Crain's Detroit Business, Sept. 30, 2019 issue by Crain's Detroit Business

Michigan Medicine CEO on why UM needs new $920M hospital Page 3

Marschall Runge, M.D.

SEPTEMBER 30 - OCTOBER 6, 2019 | crainsdetroit.com

Here’s the price tag for the Silverdome demolition Page 6

DETROIT HOMECOMING RECAP

THINGS ARE LOOKING UP

ntrepreneurship and investment. Those were two major themes of this year’s Detroit Homecoming, and this week, Crain’s takes a deeper look at how Southeast Michigan can encourage a healthy ecosystem that spurs investment.

■ Fast-growth companies seen as key to job growth, Page 10 ■ Opportunity Zones start to take off, but some question the specifics, Page 16

■ Retooled film incentives seen as opportunity, Page 20

AARON ECKELS FIR CRAIN’S

■ Tales of Motown entrepreneurship, Page 24

PHILANTHROPY

FINANCE

New approach in $200M plan to help working-class families

Union pension fund to slash benefits to avoid insolvency

By Sherri Welch

By Chad Livengood

Thompsons amp up scholarships After investing more than $100 million in schools in Detroit, Michigan paving magnate Bob Thompson and his wife, Ellen, are prepared to invest $200 million more — this time

for scholarships, not buildings. The Thompsons believe they’ve found “the magic formula” for how philanthropy can help make college affordable for working-class families. Their plan would greatly expand the scope of a scholarship program they’ve

crainsdetroit.com

Vol. 35 No. 39 $5 a copy. $169 a year.

swelch@crain.com

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been working on for eight years over the next decade, using the remainder of the wealth they pledged to donate 20 years ago following the sale of Thompson-McCully Co. and profits from Bob Thompson’s McCoig Holdings LLC. SEE THOMPSON, PAGE 38

Bob and Ellen Thompson

clivengood@crain.com

The pension fund for the Michigan Regional Council of Carpenters and Millwrights has filed a plan with the U.S. Treasury Department to reduce retirement payments for up to 19,600 Southeast Michigan union members and retirees in a bid to stave off insolvency. The Detroit Carpenters’ Pension Trust Fund reported a funding level of 34.8 percent on May 1, 2018, as actuaries for the employer-sponsored pension plan have projected it will run out of money by 2034 without a reduction in benefits. With $772 million in pension

fund assets, the carpenters’ union is the biggest labor union in Michigan yet to seek reductions in pension benefits under the Multi-Employer Reform Act, a 2014 federal law requiring multi-employer union pension funds to cut benefits if they’re projected to be insolvent within 20 years. The proposed reductions would slash pension benefits earned before 2007 by up to 16 percent, depending on the number of years of work and man-hours for each retiree and active carpenter or millwright, according to the proposal sent last week to active and retired union members. SEE UNION, PAGE 40

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MICHIGAN BRIEFS

INSIDE

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

Lawsuits seek to halt vape ban Gov. Gretchen Whitmer’s efforts to ban flavored vape products in the state is now facing a legal challenge. Houghton-based tobacco vape shop 906 Vapor LLC and its owner Mark Slis filed three lawsuits last Wednesday against the state and the Department of Health and Human Services to effectively stop the state from following through on its 180day ban. Slis, who is represented by attorneys at Detroit-based Honigman LLP and O’Dea, Nordeen, Burink and Pickens PC in Marquette, is seeking a preliminary injunction, a temporary restraining order or an outright overturning of the ban, according to the lawsuits filed in a circuit court in Houghton. “We think we have a good likelihood of success on the merits,” Kevin Blair, litigator and partner at Honigman, told Crain’s. The suit claims Whitmer’s office lacked the legal authority to enact the emergency rule, which bans the retail sale and possession of flavored-vape products for 180 days. It also alleges the state violated the “notice-and-participation” rule-making process required by the state’s Administrative Procedures Act and that the emergency rule is un-

Enbridge gets permit for Line 5 supports

The U.S. Army Corps of Engineers has granted Enbridge Energy Co. a permit to install 54 new steel supports along its twin underwater oil pipelines in the Straits of Mackinac. The Calgary-based oil transportation giant disclosed in August that the distance between two of its steel supports measured 81 feet, six feet over the legal limit. Changing currents in the Straits of Mackinac caused sand to erode and shift underneath the 66-year-old, 20inch pipelines, according to the company. Enbridge spokesman Ryan Duffy said work began last Tuesday on installing steel supports in the 81-foot gap. The steel supports, which have anchor screws that dig into the lake bed, BLOOMBERG

Gov. Gretchen Whitmer announced a ban on flavored e-cigarettes Sept. 4.

constitutional because it did not provide “any reasonable standards or guidance by the Legislature about what constitutes a true emergency, what ‘public health, safety or welfare means, etc.’” A representative for Michigan’s attorney general said last week the office hadn’t yet seen the complaint and would review before responding. Whitmer announced the ban on

flavored e-cigarettes on Sept. 4 to combat growing concerns about health and teen use. Michigan’s vaping industry generated more than $608 million in economic impact in 2018 and created 4,290 jobs, according to data cited in the lawsuit. That translates to nearly $189 million in wages and benefits and more than $51.3 million in state and local taxes, according to the data.

CALENDAR

CLASSIFIEDS

OPINION

PEOPLE

RUMBLINGS

WEEK ON THE WEB

are installed mechanically from a barge and crane, Duffy said. Contractors working for Enbridge will continue installing the remaining steel supports this fall, depending on weather conditions, Duffy said. The company is proceeding with the project as Michigan Attorney General Dana Nessel is seeking to have the pipeline shut down by asking a judge to invalidate the state’s 1953 easement granting Enbridge the right to operate the 4-mile underwater pipeline in the waterway connecting Lakes Michigan and Huron.

CORRECTIONS J In our Sept. 23 Notable Women in Education Leadership section we included incorrect information about two honorees’ most recent degrees earned: Jennifer Lewis most recently earned a Doctor of Philosophy from the University of Michigan, and Rhonda Longworth most recently earned a Doctor of Philosophy in political science from the University of Iowa.

J In our Sept. 23 interview with Wendy Cox, we misstated Cox’s title, which is vice president, director of personal trusts and fiduciary officer at Greenleaf Trust. Michael F. Odar, CFA is the president of Greenleaf Trust, a role he has served in since Dec. 1, 2012. We also included an incorrect figure for the assets the firm has under management. The firm manages $14 billion in client assets.

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

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HEALTH CARE

INVESTMENT

CEO: New UM hospital won’t slow affiliation plans

New $75M VC fund aimed at health care to be run from Ann Arbor By Tom Henderson thenderson@crain.com

A rendering of the planned new $920 million, 264-bed adult hospital for the University of Michigan in Ann Arbor.

UNIVERSITY OF MICHIGAN

Michigan Medicine to continue current relationships, explore more By Jay Greene jgreene@crain.com

Michigan Medicine CEO Marschall Runge, M.D., said in an interview with Crain’s that building a new $920 million adult hospital will not alter the university’s expansion and affiliation plans with other health systems across the state. Last week, the university’s board of regents approved construction of a new 12-story, 264bed hospital that will open in the fall of 2024. Officials said it will “transform inpatient and surgical care” and create the “most advanced” hospital in Michigan. Runge said UM will pay for the $920 million hospital with a combination of funds from operations, debt and charitable donations. He said about $300 million will come from a tax-exempt bond issue.

HOK, which did the preliminary planning for the hospital, has been chosen as the architect. Groundbreaking is expected in October. While the goal will be to alleviate overcrowding on the main medical campus in Ann Arbor, Runge said UM will continue to seek Runge out new health care partners across the state. Over the last five years, UM has partnered with a number of health systems, including Sparrow Health in Lansing, Mid-Michigan Health in Midland and Trinity Health Michigan; as well as acquiring Metro Health Hospital in the Grand Rapids suburb of Wyoming.

“We will continue all our current relationships, and we are constantly hearing from different health systems across the state,” Runge said. “We will have more in-depth discussions with them.” Overall, Michigan Medicine, the clinical arm of the university, owns or is affiliated with 15 hospitals in Ann Arbor, Midland, Chelsea, Wyoming and Lansing. It also operates 40 outpatient locations, several in Southeast Michigan, and home-care operations that handle more than 2.1 million outpatient visits a year. “(Michigan Medicine) has a unique role to provide the highest-quality and safest care for patients with complex medical problems,” said Runge, adding that the university’s affiliation strategy is designed to provide care for those with less complicated symptoms. SEE UM, PAGE 41

‘DETROIT RISING’

High-rise condos at The Mid may reach $1M in cost By the time Detroit expats return to the city for Detroit Homecoming VII next year, a new high-rise hotel and condominium building with high-dollar CHAD views is expected LIVENGOOD to be in the air across the street from this year’s gathering in Midtown. Developers of The Mid plan to break ground this fall on construction of a 25-story high-rise building on 3.78 acres of vacant land sandwiched between the Whole Foods Inc. grocery store and The Plaza apartments, across Woodward Avenue from the Max Fisher Music Center where Detroit Homecoming VI was held, Sept. 19-20.

The 25-story building is the first phase of a two-tower development totaling $377 million and will include a new hotel and 51 for-sale condo units on the higher floors. In an interview at Detroit Homecoming for the Crain’s “Detroit Rising” podcast, the master developer behind The Mid confirmed the condos could reach $1 million in price when phase one of the project is complete in the second quarter of 2021. “It is potentially true,” said Emery Matthews, founder and co-owner of Detroit-based Real Estate Interests LLC. The condos atop of the 25-story tower “will probably be on the higher end in this market, more akin to what you might find in Birmingham,” Matthews said. SEE THE MID, PAGE 40

INFORM STUDIO LLC

The Mid, a pair of skyscrapers at Woodward and Mack avenues in Midtown planned to be constructed in the next couple of years, would drastically alter Detroit’s skyline. The developer of the property plans to break ground on the first tower along Woodward Avenue this fall.

Venture Investors LLC, a Madison, Wis.-based venture capital firm with an Ann Arbor office and a strong local presence, plans to announce Monday that it has closed on its latest fund, the $75 million Venture Investors Health Fund VI LP. “In our prior funds, we invested in a mix of health care and technology. For this fund, we made the decision to go 100 percent to health care,” said Jim Adox. Adox is based in Ann Arbor, and he will be the executive managing director of the fund. The new fund builds on Southeast Michigan’s strength in health care venture investing. The state’s largest venture capital firm, Arboretum Ventures, specializes in health care investments, and some of the state’s biggest rounds of VC investment have gone to health care companies. And the region has had a track record of startups going on to reward their VC investors by having initial public offerings, including Ann Arbor-based Esperion Therapeutics Inc., Livonia-based Gemphire Therapeutics Inc. and Plymouth Township-based ProNAi Therapeutics Inc. Adox Venture Investors is one of the oldest VC firms in the country, raising its first fund in 1982. It opened its Ann Arbor office after the state of Michigan launched the $95 million Michigan Venture Fund in 2006 to invest in VC firms willing to open offices in the state. In January 2007, Venture Investors and Nth Power of San Francisco were the first two outof-state firms to get funding from MVF. Venture Investors now has $275 million under management and has invested $54 million in state companies, Adox said. “Michigan is having its biggest year for venture capital investment ever, and it is a great sign that top-tier venture-capital funds around the country are investing here for the first time. But it is extremely important that we continue to also have strong venture funds locally,” said Chris Rizik, CEO and fund manager for Ann Arbor-based Renaissance Venture Capital Fund, a fund of funds that invests in VC firms that invest in Michigan companies. Renaissance is not an investor in Venture Investors. “For years, Venture Investors had been a key firm investing in Michigan, even as they were based in Wisconsin. But they became even more essential here when Jim joined them and opened their Ann Arbor office. VI has become a go-to firm for local entrepreneurs, and Jim is a key person for founders to get to know,” said Rizik. SEE VENTURE, PAGE 41

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REAL ESTATE INSIDER

Pontiac Silverdome demolition cost $8 million It cost $8 million to demolish the Pontiac Silverdome, the property’s owner says. Steve Apostolopoulos, managing member of KIRK Toronto-based PINHO Triple Properties Inc., paid the cost of tearing down the former home of the Detroit Lions between 2017 and 2018, but declined to reveal specifics behind a deal with an Atlanta-based developer to build 3.7 million square feet for a distribution center for Amazon.com Inc. “Yes, of course we did,” Apostolopoulos said Tuesday morning when asked about the demolition payment, which I have not seen reported elsewhere. My rough math shows that at 3.7 million square feet, the Amazon development on the Silverdome’s 127 acres would be larger than its other facilities in Southeast Michigan combined. In addition, it could be well more than of the $250 million or so reported as the development cost by the city. I have a hard time seeing it coming in at that cost based on the cost of

In other reports

The Pontiac Silverdome demolition began with a partial implosion in late 2017 and finished the following year.

previous Amazon developments around here. It would also be a surprise to me if Seefried Industrial Properties/Amazon didn’t seek incentives for the project, which was dubbed “Project Cougar” in Pontiac planning documents. The online retail giant’s developers have sought them in the past (John Gallagher at the Detroit Free Press looked at this a couple of days ago, and I messaged Pontiac Mayor Deirdre Waterman about it). The project is expected to be complete by the third quarter of 2021. In all, Seefried envisions an approximately 3.5 million-square-foot,

five-story fulfillment center, along with a one-story, 200,000-squarefoot delivery station, the 30-page document says. It also says there would be 1,800 parking spaces for the larger building and 350 spaces for the smaller building, totaling 2,150. The city and Triple Properties reached a court agreement in March 2017 to hire a demolition contractor and raze the 80,000-plus seat stadium, which was home to the Lions until 2002, when the team moved to Ford Field in downtown Detroit. In February 2017, the city sued Triple Properties, which purchased the

AERIAL ASSOCIATES

Silverdome at auction from the city in 2009 for $583,000, just 1.05 percent of the total 1975 construction cost of $55.7 million. The city alleged violations of building and safety codes, as well as illegal storage of vehicles. Demolishing the property was the next major step to finding a new use for the property, which became run down and was photographed strewn with debris. It was generally considered an eyesore in the city of 60,000 people. Demolition began in December 2017 with a partial implosion that initially failed. The second attempt succeeded the following day.

J It seems to be the end of the IHOP on Jefferson Avenue. The Detroit Free Press reports that the new building owner, Saber Ammori, anticipated IHOP to renew its lease but it chose not to. J The Detroit News’ Candice Williams and Christine Ferretti took a lengthy look at the anticipated $143 million Herman Kiefer project, which has been in the works for years and faced myriad delays. They report that the project “is finally about to get underway amid concerns from residents.” J Newspapers in Greenville and Fenton are reporting on a pair of projects tied to Viktor Gjonaj, the missing Detroit area commercial real estate executive implicated in a “Ponzi-type scheme” in Oakland County court documents on which Crain’s reported last week. The story in the Greenville Daily News says a real estate development project there with ties to the Troy-based Imperium Group president and founder will not be impacted by Gjonaj’s issues, and the story in the Tri-County Times says largely the same thing about a project in Fenton. Read local news, y’all.

Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

Nonprofit, neighborhood group to rehab Woodbridge buildings By Kurt Nagl knagl@crain.com

A nonprofit developer and neighborhood group are teaming up to revitalize commercial buildings and houses in Woodbridge, a historic neighborhood wedged between Detroit hot spots. Lansing-based Cinnaire, with an assist from the Woodbridge Neighborhood Development Corp., is preparing to start a $1.2 million rehabilitation of an old bank at 3530 Grand River Ave. The 11,500-square-foot building — recognizable by the big giraffe mural on its side — has sat vacant at a main thoroughfare into the neighborhood for the past few years. The mural greets motorists at the busy intersection with the message “Welcome to Woodbridge.” “This building is like the entrance into our neighborhood, so we wouldn’t want to have the main entrance be closed,” said Evette Napier, 45, who is board president of the neighborhood development group and has lived in Woodbridge her whole life. Cinnaire purchased the three-story building, built in the 1920s, from the Presbytery of Detroit for $330,000 in January. Its days as a bank predate Napier, who remembers taking her kids there for dance, acting and other extracurricular activities. Most recently, it was home to the nonprofit Barnabas Project, which moved out around five years ago and left unclaimed items such as golf clubs and old computers to collect dust. Cinnaire is planning to invest nearly $1 million to renovate the building for a commercial tenant on the first floor and flexible office space on the upper two levels, said Ed Potas, development manager for Cinnaire. The neighborhood group is pitching in a big chunk of the $150,000 Kresge Foundation grant it

KURT NAGL/CRAIN’S DETROIT BUSINESS

The 11,500-square-foot former bank at 3530 Grand River Ave. in Detroit is being rehabbed by Cinnaire.

was awarded in June for some cleanup and community engagement. The partnership between the Woodbridge group and Cinnaire started in 2017 when the developer gave it a construction loan to renovate a house in the area. If all goes well with the bank building, the groups would like to continue elevating their work together with the revitalization of a ramshackle 18,000-square-foot former elementary school and nearby 8 acres of vacant land in the neighborhood. Cinnaire bought the school building at 1780 W. Hancock St. from private owner Blair Evans for $1.7 million, according to city property records, along with acreage at West Forest Avenue and Rosa Parks Boulevard. Potas said that project is still being budgeted and presents bigger challenges due to the condition of the building. “The land was the opportunity. It’s a semicontiguous 8 acres. What can

happen there, we’re not set on any one thing,” Potas said, adding that Cinnaire is considering the construction of affordable homes. The developer is bankrolling the rehab efforts and using the long-established neighborhood group to tell it what the area really needs. Angie Gaabo, executive director of the group, said they began discussions about rehab with Cinnaire around three years ago. “We didn’t have a lot of cash in the bank but we have a lot of engaged neighbors and a very active and engaged board of directors, and a lot of us felt like development was really beginning to happen,” Gaabo said.

Cusp of development Bordering bustling Midtown to its east and North Corktown to its south, where development is heating up with Ford Motor Co.’s renovation of Michigan Central Station, Wood-

Evette Napier, president of Woodbridge Neighborhood Development Corp., is working with developer Cinnaire to rehabilitate an abandoned elementary school and vacant property in the neighborhood.

bridge is filled with Victorian-era homes and lots of empty properties. Gaabo wants to get out ahead of investment that could soon be spilling into the enclave. Big land owners in the area include the Ilitch family, whose matriarch Marian Ilitch owns the MotorCity Casino Hotel and swaths of surrounding property; Phil Kafka, builder of the Quonset huts in Core City; and George N’Namdi, founder of the N’Namdi Center for Contemporary Art in Midtown. Last year, the neighborhood group launched its minor home repair program, helping a half-dozen home owners with projects such as roof repairs, furnace fixes and porch improvements at no cost to the home owners. It was funded with $20,000 made from the $360,000 sale of the rehabbed home on Calumet Street. This year, the group hopes to complete another home renovation and help twice as many homeowners with repairs

using a $50,000 Michigan State Housing Development Authority grant. The Woodbridge Neighborhood Development Corp., governed by a 10-member board of residents, is funded primarily through philanthropy and corporate donations. Its yearly operating budget is $250,000. Potas said renovation of the old bank building would likely start in the next month or so and be done by early spring. Windows will be added, and the building’s historic architecture and interior will be preserved. Also staying put is the giraffe mural, painted in 2006 by artist Carl Oxley III and volunteer organization Summer in the City. Detroit-based AGI Construction is the general contractor and Detroit-based Unfolding Architecture PLLC is the architect. Cinnaire and the neighborhood group aim to make the building a community gathering space and an affordable alternative to downtown for nonprofit groups or small businesses in need of space. Rental rates have not been decided yet, Potas said. The renovated building would feed off the momentum started a couple of years ago with the $650,000 renovation of Scripps Park across the street. Meanwhile, on the opposite end of the neighborhood, a small business district is being built up. Development is a benefit, but it must be the kind that helps residents, Napier said. “I’m not surprised by the development,” she said. “And my kids, growing up, anytime anyone had something discouraging to say about Detroit, they’re like, what are they talking about, because we’ve always been a place that’s very vibrant and good for them.” Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

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OPINION COMMENTARY

Want to fix roads? Start with the damn term limits

here was some chuckling at the Road Commission of Oakland County’s offices in Beverly Hills last Monday when it was reported that one of the most influential Republican legislators suggested Michigan should turn some roads back to gravel as part of a solution the state’s bad roads. Senate Majority Leader Mike Shirkey told the Detroit Free Press a “comprehensive” plan for road funding should include reducing the number of paved roadways and turning some “back to gravel.” “We were laughing because that quote suggested there’s no cost to a gravel road,” said Craig Bryson, spokesman for a road commission that maintains 850 lane-miles of gravel roads in Michigan’s wealthiest county. “In some cases, they cost more to maintain (than pavement).” Heavily traveled gravel roads — like the kind found throughout Oakland and Macomb counties and even parts of western Wayne County — require monthly grading and summertime dust-control spraying, among other maintenance needs that blacktop doesn’t require, Bryson said. “Gravel roads are not the answer to reducing the cost of road maintenance,” Bryson said. “Engineering standards suggest that if a gravel road carries more than 500 cars per road they should be paved. And we have tons of gravel roads that carry more than 500 cars per day that should be paved.” That one of the leading Republicans in charge of the purse strings of state government would suggest Michigan needs to rip up pavement and return to dusty gravel roads shows how little progress has been made in this years-long struggle to tackle the state’s infrastructure crisis. Shirkey’s gravel roads comment is a brutally honest way of saying Michigan has more roads than its populace can afford — or perhaps wants? — to support. A businessman, Shirkey is actually one of the Legislature’s more serious and analytical members when it comes to public policy. But the Legislature’s less serious members have largely controlled the debate — and votes — over this vexing issue for a decade. They contend there’s fat in state government, but haven’t cut enough to amount to $2 billion a year more for roads. They argue roads could be built to last longer and withstand Michigan’s harsh freeze-and-thaw cycles. Almost none of them are civil engineers. They say the road-building industry can’t handle a major increase in work. The road-building industry says otherwise, but wants a stable tax revenue source to plan ahead for capital investments and building up a trained workforce. They contend this is a problem for Southeast Michigan, even though the government services for their outstate corner of the state are subsidized by the wealth and taxes gener-

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

Pine Knob Road along the outer edge of DTE Energy Music Theatre in Independence Township is among 850 miles of gravel roads in Oakland County that are often more costly to maintain than paved roads, according to the Road Commission of Oakland County.

CHAD LIVENGOOD clivengood@crain.com

ated in Southeast Michigan. And they say voters can’t stomach any tax increase, despite voters across the state routinely taking matters into their own hands and passing local road-funding millages in response to the gridlock in Lansing. It’s that gridlock that has left Michigan on the precipice of a potential state government shutdown on Tuesday if Gov. Gretchen Whitmer doesn’t blink and vetoes all or parts of the state budget in this standoff over long-term road funding. The Republican-controlled Legislature, which was essentially done writing budget bills two weeks ago, on Tuesday formally began sending the Democratic governor 15 budget bills. Whitmer has until Monday to decide whether to sign, veto or lineitem veto bills, which she called “a mess.” This budget process was dragged out all summer as Republicans said they were working on an alternative plan to Whitmer’s 45-cent-per-gallon fuel tax. The plan never came as the Legislature ran the clock down on the governor. And beyond pledges by Whitmer, Shirkey and House Speaker Lee Chatfield, there’s no evidence to suggest the Legislature will actually get serious about passing a long-term road funding deal after the budget cloud clears.

“Until there’s courage and leadership, this is one of those problems where I don’t know how it gets solved,” said Roger Martin, a partner at the Lansing public relations firm Martin Waymire. Shirkey has said long-term road-funding negotiations are on “pause” until the budget is sorted out. But Shirkey doesn’t control Chatfield’s caucus, which has shown little interest in addressing the crumbling pavement crisis beyond the $400 million in one-time aid lawmakers baked into the budget. Whitmer says it would pave 39 miles of freeway and rebuild four of Michigan’s 1,000 bridges in critical condition. Mike Nystrom, executive vice president of the Michigan Infrastructure & Transportation Association, said the one-time infusions of cash makes it difficult for road builders to invest in the business infrastructure needed to rebuild transportation infrastructure. “These are business owners — they have to understand what the future holds,” Nystrom said. “And if they don’t, it’s hard to bring in new employees, train them, retain them (and) buy new equipment when you have one-time money — maybe — year in and year out.” To most longtime Lansing observers, the Legislature’s runaround approach to getting focused on one big, glaring public policy issue leads back to one unpopular culprit. “Term limits is the No. 1 reason why we don’t have a long-term fix,” Nystrom said. The short, six-year stints in the House and eight-year term limits in the Senate don’t give legislators the time to become experts in the subject areas they govern, such as the maintenance costs of gravel roads versus pavement.

“Term limits are the root cause of everything in Michigan from the unwillingness to deal with long-term legacy issues to the partisan hue and cry that you have now in the Legislature,” said TJ Bucholz, president and CEO of Vanguard Public Affairs, a Lansing public relations firm. “If you want to gravel roads, let’s hit your district first and see how citizens respond to taking perfectly good paved or roads in need of repair and turning them back into gravel.” Business groups have complained for years about the effect of term limits on the leadership in Lansing. So far, none have stepped up to the bat to propose (and fund) any kind of reform. Meanwhile, Michigan’s infrastructure continues to crumble. “The way we have our term-limit law structured today, it has created a mess ... (and) political stalemate that makes solving problems like fixing the roads nearly impossible,” Martin said. Ultimately, the voters do have the power to impose earlier term limits on legislators for failing to get a longterm plan on road-funding before the 2020 pothole season starts this coming winter and spring, Nystrom said. “I think it’s a risk, especially for the House Republicans, to not be sincere about addressing a real solution for road investment — and just hoping the voters ignore that next fall,” Nystrom said. “Because I don’t think they will.”

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

Nuanced strategy needed for Detroit’s open space To the Editor: In the Sept. 23 edition of Crain’s Detroit Business, Chad Livengood raises a timely question: What is the city’s strategy for returning vast acreage of vacant land to productive use? This question is not new, but takes on added urgency with Mayor Mike Duggan’s proposal to demolish 19,000 additional vacant structures utilizing funds raised through the sale of $250 million in municipal bonds. At Detroit Future City, we have been advocating for a comprehensive, strategic approach to land reuse since the publication of the DFC Strategic Framework plan in 2012. This framework was the result of a two-year, citywide planning effort that engaged over 100,000 Detroiters to develop a shared 50-year plan for the city. The framework makes recommendations on how to best use the city’s abundance of land, create job growth and economic prosperity, ensure vibrant neighborhoods, and build infrastructure that serves citizens at a reasonable cost. The challenge ahead is more complicated than the article implies, in part because Detroit’s 24 square miles of vacant land are comprised of 120,000 public and privately owned vacant lots, which are primarily scattered throughout residential neighborhoods, not large contiguous parcels of land. Yes, some large parcels should be assembled to meet demand for industrial development. However, the majority of Detroit’s vacant land, 68 percent, is zoned residential, whereas only 17 percent is zoned industrial. There may be some exceptions, but in most cases, it will not make sense to locate large industrial operations in areas currently zoned for residential use. A more nuanced strategy will be needed that includes a wider variety of potential reuses. In 2016, DFC released a report titled “Achieving an Integrated Open Space Network in Detroit,” which outlines a set of considerations that advance the vision of transforming vacant land into a cohesive open-space network. This includes strategies such as parks and greenways, meadows and forests, green stormwater infrastructure and more. If vacant, blighted land is transformed into well-maintained and intentional open space, the city can promote environmental sustainability, quality of community life and equitable economic opportunities for Detroit residents. Detroit already has many examples of successful vacant land reuse projects, but there needs to be an influx of resources dedicated to not only demolition, but the implementation of open-space strategies if Detroit wants to truly capitalize on our potential to be an international model for resilient, sustainable and equitable land use. Sarah Hayosh Director of land use and sustainability Detroit Future City Detroit

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DTE goal: zero net carbon emissions by 2050 By Jay Greene

and development to help reduce carbon emissions will be a big help. “The great wisdom of this plan is the technology-inclusive approach combining renewable wind and solar along with a focus on needed R&D in carbon capture, zero-carbon nuclear generation and battery storage capability to reach steeper greenhouse gas emission reductions more quickly,” Perciasepe said in the release.

jgreene@crain.com

DTE Energy Co. expanded on its timetable to reduce carbon emissions by announcing Thursday plans to achieve net zero carbon emissions in its electric company by 2050. Earlier this year, DTE officials in Detroit committed to reduce carbon emissions 50 percent by 2030 and 80 percent by 2040. Rival Consumers Energy Co. in Jackson plans to reduce carbon emissions 90 percent by 2040. “We are fully committed to doing our part to dramatically reduce carbon emissions from DTE Electric,” DTE Energy CEO Jerry Norcia said in a news release. DTE made the announcement during the third annual National Clean Energy Week. “Setting the goal of net zero carbon emissions for our electric company by 2050 is an important next step that builds on our existing commitments,” Norcia said in the release. “This is the right thing to do for our customers, business and the environment. We are doing as much as we can, as fast as we can, to provide our customers and the state of Michigan with clean energy that is affordable and reliable. And we invite everyone in the state to join us as we work together to build a cleaner energy future for Michiganders.” By setting the net zero carbon emissions goal, DTE joins a growing number of companies that have pledged to take action toward addressing issues tied to climate change. The University of Michigan earlier this year announced a net zero carbon emissions goal, but did not set a timetable to reach it. Amazon also has pledged to use 100 percent renewable energy by 2030 and net zero carbon emissions by 2040. This week, the United Nations held a summit to encourage countries, cities and companies to commit to net zero carbon emissions by 2050. More than 60 countries and 100 cities made the pledge. DTE pledged to work with state and federal officials to advocate for more research on high volume storage and carbon capture technologies. Achieving carbon neutrality will require further advancements in technology, such as carbon capture and largescale storage, Norcia said. Norcia added that developing “modular nuclear facilities” will also be needed to achieve carbon neutrality. In 2015, DTE was awarded a license to build a nuclear plant by the Nuclear Regulatory Commission. If built, Fermi 3 would be on the same site as the currently operating 1,170-megawatt Fermi 2 on the shores of Lake Erie near Monroe, about 30 miles south of Detroit. Fermi 2 supplies DTE with about 18 percent of its electricity production. Former DTE CEO Gerry Anderson told Crain’s in 2018 that the utility will hold onto its “cards” for the nuclear energy option. DTE spent $100 million in the six-year regulatory process to garner the Fermi 3 nuclear plant license and continues to consider expanding nuclear as one option to reduce carbon emissions. But Trevor Lauer, DTE Electric’s president and COO, said DTE’s announcement for net zero carbon emissions is not an announcement that it has decided to build a modular nuclear power plant. “Countries are looking at smaller, modular nuclear plants,” Lauer said.

