Crain's Detroit Business, Oct. 14, 2019 issue by Crain's Detroit Business

LEED czar talks challenges and opportunities of building green Page 3 Mahesh Ramanujam

OCTOBER 14 - 20, 2019 | crainsdetroit.com

PulteGroup moving from Bloomfield Hills to Troy Page 4

CRAIN’S MICHIGAN BUSINESS: THE DRINK ECONOMY

RAISING A GLASS Ales and lagers aren’t the only game in town when it comes to Michigan’s drink economy. The wine industry is flourishing, and craft spirits and even kombucha are growing at a breakneck pace. This week, Crain’s Michigan Business uncorks a look at some of the major players in the beverage business. Stories start on Page 10.

FINANCE

ECONOMIC DEVELOPMENT

Growing like a weed

Switch goes to Legislature for retroactive tax break

Credit union doubles in size by catering to canna-business By Dustin Walsh

Sterling Heights’ Live Life Credit Union doubled its assets in the past 10 months — all organic growth. More than $500,000 in cannabis money is deposited weekly at the institution, which is the exclusive rea-

son its assets have ballooned to $26 million. Live Life made the decision to provide banking services to the state’s legal cannabis industry just over a year ago amid a shaky regulatory framework and excessive risk. CEO Karla Haglund said it’s the best busi-

crainsdetroit.com

Vol. 35 No. 41 $5 a copy. $169 a year.

dwalsh@crain.com

NEWSPAPER

ness decision she’s ever made. As more states have legalized cannabis, institutions like Live Life have started serving marijuana businesses, but conflicting federal and state Haglund laws have kept most banks and credit unions from dealing in the burgeoning, yet lucrative, green economy. In May, attorneys general from 21 states — including Michigan Attorney General Dana Nessel — signed a letter urging U.S. Congress to allow financial institutions to serve such businesses. SEE LENDING, PAGE 18

By Chad Livengood clivengood@crain.com

Four years after winning the Legislature’s approval to make tax-free capital investments in Michigan, Las Vegas-based data center giant Switch Inc. is back at the state Capitol asking lawmakers for a retroactive property tax break for its Grand Rapids-area server farm. Switch (NYSE: SWCH) is seeking an exemption to paying about 8 mills of personal property taxes on the value of the equipment inside the data center to Caledonia Community Schools for capital debt service and other schools in Kent County for operations. Switch’s leaders are arguing former Gov. Rick Snyder’s administration granted the company relief on all but the 6 percent corporate in-

come tax for 15 years. The company contends the property tax break is necessary for its data center at the former Steelcase Pyramid building in Gaines Township to remain competitive in the rapidly growing data storage industry. The Pyramid houses data servers for BDO USA, Cisco, IBM, North American Bancard, United Rentals, Wells Fargo and a subsidiary of Mason-based Dart Container Corp., public records show. Switch’s bid for enshrining additional tax relief in state law has touched a nerve with leaders of local schools, which stand to lose $373,000 annually and would have to refund the company nearly $625,000 in taxes paid for previous years. SEE SWITCH, PAGE 21

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

MICHIGAN BRIEFS

INSIDE

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

Senator: New Whitmer-backed budget bill is ‘olive branch’ to Republicans A new budget bill backed by Democratic Gov. Gretchen Whitmer would partially or fully undo some of the funding vetoes she issued, according to the Associated Press. The supplemental spending legislation introduced last week would also fund a number of her priorities, such as covering tuition for adults age 25 and older to attend community college to obtain job skills. Whitmer two weeks ago vetoed $947 million in Republican-proposed spending while signing the new state budget. The new bill would partially or fully restore funding for an autism program, county veteran services, sheriff road patrols and an increased Medicaid reimbursement rate for rural hospitals. Democratic Sen. Curtis Hertel Jr. of East Lansing said his bill is an “olive branch” and attempt to start “real” budget conversations with Republicans who control the Legislature.

Consumers Energy to buy planned wind farm

Jackson-based Consumers Energy

Co. has received state approval to purchase a 166-megawatt wind farm in Hillsdale County and recover the full costs through future rate hikes, said the Michigan Public Service Commission. Under the plan, Crescent Wind LLC would design, engineer, build, start up and test the project. When completed, Consumers would purchase the wind farm for an undisclosed price. The farm in Adams, Moscow and Wheatland townships is expected to go online before Dec. 31, 2020. Consumers, in its request for approval of the agreement, said the Crescent Wind project would have a 31-year levelized cost of energy of approximately $48 per megawatt hour, lower than its previous projections of future wind-energy costs of $57.75 per megawatt hour, but only if Consumers qualifies for the full value of the federal production tax credit. Levelized cost of energy is the measure of the lifetime costs of a project divided by its energy production. Consumers said the installed cost for the Crescent Wind project is $1,506 per kilowatt, lower than the assumed cost of $1,560 per kilowatt projected in the company’s Renewable Energy Plan. The utility can’t file its next rate case until January 2020, according to the commission. Over the past several years, Con-

CALENDAR

GETTY IMAGES/ISTOCKPHOTO

Consumers Energy has closed seven coal-fired power plants and is expanding its renewable energy sources to hit 40 percent clean energy by 2040.

sumers Energy has closed seven coal-fired power plants and is expanding its renewable energy sources to hit 40 percent clean energy by 2040. Along with DTE Energy Co., Consumers also plans to reduce carbon emissions 90 percent by 2040.

Counselors cheer OK of bill protecting their ability to practice

Michigan counselors are cheering after the initial passage of legislation aimed at safeguarding their ability

to practice psychotherapy, according to the Associated Press. The state House voted unanimously this week to advance the bill to the Senate. It would clarify the scope of practice for Michigan’s 10,000 licensed professional counselors. The measure is a response to the state Department of Licensing and Regulatory Affairs’ proposed revision of counseling rules. A state spokesman said existing law does not give counselors the au-

CLASSIFIEDS

DEALS & DETAILS

OPINION

OTHER VOICES

PEOPLE

RUMBLINGS

WEEK ON THE WEB

thority to diagnose and use psychotherapy technique. Counselors say they have been doing so for years, however, and the rule changes would have significant consequences for them and the 150,000 people they serve. Republican Rep. Aaron Miller of Sturgis, the sponsor of the bill, said it is the “antidote” and a “simple solution” to let counselors continue working. Over the past few years, LARA has been considering updating the 31-year-old counseling regulations to remove language that allows LPCs to make diagnoses and offer psychotherapy, language that has long been at odds with state law and common practice. It is not clear how LPCs were allowed to diagnose and treat people with mental illness in opposition to state law, but they have been doing so by practice for more than 30 years by regulation and post-graduate studies offered by many Michigan colleges.

2019 KNIGHT ARTS CHALLENGE

CONGRATULATIONS to the 36 winners of the 2019 Knight Arts Challenge Detroit, receiving a share of $1,385,000 to bring their best arts ideas to life! KF.org/arts | @knightfdn | #knightarts

Photo: Stephen Hennessey

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

FINANCE

ENVIRONMENT

Rules murky on Opportunity Zones for cannabis businesses By Kirk Pinho kpinho@crain.com

new construction projects are kind of standardizing themselves to what I would say are best-in-class practices for building a sustainable, healthy and livable building just because of peer competition, competitive pressure. When I’m building a building that’s let’s say, a LEED Gold, they are not going to build a building right next to me that is LEED Silver, or LEED Certified, so that peer pressure on the market is going fine. As far as new construction is concerned, I do think that right now the market is kind of struggling with which is the best system to follow. Obviously, we always advocate for LEED, being the organization that created and was advocating for it, but generally speaking, where people do realize that better construction practices, better design practices and better living spaces are a critical requirement for them to be able to attract and retain and own tenants. So that shift is happening. And then the larger trend I see is health and wellness seems to be more easily understood by people, probably more than energy efficiency, water conservation or waste avoidance.

The federal government hasn’t formally sorted out whether Opportunity Zone funding can be used for recreational or medical marijuana purposes. That has left the legal community to date trying to determine how precisely the new federal tax incentive program can be deployed now that both recreational and medical marijuana are legal in Michigan. Generally speaking, legal experts agree that Opportunity Zone funding cannot directly fund a marijuana operation because cannabis is still an illegal Schedule I narcotic under the Controlled Substances Act at the federal level but could, on the other hand, provide equity to a real estate project that ultimately leases space to one or more businesses involved in the state’s fledgling recreational pot industry. “From a real estate perspective, I think we are fine where we are at,” said Joseph Kopietz, member of the Real Estate Group for Detroit-based law firm Clark Hill PLC. “But in order for me to ever comfortably advise anybody to even consider investing in an operating business that’s engaged in marijuana activities, it needs some guidance out of Treasury.” An email was sent to the U.S. Department of Treasury seeking comment. “If enough people start asking this question, if it starts appearing more publicly, then maybe they’ll say they have to nip it in the bud,” said Saulius Mikalonis, senior attorney in the Bloomfield Hills office of Plunkett Cooney PC, where he heads up the law firm’s Environment, Energy and Resources Law and Cannabis Law industry groups. Michigan voters in 2018 legalized recreational marijuana use and possession, a decade after they legalized marijuana use for medical purposes.

SEE LEED, PAGE 17

SEE CANNABIS, PAGE 20

Green building brings paybacks

The outdoor riverfront terrace at the TCF Center. TCF CENTER

After TCF Center certification, LEED czar talks costs, waste and challenges By Kirk Pinho

Mahesh Ramanujam: We are seeing more and more

kpinho@crain.com

Last week, the new TCF Center became the state’s largest building to be LEED (Leadership in Energy and Environmental Design) certified by the U.S. Green Building Council, attaining the Gold ranking, the second-highest offered behind Platinum and ahead of Silver and Certified. The 2.4-million-square foot former Cobo Center becomes one of the 1,624 LEED buildings in Michigan and one of 213 in metro Detroit and 43 in the city limits. Statewide, there are 621 more in the process of earning LEED certification. Mahesh Ramanujam, the president and CEO of the USGBC, sat down with Crain’s Detroit Business real estate reporter Kirk Pinho last week to talk about the state of the green building movement. This interview has been edited for clarity

Mahesh Ramanujam

Crain’s Detroit Business: Can you talk about any developments in green building, any sort of trends that you’re seeing at the national level that are trickling down?

TECHNOLOGY

Mobile app Plain Sight aims to take the stress out of networking by connecting people nearby the user with similar interests.

Gilbert-backed app aims to be Tinder for networking By Kurt Nagl knagl@crain.com

A new mobile app backed by billionaire businessman Dan Gilbert is making the rounds at Detroit networking events and taking some stress out of schmoozing. Plain Sight, which helps users connect with others at parties and events, launched on Apple and Android app stores last week after attracting $500,000 in funding from pre-seed angel investors, including the Quicken Loans Inc. chairman. It was launched by founder and CEO James Chapman, former di-

rector of entrepreneurship for the Quicken Loans Community Fund, who is looking to tack on another $1 million in seed funding for his startup. Chapman, 34, sees his app as a Chapman 21st century business card of sorts, an easy icebreaker and more efficient way to meet people of influence. Bigger picture, Chapman

PLAIN SIGHT

is developing a tool he hopes will help others build social capital, especially in a city with high poverty rates. With an increasing number of “demo days” and startup grant programs, access to monetary capital for entrepreneurs is improving, but penetrating the social circle of movers and shakers is still challenging, especially for the average person. “Imagine all the networking events you’ve gone to and just talked to the person who’s closest to you when the person you want to talk to is on the other side of the room,” Chapman said. SEE APP, PAGE 20

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

REAL ESTATE INSIDER

COSTAR GROUP INC.

PulteGroup Inc. is leaving its longtime Bloomfield Hills office for about 21,000 square feet in the Troy PentaCentre office complex.

PulteGroup waving goodbye to Bloomfield Hills (again) PulteGroup Inc. is exiting Bloomfield Hills to move south ... yet again. More than six years after it revealed that it was taking its headKIRK quarters in the PINHO posh Oakland County suburb to Atlanta, the homebuilder is now moving its remaining Michigan operations to the Troy PentaCentre office property (more on that in a bit). The homebuilding company’s former CEO, Richard Dugas, said in 2013 that the move to Atlanta would “bring us closer to our customers and a larger portion of our investment portfolio.” Location is also at the core of this new move, said Macey Kessler, corporate communications manager. She said in an email that “the new office space offers a more central location with easy access to I-75 and comparable square footage to our current Bloomfield Hills space.” About 130 employees will make the move, expected to be complete in Q1 next year. The new lease is for 21,400 square feet and includes building signage at 2800 Livernois Road, said Andrew Hayman, president of the Southfield-based real estate ownership and management firm Hayman Co., which owns the property. About $8 million has been spent on upgrades in the two-plus years that Hayman has owned it. John Fricke, executive vice president in the Southfield office of Colliers International Inc., which leases the space to tenants, said PulteGroup’s lease expires in March for 160,000 to 170,000 square feet, but the company physically occupies only about half a floor, or about 33,000 square feet in the 198,000-square-foot building. Fricke also said the Pulte building, which is at 100 Bloomfield Hills Parkway, is going to undergo an overhaul that includes adding fitness, conference and food service amenities, plus interior and exterior upgrades. Work has begun on some of the updates with the goal of having them

“The goal is to secure one or more multiple long-term tenants in 2020.”

completed last month. Troy-based Compass Commercial LLC and Hayman Co. were the brokerage houses on the deal, which was signed in April.

