.”

uses high-energy X-rays, or electrons, to deliver precise external beam radiation treatments for patients with multiple forms of cancer. In 2016, the Gamma Knife Icon, the sixth generation of the technology, was introduced into the U.S. at Sutter Medical Center in Sacramento, Calif. Worldwide, more than 1.1 million people have been treated with the Gamma Knife since 1968 when it was invented by Swedish neurologists and introduced to the U.S. market in 1987. Various generations of the Gamma Knife are available in Michigan, including at Beaumont Health facilities and at Mid-Michigan Health in Midland. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

•

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Gamma Knife vs. other types of radiosurgery While Karmanos has had many years of experience using the Gamma Knife at its main hospital in downtown Detroit, other hospitals use different types of radiosurgery technologies. For example, the University of Michigan Health System in Ann Arbor uses medical linear accelerator technology, or LINAC systems. Henry Ford Health System in Detroit also uses LINAC, which generates precise photon radiation beams. LINAC

• •

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 2 6 , 2 0 1 9

CALENDAR UPCOMING EVENTS Army Futures Command: Forging the Future of Warfighting with Business Partners Big and Small. 11:30 a.m.-1:30 p.m. Sept. 5. Detroit Economic Club. Gen. John “Mike” Murray, commander of Army Futures Command, will discuss how the Army relies on collaborative partnerships with industry leaders based on modernization priorities regardless of business size. The Masonic. $45 members, $55 guests of members. Website: econclub.org For the Health of America: A Vision for the Future of Health Care. 11:30 a.m.-1:30 p.m. Sept. 10. Detroit Economic Club. Blue Cross Blue Shield Association President and CEO Scott Serota shares insights on the challenges facing the health care system today — and the steps health insurers and their partners are taking to build a stronger health care system for the future. Ford Field. $45 members, $55 guests of members. Website: econclub.org Smart Cities: A Connected Way Forward. 11:30 a.m.-1:30 p.m. Sept. 12. Washtenaw Economic Club. Camilo Serna, vice president, corporate strategy at DTE Energy, discusses how the organization is working with cities in the Detroit area to create smart cities and what the longer-term vision is. $77.50 nonmembers. Washtenaw Community College. Phone: (734) 677-5060. Email: washtenaweconclub@ wccnet.edu Masterful Networking: A Workbook. 8-9:30 a.m. Sept. 17. Troy Chamber of Commerce. Barry Demp of Barry Demp Coaching LLC

SPOTLIGHT will discuss techniques to achieve successful networking connections. Topics include: Behavior and attitude, relationships and communication, building powerful networking habits, networking as part of a solid business plan and mapping out networking. Marsh & McLennan Agency, Troy. $15 members, $25 nonmembers. Website: troychamber.com/events September Economic Development Forum. 8-9:30 a.m. Sept. 18. Troy Chamber of Commerce. Topic: The Aerotropolis Advantage. The Detroit Region Aerotropolis is a four-community, two-county public-private economic development partnership focused on driving corporate expansion and new investments. Rehmann, Troy. Free members, $15 nonmembers. Website: troychamber.com/events Top of Troy: Women of Influence. 8-9:30 a.m. Sept. 26. Troy Chamber of Commerce. Four female business leaders discuss the challenges they faced on their paths to success, the key tools they have used to remain focused along the way, the hard decisions they are faced with on a daily basis and how being a woman has affected the choices they made. Panel includes: Lara Dixon, principal, Troy Athens High School; Lenora Hardy-Foster, president and CEO, Judson Center; Angelique Strong Marks, director, general counsel, corporate secretary and compliance officer, Mahle Industries Inc. and Cheryl Yuran, group vice president and chief human resources officer, Plex Systems. Moceri Learning Center, Beaumont Hospital Troy. $15 members, $25 nonmembers. Website: troychamber.com/events

Oakland County chief deputy selected

Newly minted Oakland County Executive Dave Coulter has appointed longtime Democratic aide Hilarie Chambers to be his chief deputy county executive. Chambers, the current chief of staff for Secretary of State Jocelyn Benson, will be the first woman to Chambers hold the No. 2 county government position in Oakland County. The Pleasant Ridge resident’s appointment is effective Thursday. Coulter’s appointment of Chambers last week came one day after he was sworn into office as the first Democrat to run Michigan’s second-largest county following the death of longtime Republican County Executive L. Brooks Patterson. Patterson’s longtime chief deputy, Gerald Poisson, had served as acting county executive until the Oakland

County Commission narrowly voted along party lines Friday to appoint Coulter to serve out the remainder of Patterson’s four-year term, which expires at the end of 2020. Patterson’s top deputies Poisson, Robert Daddow and Laurie VanPelt retired from the county following Coulter’s appointment. Phil Bertolini, deputy county executive and chief information officer, plans to retire at the end of the month after assisting Coulter in the transition, county spokesman Bill Mullan said.

JVS leader to retire after 40 years with nonprofit

The president and CEO of JVS Human Services is retiring after 40 years with the Southfield-based nonprofit. Leah Rosenbaum, who has been at the helm of the organization for the past six years, will depart March 1, according to a news release. “I have been blessed with a wonderful career doing what I love, the opportunity to work with people that I admire and the privilege of

serving people in our community,” Rosenbaum said in the release. In 1979, she was hired as a rehab counselor for JVS, which concentrates on helping people with disabilities Rosenbaum find jobs. She worked her way up the ranks, serving as chief operating officer for 18 years before taking the CEO job in 2014. Under her leadership, the nonprofit grew from a yearly budget of $8 million to $26 million. JVS has a staff of more than 400 people and has helped more than 1,000 employers connect with job candidates. Among Rosenbaum’s accomplishments are creating a day program for people with dementia and their families, expanding employment initiatives for job seekers of all types and creating new revenue streams, such as its electronics recycling program, the nonprofit said.

DEALS & DETAILS MERGERS & ACQUISITIONS J Multi-Automatic Tool & Supply Co., Walker, wholesale distributor of replacement parts, attachments, tool holders and cutting tools, acquired Belding Tool & Machine, Belding, manufacturer of custom-made parts. Redtail Capital Markets LLC, New York, was lead arranger and Chemical Bank, Detroit, was underwriter.

Terms of the deal were undisclosed. Website: multi-auto.com, beldingtool.com

CONTRACTS J DeMaria, Detroit, a construction firm, was awarded the city of Novi Lakeshore Park project, which includes a new recreation center with parking lot, landscape and exterior spaces at the north end of the park.

Website: demariabuild.com J Blue Smoke Consulting, Milford, a management consultant, has a partnership with SalesStar, Auckland, New Zealand, a sales development consultant, and The SalesStar On-Demand platform, to provide clients with technology for sales coaching and development of sales managers and salespeople. Website: waltercrosby.com, salesstar.com

Advertising Section

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. ARCHITECTURE

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Michael Decoster, AIA, NCARB, LEED AP BD+C, has joined global design firm Stantec as a senior associate and Buildings Group project director in the firm’s Detroit office. With more than 20 years of architecture experience including project leadership, programming, design, and construction documentation, he will focus on leading complex projects in higher education, multi-family residential, and commercial development.