Norcia

Lauer

“It is an interesting design. It is one of the technologies that can help resolve the last 20 percent” of carbon emissions. Bob Perciasepe, president of the Center for Climate and Energy Solutions, said DTE’s focus on research

How to cut carbon emissions Earlier this year, DTE announced its five-year integrated resource plan that explains how it will provide elec-

Need to know

DTE announced plan for zero net carbon emissions by 2050 J

J Adds to timetable of reducing carbon emissions 50 percent by 2030 and 80 percent by 2040 J Plans to close coal-fired power plants in St. Clair, Trenton, River Rouge in 2022

tricity to its 2.1 million customers. So far, DTE’s IRP and carbon emission reduction plan has focused on coal plant retirements. DTE, which relies on coal to produce 65 percent of its power, plans to close coal-fired power plants in St. Clair, Trenton and River Rouge in 2022.

DTE also has said it will invest $2 billion in renewable energy, mostly in wind farms, by 2024, and solar plants later in the 2020s, expanding its MiGreenPower program to home and business customers and phasing in more energy-efficiency programs. It also plans to spend $800 million in a hydroelectric storage program at the Ludington Pumped Storage Plant on Lake Michigan, which is co-owned by DTE and Consumers Energy. By 2020, the Ludington facility will generate enough power to serve 175,000 DTE households. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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FOCUS

DETROIT HOMECOMING VI

Steve Case weighs in on Detroit’s prospects

FRO

By Dustin Walsh dwalsh@crain.com

Steve Case, AOL co-founder and former CEO, is sold on metro Detroit. Case’s Revolution venture capital fund has invested in nine startups in Michigan, including four in Detroit. Earlier this year, it led a $7.5 million Series A funding round for direct-to-consumer plant shipping company Bloomscape. It participated in a 2017 funding round for e-commerce platform StockX, which achieved a $1 billion valuation following a funding round announcement at last year’s Detroit Homecoming event. It’s also an investor in Shinola/Detroit LLC. He believes the region is ripe for entrepreneurial growth and is aiming to invest more. His Washington, D.C.based venture capital fund closed on another $215 million to finance startups with early stage capital, an anouncement he made at Crain’s sixth annual Detroit Homecoming event earlier this month at the Max M. & Marjorie S. Fisher Music Center in Detroit. Case wants others to follow his lead, but says the community needs to help itself, too. Crain’s Senior Reporter Dustin Walsh sat down with Case before he took the stage at the Homecoming event to discuss where metro Detroit’s startup scene can improve and what it’s already doing right. How did you get involved in this area?

We wanted to focus outside of California and New York with our funds and because of this bias of Rust Belt companies, we naturally looked to Detroit. I first came to Detroit five years ago as part for our Rise of the Rest tour (a bus tour across the country to discuss entrepreneurship and identify potential investments). What we saw and believe is that Detroit is a rising city. We’re hoping to prove to the rest of the country that there is room to invest in Detroit. Because we made early investments (StockX being one of the first), we come back for board meetings and end up finding others. SEE CASE, PAGE 11

Steve Case

AARON ECKELS FOR CRAIN’S

ENTREPRENEURS AND THE ECONOMY Building entrepreneurship and cultivating high-growth startups were central themes at Detroit Homecoming VI.

AARON ECKELS FOR CRAIN’S

Investing in Michigan’s startups, risk-taking key to regional economic strength, experts say By Dustin Walsh | dwalsh@crain.com

he region must diversify its economy and find ways to create more fertile ground for fast-growing, high-value companies to create a more sturdy local economy less dependent on the auto industry, local experts say. Southeast Michigan’s economic growth has slowed significantly

The region did not replace a healthy portion of those jobs losses sustained leading up to, during and following the Great Recession. Compounding this problem is 14 percent of jobs in Southeast Michigan are in industries expected to shrink in the coming years, and another 32 percent are in sectors predicted to grow more slowly than the average, according to the analysis. In short, Michigan jobs are in trouble. Entrepreneurial dynamism is the answer — an increased focus on entrepreneurship and growing high-value companies from inside the region — investors and successful entrepreneurs told Crain’s during Detroit Homecoming, the annual event produced by Crain’s that aims to re-engage local “expats” with investment opportunities in their hometown. The relationship between “larger, high-value entrepreneurial companies” — defined as companies that have grown to 50 or more employees in growing sectors created by local entrepreneurs — and regional economic strength is paramount, according to the Endeavor analysis. The number of these larger, high-value entrepreneurial companies per 100,000 residents accounts for 64 percent of the gross domestic product growth and

since 1978, largely due to erosion in automotive employment. And Detroit has fallen behind other metro areas. Personal income per capita in the region, adjusted for inflation, has grown less than 40 percent, while in other major metropolitan areas it has grown nearly 60 percent, according to a May 2019 analysis by entrepreneur research firm Endeavor Insight.

58 percent of the average income growth in major cities, according to the analysis. In Southeast Michigan, only 10 percent of companies are categorized as larger, high-value entrepreneurial but account for more than 74 percent of the jobs, according to the analysis. If Southeast Michigan could create 60 new larger, high-value entrepreneurial companies, it would increase the regional GDP by $5 billion annually, raising average annual income of residents by $1,200. The region remains well behind its peers in homegrown startups, despite several recent home runs, such as Cisco’s $2.35 billion acquisition of Ann Arbor-based Duo Security or the $1 billion valuations of Rochester-based OneStream and Detroit’s StockX. Startup experts told Crain’s building more of these types of companies comes down to three distinct problems — lack of capital, a risk-averse culture and a need to attract talent to the region to help grow early stage companies. Access to capital is improving, but remains negligible in the overall U.S. venture capital picture, said Chris Rizik, CEO of Ann Arbor-based fund of funds Renaissance Venture Capital Fund. SEE STARTUPS, PAGE 11

IN THIS PACKAGE

 Investing in startups key to regional economic strength, experts say. This Page

 Steve Case weighs in on Detroit’s prospects. This Page  Opportunity Zone investments getting a foothold in Detroit. Page 16  How Opportunity Zones work. Page 26  Debating the return of film incentives to lure back production. Pages 20-21  Secret recordings by Marvin Gaye and other stories shared by Motown legends 60 years later. Page 24

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innovation • community • results

STARTUPS FROM PAGE 10

“Capital has certainly improved,” Rizik said. “Right now, there is access to capital that’s better than it’s ever been. At the halfway point of this year, we’ve already eclipsed the largest venture capital (spending) in the state’s history. But it’s still not enough, especially at the early stage. Companies still aren’t being formed because of lack of capital and are leaving the state. We need to fill the top of that funnel with early stage startups because there’s a natural attrition. Strong, scalable companies require a lot of startups to build and capital remains a hurdle.” Detroit native Delane Parnell has raised $96 million in 18 months for his esports startup PlayVS — but not in Southeast Michigan. Parnell, an avid video gamer in high school, first fell in love with the idea of startup life when he was working at Rocket Fiber in Detroit and joined a StockX trip to San Francisco, where he saw opportunity for his vision to grow. While Parnell was searching for ways to get his video gaming idea off the ground, he met Peter Pham, co-founder of California-based startup incubator Science, who eventually became a mentor and investor in PlayVS. Pham told Parnell something that resonated with him: “You can be a millionaire in Detroit or a billionaire in Los Angeles,” Parnell said at the Detroit Homecoming event on Sept. 17. “I was dragging my feet because I was very committed to Detroit and wanted to build the business in Detroit,” he said. “I don’t know if that same opportunity would have been

CASE

FROM PAGE 10

Michigan and Detroit are often described, due to their legacy big automotive business, as an area afraid to fail. Is this how you see it?

There is a cultural element to that. Really believing in the entrepreneurs in the city. The idea of focusing on what went right, not wrong. I see that changing here, but it’s slower than I’d like it to be. StockX is considered a home run with a $1 billion valuation. Does the city need more home runs to drive in more capital?

We’ve definitely seen some progress, like StockX. But Michigan only got 1 percent of the venture capital dollars last year. California got more than 50 percent. We need more examples, more potential home runs (to lure in more capital). Momentum begets momentum. I hope to see this changing soon. Speaking to other experts in the space, access to talent remains a critical issue for startup success here. Do you agree?

That’s exactly right and why events like Homecoming are so important. For a startup to scale up, it has to

Delane Parnell

AARON ECKELS FOR CRAIN’S

available had I stayed.” To help boost local capital, Renaissance Venture Capital invested $5 million into Steve Case’s recently closed fund, Revolution III, that focuses on investing in startups outside of the startup hotbeds of Silicon Valley, Boston and New York City. Case, the founder and former CEO of AOL, announced the closing of the $215 million fund at Crain’s Detroit Homecoming event on Sept. 19. Case’s Revolution has invested in nine startups in Michigan, including four in Detroit. Earlier this year, it led a $7.5 million Series A funding round for direct-to-consumer plant shipping company Bloomscape. It participated in a 2017 funding round for e-commerce platform StockX, which achieved a $1 billion valuation following a funding round announcement at last year’s Detroit Homecoming. It’s also an investor in Shinola/Detroit LLC.

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have access to talent, getting people who have successfully launched and exited startups to assist the startups here. We need to have people with that experience move back to the area. The ones that are here need to use the bully pulpit. Mostly these CEOs need to reach out, build profiles nationally and recruit to see a hit rate. Detroit Homecoming is a great example of how you get people to return. They are probably surprised by the momentum here, and that’s what we need. Revolution has invested in companies like StockX and Bloomscape. These are obviously not in the mobility space, but that space is the major focus of this community’s discussions. Is focusing on mobility helping the startup scene here or hindering it?

I think that industry legacy is helpful. Mobility is Detroit. Agriculture is Omaha. Identifying your competitive advantage helps all startups and the ecosystem. But you do need to keep your vision wide. Entrepreneurs can build companies kind of anywhere. So you have to strike a balance of recognizing your advantages in an industry while also building a broader startup community. We’re agnostic. There are great entrepreneurs in many spaces all over the country.

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Revolution has achieved great results from its first two funds, with five of its 18 invested companies emerging with an exit, the fund said in a news release. Those exits produced larger returns than the average return from similar funds. But Case said the region’s culture and propensity to focus on legacy companies, such as its automotive industry, or companies looking to expand in Michigan, are hindering the growth of startups. “There is a cultural element to that,” Case told Crain’s. “Really believing in the entrepreneurs in the city. The idea of focusing on what went right, not wrong. I see that changing here, but it’s slower than I’d like it to be.” Rizik concurs. “We still have a risk-averse culture here,” Rizik said. “What that leads to is people afraid to get involved with startups. The good thing is that we continue to grow high-potential startups when the economy is good. Typically, when the economy is good, entrepreneurs go to large companies and startups start to recede. But the question is when the economy slows down over the next few years, will we be able to get some of those struggling at bigger companies to grow startups.” Dug Song, co-founder and CEO of Duo Security, said the region must build its entrepreneurial talent base and attract those that have been successful in launching, growing and exiting a startup to really grow companies. “Good teams, good founders can raise money anywhere; the real gap is we need more support for our founders to become great founders and great CEOs,” Song said. “We are really missing the communities of entrepreneurs that are founder-led. We have plenty of service organizations, which are great, but they can’t provide the moral support, the perspective of other founders. Long term, we need to create a really robust network of founders who

Southeast Michigan’s competitive advantage The region has a higher concentration than the national average of larger, high-value entrepreneurial companies in six categories, according to research by Endeavour Insight. Below is an abbreviated list of companies identified by Endeavour in those categories.

Carbon Media Group, Troy

Es3 Inc., Rochester Hills

DP Plus, Farmington Hills

LOGISTICS J RPM Freight Systems, Royal Oak

CONSULTING FIRMS J Torrent Consulting, Ann Arbor

Xfinity Freight Systems, Warren

Service First Logistics, Auburn Hills

Fitness Management Group, West Bloomfield

Central Transport, Warren

Howard Temes Packaging, Livonia

Atwell, Southfield

Apps Solutions, Troy

Human Element, Ann Arbor

FINANCIAL SERVICES J Home Point Financial Corp., Ann Arbor J

Credibly, Troy

J Gold Star Mortgage Financial Group, Ann Arbor

SOFTWARE J Duo Security, Ann Arbor J Member Driven Technologies, Farmington Hills J

Llamasoft, Ann Arbor

Nuspire, Commerce Township

Vectorform, Royal Oak

Captrust, Clarkston

SPECIALTY FOOD AND BEVERAGE J Drought, Plymouth

Quicken Loans, Detroit

McClure’s, Detroit

Champion Foods, New Boston

Garden Fresh Gourmet, Ferndale

Hacienda Mexican Foods, Detroit

MARKETING AND BRANDING J Shift Digital, Birmingham J

GTB Agency, Dearborn

care about each other and the communities they operate. A career in entrepreneurship is much longer than any individual company. Entrepreneurs are sick that way. They can’t stop starting things, and that’s exactly what we need.” Song said organizations like the Ann Arbor Entrepreneurs Fund, which he co-founded, should be replicated en masse to spur more startup growth. Members commit either 1 percent of equity in their company or 1 percent of annual profits to the nonprofit, which then engages in local philanthropic endeavors. But it’s more than that, said Song. “It’s really a simple idea. Get a bunch of founders together to learn from each other,” Song said. Expanding these networks is critical to solving the talent crisis facing Southeast Michigan’s startup scene. Organizations like Ann Arbor Entrepreneurs Fund create a

“cross-pollination” for startups to boost the signal on each other’s talent needs, Song said. Case pointed to Detroit Homecoming as a part of the strategy to get experienced entrepreneurs to the region. “For a startup to scale up, it has to have access to talent, getting people who have successfully launched and exited startups to assist the startups here,” Case said. “We need to have people with that experience move back to the area. The ones that are here need to use the bully pulpit. Mostly these CEOs need to reach out, build profiles nationally and recruit to see a hit rate. Detroit Homecoming is a great example of how you get people to return. They are probably surprised by the momentum here, and that’s what we need.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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We target the best 25 freshmen, sophomores, juniors and seniors. We use the hook of basketball to get them in the gym and to teach them fundamental skills. But the most important lessons are some of the things we learned as young boys—the handshake, the look in the eyes. We encourage our players to show respect, to not accept any bullying in their school. We talk about academic excellence and the importance of goal setting. There’s a lot more to it than just basketball. Burns: You now have a partnership with the Children’s Foundation. What’s the connection? McCormick: We think there’s great synergy between the Children’s Foundation and the Michigan Elite 25. Our goal is to be able to create events for younger kids. There’s no charge for any of our basketball camps. We talk to them about the importance of being a good teammate. We’re looking to expand to Saginaw and Grand Rapids. We have a great vision and I think that it can do nothing but grow. We’re immensely grateful and proud of the affiliation. We don’t care if you play basketball, everybody has a unique talent that they can use to carve out their own niche. Identify what you love and then chase it with passion and don’t let anybody stop you. We think that’s a recipe for a really sound future for these kids.