John Fricke

Eddystone repair permit issued

done by early 2020. “The goal is to secure one or more multiple long-term tenants in 2020,” Fricke said. “There are very few Class A options in Oakland County in that (200,000-square-foot) range.” It is owned by Bloomfield Hillsbased Kojaian Management Corp. Hayman said the PulteGroup lease is one of several recent deals at the property, which was leasing for $17.95 per square foot when Hayman paid $55 million ($75.14 per square foot) for it. The 732,000-square-foot complex formerly known as the Troy Officentre now asks $19.95 per square foot, Hayman said, following the renovations. A few months after Hayman bought it, it was renamed the Troy PentaCentre after its five interconnected buildings. Here are some of the other recent leases: J Leoni AG, 12,700 square feet. The company is moving at the end of 2019 from 30500 Van Dyke Ave. in Warren, said Lawrence Randazzo, senior vice president of Hayman Co. Troy-based L. Mason Capitani Inc. and Hayman Co. were the brokerage firms. J EASi Engineering, 23,500 square feet. The company moved in August to the space following a March lease that brought the firm from 901 Tower Drive in Troy, Randazzo said. Hayman and the Southfield office of Cushman & Wakefield Inc. were the brokerage firms. J Joseph Aiello & Associates, 4,500 square feet. The company moves this month from 1450 W. Long Lake Road in Troy, Randazzo said. Hayman Co. was the landlord and tenant rep. J LG Innotek, LG Hausys and LG Display, 7,300 square feet. The Southfield office of Los Angeles-based CBRE Inc. and Hayman Co. This is a temporary sublease from affiliates; CBRE and Hayman Co. were the brokerage firms on the deal. J Orbbec, expanded by 6,300 square feet to 11,100. The expansion was

It may have taken a couple of months, but the Ilitch family’s Olympia Development of Michigan has its building permit for masonry and roof repairs for the Hotel Eddystone. Eddystone Renaissance LLC, a subsidiary of Olympia, began work last week, according to a company spokesperson. The city confirmed a permit was issued on Oct. 4 after the application was submitted July 3. “With hardworking Detroiters at the helm on site, this innovative project remains firmly on pace. This marks an exciting new chapter as we continue to build on the momentum of revitalizing our city,” the company said in part in a statement Monday. In May, the Downtown Development Authority approved an agreement with Olympia for the $40.9 million redevelopment of the long-vacant building into 96 apartments. It included a series of milestones that must be met, otherwise a $33 million letter of credit or performance bond is tapped to complete the project. The agreement gives Olympia 45 days to complete the roof repairs. Window installation is to begin Dec. 18, under terms of the pact. Detroit-based Kraemer Design Group is working on the project and Troy-based O’Brien Construction is the general contractor. A 2015 agreement with the Downtown Development Authority says Olympia had one year from the issuance of a temporary or permanent certificate of occupancy for the new Little Caesars Arena to redevelop the Eddystone building that opened in 1924 at 110 Sproat St. The temporary certificate was issued Sept. 12, 2017. The Eddystone was spared from demolition in a compromise agreement with the city that allowed Olympia to implode the former Hotel Park Avenue nearby in 2015. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

here’s to the man who doesn’t just set an example, but sets the standard. Congratulations to our CEO, Jeff “JB” Brown for being named the Thurgood Marshall College Fund CEO of the Year. Thank you for all that you do to make Ally a truly diverse and inclusive company. All 8,500 allies are so proud to work with a leader who doesn’t just say the right thing, but always does it right too.

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

Kefallinos faces federal suit over how Bouzouki dancers are paid Seasoned

Connected

Ve r s a t i l e

CALL OUR TEAM FOR A FREE P R O P E R T Y VA LUAT I O N Kevin Jappaya, CCIM President

Investment Sales Seller/Landlord Representation B u y e r / Te n a n t R e p r e s e n t a t i o n

kjcre.com 248.851.8900

30201 Orchard Lake Road, Suite 100

Farmington Hills, MI 48334

FACEBOOK.COM/CRAINSDETROIT

You know. The Motor City has both fueled and felt the power of the Laker Effect. Many of our students not only hail from the Detroit area, but they also return there: as analysts and engineers, biochemists and health professionals, as leaders in business and leaders of communities. Support them. Support us. And see the power of what can be.

gvsu.edu/SupportLakerEffect

By Kirk Pinho kpinho@crain.com

Detroit landlord and real estate investor Dennis Kefallinos has been hit with a federal lawsuit because he didn’t pay at least two dancers at Bouzouki, the strip club he owns in the city’s Greektown neighborhood. It’s the latest Fair Labor Standards Act complaint filed against a local club owner, coming roughly around the same time that Alan Markovitz, who owns The Flight Club in Inkster and The Coliseum and Penthouse Club strip clubs on Eight Mile Road in Detroit, was targeted with a similar lawsuit by two former dancers and a DJ from the suburban Wayne County club. The class acKefallinos tion complaint filed in June by two former Bouzouki dancers comes amid a wave of settlements nationally in which clubs have paid millions in back-due wages, in general because they were classifying dancers and other workers such as bouncers and DJs as independent contractors rather than employees, allowing them to skirt federal wage laws. Cases have been brought virtually all over the country, from Las Vegas to Denver, Pittsburgh to Dallas. The University of Illinois College of Law’s Michael LeRoy, in “Bare Minimum: Stripping Pay for Independent Contractors in the Share Economy” published in 2017 in the William & Mary Journal of Race, Gender, and Social Justice, writes that of 75 federal and state court labor rulings he found, 38 determined that dancers were employees while only three found that they are independent contractors. (The other 34 were decided not on employment status, but on a procedural ruling, he wrote.) “When there is a challenge waged, it’s very rare that it doesn’t prevail,” said Megan Bonanni, equity partner for Royal Oak-based law firm Pitt McGehee Palmer & Rivers PC. She represents the plaintiffs in the Markovitz cases and successfully sued strip club chain Déjà Vu, netting $6.5 million for more than 28,000 workers in a case that wrapped earlier this year when the U.S. Sixth Court of Appeals upheld a May 2017 decision. Bonanni said even though she has been victorious in earlier cases against the club owner, not much has changed. “I asked at the time, I had made the request that they create an education program, do a change-over, converting dancers from independent contractors to employees, and I told their attorney that’s what I thought was the right thing to do, and also that I’d be back if you don’t correct these illegal employment practices,” Bonanni said. “That’s why we are back.” It’s more complicated than just a demand for an hourly wage and overtime pay, health benefits and worker’s compensation, some argue. In California, a state Supreme Court ruling is making it more difficult for dancers to be considered in-

Need to know

JJIssue is whether they are club

employees or independent contractors JJClass action complaint comes amid wave of settlements nationally in which clubs have paid millions in back-due wages JJLawsuit could cost club owner, real estate investor at least $80,000

dependent contractors, which sparked concern from Stormy Daniels, who wrote in a February op-ed in the Los Angeles Times that work status allowed for more flexible hours, the ability to move to clubs where the pay is better and increased ability to shield their identity. Daniels, the adult film star and exotic dancer who says she had an affair with President Donald Trump and was paid hush money, is also a spokeswoman for Déjà Vu. “In this industry, classification (as employee or independent contractor) is sometimes a very fact-specific inquiry and there is not one size fits all,” said Christopher Trebilcock, member for Detroit-based law firm Clark Hill PLC specializing in labor and employment law. “There is not one size fits all for clubs, or for entertainers. There may be entertainers who dance at multiple clubs, as well as private gigs. There are some that have established themselves as LLCs and run a business by dancing. There are others that work solely for one club.” Still, he said, independent contracting can work. “There are lawful ways to compensate where entertainers are not employees,” Trebilcock said. “You could set it up in ways where dancers establish their own schedule, come and go when they want. They keep all their own money, set their own prices for dances. If they have formed an LLC, that’s always helpful.”

Employees or contractors? At issue in the Kefallinos case is whether the Bouzouki dancers were treated as employees or independent contractors. The latter would generally allow them to set their own hours, coming and going as they please, and they would be able to dress as they wanted, among other things. However, according to the complaint, that was far from the case. Bouzouki, which the lawsuit says has north of $500,000 in revenue per year, set the two dancers’ work hours, prevented them from leaving early without permission, required them to wear specific uniforms or types of clothing, and charged fees if they missed a call to the stage or called off work, according to the complaint. Based on the duration of employment and average number of hours worked by just the two dancers, Carla Merriweather and Ami Coleman, the lawsuit could cost Kefallinos at least $80,000. The plaintiffs say there were compensated only in tips from the patrons of the club, 432 E. Lafayette St. Each shift, they were required to generally pay $155 to the club, $10 to

the “House Mom” (a sort of club manager) and $20 to the DJ, according to the complaint, which is in front of Judge Victoria Roberts of the U.S. District Court for the Eastern District of Michigan. The nightly fees can vary. The lawsuit also says it seeks to “recover unpaid wages owed to them and on behalf of all other similarly situated employees, current or former.” Maia Johnson Braun, an attorney with the Troy-based law firm Gold Star Law PC who is representing Merriweather and Coleman, said the case is in the discovery phase and could be certified as a class action complaint by March, which would then prompt Kefallinos to provide the names and last known addresses of dancers. They could then opt into the class action suit. “It has been a pretty commonly brought suit in other jurisdictions and almost across the board, there aren’t any that I’m aware of as of late where the individuals have not been deemed an employee,” Johnson Braun said. An email was sent to Kefallinos’ attorney, Ben Gonek, seeking comment, as well as Markovitz’s attorneys. Kefallinos said in his response to the lawsuit that Merriweather and Coleman were independent contractors, not employees, and are not owed any back pay. Kefallinos’ court response denies the claims the dancers made. Markovitz has been sued no fewer than five times in federal court in Michigan for violations of the FLSA with varying results by former employees like bouncers and dancers at his clubs.

Sued before The Kefallinos case is the first known time he has faced federal litigation for his Bouzouki business, but he has been sued in federal court before for his real estate enterprise. Earlier this year, he agreed in January to a $300,000 consent order with the nonprofit Fair Housing Center of Metropolitan Detroit after more than two years in court arguing a federal lawsuit that alleged his residential properties discriminated against people with children, in violation of federal law. He repeatedly denied running afoul of fair housing law, saying he regularly rents to people with children. In 2014, he was sued by people who claimed that they leased apartments or lofts from him when he knew he had no certificates of occupancy for any of the buildings and that there were safety hazards. He won that case on summary disposition and an appeals court upheld the decision. The attorney representing the plaintiffs said because it was a Michigan Consumer Protection Act complaint, it was thrown out because activities sanctioned by the government — such as renting properties, governed by Detroit city code — can’t be the basis of such complaints. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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

Michigan ACOs reap profits for Medicare, doctors, hospitals By Jay Greene

jgreene@crain.com

Michigan-based accountable care organizations continue to cut costs for traditional Medicare programs while reaping financial benefits for hospital and physician participants. In 2018, three of the top 10 ACOs in the nation for total earned shares are Michigan organizations: No. 5, Beaumont ACO, Southfield, $19.9 million; No. 8, Physician Organization of Michigan ACO, Ann Arbor, $18.1 million; and No. 9, Affirmant Health Partners’ Federation ACO, Portage, $17.4 million. “These accelerated results are not only a reflection of our ability to reduce unnecessary care, but also of our ability to deliver quality care to our patients,” William Mayer, M.D., president and CEO of Affirmant, said in a statement. “Our success speaks to the power of collaboration among physicians and leading health systems to achieve healthier patients and communities at an affordable cost.” Medicare ACOs are groups of doctors, hospitals and other health care providers, who come together voluntarily to provide coordinated high-quality care to Medicare patients. The goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. The Federation ACO is owned and managed by Affirmant Health Partners — a clinically integrated network of over 5,000 physicians across Michigan’s Lower Peninsula. Partners include Bronson Healthcare, Covenant HealthCare, Henry Ford Allegiance Health, Sparrow Health System and Spectrum Health Lakeland. Over the two years in the program, Federation ACO has saved Medicare $51 million, earned $25 million in shared savings and received quality scores over 97 percent. Overall, Medicare saved $1.7 billion from 548 active ACOs nationally in 2018, returning a record $965 million to the participating health care organizations and producing a gain of $734 million for CMS. In 2017, CMS saved $314 million from the program. Some 66 percent of ACOs achieved savings in the Medicare Shared Savings Program, which was authorized by the Affordable Care Act of 2010. ACOs share in savings by meeting a quality performance standard and saving at a rate equal to or greater than a minimum benchmark. Total earned shared savings are adjusted for quality performance. Another high performing ACO is Physician Organization of Michigan Accountable Care Organization, taking care of 77,000 Medicare beneficiaries and sponsored by the University of Michigan Health System. In 2018, POM ACO saved Medicare $43.1 million and retained $18.1 million in earnings. “We are proud to report savings yet again in 2018, which continues our strong track record of saving CMS over $146 million of taxpayers’ dollars during the life of our ACO and sharing in those savings the last two years,” said David Serlin, M.D., POM ACO’s medical director. Last year, Serlin said POM provid-