Saundra Little, AIA, LEED AP, NCARB, NOMA, has been promoted to principal in the Detroit office of Quinn Evans Architects. An architect and project manager, with more than 15 years of experience, Little has overseen the design of several renovation and adaptive projects throughout Michigan. She is a member of the American Institute of Architects, the National Organization of Minority Architects, and New Step CDC. Little is a founding member of the Advisory Board of Design Core Detroit.

DeMaria, a Detroit based commercial construction firm, is proud to announce Karen Kelly as the Business Development Manager. Karen brings almost three decades of AEC industry experience specializing in Education, Healthcare, Government, Energy, Workplace, and Water / Wastewater, giving her a multifaceted understanding of the construction industry. In her role, Karen’s goals are strengthening client relationships and developing winning strategies to expand all market sectors.

NONPROFIT ECONOMIC DEVELOPMENT

Detroit Economic Growth Corporation (DEGC) Kevin Johnson, President and CEO of the Detroit Economic Growth Corporation, has been awarded re-certification by the highly regarded International Economic Development Council. With over two decades of industry experience, Johnson uses his expertise to champion Detroit’s economic revival. Johnson leads DEGC’s growth strategy for Detroit, including business attraction and retention, global commerce, neighborhood retail development, and land assembly.

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Crain’s People on the Move showcases industry achievers and their companies to the Detroit business community. Contact: Debora Stein at dstein@crain.com

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 2 6 , 2 0 1 9

‘DETROIT RISING’

Advertising Section

CLASSIFIEDS To place your listing, contact Suzanne Janik at 313-446-0455 or email sjanik@crain.com www.crainsdetroit.com/classifieds

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Suneel Gupta (right), the new founder-in-residence at Techstars Detroit, talks to Crain’s Senior Editor Chad Livengood (left) for an interview on the “Detroit Rising” podcast at Lear Corp.’s Innovation Center alongside Techstars Detroit managing director Ted Serbinski and program manager Kelly Kang.

Suneel Gupta joins Techstars Detroit to guide mobility startups After trying his hand at politics, Suneel Gupta is now coaching budding entrepreneurs. The Novi native and tech entrepreneur reCHAD cently joined LIVENGOOD Techstars Detroit as the mobility tech accelerator’s first founder-in-residence, a mentoring-focused position designed to give founders of startup businesses guidance in bringing a concept to market and attracting investors. “What we’re trying to do is make sure people understand that Detroit’s ecosystem is almost in a lot of ways the ideal system for a startup to plug into,” said Gupta, who lost a Democratic primary for Congress last year in suburban Detroit’s 11th Congressional District. Techstars Detroit (formerly Techstars Mobility) is a corporate-funded accelerator program for startups that offers 90-day courses to help entrepreneurs with largely transportation and mobility-based ideas get their business launched. In the newly created position at Techstars Detroit, Gupta is drawing on his own experience of developing a nutrition coaching app and co-founding Rise Labs Inc., a medical services startup he sold to One Medical in 2016 for $20 million. Gupta, a 2018 Crain’s 40 Under 40, also has previously worked at Groupon Inc. and Kleiner Perkins, the Silicon Valley venture capital firm. In getting Rise Labs off the ground in 2013, Gupta recalls a period when he was striking out with investors and got to sit down for coffee with TaskRabbit founder Leah Busque to go over his pitch presentation. “By the time I left, I had culled this 25-slide monstrosity of a pitch deck down to eight slides that were very, very clear,” Gupta said in an interview for the Crain’s “Detroit Rising” podcast. “I had a much better story in my head. And when I went forward and

‘Detroit Rising’ podcast and more You can hear this interview and all Crain’s audio by subscribing to our podcast channel. Search “Crain’s Detroit” on ITunes, Apple Podcasts, Google Play or wherever you get your podcasts and subscribe to the “Crain’s Detroit Business” podcast.

started talking to investors, I just had much more success.” Gupta, 40, said he will focus both on coaching entrepreneurs as well as linking them with potential investors through his connections in Silicon Valley. He is the younger brother of CNN medical reporter and physician Sanjay Gupta. “There are great concepts that need to be connected to capital,” Gupta said. “And there are investors right now that are fascinated by Detroit, but their offices are based on the coasts or based in different parts of the world. But they really want to know what’s happening that’s exciting here in Detroit.” Gupta joins a lean team at Techstars Detroit that consists of managing director Ted Serbinski and program manager Kelly Kang. They are assisted by a volunteer corps of mentors from the sponsoring companies and other local entrepreneurs, such as Qey Capital chairman Dhani Jones and Detroit Mobility Institute’s co-founder and President Chris Thomas and Executive Director Jessica Robinson. Techstars Detroit — one of 45 Techstars programs in the world — gets its primary corporate support from Ford Motor Co., Honda North America Inc. Lear Corp., AAA of Michigan, USAA, Nationwide Mutual Insurance Co. and the state of Michigan’s PlanetM. Of the 54 businesses that have gone through Techstars Detroit’s program in five years, just three were from Michigan, and participating companies have come from 11 different countries, Serbinski said. There are 10 companies in the current class that began July 15; a demo day is planned for Oct. 1 at the Lear Innovation Center.

contact Suzanne Janik at

01 Position; Work loc: Novi,MI. Design electronic HW for audio amplifier prod/sub-modul meet automotive OEM apps. Prep & m’tain specs for amplifier des, block diagram & schema dur dev. Prov circuit routing & layer recommed, circuit & l’out rev & circuit anal to PCB l’out team. Work & parti in prod team envir providing HW des conc, prototype & pre-prod circuits support other team func: SW, mech, transducer, proc, test & q’lity eng. Sup cust interface team-answer ques, supp samp & resol HW des issu. Creat & m’tain mandat qlty improv & prevent doc: DFMEAs/DRBFMs. T’hoots/debugs HW circuits & layouts using variety indus s’dard /in-house dev tool. Prod supp ‘shoot supp high-rate warranty & B&A retur. Req: Bachelor deg (or foreign Equi) in CompSci, Eng, Electri/Electro Eng or equi or rel & 6 yrs exp in IT indus. Alt: Master deg (or foreign Equi) in CompSci, Eng, Electri/Electro Eng or equi or rel & 4 yrs exp in IT indus. Other req: Exp in Schema capture tools –Dx Desi, Vx Desig, Layout Tool–Xpedition Layout; Circuit simu–LT Spice, Signal Integ tool-HyperLynx, Aud Anal Tool–Audio Precision APx, SW dev–Vector CANoe,CANalyzer,IAR workbench,Analog Devices,A2B– Mentor Graphic. Signal Gen, Oscilloscope, Technology: Audio Amplifiers, Analog audio circuits, I2C, I2S, MOST, A2B, Ethernet, microcontrollers, audio codecs, microprocessors, vehicle networking.