Lori Ward, Site Director, Figure Skating in Detroit

Larry Burns: Tell us about the program. Lori Ward: Figure Skating in Detroit is a branch off from Figure Skating in Harlem. We follow their same model, working with girls to combine education with the grace and discipline of figure skating to help them be champions on and off the ice. We start enrolling our girls at age six and, once they’re in, they stay with us until they’re 18. Burns: What led you to figure skating? Ward: When I was an educator, I had people coming in with all kinds of resources for boys or for kids at risk but the girls were often forgotten. Girls need support too. I always found myself trying to craft or create something special for them. Once I was done as a principal at the last school that I led, I saw an advertisement for it. I was blown away. I started as a program director before I moved into the executive director position. Burns: You are now one of the grantees of the Children’s Foundation. Tell us about the program that the Foundation is supporting. Ward: The Children’s Foundation support will help us enhance our

after-school fitness and nutrition program. We will be able to work with our girls, not only with physical activity but also nutrition and lifestyle. Burns: How many girls are enrolled and where do you meet? Ward: We will be enrolling 70 girls this year. We usually end up with a waiting list. We’re with our girls four days a week out of two different sites. For the academic site, we’re at Bates Academy. On Tuesdays and Thursdays we’re at the Jack Adams Memorial rink out of the Adams Butzel Complex. Figure skating is the vehicle. It’s the vehicle that attracts our girls and then once we get them, we’re able to really expand their minds and really help them dream big. Burns: Where do you see Figure Skating in Detroit in five years? Ward: I see expanding what we’re doing with them beyond four days a week and being able to have our own building. I’d like to offer weekends with tutoring and traveling abroad. Burns: Is there anything else we should know about Figure Skating in Detroit? Ward: We’re here and we’re changing lives. This is more than a skating program, it’s about academics and leadership. The figure skating is the carrot— once we get them into the program we cultivate them and help them become the women they were meant to be.

David Lochner, Chief Financial Officer, The Children’s Foundation

Larry Burns: How do you think your 30-plus years of banking experience prepared you for your new role as the CFO of the Children’s Foundation? David Lochner: I never stopped learning. Most importantly, I’ve learned from and about people. I’ve worked with a wide range of very talented business people, both as clients and as colleagues. I’ve learned through them best practices in business management, leadership and concepts around community engagement and impact. I’ve also been a father for the last 36 years and a grandfather for the last seven and this has taught me the importance of providing young people with kid-centric services that offer the very best support for their health and overall well-being. Burns: What is the importance of having someone like you in this position as the Foundation continues to evolve? Lochner: This position has most of the traditional roles of a CFO, including financial stewardship and oversight of the financial processes. I’m also charged with helping to look after a $125 million investment portfolio, which is no small thing. The narrative of the Foundation over the past

three years has included a strong change dynamic. I’m here to be a strategic partner and support of our core functions; specifically, with grant making, fundraising, advocacy, and our overall engagement with community partners. Ultimately, I’m here to help our team, leadership and board continue to be successful as we grow the impact that we can all have on the well-being of children across the state. Burns: How is the transition from banking to the nonprofit world? Lochner: It is different, but not as different as you might think. It is still a business, it’s still about teamwork and core functions that need to propel the Foundation forward in its mission. I’ve been working to find opportunities to improve our process and effectiveness. The change has been refreshing. Burns: What are some of the exciting things that are on the horizon? Lochner: We’ve conducted a full-day summit focused on pediatric behavioral health. We’ve planned and conducted three major new events, including the annual Paul W. Smith Golf Classic and the Roast of Red Wings broadcaster Mickey Redmond for the benefit of the Jamie Daniels Foundation. We announced another exciting round of grants, which brings our 2019 total to almost $6 million. We announced the evolution of our brand. It’s been a very eventful three months.

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Opportunity Funds can be established by a wide swath of groups or organizations, such as banks, development groups, community development finance institutions, regional economic development groups and investor consortiums, according to the Economic Innovation Group, which spearheaded the initiative that started gaining traction in Congress in 2016. Dan Gilbert, the Detroit billionaire who is founder and chairman of Quicken Loans Inc. and Rock Ventures LLC, is a founding member of that organization. Under the law, in general terms, capital gains must be invested in Opportunity Funds within 180 days after the gain is realized. Generally, patience is rewarded with lower taxes. If the gains stay within the fund for five to seven years, the investor has to pay federal capital gains taxes on 90 percent of the original income. If the funds stay at least seven years, the investor pays on only 85 percent.

However, there is a clock ticking. Anything invested after Dec. 31, 2019, is subject to federal capital gains taxes on 90 percent of the original income because of a provision that eliminates the 85 percent threshold at that point, said Mark Bennett, managing director of Farmington Hills-based MJBennett PLLC. He has been involved in Opportunity Zone financing in various real estate projects in Detroit. “This is significant in terms of urgency,” Bennett said. “It’s a motivating factor for investors to close by the end of the year.” There’s an extra carrot for investors if they leave the money in the fund 10 years or longer: They don’t have to pay any capital-gains tax on the appreciation of the Opportunity Fund, in addition to getting the 85 percent rate on the original investment. If they pull that money out before then, they pay normal capital gains tax on the fund’s appreciation. To put it more concretely: According to Florida-based law firm Hol-

land & Knight LLP, a $1 million profit from an Aug. 1 stock sale would hit an investor with a $238,000 tax bill this year. Yet if the investor put the $1 million capital gain into an Opportunity Fund, which then invests in an Opportunity Zone building instead, and that money remains there until the end of 2026, the investor pays taxes on only $850,000, or 85 percent of $1 million. That would reduce the tax to $202,300 on that gain, and it wouldn’t have to be paid until 2026. If it is withdrawn in the five- to seven- year window, the tax bill (23.8 percent) on the $900,000 (90 percent) would be $214,200. However if that investment is held until 2028, for example, and the building sells for $3 million in 2028, the entire $2 million of gain on the Opportunity Zone investment would be tax-free, and the investor would be required to recognize only $850,000, or 85 percent of original $1 million, of gain on Dec. 31, 2026.

A redevelopment of the Shapero Hall property in the Lafayette Park area of downtown Detroit is planned.

ZONE

FROM PAGE 16

Sherry Wang, managing director of the Goldman Sachs Investment Group which has financed projects in Detroit, said Opportunity Zone funding helps move projects from the financially inviable category into the viable one. “Now we are finally reaching a point with a little more subsidy and with the Opportunity Zone benefit, there are deals that previously have been in the hopper in development that are now finally feasible,” she said during the panel. “That’s a really exciting thing.” Opportunity Zone investments to date have been in projects like Eric Larson’s $37.5 million The Corner in Corktown, which had about $4 million in such funding; Lafayette West in Lafayette Park, which is currently a vacant lot in Lafayette Park but is targeted with a $108 million primarily residential mixed-use development; and Chroma, Detroit-based The Platform’s $16 million mixed-use development in the Milwaukee Junction neighborhood east of Woodward Avenue on East Grand Boulevard. Others are in the works.

Expats invest Greatwater Opportunity Capital LLC, an Opportunity Fund launched to invest in apartment and commercial development, has gotten financing from four Detroit expats who came to Detroit Homecoming. In addition, Jed

Howbert, a former top-ranking economic development official under Mayor Mike Duggan, left his post last year and hitched up with Greatwater. “The Opportunity Zone legislaTemkin tion is already working to increase the supply of quality housing in Detroit,” said Matthew Temkin, partner with Greatwater, and a Detroit native who lives in New York City. “We have used the program to fund several renovation projects in Detroit’s neighborhoods, and have more renovation projects, as well as new construction, in the pipeline. The housing shortage is a major problem for Detroit and other cities, and the Opportunity Zone legislation is a great tool to help solve it.” Temkin would not give specifics on the projects. Melinda Clemons, vice president and Detroit market leader for Enterprise Community Partners Inc., said that the impact of Opportunity Zones is not yet known because of a lack of oversight, something that was struck from the final tax package. “What should have taken place initially is reporting requirements that could then provide the data for evaluation,” she said. “There is still an opportunity to put guidance around the use of OZ funds.” Some of the carve-out’s initial sponsors, U.S. Sens. Cory Booker,

ZOYES CREATIVE

D-N.J., a presidential candidate, and Tim Scott, R-S.C., have signed on to legislation that would include reporting requirements on the number of Qualified Opportunity Funds, the assets and composition of those funds, the date and type of investments and other data that Enterprise says serves as “a critical and meaningful step toward strengthening the accountability and transparency of Opportunity Fund investments.” And Richard Barr, Detroit-based law firm Honigman LLP’s leader of its Environmental and Economic Development Incentives Practice Groups, said that some revisions to the law could be beneficial. “Like any new program, it’s wise and helpful to have a thoughtful review after it’s been in operation for several years,” he said. “The amount of interest expressed by professionals, including working groups that have provided extensive comments to Treasury, suggest that it would be helpful for Congress to consider a modification or improvement to the program to both consider whether additional Census tracts should be designated as Opportunity Zones and whether there are any other modifications of the law that would help the program achieve its intended goals, and address the criticisms of those who believe the program is not achieving appropriate or intended purposes.” Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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Detroit is Open for Business Thank you to all those who attended Detroit Homecoming 2019! Weâ&#x20AC;&#x2122;re proud to call this city home and invite you to join us in our mission to support a more inclusive, thriving and resilient community.

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FOCUS

INTELLECTUAL PROPERTY LAW

What’s driving the uptick in IP litigation? It could be a blip — or a sign of a slowing economy By Doug Henze

Special to Crain's Detroit Business

George Schooff used to spend a lot more time seeking patents for client inventions than fighting legal battles. “For the first time, I find myself — in I don’t know how many years — with more litigation than (my normal) kind of work,” said Schooff, a registered patent attorney in the Detroit office of law firm Butzel Long. “I have six active (legal) cases. There’s been years where I’ve had one or none. I’m writing an awful lot of cease/ desist letters, and I’m reviewing an awful lot of products.” It appears the intellectual property environment has turned more litigious, say local attorneys who deal with patents, trademarks, copyrights and trade se-

Need to know

JJAttorneys say intellectual property environment has turned more litigious JJUnclear what’s driving the uptick in litigation, or if it will last JJBusinesses risk trade secrets violations when hiring talent

PROPRIETARY POT

In the cannabis industry, trademarks are illegal, but workarounds exist to protect budding intellectual property rights By Dustin Walsh dwalsh@crain.com

The state’s largest marijuana grower plans to launch a line of edible gummies this fall — without enough tetrahydrocannabinol, or THC, to get you high. Dimondale-based Green Peak Innovations will launch its branded Jolly Edibles as a CBD-only product, meaning it contains less than 0.3 percent THC. While CBD products are popular, the choice has more to do ILLUSTRATION BY ILYAST VIA ISTOCK

with protecting its branding than selling gummies. The U.S. Patent and Trademark Office bars trademarks on illicit products. Marijuana remains a Schedule 1 narcotic at the federal level, despite being legal for use in Michigan. This presents a tricky scenario for the state’s legal marijuana companies seeking to protect their intellectual property. Green Peak, like many others in the industry, is enforcing its protec-

tions in as many “workarounds” as possible, local experts say. “We’re forced to get somewhat creative,” said Jeff Donahue, general counsel for Green Peak. “We’ve had a few (trademark) denials, so we’re crafting some specific language with the USPTO. We’re taking a look at all of our products that could fall under the legal threshold for trademark and establishing our name everywhere we can.” SEE CANNABIS, PAGE 34

crets. At least on the patent side, it could be a signal the economy is slowing. Patent lawsuits, which Schooff says have been on a downward spiral since 2011, appear to be on the rise. According to data compiled by Washington, D.C.,-based Unified Patents, nearly 900 district court lawsuits over patents were filed in this year’s second quarter — the most in a single quarter since second-quarter 2017. Unified Patents, which has 200 members, including Ford, Google and Facebook, challenges patent assertions it considers invalid. The uptick comes after a yearslong decline in lawsuits Schooff traces back to President Barack Obama’s signing of the Leahy-Smith America Invents Act in 2011. Named for sponsors Sen. Patrick Leahy (D-Vt.) and former Rep. Lamar Smith (R-Texas), the act switched patent rights from a firstto-invent system to one that recognizes the first inventor to file for a patent. The act also expanded the post-grant opposition system, which allows parties to challenge patents after they’ve been granted. SEE LITIGATION, PAGE 31

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SPECIAL REPORT: INTELLECTUAL PROPERTY LAW

LITIGATION FROM PAGE 30

The act effectively resulted in confusion for companies about the strength of their patents and the ability to win legal battles over ownership, Schooff said. “Anytime you inject uncertainty, you reduce the ability to enforce intellectual property rights,” he said. “I had watched patent litigation just fall off the table.” So, what’s sparking more lawsuits now? The answer isn’t clear. “There’s a lot of IP litigation as economies start to slow down,” Schooff theorized. “As the size of the pie begins to stagnate, people begin fighting for their slice.” In the trademark space, the emergence of cannabis products may be fueling battles. “We do have a lot of companies that are trying to secure marks in the cannabis area,” Schooff said. “You’ve got a lot of states that are legalizing cannabis. One of the flies in the ointment is in the federal law it remains illegal. The trademark office won’t register them.” (See related story, Page 30.) Interestingly, while parties seem more willing to battle in court over intellectual property, post-grant proceedings are trending down. Unified Patents found that the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board received 320 appeals filings in second-quarter 2019, down 29 percent from the first quarter. It’s the lowest number of new filings since first-quarter 2014. “It seems counterintuitive” that lawsuits and administrative appeals wouldn’t move in the same direction, Schooff said. But the patent office, under a new director, has tightened the appeals process, he said.

Is it a blip? This year’s increase in patent litigation may or may not be the start of a trend, cautions attorney Bea Swedlow, who also has heard the rumblings. Swedlow is co-leader of the intellectual property litigation practice group in law firm Honigman LLP’s Ann Arbor office. “We’ll find out in the next six months or so if this uptick is real or a blip,” she said. In terms of her own practice, patent litigation still is trending in the opposite direction. Three to five years ago, patent cases made up 60 percent to 70 percent of her caseload, she said. “Over the last years, that has changed to a more even mix,” she said. “I’ve seen an increase on the trademark/copyright side.” Two industries that Swedlow has watched generate more patent lawsuits are life sciences and the internet of things. The second category refers to technology embedded in devices such as smartphones that allow them to communicate over the internet. “The development of these kinds of objects has just exploded over the last decade,” Swedlow said. More products can mean more lawsuits. In fact, the growing number of patents across all industries may prove a factor in a sustainable increase in lawsuits. “You need to be able to enforce your rights,” Swedlow said.

Potential legislation Congress has been weighing in to address the perception there’s lack of confidence in the ability to defend intellectual property. In July, Sen. Chris Coons (D-Del.) and Steve Stivers (R-Ohio) reintroduced the STRONGER Patents Act of 2019. The Support Technology and Research for Our Nation’s Growth and Economic Resilience aims to prevent patent infringers from continuing the practice, through injunctions. Coons and Thom Tillis (R-N.C.) also held closed-door meetings this summer with representatives of industry and legal associations to develop further legislation. “It’s likely this year or next year something will pass,” Swedlow said. “It’s a fairly bipartisan issue. It could result in increased litigation for a period of time.” For legislators, patent protection isn’t the only focus in guarding intellectual property, Swedlow said. “Patents get all the attention (but) there is potential for legislation at the

“Just be mindful that there appears to be a shift toward more enforcement of intellectual property rights. You should always be contacting your friendly neighborhood patent attorney to get an opinion or clear your mark with the trademark attorney.” — Michael Brady, a partner in Warner Norcross + Judd LLP

federal level to make it easier for owners to protect their copyrights,” she said. The Copyright Alternative in Small-Claims Enforcement Act of 2019 — the CASE Act — was introduced in May by half a dozen legislators, in House and Senate versions. The bills seek to establish a smallclaims process for copyright holders to seek compensation for infringed works, capping the recovery at $15,000 per work. Now, copyright holders who pursue claims in federal court face legal costs that often exceed judgments, which may total only a few thousand dollars. “There are times copyright owners forgo litigation, because it simply makes no financial sense,” Swedlow said.