Mayer

Serlin

Michigan's top accountable care organizations The top accountable care organizations for total shared savings in 2018, ranked by earned savings: Beaumont ACO, Southfield: Total savings $45.1 million; earned $19.9 million; quality score, 89.8% Physician Organization of Michigan ACO, Ann Arbor: Total savings $43.1 million; earned $18.1 million; quality 85.6% Federation ACO, Portage: Total savings $36.6 million; earned $17.4 million; quality score 97.2%. U.S. Medical Management ACO (many states), Troy: Total savings $35.2 million; earned $12.6 million; quality score 73.2%. McLaren High Performance Network ACO: Total Medicare savings, $13.8 million; earned $6.4 million; quality score 94.5% Genesys PHO LLC, Flint: Total savings $12.2 million; earned $5.4 million; quality score 89.5%. Southern Michigan Rural ACO: Total savings $9.9 million; earned $4.4 million; quality score 90% United Physicians ACO, Bingham Farms: Total savings $7.9 million; earned $3.9 million; quality score 100% Greater Genesee County (GGC) ACO, Flint: Total savings $6.4 million; earned $3 million; quality score 95.4% Greater Michigan Rural ACO: Total savings $4.5 million; earned $2 million; quality score 92% Source: Centers for Medicare and Medicaid Services

ers focused on the transition between hospitals and nursing homes or other skilled-nursing facilities and in the number of days spent in both types of facilities to improve quality and lower costs. Michigan’s 20 accountable care organizations earned back nearly $97.5 million last year compared with $72 million in 2017. In addition, 65 percent of Michigan ACOs earned money in the Obamacare program, compared with 36 percent in 2017. Overall, Michigan’s ACOs saved Medicare a total of $214.9 million, up from $181.6 million the year prior. Trinity Health Integrated Care, which is based in Livonia, earned $18.7 million in Medicare savings during its first year. However, Trinity operated its ACO in New York, Pennsylvania, Indiana and Idaho and is not counted as one of Michigan’s 20 ACOs.

How Beaumont became the No. 1 ACO in Michigan Beaumont ACO has earned savings for six straight years with 2018 becoming one of its best years, said Walter Lorang, its executive director

and COO. The ACO, which includes now includes all eight Beaumont hospitals and 1,700 physicians, generated $45.1 million in total savings, earning $19.9 million in 2018. “We continue to focus on ways to help patients manage their health,” Lorang said. “Our collaboration with physicians has helped us improve communication and information sharing among primary care physicians, specialists and hospitals.” Ryan Catignani, vice president of managed care and accountable care services, said Beaumont Health’s close partnership with physicians in the ACO has “allowed us to improve efficiency, reduce costs and improve care.” In 2014, Beaumont Health was formed in a merger with four-hospital Oakwood Healthcare, three-hospital Beaumont Health system and Botsford Hospital. Beaumont ACO originally was formed as the Oakwood ACO. In 2018, the Beaumont ACO for the first time incorporated all three of Beaumont’s three legacy hospitals and doctors, increasing covered lives from 13,412 to more than 23,900. “We had the third highest savings rate nationally” at 15 percent, Lorang said. Beaumont’s six-year average is 10.8 percent. The national ACO average is about 2 percent. The savings rate is the number of dollars an ACO saved Medicare divided into its historic benchmark Medicare spend. Beaumont’s historic Medicare spending for its ACO population is $300 million. “We are not a flash in the pan. We have had consistent success over time,” said Lorang, noting that Beaumont has saved Medicare a total of $133 million since 2012, retaining $60 million at an average quality rating of 92 percent. Catignani said Medicare’s shared savings program fits in well with Beaumont’s transition from fee-forservice payments to fee-for-value. Lorang said Beaumont has three basic approaches to reducing costs for its traditional Medicare ACO patients. First, it uses the patient-centered medical home model to coordinate care at the primary care physician level and with specialists and hospitals; second, it uses several care management programs to reduce costs for the sickest patients; three, it uses technologies like electronic medical record systems to track care and avoid duplication and waste. Care management programs include advanced illness management, where six nurses focus on the top 1 percent sickest patients to make home visits, drive patients to doctor appointments; transition of care, when a patient has been discharged from a hospital and nurses follow up to ensure they follow instructions; skilled nursing care followup, where nurses make sure patients receive best care in post-acute care settings. “We want to create a disease management program to focus on highcost patients,” said Lorang, adding that every year ACOs need to find more ways to reduce costs because Medicare measures savings based on each ACOs’ previous year. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Norman A. Yatooma ATTORNEY AT LAW

• • •

NYA won MI’s largest judgment in 2018. NYA won MI’s largest legal malpractice judgment of all time. NYA won the largest franchise settlement in MI’s history.

For Help Minding Your Own Business, Contact Us for a Free Consultation. (248) 481-2000 | normanyatooma.com Sources: Thompson Reuters Westlaw Edge Case Evaluator Report for Largest Legal Awards and Lexis Nexis Settlement and Verdict Analyzer

From dedication to innovation in the practice of law... Celebrating 50 years and looking forward to 50 more!

5 1969 2019

Kitch Attorneys & Counselors www.kitch.com

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

OPINION COMMENTARY

Elimination of private college How Domino’s disruptions might help tuition grants worsens talent crisis it keep its slice of pie M I

t’s a tale as old as business: Sometimes the disruptors get disrupted themselves. We saw whispers of that last week when Domino’s came out and lowered its long-term sales projections. The reason? It’s hard to predict what changes will be wrought by the fact that you can now get DoorDash to deliver you a Big Mac or a Burrito Supreme. The Ann Arbor-based pizza franchisor, which last year overtook Pizza Hut as the largest in the world by sales, was a disruptor itself, by virtue of delivering food to customers’ doors when that was a rare practice outside big cities. And over the past decade, it’s been a darling of the fast-food world and of Wall Street, first with a bold ad campaign touting new recipes that admitted its old pizza wasn’t really all that good, then a focus on using technology to make ordering easier. The big one was letting customers save standard orders. Getting “the usual” became a matter of a couple of clicks. All these investments (combined with a massive international expansion effort) delivered for investors. Shares of Domino’s (NYSE: DPZ) were trading for around $8 a decade ago; now, they’re over $250 and flirted with $300 last year. If you’d put $1,000 into those shares in 2009 and held onto them, they’d be worth north of $30,000 today. But there is uncertainty in pizza-land. The food business is undergoing a heavily advertised revolution. Third-party delivery services are bringing a huge wave of competition, even in towns where pizza used to be the only option if you didn’t want to leave the house. Now, the likes of DoorDash, Seamless and UberEats are offering steak, sushi and everything in between. And Domino’s has more to lose than most from the new competition. But this isn’t only a story of a company losing business to a new and innovative business model. There are complicating factors. Right now, those companies and their restaurant clients are spending big — and losing money — in an attempt to “buy market share,” in the words of Domino’s CEO Richard Allison Jr. The current free and cheap delivery deals can’t go on forever. It remains to be seen whether anybody can make money delivering subs in South Lyon or tacos in Taylor. Which makes Domino’s model of delivery by its franchisees’ own employees — a model it knows how to run profitably — look pretty good in the long run. And it’s important to note that even Domino’s dialed-back growth expec-

MICHAEL LEE malee@crain.com

Third-party delivery services are bringing a huge wave of competition, even in towns where pizza used to be the only option if you didn’t want to leave the house. tations would thrill plenty of its competitors — 7 percent to 10 percent sales growth is still awfully healthy for an established retail business. Allison warned of a shakeout coming in the industry. It’s just not clear who will be eating whose lunch. We’ve seen from the WeWork saga that sometimes disruption is just smoke, mirrors and a big pile of investment capital that doesn’t last forever. But whether the delivery wars go well for the GrubHubs of the world or not, it is pretty clear that Domino’s is in a good position to weather those changes precisely because it was willing to disrupt its own business — by reworking its most basic product, by investing in technology with an eye toward details where small changes add up to make a big difference. It never slowed down on investing in innovation. The lesson here for business owners is that taking hard looks at every area of a business — and not being afraid to throw away the old recipes with brutal honesty when they’re not working — can offer armor when new competitors and new challenges come along. Bottom line: If you’re not willing to look at your business the way a disruptor does, you’re making it weaker for the day that disruptor comes for you. Michael Lee is managing editor of Crain’s Detroit Business.

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.

ichigan’s talent crisis. You hear about it everywhere — too few skilled, educated workers are available to fill important jobs in an array of sectors, from education and health care to business, finance, technology and manufacturing. Unfortunately, partisan wrangling among our state’s elected officials is set to worsen Michigan’s worker shortage in the future. This month’s budget battle eliminates an essential financial aid program for today’s college and university students, resulting in lasting harm to thousands of academic goals and career trajectories. Nearly 17,000 Michigan postsecondary students are impacted by this change. These future teachers, accountants, nurses, programmers and manufacturers — many of whom are from nontraditional backgrounds — are preparing to put their career ambitions on hold as their need-based Michigan Tuition Grants evaporate. Just look at the numbers: J 5,646 MTG recipients are over the age of 25, the only program serving adult students in Michigan who are earning a bachelor’s degree J At least 210 grant recipients are veterans J More than 6,000 grant recipients are first generation college students J MTG recipients tend to complete college in an average of four years compared to a statewide average of seven years for students who do not receive grant aid. This is three years of college saved and — more important for Michigan’s economy — three years in the workforce that students without grant funding do not have. J The tuition grant also saves an average of $10,400 in loan interest per student over the lifetime of a 30-year college loan. This is money that can be spent in the economy, rather than

GETTY IMAGES/ISTOCKPHOTO

OTHER VOICES Marsha Kelliher

paying down debt. J A bachelor’s degree from a public university in Michigan costs the state $28,534 in appropriations dollars. An associate’s degree from a community college costs the state $39,643 in appropriations dollars. Comparatively, Michigan Tuition Grant students cost the state an average of $9,600 for a bachelor’s degree (four years of a $2,400 tuition grant). That’s a third the price of a public university education and less than a quarter the price of a community college education. The contributions these students can make to our economy are limitless, if they have the right opportunities before them. The Michigan Tuition Grant provides those opportunities, helping students choose the schools that are best

for their unique learning needs. In fact, removing independent colleges from the state’s overall baccalaureate attainment would reduce the average number of bachelor’s degreed individuals in the state by up to 12,000 per year. Over a decade, this would result in 120,000 fewer individuals in Michigan with a bachelor’s degree. Ultimately, the loss of this financial aid option will harm our state’s economy for decades to come. When skilled, educated workers are not available in Michigan, employers will almost certainly look elsewhere. Our state will become smaller and less competitive. But most tragically of all, it’s today’s young adults who will pay a lifelong price for this short-term political warfare. A decade from now, few will remember how this year’s budget crisis played out. But there are 17,000 Michigan adults who will very much remember how they were forced to give up their dreams because a group of short-sighted elected officials didn’t do their jobs responsibly. It’s time to do the right thing. Marsha Kelliher is the president and chief executive officer of Walsh College.

LETTERS

House Bill would enable counselors to continue to practice To the Editor: Sometimes, we experience moments in life that shock us, shake us and lead us to wonder whether we can handle what has come our way. Here is one such situation … and a request for your help. As a licensed professional counselor, it is my true calling to help my clients heal from the past and create the life they are meant to live. Yet, like a shockwave, I, and my 10,000 fellow Michigan licensed professional counselors, recently were intensely jolted when we discovered in horror that we may lose our ability to practice due to the state Department of Licensing and Regulatory Affairs’ proposed revision of counseling rules. As Michigan’s largest contingent of

mental health professionals, we wondered why more than 150,000 Michigan residents will be robbed of desperately needed services during a mental health shortage, destroying trusted client-counselor relationships. Further, why steal LPCs’ professional counseling practices and their living? LPCs valuably guide, support and save lives of Michigan’s children, teens, adults and families struggling with issues such as depression, anxiety and suicidal ideations to opioid addictions. Insurance companies’ confidence in our value led to LPCs accepting insurance, giving residents far more access to mental health services. Instead of giving in to fear and defeat, Michigan’s LPCs and community organizations, universities, leaders and other mental health providers with strength and courage support House Bill 4325 to resolve issues and enable counselors to continue to practice.