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DIVDAT

greatly reduced DTE’s transaction costs and boosted money collected. DTE and DivDat declined to provide financial terms of their agreement. “While it also creates efficiencies in our operations, we’ve been most pleased in how DivDat has made it possible for our customers to pay how, when and where they would like,” Chris Lamphear, manager of corporate communications for DTE, said in an email. In Detroit, data indicates kiosk usage is rising quickly. About $9.4 million in city property taxes were paid through DivDat in 2017, which nearly doubled to $17.2 million in 2018, according to a city document. Last year, the local kiosk network collected a total of $86 million in payments for the city, not including the water department. About $60 million has been collected so far this year.

FROM PAGE 3

Of all major cities in the U.S., Detroit has the highest percentage of underbanked people. Around 20 percent of residents do not have a checking or savings account, and nearly 30 percent rely on alternative financial services, such as check-cashing, payday loans and pawn shops, according to a study by Washington, D.C.-based nonprofit Prosperity Now. This makes Detroit the perfect pilot market, Bierkle said. DivDat is a startup in the sense that it aims to disrupt the payment industry not with flashy new technology, but with a new way of thinking. There are hundreds of companies competing in kiosk billing. One of the bigger ones is Chicago-based CityBase, which sold for $160 million last year. What separates DivDat, Bierkle said, is that it does not charge users fees. Transaction costs, typically $1.85 each, are shouldered by the clients who the users are paying. The multilingual kiosks let customers to use cash, checks or credit cards to pay Detroit property taxes and water bills, DTE electric bills, 36th District Court fines and escrow rent payments. To make a payment, customers can scan their utility bills or type in their addresses to see property taxes owed. The kiosk does not require a separate account, and personal information is not stored. It does not accept payments for parking tickets, but the company is in early talks with the Detroit Municipal Parking Department about the possibility. Bierkle contends that energy companies and municipalities have ignored the unbanked, which usually includes those most at risk for foreclosures and water and electricity shutoffs. DTE operates payment centers throughout metro Detroit from 9 a.m. to 4:30 p.m. Bierkle says the limited hours are unrealistic for most customers. Give them a convenient way to pay bills, he says, and they will. “It’s not a new technology because everything we’re doing is the same thing we’ve been doing forever. It’s data processing, it’s payments,” he said. “We actually have to sell people on the process.” The first person he had to convince was his father. At 75, Al Bierkle is still a hard-nosed, old-school entrepreneur, and DivDat is still his baby. While his wife was in labor with Jason, he told her he was quitting his job at Kelly Services to break

ESPORTS FROM PAGE 3

Riot has been working with Dan Gilbert’s Quicken Loans — the event’s premier sponsor — since February to get an understanding of what an LCS Detroit event would look like. From there, they brought Riot executives to the city to show them the progress made toward rebuilding downtown, and then toured them through Little Caesars Arena. The latter’s tech infrastructure made Detroit an easy pick. Because Riot runs all of its broadcasts from its Los Angeles headquarters, it needed a strong network. Typically it has to run its own cable at each venue, but for the Summer Finals was able to piggyback off

Moving to Detroit

KURT NAGL/CRAIN’S DETROIT BUSINESS

Multilingual kiosks let customers use cash, checks or credit cards to pay Detroit property taxes and water bills, DTE electric bills, 36th District Court fines and escrow rent payments.

Dive into kiosks

out on his own. A few days later, both Jason and DivDat were born. “(The sale) was very, very tough for him because the company has been our fifth sibling our whole lives,” Jason said. “We canceled many vacations because if a job came in on Friday, he’d call my mom and say, ‘You guys go to Disney World, I gotta pay for it.’” Like a good parent, Al eventually realized that to keep the company going, he had to let go a little. He stepped back from daily operations after the sale last year. He still shows up to the office every day, midmorning, and kicks the tires a few times, usually leaving a trail of cigarette smoke before being shooed outside by his son. “I think digital is obviously the way of the future, but I think there is always gonna be a need for print mail,” Al Bierkle said. “I’ve heard it now for the last 10 years that print mail is dying. I think you’ll see an increase in mailing.”

DivDat’s dive into kiosks started in 2014 when it signed a deal with DTE Energy Co. to develop the software for kiosks and operate them at the utility’s customer care centers, headquarters and Rite Aid stores throughout metro Detroit. Then, last year, DivDat won a five-year, $5 million contract with the city of Detroit. It now serves more than 100,000 customers per month. Revenue for the kiosk company in 2019 is projected to double year-overyear to just below $5 million, Bierkle said. He hopes to double it again next year by exporting the model to underbanked communities across the U.S. The company recently signed payment processing deals with Iowa-based MidAmerican Energy Co., the Las Vegas Valley Water District, and the cities of Colton, Calif., and Grapevine, Texas. The company’s strategy is to leverage kiosks as a “foot in the door” to municipalities, Bierkle said. Then, the

idea is to build credibility and grow from a single kiosk to expanding the network and taking over the client’s other payment channels, including internet, phone and walk-in. The advantage for the client is consolidating disparate systems into a single biller, Bierkle said. This reduces overhead and shrinkage by eliminating the need to staff attendants to handle payments. Detroit officials and DTE say the service is helping save money and improve business practices. The Detroit Water and Sewerage Department is saving $320,000 annually with the service, said Bryan Peckinpaugh, deputy director of public affairs for the water department. “We were pretty much dictating how customers could interact with DWSD,” he said. “Either you mail it or come in person Monday through Friday during business hours. That’s not very convenient for the average person.” Bierkle said the kiosk program

LCA’s fiber optic network. It was also able to use the venue’s center-hanging video screens rather than rigging its own 22’ by 44’ displays from the ceiling. Quicken Loans chief marketing officer Casey Hurbis wouldn’t reveal how much it invested in the sponsorship, but described it as “a healthy investment.” In addition to the sponsorship package, Quicken has other ties to esports. Gilbert is part owner of LCS powerhouse 100 Thieves, and has sponsored the team for two seasons. The Quicken Loans co-founder also owns the Cleveland Cavaliers NBA 2K esports team, Cavs Legion. Despite this, Riot said Quicken Loans’ sponsorship and team ownership didn’t play a role in picking a host city for the event.