How to avoid IP litigation The federal government also has targeted protection of trade secrets in recent years, establishing the Defend Trade Secrets Act in 2016. It’s the first statute that allows trade secret owners to sue in federal court. “Before that, every state had its own system,” Swedlow said. “Intellectual property owners want predictability. It had been troublesome for every state to have different laws.”

The Defend Trade Secrets Act is an extension of the Economic Espionage Act of 1996, which allows the U.S. attorney general to prosecute a person or company involved in trade secret theft. Through the espionage act, violators can be fined as much as $500,000 and sent to prison for 10 years, while corporations can be fined as much as $10 million. “You’re seeing some expensive lessons learned out there in the trade secret arena,” Schooff said. And it’s not difficult for companies to unintentionally stumble into that arena, he said. “You always have to be careful in hiring employees from competitors,” he said. “Get a lawyer involved. An employee is going to learn processes and how does he unlearn that? Even if they’re the best candidate, sometimes it’s better to stay away.” Businesses that recruit from competitors can protect themselves by asking to see any employment agreements from a prospective hire’s previous employer, said Michael Brady, a partner in the Southfield office of Warner Norcross + Judd LLP. “(Tell them) ‘We don’t want any of your confidential information from your old employer,’” said Brady, who specializes in trade secret law. “It’s good to get a signed agreement to that effect from the employee.” To keep their own proprietary information from walking out the door, businesses can use noncompete agreements, which prohibit employees from working for a competitor for a set amount of time. Companies also can limit employee access to data and require workers who have that access to sign confidentiality agreements. Upon a worker’s exit, it’s important to collect phones, computers and other devices and to make sure that worker didn’t email or download documents for later use, Brady said. Protection is especially important in the current, robust economy, where engineers and other professionals are in demand, Brady said. “Companies are poaching employees all the time, so you’re going to lose people,” he said. “In the last couple of years, we’ve seen an uptick in litigation over employees leaving and (bringing) trade secrets.” Caution is key in the patent and trademark areas, as well, Schooff said. “Just be mindful that there appears to be a shift toward more enforcement of intellectual property rights,” he said. “You need to approach introduction of products with caution. You should always be contacting your friendly neighborhood patent attorney to get an opinion or clear your mark with the trademark attorney.” Patent disputes can cost companies on either side of the argument more than $1 million in attorneys’ fees, while trademark cases can reach $300,000 to $400,000 in expenses — money that could be spent making and marketing products, Schooff said. Businesses must balance those costs against the value of defending intellectual property rights. “Being in court is not a great place to be,” Schooff said. “I will always tell my clients, ‘Avoid litigation, if you can.’ Sometimes, you can’t.”

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SPECIAL REPORT: INTELLECTUAL PROPERTY LAW

Green Peak’s Skymint branded marijuana flower and the company’s Skymint branded marijuana pipe, below. GREEN PEAK INNOVATIONS

CANNABIS FROM PAGE 30

The plan is to trademark as much of Green Peak’s product line as possible and make new products under brand names that are under the THC limit to appease federal authorities. Jennifer Hetu, trademark attorney and partner at Honigman LLP in Bloomfield Hills, said cannabis companies should be filing trademarks on everything and anything they can, including branded tchotchkes and non-cannabis merchandise. “You want to get as many protections as possible as broadly as possible,” Hetu said. “File for ancillary products and services. File applications for clothing, hats, bags, stickers, lighters, rolling papers. Although not squarely in your space, it provides you protection of that brand name.” Green Peak sells T-shirts and other items with its North Cannabis brand, which is the physical marijuana product distributed to retail locations. But many sophisticated companies and their attorneys are making bigger bets on cannabis trademarks amid swaying opinion that the drug should be federally legal. Under USPTO rules, companies can file intent to use trademark applications on a cannabis product without identifying to the federal regulators that it is for cannabis. The USPTO gives applicants three years to provide documentation of the product’s use. “You can file a real buttoned up application where the mark doesn’t reference anything related to mari-

juana or cannabis and just wait,” Hetu said. “Effectively, you’re running out the clock on purpose waiting for (federal) legalization.” Green Peak is employing this strategy as well, Donahue said. “That’s the strategy for sure,” he said. “Keep things pending for as long as you can through the process. From an application point, it’s a gray area. So if we’re first to market, we’re making sure our brands are visible before it’s legal at the federal level.” Marijuana companies can also file trademarks at the state level, which holds some water legally, but cannot be used to battle infringement from outstate operators, which is more likely to be the problem, Hetu said. For this reason, many large marijuana companies are attempting to establish a brand presence in as many legalized states as possible. Green Peak acquired cannabis vaporizer maker Evoxe Laboratories in California earlier this year to expand its operations, but also to expand its branding. “From a strategic standpoint, we want to be a multi-state operator,” Donahue said. “We’re doing this not specifically for the trademark issue, but clearly you get there by having brands that are defensible in many states.” Patent protection — the USPTO does not require a product be legal to achieve a patent — is heating up in the cannabis industry as well, said Thomas Southard, partner at Butzel Long PC in Washington D.C. “We’ve been seeing major companies file for patents related to cannabis in recent years,” Southard said. “Patents are always very valuable but we’re seeing they are very valuable in this space as the industry will likely see lots of (mergers and acqui-

sitions) in the future.” Biopharmaceutical giant GW Pharmaceutical has filed dozens of cannabis-related patents, mostly tied to CBD products. So has Janssen Pharmaceuticals and even the Na-

tional Institutes of Health. Cannabis companies can file patents on growhouse modifications, specialized equipment for transporting cannabis, automation for harvesting marijuana and even the

“You want to get as many protections as possible as broadly as possible. File for ancillary products and services. File applications for clothing, hats, bags, stickers, lighters, rolling papers. Although not squarely in your space, it provides you protection of that brand name.” — Jennifer Hetu, trademark attorney and partner at Honigman LLP

chemical formulas for the strains of marijuana. “I liken it to the start of the auto industry,” Southard said. “Think of all the streamlining and advancements in manufacturing. The same is going to happen in cannabis. Patents are going to be very powerful assets in the future.” Patent protections are already going to court. In July 2018, Golden, Colo.-based United Cannabis Corp. sued Conifer, Colo.-based Pure Hemp Collective Inc. for patent infringement over its CBD product formula. The case remains ongoing. “Lawsuits are coming in now as companies are correctly protecting their investment in intellectual property,” Southard said. “It’s only going to grow as the industry matures.” Southard said many small independent marijuana businesses don’t protect their patents because it’s costly, but warns that it may be costlier not to. “At some point, someone might infringe upon your IP,” Southard said. “A lot of small companies have never been involved in patent litigation and it’s costly. But there are options.” Southard estimates a patent protection suit can cost from $1 million to $3 million in many cases, but that litigation finance companies are often a smart way for smaller companies to combat infringement. These companies underwrite the litigation for a portion of the recovery if the suit is ruled in the plaintiff’s favor. “File patents,” Southard said. “Don’t be lazy and let the competition overtake you. Always think of newer and better ways to build the mousetrap. This industry is expanding and more competitive; you’ve got to protect your turf.”

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CRAIN'S LIST: INTELLECTUAL PROPERTY LAW FIRMS

“Finally. A technical team who understands my complex love language.”

Ranked by number of IP lawyers

Executive committee

54 61

Dickinson Wright PLLC 500 Woodward Ave., Suite 4000, Detroit 48226 (313) 223-3500; www.dickinsonwright.com

Michael Hammer CEO

44 36

177 171

Honigman LLP B 2290 First National Building, 660 Woodward Ave., Detroit 48226-3506 (313) 465-7000; www.honigman.com

David Foltyn chairman and CEO

40 36

233 225

Howard & Howard Attorneys PLLC 450 W. Fourth St., Royal Oak 48067 (248) 645-1483; www.howardandhoward.com

Mark Davis president and CEO

36 32

80 80

Andrew Basile Young Basile Hanlon & MacFarlane PC 3001 W. Big Beaver Road, Suite 624, Troy 48084 Jr. president (248) 649-3333; www.youngbasile.com

29 28

26 28

Theodore Olds III president and CEO

23 24

22 23

20 19

4 5

7 8 9

Jim Stevens Reising Ethington PC 755 W. Big Beaver Road, Suite 1850, Troy 48084 chairperson and president (248) 689-3500; www.reising.com Quinn IP Law (Quinn Law Group PLLC) 21500 Haggerty Road, Suite 300, Northville 48167 (248) 380-9300; www.quinniplaw.com

Christopher Quinn president and CEO

20 19

Bodman PLC Sixth Floor at Ford Field, 1901 St. Antoine St., Detroit 48226 (313) 259-7777; www.bodmanlaw.com

Larry Shulman chairman

18 18

124 122

Price Heneveld LLP 695 Kenmoor, S.E., Grand Rapids 49546 (616) 949-9610; www.priceheneveld.com

Brian Cheslek managing partner

17 19

17 18

Miller, Canfield, Paddock and Stone PLC 150 W. Jefferson Ave., Suite 2500, Detroit 48226-4415 (313) 963-6420; www.millercanfield.com

Michael McGee CEO

17 18

134 137

Fishman Stewart PLLC 39533 Woodward Ave., Suite 140, Bloomfield Hills 48034 (248) 594-0600; www.fishstewip.com

Michael Stewart and Michael Fishman founding partners

17 17

Warner Norcross + Judd LLP 2000 Town Center, Suite 2700, Southfield 48075-1318 (248) 784-5000; www.wnj.com

Linda PaullinHebden executive partner

14 14

44 38

Darrow Mustafa PC 410 N. Center St., Suite 200, Northville 48167 (248) 864-5959; www.darrowmustafa.com

Christopher Darrow president

14 12

11 11

14 14

Patents, trademarks, copyrights, trade secrets, counseling, opinions, portfolio management, litigation Patent, trademark, copyright and trade secret procurement and enforcement; licensing, IP due diligence; technology-related agreements and transactions; IP asset and portfolio management; strategic consulting Technology transfer, IP litigation, digital publishing, trademark selection, registration and licensing, economic espionage, entertainment, IP brand protection Patents, trademarks, litigation, copyrights, trade secrets and non-compete covenants, information technology and cyber law, antitrust, entertainment law, licensing agreements, interference, international law Patents, trademark, copyright and trade secret prosecution, counseling and litigation Trademark, copyright, patent, patent prosecution, trade secrets, social media, due diligence, litigation and dispute resolution, IP consulting, transactional and e-commerce services Copyright law, intellectual property, IP enforcement and litigation, patent prosecution and portfolio management, technology and IP licensing, purchase and sale, trademark portfolio and brand management Procurement and litigation of intellectual property rights

This list is an approximate compilation of intellectual property firms in Wayne, Oakland, Macomb, Washtenaw and Livingston counties. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the firms. Firms with headquarters elsewhere are listed with the address and top executive of their main Detroit-area office. NA = not available.

B Formerly Honigman Miller Schwartz and Cohn LLP. Name changed to Honigman LLP effective Jan. 1.

LIST RESEARCHED BY SONYA D. HILL

Estate Planning & Probate Government/Public Policy/Regulatory Healthcare

Celebrating 50 years of giving back to the community

Here’s to 50 more!

5 1969 2019

Kitch Attorneys & Counselors www.kitch.com

Worker’s Compensation

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Immigration Marijuana & Industrial Hemp Medical Malpractice Post-Acute Care Trucking/Transportation

Carlson, Gaskey & Olds PC 400 W. Maple Road, Suite 350, Birmingham 48009 (248) 988-8360; www.cgolaw.com

IP litigation; patents; trademarks; copyrights; licensing of IP rights; EDI; technology acquisition or sale; technology law audit; advertising; gaming Patent and trademark litigation, prosecution and counseling; technology-related transactions, including licensing, acquisitions and divestitures; representation of emerging growth companies; and commercial and employment litigation Patents, trademarks, copyrights and trade secrets worldwide; intellectual property and commercial litigation

Employment & Labor

Harness, Dickey & Pierce PLC 5445 Corporate Drive, Suite 200, Troy 48098 (248) 641-1600; www.hdp.com

Patent prosecution, trademarks, intellectual property litigation, post-grant proceedings, open source compliance, IP due diligence, trade secrets, licensing, copyrights, legal IT consulting, compliance and technical design consulting Patents, trademarks, copyrights, litigation, transactions/due diligence, anti-counterfeiting, foreign rights, appellate litigation Intellectual property, business technology, copyrights, patents, trademarks, intellectual property and trade secrets litigation Trademark and copyright, patent and intellectual property litigation practice groups

Construction/Real Estate

60 78

Commercial

60 78

Birth Trauma

Frank Angileri president

Auto/PIP

Brooks Kushman PC 1000 Town Center, 22nd Floor, Southfield 48075 (248) 358-4400; www.BrooksKushman.com

Asbestos/Product Liability

Top local executive(s)

Total number of local lawyers June 2019/ 2018 Practice areas

Appellate

Firm Address Rank Phone; website

Local intellectual property lawyers June 2019/ 2018

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Fifth Third Private Bank

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Fifth Third Private Bank has named Tony Catalina director of Private Banking. He joins the Bank with 15 years of banking experience including middle market, credit, and professional services. Catalina earned his bachelor’s degree in corporate finance from Central Michigan University. He is a member of the Young Leaders Group and Career Readiness Team with the Detroit Economic Club, and a member of the Ambassador Board for Big Brothers Big Sisters of Metropolitan Detroit.

Walton Insurance Group, an independent insurance brokerage based in Jackson, Michigan, recently announced the promotion of Kyle O’Malley as its new President. O’Malley joined Walton in January 2018 as Executive Vice President of Sales & Operations; he has served in the insurance industry for 16+ years. O’Malley will continue his focus on enhancing the customer experience, market development, and insurance company relationships as well as agency policies, procedures, processes and profitability.

Brasscraft Manufacturing Company

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Amherst Partners

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REDICO

Marc Gondek joined Amherst as a Director in the Investment Banking practice. He previously spent 11 years in various roles with several Chicago-based investment banking firms and has also owned and operated a multi-unit franchise business. Industry experience includes deep expertise in Gondek healthcare, along with consumer products/retail, food and beverage, transportation, and technology. Shareef Simaika joined Amherst as a Director in the Restructuring practice. He has 20 years of experience in banking and financial advisory services, providing turnaround and restructuring solutions to clients across a wide range of industries including Simaika manufacturing, distribution, real estate, construction, and professional services.

Brieden Consulting Group is pleased to welcome Lena Stewart as a Benefit Analyst. Lena will be responsible for using data and analytics to assist our clients in making the best decisions for their culture and corporate profitability. Lena brings excellent industry experience in employee benefits. Brieden Consulting Group is a Michigan based employee benefits management and consulting firm, enhancing each client’s culture by engaging leadership and enabling technologies.

REDICO is pleased to announce the promotion of Christine Pylar to manager, lease administration. Pylar joined REDICO in 2011, most recently serving as senior lease administrator. In her new role as manager, lease administration, Pylar will continue to oversee and train the lease administration team, as well as enhancing talent, improving policies and procedures, and streamlining the leasing process for efficiency and accuracy.