Your support can help pass this bill. We thank you for contacting your senator and asking: “Please pass House Bill 4325 without any amendments.” My clients recognize and speak to the need for LPCs as a therapy option: “My counselor transformed my previously anxious thinking and self-messaging in profound ways. She empowers my personal healing and growth processes with nurturing energy, guiding our sessions in ways that consistently produce long-term positive results.” — Nicole Kaplan, Rochester “I have been lucky to find a counselor who is an excellent fit for me. Without insurance, I would not be able to continue seeing the therapist that I’ve built a strong foundation with. Therapy has become an invaluable part of my overall wellness.” — Kristen Wozniak of Berkley Anahid Lisa Derbabian, counselor, MA, LPC, NCC, Troy

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

FOCUS

CRAIN’S MICHIGAN BUSINESS: THE DRINK ECONOMY

Chateau Chantal grapes at harvest. CHATEAU CHANTELL

Michigan’s wine business on the grow

The beverage economy — by the numbers

In this package

acres of wine grapes planted

ABV of New Holland’s “Kombucha IPA,” a ginger-tinged hard kombucha

3 million

Sources: Kombucha Brewers International; New Holland Brewing Co.

State adds vineyards, wineries as industry gains national attention Wine industry strives to gain respect, grow production, distribution. This Page 

Many of the Leelanau Peninsula’s mighty winemakers credit their success to Larry Mawby. Page 11 

 Michigan-grown grains and fruits are a bounty for small craft distillers. Page 14  Kombucha entrepreneurs brew up a growing beverage sector in Michigan. Page 14

The legendary ‘curmudgeon’ who kick-started Michigan’s wine industry. Online at crainsdetroit.com 

By Greg Tasker | Special to Crain's Detroit Business

odales Wines opened a temporary tasting room outside Fennville in western Michigan this past summer inside of a remodeled cinder block building that sits on their 74-acre estate, void of vineyards. Already, thousands of tourists have stopped by to sample familiar red and white varietals, including pinot noir, cabernet franc, riesling and pinot gris. Growing mostly European vinifera wine grapes, the family-owned boutique winery expects to produce about 5,000 cases of estate-grown wine annually, with most currently harvested from their 32-acre farm a few miles away. A larger permanent tasting room will open this year and the estate grounds are being prepped for planting an additional 30 acres of vines starting in the spring of 2020. SEE WINE, PAGE 12

Number of kombucha brewers in Michigan

3,050

gallons of wine

1.7 million Annual visitors to Michigan wineries Source:Michigan Wine Collaborative

551

Distillery jobs in Michigan in 2018

$45 million in wages

$531 million Economic impact of Michigan distilling Source: Wine & Spirits Wholesalers of America

$1.2 billion

Projected size of the U.S. kombucha industry by 2020

5 percent

18 million

Pounds of potatoes harvested annually at Iott Seed Farms

18 Pounds of potatoes in one 750milliliter bottle of North River Vodka

80 percent Percentage of potatoes that is just water, making them a more expensive crop for vodka production than grains Source: North River Vodka

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

Fruits of the vine

SPECIAL REPORT: THE DRINK ECONOMY

Many of the Leelanau Peninsula’s mighty winemakers credit their success to Larry Mawby By Tom Henderson thenderson@crain.com

In 1973, Larry Mawby was just the second grower to plant vines in the Leelanau Peninsula, putting in a few as an experiment. Bernie Rink had planted the first 15 acres of commercial vineyards in the peninsula in 1970, and the jury was still out on whether enough grapes could survive the harsh winters off Lake Michigan and the short growing season to make wine-making commercially viable. Rink was sure it could be done, and helped convince Mawby, too. Today, according to the Leelanau Peninsula Wine Trail, a growers’ association, there are 47 vineyards and 26 wineries on the peninsula, with 800 acres of grapes producing about 800,000 gallons annually. At the beginning of this year, Mawby took on two more partners and became a minority owner of L. Mawby LLC, which does business as Mawby Vineyards and Winery, a winery he opened in 1978 near Suttons Bay in the Leelanau Peninsula northwest of Traverse City. Retaining a 24 percent share in the business, he says his duties are restricted now to a weekly owners’ meeting. “Other than

CHATEAU FONTAINE

Larry Mawby

Dan Matthies remembers Larry Mawby helping him plant his first acres of grapes.

that, I am on call. When a crazy journalist calls, I’ll come and talk,” he joked to a crazy journalist just ahead of this fall’s harvest. Growing fruit in the peninsula for a living wasn’t something new for Mawby, 69. His parents owned an apple orchard in Rockford and his grandparents owned apple and peach orchards just outside of Grand Rapids. In the summer, his family would head north to a cherry farmstead they owned near Suttons Bay, a village on the west arm of Grand Traverse Bay in the Leelanau.

The farmstead became their yearround home in 1963. The family owned Mawby’s Farm Market on M-22, between Suttons Bay and Traverse City, selling produce from their farm and those of their neighbors. Mawby got an English degree from Michigan State University in 1972, but hitchhiking around Europe after college, especially the Burgundy region of France, convinced him he wanted to farm for a living. In 1974, Mawby planted some French-American hybrids he bought from Rink. The next year, he planted

more varieties that Rink had proven could thrive in the Leelanau — Cascade, Chelois, De Chaunac, Marechal Foch and Seyval — and the rest is history. In 1975, Mawby bought a 32-acre hay and strawberry farm on Elm Valley Road near Suttons Bay, where he opened his winery. In 1976, Mawby completed his only formal training — a three-day course in viticulture at the University of California-Davis. Mawby released his first wine to the public in 1979, made from 378 gallons’ worth of blended grapes. Those early years, Mawby said, it

was all for one and one for all among those crazy enough to start planting grapevines. He remembers in 1975 helping Dan Matthies plant his first row of grapes in an April blizzard for what would become the Chateau Fontaine vineyard. Last August, Chateau Fontaine won 17 medals at the State of Michigan Wine Competition at the Kellogg Center at Michigan State University, second only to St. Julian of Paw Paw, which won 37. Also last summer, the Mawby winery won a silver medal for a blanc and a bronze medal for a pinot noir at the Champagne and Sparkling Wine World Championships in London, the biggest competition for sparkling wines in the world. “Bernie started it all, but Larry took it to the next level,” said Matthies. “Larry is the sparkling wine king. I go to Europe a lot and I’ll ask, ‘Have you ever had a Michigan wine?’ And they’ll say, ‘Yes, a sparkling wine by a guy named Mawby.’ He’s that well-known.” Matthies, who left a career in mortgage banking to pursue life in the Leelanau as a farmer and winemaker, remembers Larry Mawby helping him plant his first acres of grapes. “It was snowing so hard, you couldn’t get the rows straight,” said Matthies. “Larry took a line and went to the other end of the property, but it was snowing so hard we couldn’t see him.” SEE MAWBY, PAGE 12

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

SPECIAL REPORT: THE DRINK ECONOMY

PROGRESS AT WORK

HENRY FORD BRINGS CUTTING EDGE TECHNOLOGY TO ROYAL OAK

SPRING 2020 SPECIALIZING IN PRIVATE-PUBLIC PARTNERSHIPS

REAL ESTATE DEVELOPERS | PROPERTY MANAGERS | CONSTRUCTION MANAGERS

FOR MORE INFORMATION VISIT BOJIGROUP.COM

MORTGAGES FOR DOCTORS† MADE EASY

WINE

FROM PAGE 10

“We’ve already exceeded our expectations,” said Todd Robbins, the winery’s general manager and former vineyard manager at neighboring Fenn Valley Vineyards, one of the state’s oldest wineries. “There’s a feeling that we haven’t even hit saturation here in Michigan. There’s room for more wineries in Michigan. We certainly haven’t hit saturation in Fennville. That critical mass brings more people and helps all the wineries.” Modales Wines — the name means “manners” in Spanish — is among a handful of wineries that opened in the Great Lakes state this past year, bringing the total number of commercial wineries to more than 150. Less than a decade ago, there were 90. A few more open each year, with wineries planting roots not only along well-traveled wine trails — the Leelanau and Old Mission peninsulas near Traverse City and the Lake Michigan Shore in the state’s southwest corner — but also in metropolitan Detroit and the Upper Peninsula. “Michigan has unique conditions that make it a great place to grow and ripen world-class grapes,” said David Miller, a winemaker and president of the Michigan Wine Collaborative, a nonprofit organization created to sustain and promote the industry. “There are new areas of the state where grapes are being grown for the first time. So there is a lot of room for more grapes and more wineries. We have millions of people within a day’s drive and Michigan offers so many beautiful areas to relax and enjoy — it’s hard to imagine the industry going anywhere but up.” In the past decade, the vineyard area in the state has doubled, with more than 3,050 acres of wine grapes planted. Michigan vintners produce about 3 million gallons of wine each year, ranking the state among the top producers in the country. California, Washington, Oregon and New York state rank higher and have far more wineries than Michigan. Wine is big business in Michigan. A recent study by the Michigan Craft Beverage Council showed the wine industry has had a $5.4 billion economic impact on the state — a figure that includes business with wholesalers, retailers, restaurants and bars and tourism spending. About 1.7 million people visit the state’s wineries each

MAWBY FROM PAGE 11

Fixed and adjustable rate options $0 down payment up to $750,000 5% down payment up to $1.5 million* No mortgage insurance ‡

SPEAK SPE AK WIT WITH H A LO LOAN AN OFF OFFICE OFFICER ICER R FOR FOR DET DETAIL DETAILS. AILS S.

IndependentBank.com/mortgages | 800.285.3111 Equal Housing Lender. Member FDIC.†Financing program available for Residents, MD (Medical Doctor), DO (Doctor of Osteopathic), DDS (Doctor of Dental Surgery), DMD (Doctor of Medicine in Dentistry), DPM (Doctor of Podiatric Medicine), OD (Doctor of Optometry), GYN (Gynecologist), MS (Master of Surgery), and OB/GYN (Obstetrician and Gynecologist) for purchase or construction of owner occupied primary residence, single family home, townhome, duplex or condominium (including an Independent Bank approved non-warrantable condominium). No manufactured homes. Minimum income and reserve requirements apply. Normal credit standards and restrictions apply. Terms are subject to change. Loan approval required. ‡Maximum debt to income ratio 43%. *Maximum debt to income ratio 36%. Other fees and restrictions may apply. Taxes and insurance required. Program subject to change and loan approval.

The snow passed and, working without heavy equipment, on their hands and knees, it took them 10 days to plant 5 acres. Matthies now has 100 acres, with 27 under cultivation. “I wouldn’t be here today without Larry Mawby.” Mawby remembers the handful of growers in the 1970s sharing equipment because they couldn’t individually afford to buy everything they needed to grow grapes and make wine. “When we started out, there weren’t any facilities here. We all worked together to buy supplies and share them,” said Mawby. “If you could buy a truckload of bottles, you got a way better deal. But nobody could use a truckload, so we’d all go in together.”

year, contributing more than $252 million in tourism dollars. “There are a lot of different winery business models employed in the state,” said William Schopf, a Chicago businessman and owner of Dablon Winery and Vineyard near Baroda in southwest Michigan. They range from fully integrated wineries that grow, bottle, produce and sell where the grapes are grown to mom-and-pop operations and farmers turned vintners to others who buy bottles of wine from other producers and label them with their own brand. “I can’t complain about companies that are making cheap wine and selling it for $7 a bottle,” Schopf added. “There is a market for it and people are buying those wines. There’s a market for pretty much every quality level of wine.” Until recently, the industry was heavily promoted by the Michigan Grape and Wine Industry Council, which was reconfigured last year to become the Michigan Craft Beverage Council, to promote craft beer, hard ciders and spirits as well. That change has meant far fewer dollars for research and promotion for wineries. That level of support, Miller said, is still needed and is a void the Michigan Wine Collaborative is trying to fill. It’s an industry striving to be taken more seriously in Michigan and outside the state, with an eye on not only gaining respect but also on growing production and broader distribution. To that end, the wineries on Old Mission and Leelanau peninsulas have banded together to create the Traverse Wine Coast, an attempt to establish a national reputation as a premier wine region. Old Mission and Leelanau remain distinct American Viticultural Areas — designated wine-growing areas — but collectively, the wineries are promoting themselves as world-class wine producers. For the past decade, the wineries have been entering their wines in international wine competitions with excellent results. Their efforts were tested on the national stage this summer when nearly two dozen Michigan wineries submitted their wines en masse to Wine Enthusiast for judging. In July, the magazine published the largest collection of Michigan wines ever reviewed in a national publication. Nearly 100 wines were rated by the magazine, with 65 wines earning ratings and scores between 87-91 points. Those scores are noteworthy, In 1972, John and Jo Crampton started planting their first vines on a gorgeous piece of land, just shy of 12 acres, they had recently bought with a southwest exposure and a stunning view high over the west shore of West Grand Traverse Bay. “We used to camp out on it and think about what we wanted to do with it,” said John. He and his wife owned a landscaping business in West Bloomfield and they decided, what the heck, let’s make wine. So they sold the business and moved north. “I literally had a dream I went to work for Larry, so I went to see Larry and asked if he needed any help. He put me to work bottling wine. I told him, ‘Larry, I’ll give you muscle power. Can we make our wines here while we get going?’” So the Cramptons made wine using Mawby’s equipment until they could open their Willow winery in 1998. “I gave Larry 120 percent and he did the same for me,” said John. “Everyone