“It’s certainly nice to use [local sponsors] to make introductions,” Greeley said. Ultimately, if Riot leans too heavily on regional affinity of the teams, Greeley said it leads to uncomfortable conversations with other team owners, a situation it would rather avoid. “It was not a deciding factor for us,” he said. Instead, it was the region’s sports legacy and density of Riot’s fans that made the biggest impact on decision making. The event also has the chance to reshape perceptions of Detroit not just from a public standpoint, but from a business perspective as well. This was the first and largest esports event of its caliber in the city. Previously in 2014, Red Bull brought its Battlegrounds series to 1,200-capacity Garden Theater up the street

from LCA in Midtown. The ultimate success of the LCS may go beyond the number of pizza slices sold and hotels booked — Riot’s production crew accounted for 800 room nights downtown alone — and could transform Detroit into a regional hub for esports in general, marrying the city’s sports legacy with its burgeoning tech community. “Detroit, we’re a great sports town, but when you look at esports I think it can carry over,” the Detroit Sports Commission’s Marty Dobek. “With every event we host, we’re going to make sure it’s a first-class operation and a great experience for everybody.” Jeff Zajac, manager of the Detroit Renegades esports team, agreed. “If you look at Michigan, there

In the corner of an industrial district off Eight Mile Road, DivDat’s operations are in flux. As software developers work on kiosk technology, including a new outdoor model, employees for the legacy business are still running Xerox machines. When DivDat sold its paper billing business, consisting primarily of health care contracts, to New Jersey-based OSG Billing Services last September, OSG contracted DivDat to run the business temporarily during the asset transfer. Terms of the sale and agreement were not disclosed. Bierkle said he expects the transition to be done by the end of the year, in tandem with the company’s move to Detroit. He said he is finalizing a five-year lease agreement to take 6,000 square feet on the seventh floor of the Palms Building at 2111 Woodward Ave. The company will bring over around 20 of its 50 employees. Bierkle said the others will either stay on with OSG or be “relocated through a managed services firm.” He considers it more of an evolution than a downsizing. The company is looking to add another 10 sales and marketing employees soon after settling into its new headquarters and hopes to eventually outgrow the space. If the idea catches on with other cities and energy firms, there will be plenty of room to expand. “We’re going out on a limb here that we’re gonna be able to change the way that big energy and municipalities do business with the unbanked and underbanked,” he said. Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl hasn’t been too big of a push in terms of esports or as an esports hub,” he said. Combined with Google’s and Microsoft’s offices downtown, he said the growing number of LAN centers and arcade bars popping up — not to mention the high school and collegiate esports scene — are proof that the state is primed to become one of the next big regions for play. Total esports viewership has surpassed that of professional baseball, hockey, basketball and soccer, according to Syracuse University, with 84 million viewers in the U.S. alone. By 2021, it predicts esports viewership will surpass that of the NFL. “Michigan’s sports legacy lends itself very well to this narrative,” McClure said. “Hopefully we’ll see that continue to play out.”

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Bankruptcy In May 2017, 21st Century filed for bankruptcy under Chapter 11, listing debts of approximately $1.3 billion and assets of about $814 million. Since emerging from bankruptcy in January 2018, it has erased half of its debts and is positioned for growth in Michigan. Commins-Tzoumakas was appointed interim CEO in January 2018 and CEO in April 2018 by a consortium of six new equity owners. They are Beach Point Capital Management LP, Governors Lane LP, J.P. Morgan Investment Management Inc., Oaktree Capital Management LP, Roystone Capital Management LP, and HPS Investment Partners LLC. But one of the effects of unrestrained growth was the company ran into serious billing and collection problems. This led to regulatory compliance issues that garnered the attention of the fraud division of the U.S. Department of Justice. Over a period of several years, 21st Century paid about $55 million to settle various allegations it billed government programs for services that were not medically necessary, the DOJ said. The company did not admit any wrongdoing. In November 2017, 21st Century signed a five-year corporate integrity agreement with the U.S. Department of Health and Human Services office of inspector general. One of the provisions required it to hire a new compliance program to ensure the company follows all state and federal laws. It also is required to report any fraudulent activities it discovers within 30 days. By early 2018, Commins-Tzoumakas said the turnaround began with a restructured leadership team with all new managers. “We were building a new culture based on quality that we wanted to trickle down to patient care,” said Commins-Tzoumakas, who said she

is personally committed to quality care because her father died at age 50 from cancer. “It is why I am so personally invested in our patients. I know what they are going through. I lost a father and my children lost a grandfather.” But another curveball hit 21st Century earlier this year when the children and former partners of Daniel Dosoretz, the former CEO and co-founder of 21st Century, who had stepped down as CEO in September 2016, filed a lawsuit against their former company that challenged non-compete agreements they signed with the company. A radiation oncologist, Dosoretz continued to provide clinical services through 21st Century until April when he resigned. Also resigning were his son and daughter, physicians Arie Pablo Dosoretz and Amy Fox, and partners James Rubenstein and Michael Katin. The lawsuit also demanded 21st Century vacate a property Dosoretz owns in Fort Myers, a building the company has leased for a clinic for nearly 32 years. Lawyers for 21st Century asked the federal courts to dismiss the former 21st Century physician’s legal action. At the end of June, the plaintiffs voluntarily dismissed the federal lawsuit, thus closing the bankruptcy court review of the issue.

Rebranding Over the past two years, Commins-Tzoumakas said 21st Century has “focused on rebranding in the locations we serve, which mostly were single towns where there didn’t exist monster cancer care providers.” Focusing on boosting relationships with physicians is a big part of the turnaround. “Doctors want all-inclusive care and integrated care for their patients, and we focused on that,” she said. Commins-Tzoumakas said the company also developed new core values that include working collaboratively, being compassionate with patients and their families and being transparent. She said employees and doctors are encouraged to be “unstoppable, go above and beyond and do the right thing.” “Our adoption of these core values embodies what we provide to our patients that differentiates us in the market through world-class trained and committed physicians and team members in communities across the country,” she said. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Post-Acute Care Trucking/Transportation Worker’s Compensation

Several Beaumont radiation oncologists, including Vicini, Martinez, Kestin and John Vito Antonucci, left Beaumont in a dispute over the future direction of the oncology program and joined 21st Century Oncology, Crain’s previously reported in December 2011. In 2012, 21st Century became one of four groups that struck a partnership with newly formed Michigan Healthcare Professionals, headed up by medical oncologist Jeffrey Margolis, M.D., the former vice chief of oncology at Beaumont and president of Beaumont Oncology Network PC. From 2008 to 2011, Beaumont Oncology Network held a contract to develop oncology programs at Beaumont Hospital Royal Oak. BON featured more than 140 cancer-treating physicians and surgeons and also included 18 physicians employed by Beaumont. Specialties included radiation oncology, medical oncology, urology, neurosurgery, thoracic surgery, colorectal surgery and breast surgery. However, Beaumont terminated BON’s contract to cut costs and because executives were concerned payments to the for-profit group might cause federal regulatory compliance concerns. After BON folded, Margolis formed MHP, and Vicini, Martinez, Kestin, Antonucci and several other former Beaumont radiation oncologists joined 21st Century as a division of MHP called Radiation Oncology Institute. While the partnership in Michigan between 21st Century and MHP has been successful, problems were starting to become apparent nationally at 21st Century’s headquarters as early as 2014, said Commins-Tzoumakas. By 2016, 21st Century had grown too quickly to 179 centers in 17 states with more than 1,000 physicians, and clearly was running out of steam. The partnership with MHP remained strong, but financially and operationally 21st Century needed an overhaul, said Commins-Tzoumakas, who from 2014 to 2018 was the company’s outside counsel with Hall, Render, Killian, Heath & Lyman. Commins-Tzoumakas said the basic problem with 21st Century is that the company was run like a small family business. “It grew fast into a billion-dollar

company, but it hadn’t created the infrastructure for the growth,” said Commins-Tzoumakas, who travels around the country on a regular basis. “By 2014, it was already in trouble.” David Rogers, who represents MHP with Rogers Mantese & Associates in Farmington Hills, said the problems that 21st Century faced nationally were never a problem in Michigan. “Prior to the bankruptcy the problems affected nationally didn’t really show up in Michigan,” said Rogers. “It has been a good relationship and continues to be a good relationship.”