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

LEGAL

Brooks Kushman P.C. Linda Mettes has been named Chief Diversity Officer of intellectual property law firm Brooks Kushman. In her role, Mettes is responsible for the strategic planning of diversity, equity and inclusion initiatives. Since joining the firm, Mettes has worked to set diversity, mentoring and recruiting standards. Externally, she is involved with national organizations that focus on diversity in the legal industry. She has also worked on STEM for girls initiatives with the American Heart Association.

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C O N TAC T

NEW HIRE? PROMOTION? BOARD APPOINTMENT?

Brasscraft Manufacturing Company, a leading provider of branded rough plumbing products, announced the promotion of George Werner to Vice President, Sales, effective immediately. In his expanded role, Mr. Werner will develop and implement strategies that position the company for profitable growth in all its sales channels. Mr. Werner has 15 years of experience with Brasscraft Mfg. Co. Since 2011, he has held the position of Vice President, Retail Sales.

Laura Picariello Reprints Sales Manager lpicariello@crain.com (732) 723-0569

CALENDAR

SPOTLIGHT

UPCOMING EVENTS

Horizon Global hires auto supply pro as CEO

Great Lakes Digital Transformation Summit. 8 a.m.-5 p.m. Oct. 10. WIT. The speakers will include representatives from Greenpath Financial, Secure-24 and Stant and keynote speaker Joe Chung of Amazon Web Services. Also a panel of tri-county CIOs comprised of Phil Bertolini from Oakland County, Jako Van Blerk from Macomb County and Carlos Perez from Wayne County will discuss the topic of “Digital Innovation: Connecting Citizens to the County.” Troy Marriott. $129. Contact: Erin Adair-Guy, email: eguy@witinc.com; phone: (800) 257-1490. 2019 Entrepreneur & Small Business Conference: Power Up Your Business. 8:30 a.m.-3 p.m. Oct. 11. The National Entrepreneurs Association. The program will focus on ways to leverage relationships, finances and marketing to accelerate growth through tech. The event will include: keynote speakers, breakout sessions, Google training, entrepreneur awards exhibitors, breakfast and lunch. Speakers include: Tommey Walker, owner and creator of Detroit Vs. Everybody and Paul Glantz, founder and chairman of Emagine Entertainment. Mike Ilitch School of Business. $125. Contact: ZaLonya Allen, email: supportstaff@ nationalentrepreneurs.org; phone: (248) 491-3146. Lunch & Learn: Stay on the Path to Success with Staff Succession Planning. 11:30 a.m.-1 p.m. Oct. 22. Michigan Manufacturing Technology Center. Event will discuss the need for effective succession planning throughout an organization to sustain stability and growth. Topics will include: Documenting job descriptions, executing effective performance reviews, implementing a capability database, conducting a training needs analysis and following a nine-block leadership competency model. Michigan Manufacturing Technology Center, Plymouth. $20. Contact: Theresa Payne, email: tpayne@the-center. org; phone: (888) 414-6682. Women Who Fund Forum. 11 a.m.4 p.m. Oct. 24. ACG Detroit Women’s Forum and University of Michigan Center for Venture Capital & Private Equity Finance, Ross School of Business. Mary Tolan, founder and managing partner of Chicago Pacific Founders, provider of health care management services, opens the forum with a perspective on investing in health care and industry opportunities. The program includes lunch and features panels on “The Rise of Investors Supporting Health Innovators” and “The Spectrum of Deal Sourcing and Post-Deal Governance.” UM Golf Course Clubhouse, Ann Arbor. $95. Contact: Mary Nickson, email: MNickson@umich.edu; phone: (734) 615-4424. Forbes Under 30 Summit. Oct. 2730. Forbes. The summit includes: a private music festival, speakers, investor speed-pitching, industry-focused field trips, a pub crawl, a food festival and community service. Masonic Temple. $595. Contact: Lexi Driscoll, email: 30under30@forbes. com.

Troy-based Horizon Global Corp. has named veteran auto supplier executive Terrence Gohl as its new CEO after the resignation of former CEO Carl Bizon, the maker of towing products said. Bizon also resigned from the company’s board of directors. The Gohl change comes two weeks after the company sold off its Asia-Pacific business to help pay down its debt and less than a year since his appointment to the role. “After years of service to Horizon Global and its subsidiaries, Carl would now like to spend more time with his family in Australia. We wish him well in his future endeavors,” company Chairman John Kennedy said in a written statement. Gohl served as COO of Southfield-based International Automotive Components, and prior to that as president and CEO of Sterling Heights-based Key Plastics LLC. Horizon cited Gohl’s strategic leadership at Key Plastics as vital to that company’s turnaround and eventual sale. Gohl has also held executive positions at Visteon Corp., Tower Automotive and Lear Corp. Kennedy praised Bizon for his role in an ongoing turnaround effort at Horizon, which has struggled with operational problems and financial losses.

Altair names new chief information officer

Andrea Siudara, the former global director of sales and marketing IT for Ford Motor Co., has joined Altair Engineering Inc. as its new chief information officer. In her new role, Siudara, 47, will oversee the Troybased global technology company’s global informaSiudara tion technology team, IT systems, enterprise business systems and lead Altair’s global IT business strategy, according to a news release. She replaces Martin Nichols, who was named chief purchasing officer — a newly created role — and will manage global purchasing, budget tracking and facilities management, the release said. Siudara’s experience managing global IT organizations at large companies spans nearly 20 years, the release said. Prior to joining Ford in 2015, Siudara was the vice president of information technology at Delphi Automotive for about seven years, according to her LinkedIn page. The Troy-based supplier split off its powertrain unit to focus on technology for autonomous and electric vehicles in 2017, creating two separate companies — Aptiv and Delphi Technologies. Before Siudara’s one-year stint as director of global technology and operations for Round Rock, Texas-based Dell, she held several IT management positions at General Motors Co. for a decade, her LinkedIn page shows.

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Gallagher to acquire Bloomfield Hills-based LSG Insurance Partners By Annalise Frank afrank@crain.com

and Dustin Walsh dwalsh@crain.com

Arthur J. Gallagher & Co. announced Friday a definitive agreement to acquire Bloomfield Hillsbased insurance, risk management and consulting services agency LSG Insurance Partners. Under the deal, which is expected to close in the fourth quarter of this year, LSG will be rolled into the Illinois-based global insurance brokerage and risk-management services provider’s regional benefits and human resources consulting division. Terms of the deal were not disclosed, but it is the largest U.S. acquisition for Gallagher, Michigan President Bryan Hirn confirmed. Jay Schreibman, president, CEO and majority shareholder of LSG, declined to reveal financial details about the acquisition, but said it was not about the money. “We got a fair value for the business ...” Schreibman said. “I can tell you I did not accept (the largest offer). This is about what’s best for our customers and my team. I’ve been an entrepreneur for 31 years, and Gallagher shares our morals and our ethics. We share a lot in how we approach the business.” Gallagher (NYSE: AJG) is frequently ranked among the most ethical companies in the world, according to research by The Ethisphere Institute. Following the acquisition, Schreibman will become Michigan-area chairman of Gallagher’s benefits and HR consulting division. Todd Preston, minority partner and executive vice president, will be the division’s national practice leader, the release said. LSG’s approximately 120 employees at its Bloomfield Hills and Milwaukee offices will be led by Tom Lannen, head of Gallagher’s Great Lakes region employee benefits consulting and brokerage unit, and Cindy LaMantia, head of its Great Lakes re-

Need to know

 Global insurance brokerage and risk-management services provider expects to complete deal in fourth quarter  LSG Insurance expects to grow scale, network with deal  Employees, two company leaders expected to continue under new owner

afrank@crain.com

Green Peak Innovations, Michigan’s biggest marijuana company, has wrapped up a $10 million round of mezzanine financing to fund expansion. The company based in Windsor Township southwest of Lansing expects its fourth store to open this month in Nunica on the west side of the state. Thirteen more are slated to open in the next six months, according to a news release. “We are well on our way to becoming Michigan’s premier cannabis company as the recreational market opens up next year,” CEO Jeff Radway said in the release. Green Peak is also making expansion moves outside Michigan: It announced in May that it had agreed to buy a marijuana license holder in Florida, marking its first foray out of the state. Radway said in July that a

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gion retail property/casualty brokerage operations. Schreibman said LSG was limited by its ability to invest in expansion and the deal with Gallagher opens more doors to the company. “This was a very carefully thoughtout decision,” Schreibman said. “While LSG has been a very successful business for us ... we had to look at what our competitors were doing and what our scope and reach was. When we took stock of the marketplace, we made the decision that it was probably the right time to find the right organization (to sell to). Capex investment, data mining and all the things that have become important to make intelligent business decisions, Gallagher gives us that and then some — an international reach, tools, culture.” LSG Insurance Partners was the 11th-largest business insurance company in Michigan in 2018, according to Crain’s data. It reported $37.44 million in revenue in 2018, up from $36.97 million in 2017. Gallagher operates in 35 countries. It completed 13 brokerage mergers in the second quarter; most recently, it announced Monday it had acquired Tennessee-based The Human Capital Group Inc. for an undisclosed amount. The company recorded $1.6 billion in total revenue before reimbursements in the second quarter. Shares of Gallagher were trading down more than 1 percent at $88.77 in Friday afternoon trading. Year-todate, shares are up more than 23 percent.

Green Peak Innovations raises $10M for expansion By Annalise Frank

100-store roll-out was planned, involving locations in both Ohio and Florida. It also plans to expand its 60,000-square-foot production facility in Windsor Township. Mezzanine financing is a gap-filler between equity and senior debt in a company’s capital structure that gives the lender the right to convert to an equity interest in the company in case of default. “This capital raise, in conjunction with our existing partnership with (cannabis-focused real estate company) Innovative Industrial Properties and expected positive cash flow, will facilitate further expansion plans and strengthen our organizational capacity to fuel our rapid growth objectives,” CFO Al Gever said in the release. Previously, Green Peak raised $30 million in an oversubscribed debt round, exceeding its planned funding goal.

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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 // S E P T E M B E R 3 0 , 2 0 1 9

THOMPSON

Ellen Thompson said. “(And) the success of the kids has just been tremendous.” The Thompson Foundation and Grand Valley piloted the Working Families Scholarship program in 2011 with a handful of students. By 2016-17, the scholarships were offered to 30 students each at Grand Valley and Bowling Green and 10 each at Saginaw Valley and Ferris State. They’ve grown each year since,

FROM PAGE 1

“Doing this work is like building a business; you have to learn what works and what doesn’t,” Bob Thompson said last week. “You can’t just throw money. You’ve got to have everyone have skin in the game. The university has to participate; the parents have to participate; and the students have to participate.” At the same time, students and universities also have to be held accountable for hitting prescribed academic progress and completion benchmarks, he said. “We have a couple hundred million dollars set aside and we hope in the future to graduate 9,500 kids with that money because we get matching money out of the colleges and other people to do it,” Thompson said during an education panel discussion at Detroit Homecoming VI earlier this month. “It’s a great program. And we think it’s a gap that’s missing in our society, so we’re trying to fill that gap.” Now offered at three public universities in Michigan and one in Ohio, the program provides $10,000 annual scholarships for up to four years to students who come from families with at least one parent working and household income of less than $65,000. Recipients must maintain a minimum 2.75 GPA and commit to doing 20 hours of community service each academic year. The scholarships are offered at Grand Valley State University, Saginaw Valley State University, Ferris State University and the couple’s alma mater, Bowling Green State University in Ohio. Funded equally by the Thompson Foundation and the universities, the scholarship program’s aim is to help make college affordable for working class families who make too much to qualify for income-based financial aid but can’t keep pace with rising tuition costs. The donor agreements between the Thompson Foundation and the universities come with a high level of accountability for the universities and biannual checks from the foundation, rather than one large check to the university to establish and manage a scholarship endowment. The Thompsons have set a goal to increase the annual number to 1,000 students, with spots for freshmen and second-year students who did well their first year and need the support, as well as transfer students and veterans. This fall, 680 “Thompson scholars” entered the four-year scholarship program, which first launched in 2011. Thompson Foundation is in talks with another Michigan university which could come into the program to help it reach its target, said vice president and board member John Cleary. The couple’s larger aim is to help more than 9,500 students from working-class families afford college between now and spring 2030, he said. Since the program was launched in 2011, 1,840 students have received scholarships through the program. Bob Thompson estimates he and his wife will put “at least a couple hundred million” behind the program as they sunset their philanthropy by 2030 with personal assets and revenue from his ready-mix company, McCoig Holdings, transferred to the Thompson Foundation on a rolling basis.

“We have a couple hundred million dollars set aside and we hope in the future to graduate 9,500 kids with that money because we get matching money out of the colleges and other people to do it. It’s a great program. And we think it’s a gap that’s missing in our society, so we’re trying to fill that gap.” — Bob Thompson

landing at 275 each for Grand Valley and Bowling Green this fall, 100 scholarship recipients at Saginaw Valley and 28 at Ferris State. Ellen and Bob Thompson

The cost of college At the three Michigan universities participating in the Working Families Scholarship, the average annual cost for an undergraduate student living on campus is: Grand Valley State University: $25,392 Ferris State University: about $23,200 Saginaw Valley State University: $22,694 Source: University websites

The fair market value of the Thompson Foundation’s assets at the end of 2018 was $13.2 million per its 990 filing with the Internal Revenue Service. Like other philanthropists who have chosen spend-down models to distribute their wealth after their death, the couple wants to ensure the people on the Thompson Foundation board who will spend down the assets know the couple and what they want to support.