Ch on

vintners said, because they place the wines from Michigan on par with acclaimed wine-growing regions, including New Zealand, Washington, Oregon and Spain. Mostly published online, the reviews accompany an article, “Michigan’s Wine Scene is Full of Potential,” about the state’s burgeoning wine industry and winemakers’ success in growing cool-climate, aromatic whites, such as riesling and gewurztraminer, despite sometimes challenging weather conditions. “The Wolverine State is sailing toward world-class wine production,”

the M vitic vers St. J said the i both mos don with que cult man goo at ba

looks up to Larry. His stories are pearls of wisdom, and he’s fun to be around.” Matthies calls Mawby the mayor of Suttons Bay, a metaphor for his popularity and esteem. But it is close to the truth. He was president of the village council from 2002 to 2012.

bran a ne grap tion troit grow soug selli L way he s bus me,’ the cap duc to f mer Maw In Pete taki of t ron, wor

Taking on a partner In 1984, Mawby began making sparkling wines and in 2003 discontinued making any still wines. He sold his bottle-fermented wines under the L. Mawby brand, and his barrel-fermented wines under the M. Lawrence brand. By 2008 he was making 8,000 cases a year of his own wine and 1,500 cases for neighboring growers. (His best-selling champagne reflects his sense of humor: It’s called Sex, and it’s marketed with buttons that say, “Have you had your Sex today?”) Wanting to cut back a bit, Mawby decided to look into selling one of his

the acinton,

rechitenning sucaroand mes ons. toon,”

earls nd.” or of oputhe lage

king consold the -ference ,000 ,500 (His his d it’s Have

wby f his

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

the story begins. Miller, who has a master’s degree in viticulture from Michigan State University and owns White Pine Winery in St. Joseph in southwestern Michigan, said to sustain its success and grow, the industry needs to continue to grow both European vinifera — varietals most consumers know, such as chardonnay — and hybrids, wine grapes with not-so-familiar names like Marquette and Chambourcin. Sound viticulture practices, including canopy management, crop adjustments and a good spray program to keep bunch rot at bay, also are important.

“With the changing climate we need ongoing research in how to deal with new pests, disease pressure and working with resistant hybrids-cold hardy varieties to make consistent, high quality wines of excellent value,” he said. “All of these things are happening now and will continue to be necessary for the growth of the industry into the future.” Chateau Chantal, an estate winery on Old Mission Peninsula, was among those garnering praise from Wine Enthusiast. Chateau Chantal scored 86 points or higher on four wines, including its NV Naughty Red, a blend of pinot noir and gamay, and its NV Celebrate Brut Sparkling, a sparkling rose made from riesling, chardonnay and gamay. The wines scored 89 and 88, respectively. “It was a fantastic piece of exposure,” said Marie-Chantal Dalese, president and CEO of the winery, which opened its doors in 1993. “A third-party endorsement from outside our region holds a lot of clout for a lot of people and gives us some clout on store shelves. It provides credibility. Some people perceive a lack of quality in Michigan wines. Ratings like this help dismiss that perception.” Despite the spate of publicity this summer and perhaps a slight boost in sales, winemakers readily concede many hurdles remain for Michigan’s flourishing industry, no matter where the wine is being produced in the state. Dalese, whose winery produces 20,000 to 25,000 cases of wine each year and also distributes in Illinois, said there is a tremendous untapped potential for wine producers and wine consumption in Michigan. “I think there is a lot of work in our own backyard. Many restaurants in the state don’t even serve Michigan wines,” she said. “There’s no other wine region in the world where that would happen.” Dablon’s Schopf, who recognized the potential for Michigan to produce world-class wines and began planting vines in the state’s southwest corner in 2009, said that while third-party recognition helps, misperceptions endure — especially that Michigan wines are sweet and cheap. Dablon was the sole winery outside of the Traverse Wine Coast to be included in Wine Enthusiast. Dablon received accolades for its 2017 riesling and its 2016 cabernet franc, among others. “What we as owners and winemak-

ers need to do is get people to our vineyards and winery and see how we plant vines, how we grow our grapes, and how we make the wine,” said Schopf, whose winery produces about 10,000 cases a year, mostly red varietals. “If they do that, they become converts. They begin believing in Michigan wine. ... “If you go to a wine store in Chicago and see Michigan wine on the shelves, you may barely know wine is made in Michigan. It’s a hard sell.” Edward O’Keefe III, president owner of Chateau Grand Traverse on Old Mission Peninsula, said the Michigan wine industry has been able to flourish and adapt even with ever-changing consumer tastes and trends. In the past, people generally visited wineries to taste and buy wine; now, nearly half of them come to be entertained, as part of a group or to relax with a glass of wine and soak in the ambiance of the vineyard and winery. Chateau Grand Traverse, the oldest winery on Old Mission and one of the biggest in the state, produces about 100,000 to 110,000 cases of wine each year, with some distribution outside Michigan, including Indiana, Illinois, Ohio, Virginia and Maryland. The hurdles to distribution outside the state include not only brand recognition and respect, but also overcoming antiquated distribution laws that have been in effect since the end of Prohibition. Each state has its own set of distributors and laws. Licensing fees also tend to be expensive. Consolidation among wholesale distributors in and outside Michigan also makes it difficult. “Every state is like dealing with a different country,” O’Keefe said. “We only have so much wine to go around. Distribution is a tough game. If you don’t have people in that market working on selling your wine and rattling cages to get attention, you get forgotten real fast.” Still, there’s more room for more vineyards and wineries in the state, with many owners and vintners saying prime land remains, even in heavily visited wine regions, and especially along the shores of Lake Michigan with its moderating waters. “I’d love to see one of the big California families realize we can grow world-class grapes here and come in,” Schopf said. “You need someone to have the capital and the desire to do it. I haven’t seen too many steps in that direction, but that would really help Michigan.”

brands. He approached Stuart Laing, a nearby grower who was selling him grapes. Laing had sold a steel fabrication business with operations in Detroit and Ann Arbor and started growing grapes in 2003, and Mawby sought his advice on how to go about selling part of the business. Laing told him there was an easy way. Don’t sell off one of the brands, he said: Just sell some of the overall business. “He said, ‘Sell half of it to me,’” said Mawby. The deal closed at the end of 2008, and he used the capital from the sale to double production capacity. They later decided to forget having two brands and merged the lines into one brand: Mawby Sparkling Wines. In January, Laing’s sons, Mike and Pete, became co-owners as well, taking the Laing stake to 76 percent of the business. Stuart’s wife, Sharon, makes it a family affair, having worked in the Mawby tasting room

since before she and her husband became partners. Mike had been working for Larry since 2007, doing whatever needed to be done. An English teacher in Abu Dhabi before that, he wanted to return to Michigan. “I was homesick and I wanted to explore another career,” he said. “I thought, ‘Maybe I’ll explore wine making.’ I was a beer drinker. I didn’t know anything about wine.” Pete was a data analyst for Capital One in Virginia before he decided to join his brother Mike at Mawby’s in 2009. “I knew I was missing something,” said Pete. Today, Mike’s official title is partner and director of Mawbyness. Pete is partner and operations manager. “I get the wine in the bottle and run the tasting room and Pete does everything else,” said Mike. “Everything else” includes a focus on expanding national distribution channels.

The brothers also own a boutique brand of still wines called bigLITTLE Wines, named for big brother Mike, who is 40, and little brother Pete, who is 37. “We wanted to create a brand to put our ideas out there, put more of our stamp on it,” said Mike. They do about 1,500 cases of their own wine, with grapes coming from their 6-acre vineyard. The Mawby vineyard does about 30,000 cases, with grapes from Mawby’s 15 acres and from Stuart and Sharon’s eight and a half. It also buys grapes from local growers and downstate growers. The winery has 13 full-time employees and 30 part-time. Last May, the vineyard was honored as one of 50 companies to watch at the annual Michigan Celebrates Small Business event in Lansing.

Chateau Chantal is an estate winery on Old Mission Peninsula. CHATEAU CHANTAL

Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

A F e e - O n l y We a l t h M a n a g e m e n t G r o u p

Michigan’s #1 Financial Advisor* Charles C. Zhang CFP®, MBA, MSFS, ChFC, CLU CEO and Founder

Charles was ranked #7 on Forbes’ list of America’s Top Wealth Advisors and is the #1 Fee-Only Advisor on the list.**

We Uphold a Fiduciary Standard 101 West Big Beaver Road 14th Floor Troy, MI 48084 (248) 687-1258 or (888) 777-0126

www.zhangfinancial.com Minimum Investment Requirement: $1,000,000 in Michigan $2,000,000 outside of Michigan. Assets under custody of LPL Financial, TD Ameritrade, and Charles Schwab *As reported in Barron’s March 8, 2019. Rankings based on assets under management, revenue generated for the advisors’ firms, quality of practices, and other factors. **As reported in Forbes September 13, 2018. The rankings, developed by Shook Research, are based on in-person and telephone due diligence meetings and a ranking algorithm for advisors who have a minimum of seven years of experience. Other factors include client retention, industry experience, compliance records, firm nominations, assets under management, revenue generated for their firms, and other factors. For fee-only status see NAPFA.org

Birmingham, we’re

In Your Corner.

260 East Brown Street Suite 150 Birmingham, MI 48009 Main 248/567-7800 | Fax 248/567-7423

www.varnumlaw.com

August 2019

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

SPECIAL REPORT: THE DRINK ECONOMY

Farm to bottle

Michigan-grown grains and fruits are a bounty for small craft distillers By Nina Ignaczak

Special to Crain's Detroit Business

On the tasting room wall of the Iron Fish Distillery near Thompsonville hangs a black-and-white Prohibition-era photo of the Wexford County sheriff. He’s standing proudly next to a pile of about 40 stills, all confiscated from local farmers. The photo represents one chapter in Michigan’s long agricultural history when distilling was something small farmers did on the side — and sometimes in secret — for extra cash. Now Richard Anderson and his family are returning to that history, with a twist. In 2017, the family purchased and restored an abandoned 120-acre farm with an old granary and still near the Betsie River. But instead of farming with a still on the side, the distilling operation is the main focus at Iron Fish Distillery, Michigan’s only distillery to grow its own grain on the premises. Iron Fish Distillery has also tapped into the region’s tourism market, establishing itself as a destination with a tasting room, outdoor patio, barn venue for weddings and live music. “Very conservatively, we’ve probably had about 120,000 people visit us in the last 12 months,” said Anderson. “And we’re down a dirt road, kind of in the middle of nowhere.” Iron Fish Distillery is one of a growing number of craft distillers leveraging Michigan agricultural prod-

ucts. According to the Wine & Spirits Wholesalers of America, distilleries accounted for 551 jobs in Michigan in 2018, paying out $45 million in wages with a $531 million economic impact. Lansing-based Michigrain is Michigan’s only bulk spirits producer that sources its distillate entirely from Michigan farmers within 30 miles of its facility. The company sells raw ethanol in the form of corn or potato vodka and neutral grain spirits to local distilleries like Holland-based Coppercraft Distillery for their own processing and labeling. The company is about to launch a contract with St. Julian to supply its vodka line. “We live in a river of gold,” said Michigrain owner Mike Bird. “The best grain in the world is grown in Michigan, and if you want to get some of the best fruit in the world, just go up to Kalkaska where you can get apples, peaches and pears. About the only things we don’t have are avocados and almonds.” That sense of pride in Michigan’s agricultural heritage is what led Jackson-based distiller Chris Iott to source potatoes for vodka from his family’s 1500-acre Kalkaska potato farm. Iott and his wife Amanda opened North River Distillery LLC in 2018, and last week the company announced an expansion into statewide distribution through a partnership with the Grand Traverse

Distillery. “I believe people have a lot of pride in our state and the various things that are made or grown here, from cars in Detroit to cherries in Traverse City,” Iott said in an email. “We started North River Vodka with two goals in mind: to make good vodka and to make it from potatoes from my family’s farm. We’re proud that we have accomplished those goals.” Local sourcing for small distillers is not straightforward; it requires technical knowledge and relationship-building with farmers. Kevin Slagh launched Zeeland-based Emergent Malt in 2016 when he saw an opportunity to supply local grain for the Michigan craft brewing industry. That demand has since grown alongside demand from distillers. Slagh says about 60 percent of his sales today are in craft breweries with the other 40 percent in local distilleries. He sources and processes grains on demand, contracting with farmers and focusing on custom and specialty varieties. “Our niche is definitely a pure Michigan product,” said Slagh. “We only contract local farmers to grow local grains for us.”