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COMEBACK The top three 21st Century Michigan oncology researchers are Frank Vicini, former oncology chair at Beaumont Hospital Royal Oak; Alvaro Martinez, former chair of radiation oncology for 27 years at Beaumont; and Larry Kestin, former director of the residency program for radiation oncology at Beaumont, who now is medical director for 21st Century Oncology Michigan. For example, Vicini recently worked with other researchers at the University of Michigan and other leading cancer centers to publish a study on breast cancer. It found that older women with low-risk, hormone-positive breast cancer can safely opt for a short dose of radiation instead of taking anti-estrogen pills, which can cause adverse side effects like hot flashes, weight gain and bone fracture, according to the International Journal of Radiation Oncology.

SOLAR FROM PAGE 1

Forell estimated that the return on investment will be higher for solar than for his crops. “Each year is different with prices, but if I look at grain income now, I can get two or three times prices for solar than from crops,” he said. In June, Gov. Gretchen Whitmer signed an executive order that opened 3.4 million acres of farmland for solar energy development by changing the tax policy. It was a reversal from a 2017 decision by former Gov. Rick Snyder that practically barred farmers from using their lands for solar power development. Snyder’s policy allowed wind turbines and cell phone towers to be placed on land in the program, but if farmers wanted to sign commercial solar leases, they had to end their contracts with the state promising to maintain land for agricultural use, potentially costing them thousands of dollars. Ending the agreement earlier than the 10-year minimum meant repaying the last seven years of tax credits with 6 percent interest. Environmental, conservation and agriculture groups said Whitmer’s new policy will produce an important new revenue stream for farmers. Rural communities also will benefit from jobs and economic boosts that come with solar installations, they said. “Solar energy provides farmers, agribusinesses and farm communities with a steady source of tax revenue while preserving farmland for future generations,” Jim Byrum, Michigan Agri-Business Association president, said in a statement. Michigan League of Conservation Voters Executive Director Lisa Wozniak said the new rules will remove barriers for solar development in rural communities. “At a time when big utility companies like DTE and Consumers Energy are laying out their long-term energy plans, this order will remove barriers to solar energy and provide opportunities to aggressively follow through on their own clean energy goals,” Wozniak said in a statement. Another regulatory hurdle may have been overcome earlier this month when Jackson-based Consumers Energy proposed a settlement with commercial solar power producers over prices to be paid for contracts to connect with the electric grid. Over the next four years, Consumers Energy proposes to contract with nearly a dozen solar development companies, including Cypress Creek Renewables and Geronimo, for up to 584 megawatts of renewable power, averaging about 150 megawatts of installed projects per year, according to the settlement filed with the Michigan Public Service Commission on Aug. 8. The settlement must be approved by the PSC, which is expected to consider the issue this fall. If approved, the solar farming projects could start as early as next spring, officials said. “It breaks the logjam (of interconnection applications) and allows nearly 600 megawatts of projects to be paid at sustainable rates,” said Sean Gallagher, vice president of state affairs for the Solar Energy Industries Association, in an interview with Crain’s. Founded in 1974, SEIA is the national trade association of the U.S. solar energy industry with about 1,000 member companies that employ more than 242,000 workers.

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 2 6 , 2 0 1 9

“(We struggle with) the economics with raising crops and found there is demand in society for clean energy. Renewable energy companies needed land near substations and power lines to put solar panels and wind farms. We did due diligence and decided it was the avenue to go.” — Farmer John Forell

More farmers are seeing renting land for solar power as a way to maximize revenue from their land.

Why farmers opt for solar Kraynak said he is in the final stages of his solar project with Cypress Creek Renewables that will place electricity generating panels on about 50 acres, or half his farm, sometime in 2020. “The way the weather is, crop prices are, I can’t hardly make any money. Solar farming is guaranteed income. I don’t have to worry about the weather,” said Kraynak, who said his father several years ago signed up for the tax incentives that reduced his operating costs and allowed him to stay in the farming business. “Three years ago, grain prices jumped, but fertilizer, seeds and fuel, all the input costs have gone up, then prices dropped,” Kraynak said. In Saginaw, Kraynak hasn’t heard any opposition to solar farms as some in Eaton County. “They are more opposed to wind. Solar is so low to the ground. It actually is attractive to look at,” he said.

Forell has been farming cash grains since the mid-1980s. His son and daughter also are part of the family business. “(We struggle with) the economics with raising crops and found there is demand in society for clean energy,” Forell said. “Renewable energy companies needed land near substations and power lines to put solar panels and wind farms. We did due diligence and decided it was the avenue to go.” As stewards of the land, Forell said farmers create clean products for society that include corn for ethanol and soybeans for food oil. While Forell doesn’t consider himself to be an environmentalist, he said he has always tried to use technologies to create sustainable land uses. One way is to limit use of fertilizer and chemicals. From an aesthetic perspective, Forell said developers Cypress Creek and Geronimo try to make the solar panels meld with the environment. “They put plants underneath, for

DTE ENERGY CO.

DTE’s Lapeer Solar Park is one of the largest in Michigan on 250 acres with 200,000 panels, enough to generate power for 11,000 homes.

DEAN BERDEN FARMS

animals, and do everything they can to create a nice look,” he said. Another appealing aspect of the solar developments is they can be returned to farmland. “If after a time ... solar doesn’t need to be utilized, it can be turned back into farmland,” he said. “If you build subdivisions and houses, that doesn’t come back to farmland.” Converting farmland into subdivisions is a sore spot for Forell. He said because his property is located close to Lansing, farmland property values have been increasing, making it tempting to sell for financially struggling farmers. “Solar helps us. We don’t have to sell our land for housing developments. PA 116 is a good program because it allows us to keep our land, farm on part of it and rent to solar companies,” he said.