Program’s roots Late in 2002, following the sale of his asphalt company Thompson-McCully Co. a few years earlier for $461 million, Bob and Ellen Thompson offered to donate $200 million to open 15 high-performing charter high schools in Detroit. Their offer was rebuffed by the Detroit Public Schools, Detroit Federation of Teachers and others. The couple pulled their offer off the table but moved forward with plans to open charter schools. They invested $125 million to help build, equip and open nine schools under the University Prep banner. Their Thompson Schools Foundation (previously Thompson Educational Foundation) holds the buildings and leases them to University Prep Schools for $9 a year on the promise

CONTRIBUTED PHOTO

that the schools maintain at least a 90 percent graduation rate and a 90 percent college admissions rate. “We started those schools and realized you don’t finish those kids in high school,” said Bob Thompson, 87. The couple began providing scholarships for Detroit students to attend Grand Valley State University and Bowling Green State University, where they both earned education degrees. “That was a learning curve for us,” Bob Thompson said. “You have to get the colleges to cooperate. They don’t like to be told how to act.” Where Bob Thompson was the champion of U Prep, the Working Families Scholarship was Ellen’s baby, said Lynn “Chick” Blue, vice president of enrollment at Grand Valley State University. Around 2011, Ellen Thompson, reached out to Blue — whom the couple had met as they worked on the charter schools — for advice on a new scholarship program she was interested in launching. Ellen Thompson, who grew up in a “very middle-class” family in Ohio, said last week that it was troubling to hear that working-class parents were struggling to pay for college. “Parents have tried to save for school … but college costs have gone up a whole lot,” she said. Students from working-class families have the desire to do well and a really good work ethic, said Ellen Thompson, 87. “I think it’s a Midwestern quality that we need to keep expanding on.” She tapped Blue to help develop her idea into the Working Families Scholarship program and piloting it at Grand Valley State University before expanding it to the other universities. “I’m very pleased with the way the universities have implemented this,”

Accountability Donor agreements to fund the program at the four participating universities are anything but business as usual. Rather than simply writing a check to endow a scholarship fund and leaving administration to the institutions, the Thompson Foundation requires each to submit detailed biannual reports on student academic progress and financial status, along with an invoice for $5,000, the foundation’s half of the $10,000-per-student annual scholarships awarded that semester. The universities also commit to provide the necessary supports to ensure 80 percent of the new students coming into the program graduate within six years and to provide continued financial support to students who take up to six years to graduate. “It didn’t take us long to learn that higher ed was not used to accountability from donors,” Cleary said. “We’re proud to help make some change.” As the foundation started to ask more questions, “we worked with some very smart and talented people at GVSU to get them the type of biannual reporting they Rhodes wanted,” said Michelle Rhodes, associate vice president for financial aid at Grand Valley. It took a few iterations to get what the Thompson Foundation wanted, she said. “We were very willing to work with them. But it’s a very different model because of the biannual reporting and the invoicing.” Many times, donors just give money and don’t necessarily request to

see outcomes on the impact of their gifts, Rhodes said. Given the millions of dollars the Thompsons are putting behind the scholarships, “they want to make sure we are creating the impact they want to create,” Rhodes said. The foundation’s requirement that universities develop comprehensive, on-demand reports is absolutely unique, said Jason Bentley, dean of retention and student success at Ferris State. The report, which needs to be kept updated so it’s current if requested at any point, contains 59 data elements, looking at factors including: per-semester overall funding, community service hours, cost of attendance, financial assistance received, a student’s major and any changes, how many credits they’ve come into the program with, if any, and if their expected family contribution changes over time, Bentley said. “Overall, it’s created a supportive structure and very clear transparency about what’s taking place,” he said. “It is a much more engaged donor-university relationship than many. “It is for the benefit of students ... (and) very positive in focusing the university on how together we can best support the students.” So far, the universities are on track to meet the 80-percent requirement, that number or better maintaining the GPA requirement and continuing on track to their degree or graduating, Cleary said. At Ferris State, which launched the Working Families Scholarships program in 2016, 88.5 percent of the 96 students who came into the program between 2016 and 2018 have graduated or are continuing to make good academic progress, compared to about 70 percent for the same cohort of general population students at the university, Bentley said. At GVSU, 94 percent of the 2011 cohort of 15 Thompson scholars graduated vs. 65.3 percent of the general student population that year, Rhodes said. From a longer viewpoint, 94 percent of the Thompson scholars who started between 2011 and 2018 are still enrolled or have graduated, she said. The Thompson Foundation is ramping up the number of students in the program, “pressure-testing” schools to ensure each can successfully support increasingly larger number of students in the program as it moves toward its 1,000-student goal, Bob Thompson said. If universities lose footing and can’t meet the 80-percent requirement, the foundation would reduce the number of students coming in to the cohort and the funding coming to the university, Cleary said. It’s not mean to be punitive but to ensure the universities can adequately support the students and ensure the bulk of them graduate. The Thompsons have been engaged in philanthropic work for 20 years now, Bob Thompson said, spending a lot of time figuring out what works and what doesn’t. After all of that, they are happy with how the Working Families Scholarship program has come together and the legacy it’s leaving. “Having your name on a building is ridiculous to a lot of us,” Thompson said. But with something like the Working Families Scholarships, “you’re really affecting lives,” he said. Sherri Welch: 313 (446-1694) Twitter: @SherriWelch

Even after six years, Detroit Homecoming is bigger and more inspiring than ever. More than 200 expats came home to explore ideas to move the city forward and immerse themselves in communities that help make up the fabric of Detroit.

THANK YOU TO THE GENEROUS SPONSORS WHO SUPPORTED DETROIT HOMECOMING VI:

The Cotton Family Foundation

Powell Consulting Group

A financial advisory practice of Ameriprise Financial Services, Inc.

Read all about Detroit Homecoming at detroithomecoming.com VI

C R A I N ’ S D E T R O I T B U S I N E S S // S E P T E M B E R 3 0 , 2 0 1 9

FROM PAGE 1

Pension benefits earned after 2007 would not be affected because the trustees slashed pension accrual rates by 67 percent that year when the pension fund was 56.7 percent funded in an effort to avoid an earlier insolvency date, said Tom Lutz, president of the Michigan Council of Carpenters and Millwrights. “We believe this is an equitable way to distribute the proposed reductions,” Lutz said in an exclusive interview with Crain’s. “Nobody likes the idea of taking a pension cut. Nobody likes the idea of telling men and women that something that they were promised ... isn’t going to be fulfilled.” Federal regulators certified the Detroit Carpenters Pension Trust Fund as being in critical and declining financial condition last year, when its long-term liabilities were nearly $2.22 billion. “The reality is, we know the longer (pension) plans wait to apply, the harsher the cuts have been,” said Lutz, a floor coverer by trade who has been a union member since 1990. The move to reduce benefits is largely a hangover from the Great Recession, as the pension fund suffered significant investment losses in 2008 and 2009, coupled with a decade-long downturn in the number of manhours the union’s members worked because of a lull in new construction in the automotive and health care industries until recent years. Man-hours worked is directly tied to the solvency of the pension fund, and those hours have been further reduced by advancements in productivity and automation in construction processes, Lutz said. From 2000 through 2009, the union’s members worked an average of 14 million hours each year. In the subsequent 10 years, total manhours worked plummeted to an average of 6.9 million annually, according to pension fund records. Unionized construction companies in Southeast Michigan pay $15.91 per work hour toward the pensions of skilled carpenters and millwrights, $9 of which is earmarked for the specific employee’s retirement, Lutz said. In 2000, when the carpenters pension fund was over funded and the construction industry was enjoying the tail end of the 1990s economic boom, employers were paying about $3.13 per hour toward the pension, Lutz said. At that time, there were more than twice as many active carpenters and

A slide toward insolvency

The Detroit Carpenters Pension Trust Fund was overfunded at the beginning of the 21st Century and now faces the prospect of insolvency by 2034. The pension fund’s trustees have recommended reductions in retirement checks of up to 16 percent for pension benefits accrued before 2007, when the pension fund sharply reduced the benefit accrual factor in an earlier bid to keep the fund solvent. 120% 112% 100% 80% Percentage funded

UNION

60% 34.8%

40% 20% 0

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18

SOURCE: Michigan Regional Council of Carpenters and Millwrights

millwrights paying into the fund and they outnumbered retirees two-toone, pension fund records show. Increasing the pension contribution cost for employers was no longer deemed a viable option. “There comes a point where there’s a diminishing return,” Lutz said. The pension costs for unionized carpenters have affected the competitiveness of unionized contractors,

“We believe this is an equitable way to distribute the proposed reductions. Nobody likes the idea of taking a pension cut. Nobody likes the idea of telling men and women that something that they were promised ... isn’t going to be fulfilled.” — Tom Lutz, president of the Michigan Council of Carpenters and Millwrights

said Robert Halik, president and owner of Turner-Brooks, a Madison Heights commercial interiors construction contractor. “It just can’t keep going up and be competitive to the end user,” said Halik, who serves as secretary of the carpenters’ pension fund board of trustees. “You can’t really increase the amount and get out of this problem.” The proposed pension cuts also reflect the fact the pension fund is sending out monthly retirement checks to nearly 7,400 retirees, while just 5,800 active workers are paying into the fund through employer contributions negotiated through collective bargaining agreements. The pension system has another 6,400 members who are vested but no longer working and have deferred drawing on their retirement benefits,

THE MID

“Unless the federal government comes around and does something on a national level, this is probably the best solution to right the ship,” Halik said.

meaning if we didn’t improve (those benefits) we were overfunded and we were not allowed to be.”

‘A substantial hit’

The Detroit carpenters’ pension fund is the second multi-employer pension in Michigan to seek reduced benefits since Congress passed the reform law five years ago. In late 2017, the International Association of Machinists of Motor City Pension Fund became Michigan’s first multi-employer pension fund to reduce benefits for its 1,247 members as it faced a projected insolvency date of June 2026. That pension fund, which was 59 percent funded in July 2016, reduced its pensions to 110 percent of the PBGC’s guaranteed benefit — or $14,157

A union carpenter who worked 25 to 30 years under today’s benefit rates would be eligible for a lifetime annual pension of $35,000 to $40,000, depending on the number of hours worked, said David Morris, a retired millwright from Washington Township and the pension fund’s retiree representative. The alternative to the pension fund’s self-imposed cuts is to run the trust fund dry and fall back on the Pension Benefit Guaranty Corp.’s maximum annual payout of $12,870 for failed multi-employer pension plans.

Cuts likely final

Upcoming podcasts You can listen to “Detroit Rising” and other Crain’s Detroit Business podcasts by subscribing on iTunes, the Apple Podcasts or Google Play apps on your phone, and most other podcast apps.

FROM PAGE 3

“It will be a fairly precious commodity in the sense there won’t be a lot of competition for this,” he said. “Our market has not seen high-rise condominiums of this nature really ever, but in the strictest sense probably for a couple of decades.” Real Estate Interests LLC is developing The Mid project for Ciena Healthcare CEO Mohammad Qazi, whose 3750 Woodward Ave LLC paid $15 million for the land in September 2018 after the Wayne State University Physicians Group scrapped plans to build a new medical office building. In July, the Detroit City Council approved a rezoning and community benefits agreement for the project on the same day the Michigan Strategic Fund board approved $58.3 million in

Lutz said. Under the proposed cuts, the 6,400 deferred members or their survivors will see benefits accrued before 2007 slashed by 26 percent, according to the proposal. Under federal law, retirees over age 80 and those who are disabled are exempt from any pension cuts. Retirees between the ages of 75 and 80 will get a smaller cut, according to the plan.

“It’s kind of a no-brainer: Do you want 75 percent of your money or 25 percent of your money?” Morris said. “I try to ensure (other retirees) that the trustees are looking after their best interest and doing the best they can.” The Detroit carpenters pension fund trustees also say other factors contributed to the fund’s downward spiral from being overfunded in 2000 at 112 percent to under 35 percent by last year. Under federal law, the pension fund was not allowed to be overfunded, so pension benefits were sweetened in 1997 to increase the accrual rate for each worker to 4.3 percent of their individual pension earnings. In 2005, that benefit was reduced to a 3 percent accrual rate when the pension fund had slipped to a 68.8 percent funding level, according to data the trustees submitted to members and the federal government. In May 2007, the accrual rate was slashed from 3 percent to 1 percent, a reduction Lutz called “a substantial hit” to the future benefits of active union carpenters. “When we look back on it, we say, ‘That was probably unsustainable,’” Lutz said of the more lucrative pensions. “But it was well within the requirements of the existing law,

Jordan

Matthews

brownfield reimbursement incentives. “The project is not viable without incentives, just to be clear,” Matthews said. If the project comes to fruition as planned, the two skyscrapers at the Midtown site would be the tallest buildings constructed north of Mack Avenue since the 1920s, drastically altering Detroit’s skyline. “We definitely wouldn’t be upset if people paid a million per condo, I don’t think,” Damon Jordan, manag-

The schedule of upcoming podcasts, all recorded at Detroit Homecoming VI: JJOct. 3 — An interview with Stephanie

Byrd, co-owner of The Block restaurant in Midtown on moving back to Detroit to join a growing family hospitality and real estate management business.

ing director of real estate and development at Real Estate Interests LLC, said during the podcast interview. “We would not,” Matthews added. “But that’s not the only option in The Mid. We don’t just want million-dollar condo owners.” The second phase of The Mid en-

JJOct. 10 — An interview with Andrew Leber, vice president of hospitality for Bedrock LLC, on the Dan Gilbert-owned real estate company’s plans for the Courtyard by Marriott hotel on Jefferson Avenue and why Detroit needs a bigger convention hotel. JJOct. 17 — An interview with Ashley Williams, founder & CEO of Rizzarr, a Detroit-based content-creating platform for consumer brands seeking to market their products to millennial customers.

tails construction of a 27-story residential tower with 180 market-rate apartments and a 12-story building with about 198 co-living units. The co-living units will feature three-to-five bedrooms with private bedroom and bathroom suites and shared common living space and

— for all members except those over age 75, said Paul Bullock, vice president of actuarial services for Carmel, Ind.-based United Actuarial Services Inc. The Detroit carpenters’ union’s proposed pension cuts are subject to a vote on the trust fund’s vested members. But it won’t be a democratic process. Under federal law, a majority of the vested members would have to cast “no” votes to stop the pension reductions from taking effect in August 2020. “This means not voting counts the same as voting to approve the reduction,” according to a letter the Michigan Regional Council of Carpenters sent vested pension members last week. The International Association of Machinists’ pension fund’s cuts took effect in 2018 after 30.6 percent of vested pensioners voted to reject the benefit reduction, 10.4 percent voted to approve the benefit reduction and 59 percent did not return a ballot, according a Treasury Department report to Benesys Inc., the fund’s Troybased benefits administrator. Benesys also administers the Detroit Carpenters Pension Trust Fund. In the event that the carpenters pension fund members reject the cuts, the 2014 law allows the U.S. Treasury Department to enforce the reductions because the value of the payments exceeds a $1.097 billion threshold for the PBGC, according to pension fund trustees. The carpenters’ pension fund paid out $150 million in the fiscal year that ended April 30, according to pension fund financial statements. “This basically says no matter what happens in the election, they’ll cut it,” said Lutz, who as president of the union serves as chairman of the pension fund board. Morris, who retired in 2002, said running the pension fund dry would crimp the union workforce and undermine the employers. “If you drain the funds, you lose the contractors you work for,” Morris said. “It would bankrupt every contractor.” Lutz warned the reduced pension checks won’t “immediately” repair the financial health of the pension fund. “One of the things people think is that you make this reduction, or suspension of benefits as they call it, and you immediately return to solvency,” he said. “That’s not the case.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood kitchens, Matthews said. Matthews believes the co-living units may be the first of their kind in Detroit’s residential rental market that will spur “a tremendous amount of curiosity.” “If you’re the type of person who only uses your kitchen a couple of times per month, why should you pay rent for that on an ongoing basis?” he said. “Why couldn’t you share that with others in a way that lends itself to a nice, cohesive environment that still gives you your privacy but dramatically lowers your cost?” The rest of the podcast interview focused on Matthews’ and Jordan’s insights on real estate development and land use planning in the city as well as their backgrounds of growing up in Detroit. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

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VENTURE FROM PAGE 3

“Jim is a really smart investor who has invested in both tech and health care, and has done it through several cycles, so he has pretty much seen it all. He’s a leader in the venture community here and has a strong national reputation.” Adox is a past chairman of the Ann Arbor-based Michigan Venture Capital Association. “It’s great to hear that Venture Investors has completed its fundraising. They have been an important player

in the Midwest VC community for many years,” said Tim Petersen, managing partner of Ann Arbor-based Arboretum Ventures LLC. In June, Arboretum closed on its fifth fund, which at $250 million set the record for the largest VC fund in state history, surpassing the $220 million the firm raised for its fourth fund in 2015. “I’ve known Jim about 20 years (and) Arboretum and VI have had a very constructive relationship, having introduced deals to each other and co-invested on a number of occasions,” said Petersen. Current portfolio companies the two VC firms are invested in include

Novi-based Delphinus Medical Technologies Inc., whose ultrasound technology to detect breast cancer is in human trials; Ann Arbor-based NeuMoDx Molecular Systems, which makes diagnostic tools to help health care providers to more quickly diagnose and treat diseases; and ViaLase Inc., a company based in Corona Del Mar, Calif., that uses femtosecond lasers to improve the treatment of glaucoma. Venture Investors’ other local portfolio companies are SkySpecs Inc., which provides inspection, diagnostics and data analytics for renewable energy industries; Ann Arbor-based