Policy tweak could help local brands Sourcing locally can come at a premium; it’s typically cheaper to buy large quantities of out-of-state grain on the commodity market. Competing with large-scale spirits producers on price is difficult for small Michigan distillers. That’s why Jon O’Con-

CONFERENCE 2019

NEXTGEN HR SUSTAINABLE RELEVANT RECOGNIZED

FRIDAY, NOVEMBER 15, 2019 FULL-DAY 8:30 AM – 5:00 PM

Wayne State University Student Center 5221 Gullen Mall, Detroit, MI 48202

ADVANCE REGISTRATION REQUIRED Register at www.detroitshrm.com $100 for non Detroit SHRM members $75 for members $35 for students

DETROIT HR

EXPLORE TODAY’S PRESSING HR ISSUES: HUMAN CAPTIAL MANAGEMENT NAVIGATING YOUR HR CAREER TALENT EXPERIENCE LEFT BRAIN HR PLUS PANEL DISCUSSION

#nextgenhr

#detroitshrm

Potatoes grown at the Iott Seed Farm in Kalkaska provide the raw material for North River Vodka. Roughly 18 pounds of potatoes go into each 750-milliliter bottle of vodka. IOTT SEED FARM

Kombucha bubbling up in Michigan By Nina Ignaczak

Special to Crain’s Detroit Business

As a Type-1 diabetic, entrepreneur David Wentworth was constantly on the hunt for healthy, low-sugar beverages. So when he learned about coldbrew coffee during a trip to California, he was intrigued. He began experimenting with it back at home in Grand Rapids and in 2014 was the first to enter the Michigan market with Prospectors Cold Brew Coffee. The success of that brand, now distributed through Meijer, Lipari and Cherry Capital Foods in Michigan, Illinois and Wisconsin, led him to search for a second healthy beverage to bring to Michigan. He didn’t have to look far before he found it in fellow Grand Rapidian Emily Helmus’ kombucha brand Bloom Ferments, which he brought and added to the portfolio under Prospectors Specialty Beverage. “We knew that kombucha was a trending product just like cold brew coffee, and we wanted to expand our product offerings to the current customers we had,” said Wentworth. For the uninitiated, kombucha is a fermented tea with roots in ancient Asia. The product begins with green or black tea, sugar and a rubbery, discshaped starter called a SCOBY (an acronym for “symbiotic culture of bacteria and yeast”) that initiates the fermentation process. The result is a

carbonated, slightly alcoholic beverage that proponents claim is rich in probiotics and digestive enzymes. Many brewers, like Wentworth, add fruit flavors to sweeten the traditionally dry, slightly vinegary drink. “We sweeten it because we see that the kombucha trend is steadily growing, but where it’s growing fastest is in new entrants to the category,” said Wentworth. “So a lot of our flavors are more fruity, like our blueberry or strawberry kiwi. They’re a little bit more friendly for people who haven’t had kombucha before.” Growth appears to be the rule in this nascent industry. In 2015, Courtney Lorenz, the owner of Traverse Citybased Cultured Kombucha, launched her business by selling out of three 5-gallon batches of home-brewed kombucha in 20 minutes at a farmers’ market in Midland. She moved the business to a 1,500-square-foot space in Traverse City, then scaled up to a 5,000-square-foot space in November with a dozen 450-gallon fermenters. She’s also opened a taproom. “We are actually larger than a good chunk of the microbreweries, and we’re making something healthy, which has a really cool perspective,” said Lorenz. Cultured Kombucha now distributes in approximately 150 locations in Michigan, including grocery, food service and hospitals.

Su ko ba Ma

A trad Inte ket jecte glob $5.2 mem grew 2019 that kom of w have Mid brew with show “W grow

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

NORTH RIVER DISILLERY

Chris Iott and his wife Amanda opened North River Distillery LLC in 2018.

IRON FISH DISTILLERY

A Prohibition-era photo shows the Wexford County sheriff standing next to a pile of about 40 stills confiscated from local farmers. At the time it was common for small farmers to distill their grains and fruits on the side for extra cash.

The locations of 11 kombucha brewers in Michigan

# Kombucha brewer 11

SUPERIOR CULTURE

that owis in said s are or bit en’t

ood and lthy, ive,” now ocacery,

8 7

6 5

4 3

cent range, is in convenience stores,” said KBI President Hannah Crum. “Traditionally 7-11 has been a place where you just grab some junk food like a hot dog or coffee. But these days people are turning to convenience to grab premium, functional beverages like coconut water or kombucha. And so we’re seeing kombucha has a real opportunity for growth there.” Another area for growth, according to Crum, is in hard kombucha. All kombucha contains trace amounts of alcohol as a byproduct of the fermentation process. In 2010, kombucha was temporarily recalled nationwide after an inspector found samples in a Maine Whole Foods that exceeded the 0.5 percent by alcohol by volume limit imposed by the Alcohol and Tobacco Tax

and Trade Bureau. But two Michigan Kombucha Brewers, Ypsilanti-based Unity Vibration Kombucha and Holland-based New Holland Brewing Company, produce a hard kombucha that exceeds those values. Unity Vibration produces a line of five fruit-and-hop infused kombucha beers that range between 8 and 9.2 ABV. New Holland Brewing Company produces a “Kombucha IPA” tinged with ginger that clocks in at 5 percent ABV. Because alcoholic kombucha is gluten-free, according to Unity Vibration owner Tarek Kanaan, kombucha beer presents an opportunity for brewers to offer a healthy alternative to beer with fewer calories. “The cool thing is it’s really just an-

Street Address

City

DKBCo (Detroit Kombucha Company) 32300 Lahser Road

Beverly Hills

Neu Kombucha

33305 Grand River

Farmington

Unity Vibration Living Kombucha Tea Also makes a hard kombucha

93 Ecorse Road

Ypsilanti

Young Earth Organics

E Grand River Ave.

Brighton

Apple Blossom Kombucha Co.

East Lansing

Reputation Beverage Co.

116 N. Bridge St.

DeWitt

Bloom Ferments

5035 W Greenbrooke Dr SE

Kentwood

Sacred Springs Kombucha

1059 Wealthy St SE Suite B

Grand Rapids

New Holland Brewing Co. Also makes a hard kombucha

684 Commerce Ct.

Holland

10 Cultured Ferments Co.

3842 Jupiter Cresent Drive

Traverse City

11 Superior Culture

717 N 3rd St.

Marquette

Source: Maps4News

According to Los Angeles-based trade association Kombucha Brewers International, the U.S. kombucha market stands at $800 million and is projected to reach $1.2 billion by 2020. The global industry is projected to reach $5.25 billion by 2025. The number of members in the global organization grew 32 percent between 2018 and 2019 and doubled in Michigan during that period. KBI currently counts 12 kombucha brewers in Michigan, seven of which are “Tier 1,” meaning they have at least five retail outlets. In the Midwest, Wisconsin leads with 15 brewers. California leads the nation, with Oregon, New York, and Colorado showing a strong presence. “Where we’re seeing most of the growth right now, in the 50 to 75 per-

nor, president of the Michigan Craft Distillers Association and owner of Grand Rapids-based Long Road Distillers, is advocating for a change in how spirits are taxed in Michigan. Michigan is a “control state” in which the state acts as the wholesaler for spirits. Beer and wine are taxed on an excise basis, paying a flat rate based on volume, but spirits are taxed at a 65 percent markup rate on the cost, with three additional 4-percent taxes layered on top of that. Michigan’s startup craft distilleries, due to their use of premium local inputs and smaller-scale production, inherently cost more and thus pay a higher tax, according to O’Connor. “The way the taxation structure works for distilled spirits really puts Michigan brands and small producers at a competitive disadvantage,” O’Connor said. Senate Bill 0349, introduced in May and currently in committee, would cut that 65 percent markup in half for qualified small distillers who source a minimum of 40 percent of their distillate from products grown and harvested in Michigan. O’Connor believes that if the bill passes, the full potential of Michigan’s craft distillery industry will be unleashed. He points to Minnesota, which offers a tax credit to microdistillers. “They went from a state that had literally no industry to being one of the most robust craft distillery markets in the entire country,” O’Connor said. “The dollar figure that the state of Michigan would have to give up is far inside the growth threshold for the industry. It would give Michigan distillers an opportunity to get their feet under them and to start being competitive in the marketplace.”

Brewing up kombucha

Superior Culture kombucha is based in Marquette.

rage obiMany fladry,

this tney Cityhed hree wed mers’ the pace to a mber ters.

other style of craft beer,” says Kanaan. “The flavor profile is a mix between a bit of a cider, wine and beer; it’s a unique flavor profile. And so you’ll find it in the craft beer cooler.” Crum points out that even regular kombucha has a place in bars. “There’s a generation of people who want to eschew traditional beer and wine and other spirits,” said Crum. “That’s a real opportunity for regular kombucha because it has those interesting and unique flavor profiles. It’s something for the designated driver hanging out with their friends who are drinking beer. And it makes a great cocktail mixer.” Crum says KBI is working toward an identity definition that would create a standard for kombucha. She said some

Crain’s Detroit Business graphic

brands have developed a variety of non-traditional methods involving dilution and additives in order to comply with regulations on alcohol content, and so the organization wants to help consumers to discern among those brands and production methods. “Just as there are seals and symbols to indicate when brands are doing it better, whether that means fair trade or organic, we’re likely going to see that ultimately in the kombucha industry, so that consumers can quickly identify the brands that maybe aren’t still working with a SCOBY,” said Crum. She said the industry is still wide open for newcomers. “There’s still a lot of opportunity in this nonalcoholic craft beverage space and all fermented foods,” said Crum.

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

Advertising Section

PEOPLE ON THE MOVE To place your listing, visit www.crainsdetroit.com/people-onthe-move or for more information, please call Debora Stein at (917) 226-5470 or email dstein@crain.com. ARCHITECTURE / ENGINEERING

CONSTRUCTION

Spalding DeDecker

Brinker

Spalding DeDecker, a leading civil engineering and surveying firm, is pleased to announce that Jeremy Schrot, PE has joined our team as Director of Public Engineering, and Dan VanderHeide, PE has joined our team as our Grand Rapids Office Manager. With more than 12 years of experience in the Schrot public and private sectors, Jeremy will be responsible for driving the growth of our Municipal and Transportation markets. Dan will be responsible for managing projects, building client relationships, and pursuing business opportunities VanderHeide throughout western Michigan from our newly opened Grand Rapids office. With nearly 15 years of experience in the industry, Dan brings a wealth of expertise serving the needs of municipalities.

Brinker, a commercial construction services organization, named Brian Farhat as its Chief Financial Officer. Brian held progressive leadership positions at Barton Malow for 18 years and is known for his strategic approach and deep finance and accounting construction expertise. “Having an industry professional like Brian join our growing team strengthens our ability to support recent and future growth for our business, employees, and community,” said president, Larry Brinker, Jr., Brinker.

AUTOMOTIVE

Ricardo Inc. Marques McCammon has been appointed as President of Ricardo Inc. to lead the next stage of the company’s growth in North America. A mechanical engineer, his automotive and marketing career includes leadership roles with OEMs, Tier 1 suppliers, venture-backed start-ups and most recently, embedded software products and services. A Crain’s Detroit 40 under 40 alumnus, his experience will help the company deliver renewed focus on sustainable growth in the automotive technology sector.

LEGAL

Bodman PLC Attorneys John T. Below and Gary S. Fealk have joined the Troy office of Bodman PLC, a leading Midwest business law firm. Below has 25 years of experience resolving labor and employment and general business disputes. He defends employers in federal and state litigation and frequently handles Below complex banking and commercial cases for regional and national financial institutions and large corporate clients. Fealk has nearly 25 years of experience in all areas of labor and employment litigation defending public and private employers exclusively. He is a Fellow of the College of Labor and Employment Lawyers and a member of the American Employment Law Council. Bodman Fealk is excited to add these two highly accomplished attorneys to the team.