Renewable energy goals Michigan has become an attractive option for solar operators due to the state’s high energy prices and the state requirement for utilities to have 15 percent of their power come from renewable sources by 2021, according to solar industry experts. “The solar industry is relatively new in Michigan. You’re really starting to see the first large projects come online over the next two or so years,” said Daren Griffith, a former Cypress Creek solar salesman who worked with Kraynak before leaving the company. “The price of solar panels has dropped so much that it is appealing now.” The proposed settlement with Consumers Energy was met with relief from developers like Cypress Creek, which has proposed to build

2,600 megawatts of solar plants in Michigan. However, those projects have been stuck in the so-called “interconnection queue,” which the settlement seeks to address. “Developers like Cypress Creek have invested millions in solar projects in the state,” said Noah Hyte, executive vice president of development with Cypress Creek, in an emailed statement to Crain’s. “This filing will finally allow many of those projects to move forward, saving ratepayers money and driving competition and innovation, while bringing hundreds of new jobs, millions of dollars in lease payments to Michigan farmers, and new property tax revenue for rural communities.” “Multiple things have to happen before we generate power,” Griffith said. “First thing is we must find willing landowners, then we go through the process of environmental, geological surveys, utility studies.” “There are three (steps) for interconnection (with the electric grid). Then you need to identify the upgrade costs for the local infrastructure to connect. Once you get that far along you have a contract and a power purchase agreement” with a utility, he said. Gallagher said Consumers’ proposal to pay $95 per megawatt hour for the first 584 megawatts of power, then dropping down after 2023 to $54 per megawatt hour could become a disincentive that will cause some solar developers to walk away from proposed projects, leaving farmers and other landowners disappointed. National solar developers have proposed thousands of megawatts of solar projects they want to sell to the state’s utilities and add to the electric grid. “Not all will go through because the prices won’t make the projects viable,” Gallagher said. In its recent five-year energy plan, Consumers Energy has proposed adding 6,000 megawatts of solar to its portfolio by 2040 to replace power generated from closed coal plants. DTE is proposing modest solar projects of 15 megawatts, but much more wind farms. DTE recently purchased 383 megawatts of wind power from Apex Power Co. that will come online in November 2020. Michigan has more than 153 megawatts of solar capacity, accounting for only 0.21 percent of total electricity produced, but up from 27 megawatts in 2014, said SEIA. In 2017, 89 percent of Michigan’s electricity came from coal, nuclear or natural gas, according to the MPSC. Those three sources accounted for 97 percent of electricity in the state in 2001. Michigan’s leading renewable resource in 2017 was wind, accounting for 5 percent of the overall electricity. Most nonresidential solar plants are owned by DTE and Consumers, including DTE’s 28.3 MW DeMille Solar Farm in Lapeer County and Consumers’ 3 MW Solar Garden 1 at Grand Valley State University. One of the state’s largest private developments is a 1.3 MW solar farm that came online in early 2018 by American Municipal Power at a brownfield site in Coldwater. “Solar and agriculture can really co-exist,” Gallagher said. “There is good evidence in Michigan, North Carolina and other states we have worked in that leasing some land for solar development can help farmers create steady income to keep farms in the family. There are a lot of benefits. We need to make sure our developers are doing it right.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 2 6 , 2 0 1 9

BREWERIES FROM PAGE 1

But that kind of success, like the frothy head on a good pour, fizzles eventually. “It was unrealistic to expect that breweries could continue to be such an outlier forever,” Watson said. “To me, (the closings) are the signs of a maturing, competitive marketplace. With demand growth slowing, and so many locally focused service competitors, it’s natural that openings and closings were going to start to close together. Anyone planning a brewery, or in their first few years of business, should be aware that the last decade is probably not the best model for the next five or 10 years.” Some Michigan breweries that closed in the last 12 months include: St. Clair Shores’ Shipwreck Brewing Co., Warren-based Falling Down Beer Co., Munising’s Pictured Rocks Brewing Co., Traverse City’s CraftHouse TC, Paw Paw Brewing Co., Jackson’s Poison Frog Brewing Co. and Hazel Park’s Cellarmen’s, among others. For Axle, profits proved tough amid increased competition. “We struggled early on to gain momentum in distribution, so we focused our energy and resources on creating a place that would reflect our values, aspirations and define our brand,” Axle Brewing Co.’s president Dan Riley said in a news release announcing the closing. Axle Brewing said in the release that it didn’t see a “clear path to profitability” due to its current cost structure and “very lean margins on the distribution side of our business.”

‘Own the local market’ Scaling up was important to breweries for years as competition grew, but now the industry is faced with peaking out in beer consumption across the U.S. Overall beer production was down nearly 1 percent in 2018, but craft beer production was up 3.9 percent, according to Brewers Association data. While craft beer production was up marginally, the market added more than 850 breweries in 2018. “The craft beer market as a whole is growing every year, but that growth is being taken up by new breweries,” Alejandro Brown, founder of Big Al Brewing in Seattle, which closed in 2017, told Draft Magazine. “If the new breweries are absorbing all that growth, the rest of us are going to be flat.” Michigan is the fourth-largest beer state with 357 breweries last year, or about 4.7 breweries per 100,000 residents, according to Brewers Association data. But Michigan-produced beer continues to chew up overall market share for sales. Last year, state-produced beer accounted for 12 percent of sales and that means there’s plenty of opportunity in the market, said Scott Graham, executive director of the Lansing-based Michigan Brewers Guild. “I think craft beer in Michigan can reach 20 percent or 25 percent of the market,” Graham said. “But who is going to get that volume is the people who are best at it. Those that have been doing it for 25 years and proven successful.” The realization that markets are dominated by “Big Beer” like Anheuser-Busch InBev, which enjoys roughly 45 percent of the U.S. market share, and established local players has breweries rethinking their strategy.

crainsdetroit.com

AXLE BREWING VIA FACEBOOK

As Axle Brewing prepared to close its doors in June, fans turned out for a final visit to the Ferndale brewpub.

Michigan’s fourth-largest brewery, Detroit-based Atwater Brewery, abandoned its long-discussed plans earlier this year to open taprooms in Texas and North Carolina and expand distribution to nearly the entire continental U.S. Atwater currently distributes to 15 states with taprooms in Detroit and Grand Rapids. “There’s a correction happening,” said Atwater CEO Mark Rieth. “I think consumers have just hit a choice paralysis. There is just so much beer out there. There’s just no more room on the shelves and if you’re a new player in this business, it’s almost impossible to establish yourself through distribution. New guys should just avoid distribution and stay in the taproom. If you’re going to open up a brewery, make sure you’re the only brewery in town. Own the local market. It’s more profitable that way.” That logic jibes with the closings in the state. Most have come in populated areas with more than one brewery, thus more competition. Grand Rapids’ The Hideout brewery shuttered in March after 13 years of competing with the state’s second-largest brewer, Founders Brewing, the 17th-largest Brewery Vivant and Atwater, among others. Joe Infante, head of the alcoholic beverage regulation practice for Detroit-based law firm Miller, Canfield, Paddock and Stone PLLC, agrees with Rieth that saturation is a problem and has spelled the doom for places like Axle. “People keep wanting open breweries in the same place because of a concentration of clients,” Infante said. “Everyone is going to Ferndale or they want to open in Grand Rapids. There’s just not enough for everyone in these places. You’ve got to be more deliberate with where you want to be and figure out where there’s more demand. Opening a brewery in Grand Rapids? Good luck.”