HistoSonics Inc., which is testing the use of noninvasive sonic beams to destroy some tumors and which raised a Series C funding round of $54 million last April; and Ann Arbor-based BlueWillow Biologics Inc., which is developing intranasal vaccines. Investors in the new fund include two past investors in the firm, the State of Wisconsin Investment Fund and the Wisconsin Alumni Research Foundation, and one new investor, Advocate Aurora Health, a not-forprofit healthcare system based in Milwaukee. Adox was a co-founder and first CEO of Tissue Regeneration Systems

Inc., a University of Michigan spinoff in 2006 that used 3D printing to help bone healing in patients for birth deformities and severe injuries. In 2017, West Chester, Pa.-based DePuy Synthes Products Inc., a Johnson & Johnson company, bought half the company. Two months ago, Dublin-based Medtronic plc bought the other half. “It’s cool that a local startup ended getting sold to two of the biggest health care companies in the world,” said Adox. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

FROM PAGE 3

“We try and work with hospitals in communities to bring new technologists and specialists to increase convenience for patients,” he said. When asked why UM is only to add a net of 154 more beds to its 998-bed downtown medical center campus, which includes 550 adult beds and 348 children and women’s beds, Runge said converting semi-private rooms to private and increasing the size of the rooms will actually create 264 new beds that are capable of serving as intensive care. “What we did need were more ICU beds and private rooms to care for the sickest patients,” Runge said. “The key is private rooms. We are moving to all private rooms.” Runge pointed to C.S. Mott Children’s Hospital and Von Voigtlander Women’s Hospital, which opened in 2011 with 348 beds in private rooms. “Patients get more rest, and families get a better experience,” he said. “We know that infection rates are higher in semi-private rooms” and the move to more private rooms will also act to lower infection rates in the adult hospitals. Bret Jackson, president of the Economic Alliance for Michigan, said the alliance supports UM’s decision to expand on its Ann Arbor campus. EAM represents larger employers and unions. “It’s under the same license and does not duplicate any services,” Jackson said. “It is a good thing. They have been at overcapacity for some time.” But Runge said another reason UM needs more beds is because its hospitals are typically above 90 percent occupancy rates. However, with ongoing patient demand, how long will the additional adult beds keep UM below 90 percent occupancy? “What we hope to happen is during a period of five years we will further enhance affiliations and collaborations (with health care organizations) for people with less complications,” Runge said. “We won’t be at 90 percent. We will get down to 85 percent, and we can accept transfers. Sometimes we are so full, we can’t do it.” Jackson said there are only a handful of hospitals in Michigan that are at above 85 percent occupancy, which is considered full. Those hospitals don’t need to seek certificate of need approval to add beds; all they do is file a CON and show they are overcapacity, he said. Runge said the new hospital will allow UM to increase organ transplants and perform more specialized treatments such as CAR-T therapy for cancer and other cutting-edge treatments.

UNIVERSITY OF MICHIGAN

Michigan Medicine campus layout with location of planned new hospital.

“What we hope to happen is during a period of five years we will further enhance affiliations and collaborations (with health care organizations) for people with less complications.” Marschall Runge

Another major need for Michigan Medicine is larger and more advanced operating rooms, which will range in size from 720 square feet to 1,100 square feet. Two of the 12 floors at the new hospital will be designed for 20 advanced ORs built with the latest technology and also three cutting-edge interventional radiology suites. The interventional radiology suites allow doctors to perform a variety of minimally invasive, image-guided procedures in real time. Procedures include a variety of diagnostic, vascular, catheter placement and cancer treatments. “We have very high-tech ORs that will enable us to do” a variety of energy technology procedures, he said. “Artificial intelligence will be-

come” used more often in the future. David Spahlinger, president of the University of Michigan Health System, said the new hospital will allow 110 beds in semi-private rooms to be relocated from University Hospital, freeing up space and allowing all inpatient beds to be in private rooms. The larger private rooms, which will be 310 square feet in size, will allow for additional “family spaces” that will allow relatives to visit patients in rooms with more convenience. Private patient rooms allow for more complex care, including capability for all spaces to support intensive care. The patient areas also will create centralized “collaboration spaces” in each patient area to enhance continuity of care. When asked how spending $920 million on a new hospital will affect health care prices and affordability for patients, Runge said health care payers and employers are demanding increased value for health services. “There needs to be better outcomes at a lower cost and to take care of people at home,” he said. “Many more of these ICU patients will provide higher-quality care at reduced costs. This hospital will be built in a way to become more efficient.”

Jackson said he has no concerns that UM’s investment in the new hospital will increase costs. “Private rooms are at a higher cost for employers and payers, but the long-term benefit will outweigh the short-term costs,” Jackson said. “I have no concerns about costs.” Jackson said two reasons have to do with recovery time and reduced infection rates with patients in private rooms. “There is a lot of medical evidence that shows having private rooms allows recovery to go smoother and progress faster than semi private rooms because of stressors and lack of sleep in semi private rooms,” Jackson said. “It also can lead to lower infection rates.” Runge said people should understand that the types of patients to be cared for at UM’s new hospital can only be treated at other advanced hospitals such as Johns Hopkins Hospital, Massachusetts General Hospital, the Mayo Clinic and the Cleveland Clinic. “Our goal is to reduce costs for the sickest patients we treat,” he said. Another problem Runge said he hopes UM can address in the near future is lack of parking for employees and patients. “We recognize and accept that parking is a challenge for employees and patients,” he said. “Our goal is to

create more spots.” By fall of 2020, he said another 1,000 parking spaces will be opened on Wall Street. For example, Runge said in August the university opened 200 more parking places for patients. “They have a hard time getting around. Some come and can’t find parking. We are working on a variety of approaches,” he said. Overall, UM wants to move non-hospital-related business off the main campus to free up spaces for employees to park in remote lots. The university also is working with employees and unions on future parking plans. Another major aspect of the new hospital is that it will be designed to achieve LEED Gold standards and exceed state standards by 20 percent. LEED provides a framework to create healthy, highly efficient and cost-saving “green” facilities. “We are particularly very pleased that we are going to try and hold environmental standards to LEED Gold for environmental sustainability,” Runge said. “It is a (higher) cost” to reduce carbon emissions. The university has pledged to become carbon neutral sometime in the future, but hasn’t set a timetable. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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THE WEEK ON THE WEB

RUMBLINGS

SEPTEMBER 20-26 | For more, visit crainsdetroit.com

Minority supplier council to induct 5 into hall of fame

Plastic waste processor plans Livonia plant

n Ann Arbor-based company focused on turning pollution into profitable byproducts is planning a $60 million plant in Livonia that would create 150 full-time jobs. Quad City Innovations LLC received approval Tuesday from the Michigan Strategic Fund board for $60 million in private activity bond financing to fund the project. Under the subsidiary QCI Fuels– MI Plant 1 LLC, the company intends to build a plant at 30933 Industrial Road, off Middlebelt Road, capable of processing more than 100,000 tons of plastic waste annually, according to a Michigan Economic Development Corp. memo to the MSF. Six processing systems, powered by proprietary QCI-PCF technology, would be engineered and installed at the plant. The project is expected to start in December and be completed by December 2021. The company purchased the Livonia building and installed one processing system already. The systems “re-mine the valuable molecules from all plastic waste streams … for recirculation back into manufacturing, transportation and many other industries,” the document said. The company says its goal is to reverse plastic pollution in landfills and waterways while capturing valuable hydrocarbon molecules. The plant has two employees. QCI employs 23 administrative staff, scientists and engineers. The company was created in 2009 by Dean Rose and Chris Cuvar, ts website says. QCI is the umbrella for three companies — QCI-TCF, QCI-PCF and QCI-MSW — that convert solid waste, plastic waste and scrap tires into valuable byproducts with virtually clean emissions, its website says. Around 111 billion plastic bottled beverages are sold in the U.S. per year, according to market researcher Euromonitor International. Less than a fifth of all plastic is recycled globally, and much of what is recycled ends up in the ocean anyway, experts say. Around 10,000 tons of plastic waste enter the Great Lakes each year, according to a 2017 issue of scholarly journal Marine Pollution Bulletin.

BUSINESS NEWS J Auto parts maker Faurecia expects to invest $10.7 million and create 505 jobs in Highland Park, with $2 million in state incentives. Plans call for workers to assemble automotive seats, seat frames, foam cushions and seat covers at two leased plants. J Cuban-style casual eatery and bar Frita Batidos plans to open its Detroit location Wednesday, making it the first tenant to open in the new Ilitch family-led Columbia Street corridor project between the Fox Theatre and new Little Caesars headquarters. The Ann Arbor transplant will serve its popular burgers and tropical milkshakes, as well as margaritas and other alcoholic drinks. J Detroit Metropolitan Airport is the recipient of a large portion of $40 mil-

QCILLC.COM

Ann Arbor-based QCI is planning a $60 million plant in Livonia that would be capable of processing 100,000 tons of plastic waste annually.

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

12,000

The number of Detroit residents who prequalified to apply first for jobs at FCA US LLC’s east-side plant expansion

$36 million The amount Moroun-controlled Universal Logistics must pay in a legal settlement after losing an appeal of a case involving a serious truck crash

Motown Records founder Berry Gordy’s age when he announced his retirement at a 60th anniversary event in Detroit for the influential label

lion in federal grants awarded to six airports across the state. The airport got $12.4 million from the Federal Aviation Administration to be used for new taxiways; it follows $21.4 million granted to the airport last month for runway reconstruction. J Continental AG mapped out a sweeping restructuring plan stretching over the next decade and affecting as many as 20,000 jobs worldwide, marking the Germany-based manufacturer’s latest effort to restore profits while navigating sluggish vehicle production in key markets and an industry shift to electric cars, Bloomberg reported. The world’s second-biggest auto parts maker has its North American automotive headquarters in Auburn Hills. Two U.S. plants are slated to close in Virginia and North Carolina. J The Outloud Group, a 30-employee agency that builds influencer marketing campaigns, branched out into outdoorsy apparel with the launch last week of MuskOx. The small operation aims to use its ties to influencers — popular social media users with the ability to affect their followers’ spending decisions — to gain an edge in the crowded design-minded clothing landscape, Outloud Chief Growth Officer and partner Brad

Hoos said. J A “midcentury inspired cocktail bar” called Hammer & Nail is coming to the Midtown Detroit building formerly adorned with massive, neon hammer-and-nail signs. Detroit-based developer The Roxbury Group, which renovated the building, now called The Plaza, aims for a mid-October opening for the 1,800-square-foot restaurant and bar on Woodward Avenue.

ive active and former automotive executives will be inducted into the Michigan Minority Supplier Development Council’s Michigan Minority Business Hall of Fame next month. Ford Motor Co.’s former purchasing chief Tony Brown will be inducted along with the Dearborn-based automaker’s former director of supplier diversity development Ray Jensen, Ford’s current vice president of global vehicle and indirect purchasing and supply chain sustainability Burt Jordan, as well as Chrysler Group LLC’s late purchasing chief Dan Knott and Scott Kunselman, former senior vice president of safety and regulatory affairs at FCA US LLC and current chief operating officer at Oakland University. The MMSDC’s induction ceremony will be during its annual ACE Awards on Oct. 4 at the Suburban Collection Showplace in Novi. Prior to joining Ford in 1999, Brown, 63, served as vice president of supply management for Farmington, Conn.-based United Technologies Corp. Brown oversaw Ford’s supply chain during the economic

crisis and throughout the automaker’s restructuring. Knott, who died in 2012 after a battle with cancer, joined Chrysler in 1985. At Chrysler, he presided over several vehicle development programs and was credited with restoring the automaker’s reputation with its suppliers. Jensen, who served as Ford’s former supplier diversity development director since 1987 until his retirement, was tasked with expanding the automaker’s relationships with minority suppliers. For four years, Jordan served as Ford’s vice president of global vehicle and powertrain purchasing and supplier diversity. In 2017, he was promoted to his current role as vice president of global vehicle purchasing. Kunselman, who spent 30 years with FCA US LLC, was named chief operating officer of Rochester-based Oakland University in 2015. He had joined Chrysler Corp. as a product engineer in 1985 and held several executive posts. Event details and tickets are available at minoritysupplier.org.

OTHER NEWS J Detroit City Council approved last week a $5 million plan to renovate and reopen the Eastern Market parking garage and make repairs to the Ford Underground Garage downtown. Work could begin in the next few weeks on the 330-space structure in the center of the food district that hosts popular weekly markets. The garage has been closed for several years. Work could also start soon on the 750-space garage beneath Jefferson Avenue, which is still open but in need of improvements. J The Detroit Youth Choir and former Detroit Mayor Dennis Archer have been chosen as grand marshals of Detroit’s 93rd Thanksgiving Day parade to be broadcast in 185 cities Nov. 28. The theme this year is “Detroit Shining Bright.” The nonprofit choir’s selection comes after it placed second this month in its bid to win $1 million in the finale of reality TV talent competition “America’s Got Talent.” The choir did get a $1 million pledge from local funders and companies, though. J The University of Michigan Rogel Cancer Center and the Barbara Ann Karmanos Cancer Institute got a prestigious $9.2 million grant from the National Cancer Institute. The funding through the NCI’s Specialized Program of Research Excellence will help researchers try to answer questions about how prostate cancer develops, address barriers and challenges in diagnosis, treatment and metastasis. J Motown Museum hit the halfway point in its $50 million campaign with a $1 million gift from Chicago-based investment firm Ariel Investments. The announcement came at a fundraising gala following the museum’s groundbreaking on Hitsville Next, the first phase of the museum's expansion.

William Pickard (let) and Judson Pickard

Bill Pickard, cousin give $2M for Morehouse scholarships B

usinessman and philanthropist William Pickard is embracing his roots in Georgia and his passion for Detroit with a $2 million gift for city-based scholarships to Morehouse College in Atlanta. Detroit-based GAA Manufacturing and Supply Chain Management founder and Chairman Pickard and his cousin, Judson Pickard of Cincinnati, are jointly making the donation, William Pickard told Crain’s. It establishes the Pickard Scholars Program at the private, historically black men’s college to recruit and give scholarships to students from LaGrange, Ga., and the Detroit, Flint and Cincinnati areas — all cities with Pickard ties. William and Judson Pickard grew up in LaGrange, near Atlanta where Morehouse is based. “We grew up knowing that Morehouse was the place to go, in terms of the ideal,” William Pickard said. “It was the Harvard, as far as we were concerned ... that’s an intricate part of my DNA, because I was born and

raised in those towns down in Georgia.” Neither ended up attending Morehouse, but two of Judson’s sons did and William’s daughter went to nearby Spelman College, a historically black liberal arts college for women. “We are committed to helping African American men thrive as leaders, scholars and future businessmen,” Judson Pickard, who owns McDonald’s franchises in the Cincinnati area, said in the release. The scholarships are based partly on academics and can range up to $20,000 a year, William said. While in ninth grade, William Pickard moved with his family from LaGrange to Flint. He earned an associate’s degree from Mott College in Flint in 1962, then degrees from Western Michigan University and the University of Michigan, and a Ph.D. from Ohio State University in 1971. He started out in business as a McDonald’s franchisee in Detroit that same year, and eventually founded GAA in 1989.

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