NEW GIG? • Plaques • Crystal keepsakes • Frames • Other Promotional Items

C O N TA C T

PRODUCTS

Preserve your career change for years to come. Laura Picariello Reprints Sales Manager lpicariello@crain.com (732) 723-0569

DEALS & DETAILS

SPOTLIGHT

CONTRACTS

Bloomscape names first chief tech officer

J DeMaria, Detroit, a construction firm, was awarded the University of Michigan CVC EP Lab Renovation. The project includes renovating the existing lab and equipment room on the second floor UM Cardiovascular Center. Website: demariabuild.com J Marygrove College, Detroit, slated to close at the end of the fall semester, has reached an agreement with Eastern Michigan University, Ypsilanti, to help some of the college's displaced students finish their degrees at EMU. The plan, called a teach-out agreement, is available to Marygrove graduate students whose current program aligns with EMU’s. Under the agreement, Eastern will accept all the transcripted credits earned by Marygrove students at that institution, and count those credits toward a degree from Eastern. Websites: emich.edu, marygrove.edu J Gale, a Cengage company, Farmington Hills, an educational publishing company, has partnered with Mackin, Burnsville, Minn., a distributor of K-12, print and digital resources, to make its database content available on the MackinVIA digital content management platform. Websites: gale.com, mackin.com

EXPANSIONS J FocusCFO, Blacklick, Ohio, a fractional CFO company providing services to small and medium-sized businesses, has expanded its service area to metro Detroit. Phone: (855) 236-0600. Website: focuscfo.com

MERGERS & ACQUISITIONS Detroit-based private equity firm Huron Capital Partners LLC's information technology solutions platform, Santa Clara-based InterVision Systems LLC, has acquired SeyVu, Folsom, Calif., a company that specializes in machine learning and artificial intelligence, and all of its related interests, assets and intellectual properties. InterVision also acquired Fotis Networks LLC, Boston, Mass., an IT professional services and consulting firm. Websites: huroncapital. com, intervision.com, seyvu.ai, fotisnetworks.com J DexKo Global Inc., Novi, manufacturer of trailer running gear, chassis assemblies and related components, has signed an agreement to acquire Aguti Produktentwicklung & Design GmbH, Langenargen, Germany, manufacturer of seating and seating systems. Financial terms of the transaction were not disclosed. Websites: dexko.com, aguti.com J

NEW SERVICES J Foster Swift Collins & Smith, Lansing, a law firm, launched a cybersecurity hotline: (517) 371-8275 to provide businesses, municipalities and other organizations with quick access to cybersecurity attorneys to assist in controlling potential threats. Website: fosterswift.com

Submit Deals & Details items to cdbdepartments@crain.com

CALENDAR UPCOMING EVENTS 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. UHY LLP Annual Manufacturing Outlook: Lean into Change and Innovation. 7:30-11:30 a.m. Oct. 23. UHY LLP. National manufacturing practice leader Tom Alongi and industry thought leaders will discuss the changing landscape of the manufacturing space and how manufacturers will handle disruption. Detroit Athletic Club. Free. Pre-registration is required. Contact: Jessica Labut, email: jlabut@uhy-us.com; phone: (586) 843-2507. 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 Busi-

ness. 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) 6154424. 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 Your Company’s Crisis: What You Need to Know Now. 8-11:30 a.m. Nov. 12. Detroit Regional Chamber. Program will include advice from human resources, legal and public relations experts to prepare for a crisis. Three examples of crises will be covered at this event: de-escalating disasters, protecting an organization’s image and solutions for cybersecurity crises. Complimentary breakfast will be provided. The Henry Hotel, Dearborn. $75 members; $95 nonmembers. Contact: Andrea Rayburn, email: arayburn@detroitchamber.com ; phone: (313) 596-0340.

Bloomscape, an online plant startup based in downtown Detroit, has tapped a former executive of a Snap Inc. company to serve as its first chief technology officer. Aaron Averbuch, 40, previously served as vice president of engineering infraAverbuch structure for consumer location analytics company Placed on behalf of Snap, parent company of Snapchat. In May, Santa Monica, Calif.-based Snap sold Placed to New York-based Foursquare Labs Inc. Averbuch, a Detroit native, recently returned to Michigan after spending nearly two decades in the Seattle area, where he held several top posts at tech companies including Microsoft, Cisco Systems and AdReady, among others, Averbuch told Crain’s. In his new role, Averbuch will be tasked with building Bloomscape’s tech team while leveraging technology to improve the company’s supply chain, according to the company.

Cranbrook president to retire

The president of Cranbrook Educational Community is retiring from the post in June after more than eight years at the helm. Dominic DiMarco will step down from the Bloomfield Hills-based private institution at the end of the 2019-20 academic year, according to a DiMarco news release. DiMarco was hired as chief operating officer in 2008 and was promoted to president in 2012. “As I reflect upon a career that has brought great joy in making this work a priority, I realize how wonderfully Cranbrook’s vision has transformed my own life, and recognize that time has come to shift that focus toward family and personal considerations,” DiMarco said in a letter posted on Cranbrook’s website. Highlights from DiMarco’s tenure include implementing free admission at Cranbrook Gardens, forging a partnership with the Massachusetts Institute of Technology, and opening exploreLAB at Cranbrook Institute of Science and Art Lab at Cranbrook Art Museum, the release said.

Platt leaving Ilitch organization Shawn Platt is stepping down as a top spokesman for Ilitch Holdings Inc. after eight months as vice president of corporate communications. He said he is returning to Grand Rapids. He said Ilitch Holdings will begin looking for a replacement and Platt he will stay on board “in an advisory capacity through the end of the month.”

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

LEED

FROM PAGE 3

The second big trend we’re seeing is definitely on waste, with China trying to say they won’t take any more plastic, Starbucks coming up with the no-straw policy, and single-use plastic bottles kind of questioned in the minds of people. Every building right now is saying: How do we manage waste? There are two types of waste during construction, which is basically the construction waste that all ends up in landfills. The market is still working on it. ... But on the post-occupancy side, that waste consumption, it needs to start from upstream, like all you’re consuming to all you’re putting back into the landfill. That process and that education is an enormous and humongous effort to bring people in the marketplace because buildings, occupants have to be brought into it, because it’s such a personal preference for people. You like to bring your own plastic box and you like your coffee cup. You’re bringing a Starbucks cup inside, and these are small, small things, but they all add up to the consumption of the building.

“If you build an energy-efficient building, you are going to get those energy efficiency costs back. You are going to rent it faster, in terms of good indoor air quality, etc. So that value has to also be taken into consideration.” Mahesh Ramanujam Guilty.

Me too. But what we are unpacking is that food waste contamination is the biggest challenge, right? How do you do single-stream recycling? We have been working very hard to educate people. But now I think people have started finally thinking that we are not going to be able to educate people, we have to make things easy and obvious to people so they just do it. Right now we use these complicated words like compost, recycling, this and that. A lot of us don’t have the attention span for that. But what if you can just call it green, red, yellow. Just describing it probably will do a better job at it. But that is a clear trend that’s happening. Then from an investor level, there is a larger consciousness about ESG, environmental social governance, where the investors are saying, we are not going to fund these projects, we are not going to invest in these projects, unless you show that you’re committed to environmental sustainability, social governance. Is it at the institutional investor level?

I think it’s more institutional. You have institutional investors who are investing with the developers and are trying to create a fund. That fund has an objective. And that objective has to be met by the asset they are acquiring, either a new asset or an existing asset. What specifically would be an example of a best practice with regards to this green building?

What are you doing with energy efficiency? What does your fuel mix look like? Very simple. What does your en-

ergy look like in your building? Where are you consuming the energy from? The amount of renewables? Are you putting in enough energy-efficiency measures? In a building like this (TCF Center) ... do you have LED? Retrofitting plans to really get this to the next level? That type of stuff. Really bringing energy costs down because it clearly is a bottom-line savings, but also it’s about carbon. They’re focusing on those two. How much water consumption is going on? Third is health and wellness. Fourth, a very, very important topic: Climate risk. All these investors are worried. I was recently in Canada, and building owners said in three years, their insurance went from $25,000 to $250,000. For what?

Because of climate risk in the location. You saw Houston happened. Detroit has got its own extreme climate. So, the climate pattern is changing so much, and it has consequences for the property’s insurance. ... Sadly, many of us are not focusing on it. But they said to me that it really is jumping drastically in three years. How do you make the case for building energy efficient, LEED certified buildings when developers are also grappling with a 30 percent bump in construction costs?

Generally, construction cost has gone up. Let’s unpack why. In 2008, 2009, when the meltdown happened, the construction industry took a hit. And most of the people who left (the industry) never came back. So there is a huge gap with skill sets. You’re not going to bring a plumber into your house and have him learn in your house. I mean, that’s a very logical thing. So it’s a very highly trained and demanding skill set that’s not out there. That’s No. 1. So there is not enough work going on to train the people. In fact, construction companies are learning how to recruit people. But the second part of the conversation, you cannot say that building an efficient building is not going to cost you. I am not just going to say that. What I’ve been telling all of them is look, given all the modern technologies you already have, given all the things that you obviously do by default, you can’t tell me that you can’t even get over the base minimum requirement of LEED, which is LEED Certified. Platinum will take the effort. We have not seen Platinum projects around the world. When you have a Platinum project, you are really pushing it hard, which means that you are trying to think about solar, you’re thinking about connecting into green power, you’re doing things that are extraordinary. But we have seen over and over again in the market about Gold attained. I’ll tell you why. Because you optimize the system. You really bring the project management tighter, and you’re able to manage it. Most of the people who are doing a project for the first time, they can hit Gold, they can hit Silver, they can get Certified without any additional costs. We challenge that every single time, that notion. We’re not asking you to do anything differently, we are asking you to sequence it right. Think about what you’re building. That’s a second point. The third point is there is a payback story, very clearly. If you build an energy-efficient building, you are going to get those energy efficiency costs back. You are going to rent it faster, in terms of good indoor air quality, etc. So that value has to also be taken into consideration. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

Advertising Section

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

CRAIN’S JOB FRONT READERS HAVE AN Now Hiring: Estimator AVERAGE NET WORTH OF $1.6 MILLION POSITIONS AVAILABLE

POSITIONS AVAILABLE

NOW HIRING : INVESTMENT REAL ESTATE BROKERS

Local, established investment real estate brokerage firm is now hiring new agents. Previous sales experience required. On average our agents earn well into the six figures. Existing brokers may qualify for a substantial signing bonus. We offer some of the most competitive split structures in the industry. To discuss further contact us: fnl@fortisnetlease.com

Crain’s Detroit Business Reporter Crain’s Detroit Business is looking for an experienced reporter who can break news and write analytical and enterprising news stories, features and special reports for our weekly issue and website. We’re looking for a reporter to cover metro Detroit’s fast-growing finance and technology scenes – breaking news and offering insight on brand-name companies like Quicken Loans, a growing stable of “unicorn” companies, the burgeoning fintech industry and the vibrant startup scenes in Ann Arbor, downtown Detroit, and elsewhere in the region.

Looking for a responsible candidate for developing cost estimates & determining scopes of work using bid drawings & project specifications. Be able to communicate comfortably and confidently with fellow colleagues through the bidding process. Full Time Salary Position. Please email resumes to: * lmakins@mbmfab.com

Contact Suzanne Janik at sjanik@crain.com or 313-446-0455 for details.

Visit crain.com/careers/ for more information and available positions.

Visit our WEBSITE: www.crainsdetroit.com/classifieds for more classifieds advertisements, contact Suzanne Janik at 313-446-0455

*Signet Readership Study

LOOKING FOR THE NEXT MEMBER OF YOUR TEAM? Crain’s readers are 75% more likely to be college graduates* Connect with Suzanne Janik at sjanik@crain.com for all your recruiting needs. *The Media Audit

Suzanne Janik: 313-446-0455 sjanik@crain.com

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

LENDING FROM PAGE 1

Late last month, the Secure And Fair Enforcement (SAFE) Banking Act passed the U.S. House of Representatives by a wide margin. The legislation, which now sits in the U.S. Senate, would prohibit regulators from terminating or limiting either deposit or share insurance of banks or credit unions providing services to the cannabis industry. Meanwhile, Live Life is thriving in the margins with 100 cannabis-related accounts out of its 1,400 member credit union. But capitalizing on cannabis isn’t easy. The institution is buried in the burden of compliance as it walks the fine line between lending and laundering. “It’s been an adventure,” Haglund said in the back office of her stripmall credit union. “The reporting is strenuous and complicated. It’s been hard on our staff. A few of us have basically been working around the clock for the last eight months, but it’s been worth it.”