Maturing industry Dennis Loughlin, partner at law firm Warner Norcross and Judd LLP in Southfield, said bankruptcies are up nationwide across all industries, but are particularly high for breweries. “There are a lot of distressed breweries out there right now,” Loughlin said. “The shine is probably worn off the business. There are probably fewer investors that think it’s cool to invest in a craft brew company or brewpub. That easy money that was out there perhaps isn’t out there anymore. To me that signals an industry that is maturing and that means hitting a wall.” Despite the shaky economics of a mature industry and recent closings, wide-eyed entrepreneurs are opening breweries. Since Aug. 20, 2018, 22 breweries opened with plenty more slated to open in the near future.

Michigan’s top 10 The state’s largest breweries, by in-state beer sales: 1. Bell’s Brewery, Kalamazoo 2. Founders Brewing Co., Grand Rapids 3. Short’s Brewing, Elk Rapids 4. Atwater Brewing, Detroit 5. Perrin Brewing Co., Comstock Park 6. Old Nation Brewing, Williamston 7. New Holland Brewing, Holland 8. Griffin Claw Brewing, Birmingham 9. Keweenaw Brewing, Houghton 10. Blackrocks Brewing, Marquette Source: Michigan Liquor Control Commission

In September, Nain Rouge Brewery will open in Detroit, which is already home to plenty of breweries, including Motor City Brewing Works, Founders Brewing, Atwater, Batch Brewing, Jolly Pumpkin, Eastern Market Brewing Co. and several more. Jon Carlson, co-founder of restaurant developer 2Mission Design and Development that owns Nain Rouge, said there is room for breweries in cities with large populations, but they’ve got to understand their limits and stand apart from the rest. “If you’re in a community with a large population, there’s room,” said Carlson, whose company also owns Grizzly Peak Brewing Co. and Blue Tractor BBQ & Brewing in Ann Arbor as well as North Peak Brewery in Traverse City. “You just won’t see these Taj Mahal breweries being built anymore. The food can’t be a traditional Americana concept. You can’t just have beer and expect people will come. You have to be unique. Can’t just make an English IPA any more.” Carlson said Nain Rouge will only serve its beer on site as a community-based brewpub and has no plans for distribution. It is also developing a training program alongside Midtown Inc. for Eastern Michigan University students who study fermentation science. “I don’t think you’ll ever see a Bell’s or Founders again. They are two great champions (of this industry) but nobody is going to catch them and no one should even try,” he said.

Brewing powerhouse In terms of production and economic impact, Michigan is one of the largest brewery states in the nation. Last year, Michigan brewers produced nearly 1 million barrels with an economic impact of nearly $2.1 billion, ranking Michigan ninth nationally. The industry supported nearly 10,000 jobs in 2016, according to research from Michigan State University.

Graham said overall market growth coupled with increased competition is better for beer drinkers. “One percentage point of the market today is a lot more than 10 years ago,” Graham said. “Is that me trying to highlight the positives? Yes, but it’s true. It’s not doom and gloom. We’re talking about (the industry) maturing, being more difficult. Ultimately, it’s probably good for the consumer.” And a tighter market and saturation means breweries are pushing the creative envelope. “New breweries are, of course, still coming up but they are checking more boxes than ever before,” Watson said. “They have to be successful in business, well capitalized and have an understanding of who and what they are trying to serve. Are there styles in your market that aren’t served? Sours, hazy IPAs, etc. You can’t just bring standard beers to the market anymore. You have to do something different. Why is a consumer going to choose you versus a brewery that serves the same thing and they already trust?” Breweries are now diversifying as much as possible to stay ahead of the trends and remain profitable. Earlier this month, Atwater joined the fast-growing hard seltzer market by launching its own line of spiked sparkling waters. The brewer hopes to carve out market share as the local option for the 5 percent alcohol beverages as national players dominate across the U.S. “We’ve been working on this for about eight months,” Rieth told Crain’s. “I’ve never seen anything like it in my 20 years of business in this industry, something like this come in and completely dominate so fast.” Sales of the fizzy water beverages skyrocketed this year to roughly $550 million and could grow to a market size of $2.5 billion by 2021, according to analysis by investment and financial services firm UBS Group. Earlier this month, Michigan’s third-largest brewery, Elk Rapids-based Short’s Brewing, announced a partnership with the state’s largest cannabis producer Green Peak Innovations. The pair will form a joint venture to produce cannabis-infused nonalcoholic drinks by the end of the year. “The brewers are trying to chase every trend,” Loughlin said. “This is not the end of craft beer, but there are so many options out there. There’s been growth at a breakneck pace and now we know not everyone can make it. There is going to be some more clearing out of undercapitalized or lesser players. There are lessons out there for people wanting to get into this businesses, and it’s going to be interesting to see how it shakes out.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 2 6 , 2 0 1 9

THE WEEK ON THE WEB

RUMBLINGS

Cobo Center to be renamed

Center tied to Gilbert rehab takes to local radio airwaves

AUGUST 16-22 | For more, visit crainsdetroit.com

he four letters — COBO — that have adorned Detroit’s convention center for nearly six decades are set to come down this week. TCF Bank, which through its predecessor Chemical Bank bought the 22-year naming rights to Cobo Center for $33 million and is set to formally affix its name to the 59-year-old riverfront convention hall Tuesday. The Detroit-based bank, which completed a merger with Chemical Bank on Aug. 1, has scheduled a 10 a.m. news conference Tuesday in front of the convention center, followed by a community block party the bank is throwing throughout the rest of the day. In February, the Detroit Regional Convention Facility Authority sold the naming rights of Cobo Center for $1.5 million annually to Chemical Financial Corp., which was in the midst of a $3.6 billion “merger of equals” with Wayzata, Minn.based TCF Financial Corp. Bank leaders have previously said the convention hall will be called TCF Center. The regional authority’s sale of the naming rights to Chemical Bank came after some Detroiters began advocating in recent years for a name change in light of former Mayor Albert Cobo’s racially charged legacy of carrying out the demolitions of African American neighborhoods and businesses in the 1950s for so-called urban renewal. The authority’s board also sought to sell the naming rights to generate a new revenue source to help the convention center make up for gradually declining state subsidies from hotel, liquor and cigarette taxes. The merged Chemical-TCF bank has taken the TCF Bank brand as it moves to change branch signage and financial technology for both banks by mid-2020. TCF Bank will host a block party outside of the convention hall entrance at Washington and Jefferson from 11:30 a.m. to 6 p.m. with free food, face-painting, games and live musical performances by local musical acts Your Generation, the Selected of God Choir and The Temptations. “The goal there is to really share the renaming of the convention center, to celebrate it and bring everyone together and have some fun,” said Amie Hoffner, vice president of corporate communications at TCF Bank. In an effort to help Detroiters attend the event, TCF Bank is underwriting the cost of all DDOT bus route fares to downtown on Tuesday, Hoffner said. The new TCF Bank is trying to raise its profile in the metro Detroit market as the century-old Chemical Bank brand goes away. In October, the bank is the title sponsor of the Detroit Free Press’ annual Detroit-Windsor marathon, a race that Chemical Bank and its predecessor, Talmer Bank & Trust, have sponsored since 2011. “A lot of planning has gone into raising visibility for TCF there,” Hoffner said.

CRAIN’S DETROIT BUSINESS

The 59-year-old Cobo Center in downtown Detroit is going to get a new name this week.

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

$5M

Huntington Bank’s five-year investment in Detroit’s Warrendale-Cody Rouge neighborhood

$333M

Money being returned to DTE customers to reflect tax cuts

Number of locations Buddy’s Pizza will have statewide once a restaurant near Kalamazoo opens

BUSINESS NEWS J Huntington Bank’s $5 million commitment to Detroit’s neighborhoods will be put toward improving the housing, parks and commercial areas of Warrendale-Cody Rouge. The Ohio-based bank’s contribution is part of the $35 million promised to the city by seven corporations last year. J Detroit Body Garage, a gym in the West Village neighborhood, is moving from a former bank building to an actual garage. Founder Terra Castro plans to uproot her business late this year, moving its collection of fitness classes to a 2,400-squarefoot car garage on the edge of the near-east-side Villages neighborhoods. J Ann Arbor-based franchising company Franworth has picked up NFL star Drew Brees as a partner and executive board member. Brees, who plays quarterback for the New Orleans Saints, will play an “active role” on the board. J The Detroit Police Athletic League is tapping into a 17,000-member workforce in Detroit to boost career development and job training activities for thousands of Detroit youth through a new five-year partnership with Quicken Loans Inc.’s online mortgage service, Rocket Mortgage.

J The Community Foundation for Southeast Michigan is beefing up its program that helps Detroit nonprofits add training, build talent or otherwise add capacities within their organizations, thanks to a $714,000 injection from the John S. and James L. Knight Foundation. J The Detroit Zoo is going greener. As part of the Detroit Zoological Society’s long-term strategy for environmentally sustainable operations, the Detroit Zoo will use 100 percent renewable energy to power its Royal Oak campus through DTE Energy Co.’s voluntary renewable-energy program. J The QLine will join a universal payment system rolled out in May for suburban and city buses in a bid to reverse declining ridership on Detroit’s 3.3-mile-long streetcar line. The shared fare system called Dart is a bid for more regional cooperation on mass transit in a metro area lacking comprehensive public transportation resources. J Detroit has once again been passed over for a Major League Soccer expansion team. St. Louis is the latest city to land a new MLS team amid the league’s campaign to add more teams around the country. MLS commissioner Don Garber announced the new team last Tuesday in St. Louis. J Buddy’s Pizza plans to open a new restaurant near Kalamazoo that would be its 17th statewide and second in West Michigan.

HEALTH CARE NEWS J Farmington Hills-based Independent Emergency Physicians has acquired two urgent care centers in Southfield and Novi and created a joint venture with Healthy Urgent Care to build out a network of 10 to 15 more urgent-care centers in Southeast Michigan. J The Children’s Foundation will use a more than $1.5 million donation to zero in on mental health in children and young adults. The gift comes from Patricia Rodzik, who served as a volunteer at DMC Children’s Hospital of Michigan in Detroit and was on its board of directors for several years.

s Dan Gilbert returned home after more than eight weeks of rehabilitation from a stroke he suffered earlier this year, he might have heard a radio commercial from a familiar source. Airing spots last week on WWJ 950 AM was the Shirley Ryan AbilityLab, considered the top center in the nation for stroke rehab and believed to be where Gilbert had been recovering. The ads focus on the center’s use of cutting-edge technology to help patients get their lives back. A spokeswoman for the Chicago center said the ads were part of a national ad campaign the AbilityLab has run since changing its name from the Rehabilitation Institute of Chicago and opening its $550 million research hospital in March 2017. She would not give details on when the ads started running in the Detroit market.

Still, the timing seemed curious. Gilbert returned home Aug. 16 as he continues his recovery from the stroke suffered in late May, Quicken Loans CEO Jay Farner said in a statement. Quicken has released no details on the state of his health. Earlier this month, Gilbert appeared in a video distributed to employees of his Quicken Loans, Bedrock LLC and other companies. The video showed a thinner, bearded Gilbert sitting upright and saying he was at a rehab center in “downtown Chicago, Illinois.” AbilityLab has ranked atop U.S. News & World Report’s list of best rehabilitation hospitals every year since 1991. It focuses on translational medicine — which puts clinicians and researchers in the same space to speed the creation of new and improved treatments.

REBEL NELL AND YORK PROJECT

Social fashion enterprises Rebel Nell and York Project are sharing a new retail space near Detroit’s New Center neighborhood.

Rebel Nell, York Project to open Detroit retail shop G

raffiti-repurposing jewelry maker Rebel Nell is opening its first physical store with streetwear brand York Project in Detroit’s Northwest Goldberg neighborhood near New Center. The store was set to open Saturday. The Detroit-based brands both have social missions. Rebel Nell, founded in 2013, employs and trains disadvantaged women in Detroit to design and manufacture jewelry adorned with colorful graffiti that’s fallen from walls around the city. Last fall it debuted a new collection using flecked Michigan Central Station graffiti paint. The company sells online and through retailers across the country. It has hired 22 women so far and paid $378,000 in wages. Rebel Nell and York Project were previously housed in nonprofit co-working space Ponyride, which moved this spring from Corktown to the Core City neighborhood. The York Project donates a kit of living essentials to those experiencing homelessness — a tote bag, toilet paper, socks and water — for every item it

sells, according to the release. It designs and sells clothing and manufactures in Detroit. Founded by Josh York in 2012, it has donated $84,000 in kits so far, the release said. “Manufacturing is an opportunity to provide more jobs for Detroiters, so our mission has advanced to include workforce development,” York said in the release. The new brick-and-mortar space shows off Rebel Nell production to customers and allows them to engage with the products, store manager Molly Layman said. There’s also more training opportunity for the employees. Rebel Nell and York Project are in a renovated former manufacturing facility south of Grand Boulevard and west of the Lodge Freeway renovated by David Grasso, a Philadelphia developer and CEO of Grasso Holdings LLC. As of last September, clothing manufacturer Commonwealth Sewing Co. was expected to set up shop in the building, as well, and other tenants were being sought.

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