Marijuana money matters The process for accepting marijuana banking business is complex and expensive. After Colorado legalized the sale of recreational adult use cannabis in 2014, then-Deputy Attorney General James Cole issued a memorandum providing guidance on how the U.S. Department of Justice should handle marijuana enforcement in legal states. The “Cole Memo” cleared states to operate their own set of regulations free from federal interference as long as those regulations maintained certain priorities, such as prohibiting distribution to minors, revenue from the sale of marijuana funding gang and cartel activity and preventing sales over state lines, among many other rules. The Cole Memo also dictated that financial institutions may bank cannabis as long as it ensures their marijuana-business customer is not in violation of any of the memorandum’s rules as well as additional financial rules. These compliance rules have prevented most financial institutions, particularly large ones, from participating. At Live Life, this means Haglund and her team must conduct interviews with prospective licensed customers and have full access to the state’s point-of-sale inventory tracking system, full access to the company’s financial records and quarterly audits of their business and inspection of all of their vendors. “It helps us decide what’s going on, and it’s required of me to do an analysis,” Haglund said. “I need to know if there is suspicious activity. If they are depositing $100,000 a week, but have an empty store and only one cash register, well, I have to ask some questions.” If one of its marijuana-business customers is illegally selling marijuana in violation of federal law, the DOJ maintains its authority to prosecute credit unions and their leaders for violating federal money laundering law. The ensure those rules are followed, the Financial Crimes Enforcement Network, a bureau of the U.S. Department of Treasury, requires financial institutions to file a Suspicious Activity Report quarterly for any cash-intensive business such as marijuana-related business. For Live Life, that’s an additional 400 reports annually. Financial institutions are also required to file Currency Transaction Reports for any deposit or withdraw-

ILLUSTRATION BY ANDREA UCINI FOR CRAIN’S

al of $10,000 by any customer, which is nearly every transaction for its cannabis customer, Haglund said. “The reporting has been taxing on the credit union,” Haglund said. “The barrier to entry for getting into cannabis is the work.” The high cost of regulatory compliance has forced other financial institutions out of banking cannabis. Tulsa-based Encentus Federal Credit Union announced on Sept. 30 that it would close its nine marijuana-business accounts by Oct. 31, Marijuana Business Daily reported. The bank cited compliance costs as the reason. In August, Anchorage, Alaska-based Credit Union 1 ended its pilot program for banking cannabis after its insurance broker threatened to end its coverage because of the program, the Anchorage Daily News reported. Haglund said the reporting process and intrusiveness of banking cannabis has turned off several potential customers. “Certainly we’ve had to turn people away for various reasons,” Haglund said. “Part of my job is to get to know my clients and in that process we’ve found that our compliance requirements didn’t seem like something they were willing to comply with.” Live Life has hired two more employees since it started accepting cannabis business, upping its total to eight employees. “(Marijuana business customers) can run, we can only walk,” Haglund said. “They do business at a pace we’re not used to yet. They come in with such large sums of cash, we simply needed more people just to count down the money. I can’t pull an employee from the window to do this because it would impact my other members.” A West Michigan bank, which asked not to be identified, with nearly $200 million in assets purchased software to help manage the regulatory process for its new cannabis accounts. It also relies on outside consultants for managing the business. About 9 percent of its deposits now come from marijuana businesses, an executive from the bank said. Banking cannabis has also added other expenses to the credit union’s costs, including upping its bond, investing in a larger, more secure safe and more armored truck pickups to take the cash to the federal reserve. Patricia Herndon, executive vice president of government relations for the Lansing-based Michigan Bankers Association, said the extra expenses are resulting in large fees being

“(Marijuana business customers) come in with such large sums of cash, we simply needed more people just to count down the money. I can’t pull an employee from the window to do this because it would impact my other members.” — Live Life Credit Union CEO Karla Haglund

charged by banks and credit unions operating in this space. Haglund declined to reveal the fee structure it charges it cannabis customers, but it ranges from the hundreds to thousands of dollars per month based on the size of the account. “We’ve never seen regular business customers come in with this much cash,” Haglund said. “There has to be specialty fees to cover our costs.” Herndon said those fees are simply the cost of doing business under the federal regulations. “What may sound like they are making tons of money on these fees, they really only cover the cost of all these additional regulatory compliance pieces,” Herndon said. “These are a more work-intensive client to serve. Don’t get me wrong, (the banks and credit unions) are able to better serve the community by making those deposits available in the form of loans. Having that increase in deposits is a good thing, but they have to have an appropriate price to cover additional costs.” For Royal Oak-based MedFarms, which operates a cultivation center in Bangor Township that is licensed to grow up to 500 marijuana plants with plans to open dispensaries in Bangor and Battle Creek by the end of the year, the fees are reasonable for the opportunity to bank. “The problem is most banks are not willing to work with you once they find out you’re in the cannabis business,” said Brandon Dabish, COO of MedFarms. “Because we’re in growth mode, we’re constantly dishing out money. Now we can is-

sue checks and purchase orders and really just minimize cash handling.” Dabish said almost all of MedFarms vendors have accounts at Live Life and calls the credit union an integral partner. “I love that they are actively involved,” Dabish said. “They are about the business. They take your phone calls. It’s a personal relationship. They know their stuff and get back to you with answers.”

Turning leaf to loans Smaller banks and credit unions are generally the only institutions willing to take on the additional risk and regulatory oversight from banking cannabis, said Rodney Martin, partner and co-chair of the cannabis industry practice for law firm Warner Norcross & Judd LLP in Grand Rapids as well as the general counsel for the Michigan Bankers Association. “Generally, smaller institutions are having difficulty competing in getting more deposits,” Martin said. “There’s fierce competition from the big banks and most smaller institutions are lent up. They can lend all they can lend and they need more deposits in a growing economy. Deposits are a low-cost source of funds (to lend). That makes the marijuana business more attractive.” Herndon declined to confirm other banks or credit unions banking cannabis in the state, but said several are engaging in the activity. At least two other banks and credit unions rumored to be banking cannabis declined to confirm the activity to Crain’s by not returning phone calls and emails. Beyond falling out of regulatory compliance, there’s a risk the negative stigma toward the marijuana industry could cause institutions to lose customers, which is why most banks banking cannabis are doing so quietly, Martin said. “There is a reputation risk out there,” Martin said. “If you’re going to do this, you may have customers or community stakeholders and shareholders who object. In a lot of communities around the state, the vote was really close for adult-use marijuana.” The November 2018 Proposal 1 vote to legalize recreational adultuse marijuana passed by a 56-44 percent margin statewide. The proposal passed easily in metro Detroit, including a 55-45 percent margin in Macomb County where Live Life is located. The most populated county

to vote against the proposal was Ottawa County in West Michigan, which voted no by a 57-43 percent margin. The fear of customers pulling accounts due to its ties to the cannabis industry was at least in part why the West Michigan bank requested anonymity, its executive said. Haglund said banking cannabis has been a boon for Live Life. The bank can now loan twice as much to its customers and potential customers than it could before. The credit union is even moving to a larger facility, a former Bank of America location, at 14 1/2 Mile Road and Utica Road in Fraser in the coming months. Haglund said the move was planned prior to entering the cannabis space, but the success of that decision has allowed the credit union to move much sooner. But overextending itself is a real risk for Live Life and other financial players in the space, Martin said. Competition is expected to dramatically increase if and when the SAFE Banking Act becomes law. “There’s serious liquidity risks from banking marijuana funds,” Martin said. “That money could go elsewhere very easily. As more banks and credit unions enter the market there will be more price shopping (on fees) and become increasingly competitive and difficult for smaller institutions to compete.” The risk is if several large-deposit cannabis customers close their accounts, it becomes difficult or impossible for an institution to cover the deposits from other customers if a bulk of those funds are loaned out. Martin said many banks and credit unions banking cannabis are setting ceilings on how much of the cannabis deposits can be turned into loans to protect themselves. Haglund said Live Life is currently writing its rules on the matter. The West Michigan bank put a cap on the amount of accounts and the amount of deposits it will allow from the cannabis industry, the executive said, to protect itself when big banks enter the business. “As (banking cannabis) becomes more competitive and the larger banks enter the market, we don’t have more than we can effectively stand to lose,” the executive said. “We don’t want to build a whole team of people that we will have to lay off at some point. We would rather handle this in a controlled way with controlled growth.” Martin said managing cannabis business growth is imperative. “I do believe that a bank or credit union, they run a risk if they are going to bank marijuana,” Martin said. “But I also believe if they set up their programs correctly, if they involve regulators along the way … I think it’s a risk that some banks and credit unions take on.” Haglund said Live Life did it right and is hopeful its cannabis customers will remain loyal if the market is flooded with new competition in the future. “I hope that our relationships hold strong,” Haglund said. “That what we’re offering wouldn’t be common at a larger institution.” Dabish said his company isn’t going anywhere. “I feel the early adopters like Live Life are the ones that will succeed,” Dabish said. “It’s all about relationships. People are going to remember that when the bigger banks come on line. I won’t forget who shut the door on me.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

CONGRATU

LATIONS

TO CRAINâ&#x20AC;&#x2122;S LEADERSHIP ACADEMY FALL 2019 INDUCTEES

Shreya Bahadur Provider Performance Specialist Priority Health

Tim Crawford

Abbey Renee Colville

Shayla Davis

Deborah DoBiesz

Vice President J.J. Barney Construction, Inc.

General Manager Brainspring

Director of Human Resources Hamilton Anderson Associates

Justin Floro

Rebecca Herr

Group Leader, Systems Engineering AVL Powertrain Engineering Inc

Christine Lindemann

Vice President The Northern Trust Company

Samuel Lulkin

Lindi Kanine

Senior Manager of Marketing & Communications The Platform

Trish Meyer

Manager, Technology Program Management The Taubman Company

Paul Michon

Angela Nelson-Heesch

Alexandra Reese

Alix Rourke

AVP Operations NFP

Director of Development Michigan Opera Theatre

Angela Smith

Vice President Commercial Portfolio Manager Team Lead Huntington

inquire about future cohorts, visit crainsdetroit.com/leadershipacademy kcovington@crain.com

Vice President Brieden Consulting Group

Manager, Fixed Asset Accounting ITC Holdings

For more information or to

or email Keenan Covington at

Vice President, Operations Vision Computer Solutions

Head of Production/ Google Hardware Google

Vice President - Commercial Loan Officer First National Bank in Howell

Crainâ&#x20AC;&#x2122;s Leadership Academy is a nomination-based program focused on developing the strengths of rising leaders at local companies.

Joshua Barney

Steven Stakich

Vice President Commercial Portfolio Manager Team Lead Huntington

Michael Wheeler Consultant Data Consulting Group

Operations Manager Budco Financial

Diljit Soora

Plant Change Coordinator Bridgewater Interiors

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

CANNABIS FROM PAGE 3

Opportunity Zones were created under the federal tax reform legislation passed by Congress in 2017 to allow capital gains to be diverted into so-called Opportunity Funds, which are allowed to invest in low-income census tracts — known as Opportunity Zones — that have been strangled of investment in recent years and decades. The funds can invest in things like real estate and businesses. Yet Bloomberg Tax reported in May that Treasury Secretary Steven Mnuchin “advised against” using Opportunity Zone equity “to fund a marijuana business, even those that are legal at the state level.” His comments came in front of a Senate panel. While that doesn’t have the full force of law, said Scott Kocienski, an attorney in the Bloomfield Hills office of Detroit-based Dykema Gossett PLLC, it does complicate the equation. “It gives you pause because the opportunity for audit is more likely,” he said. “Not only could that potentially impact whether you have a true Qualified Opportunity Zone fund, but you’re bringing into play your actual operating business and bringing greater scrutiny to that operation and the potential tax ramifications for that.” Under law, Opportunity Zone funding isn’t allowed to finance so-called “sin businesses,” which include things like massage parlors, golf courses, liquor stores, racetracks, etc. However, cannabis operations are not specifi-

BLOOMBERG

Legal sales of marijuana for recreational use are likely to begin next year in Michigan.

cally identified in the federal tax code as such. “Illegal nuclear dumps aren’t on there, maybe we could do that, too,” Mikalonis joked. James Combs, a partner and leader of Detroit-based Honigman LLP’s Tax Practice Group, said the Internal Revenue Service “has not really provided a whole lot of guidance on cannabis businesses or related activities.” He also said multiple scenarios could further complicate the matter, including whether the medical and/ or recreational marijuana businesses also are involved in hemp, which became legal under federal law last year. Hemp and cannabis are effectively the same plant and really only differ in tetrahydrocannabinol, better known

as THC, content, with cannabis having more than 0.3 percent and hemp having less. Opportunity Zones aren’t the only foggy tax issue regarding marijuana. A provision of the tax code known as 280E prohibits business tax credits and deductions for businesses involved in controlled substances like marijuana, even if they are legal at the state level where the business is conducted. Alpenglow Botanicals LLC, a Breckenridge, Colo.-based medical marijuana firm, tried to claim a variety of deductions, ultimately suing the IRS after its owners’ tax bills increased by more than $50,000, but the federal government argued that the business couldn’t claim the deductions. The U.S. Supreme Court this summer declined to hear the case. In November, in a 56-44 vote, Michigan voters approved letting people 21 and up buy, possess and use marijuana and marijuana-infused edibles. In addition, they can grow up to 12 plants for personal use, Crain’s reported at the time. Sales are likely to begin next year. It also imposes a 10-ounce limit for marijuana kept at households with a 2.5-ounce personal possession limit. More than 2.5 ounces kept at households are required to be secured in locked containers. Municipalities can opt out of allowing marijuana-related businesses to operate in their community and businesses retain the right to maintain a drug-free workplace, where employees are subject to termination for use even as it’s legal. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

APP

FROM PAGE 3

Plain Sight solves this problem, according to Chapman. Free for users, the app connects job seekers with head hunters, entrepreneurs with investors and so forth. Each person who downloads Plain Sight fills out a profile with work experience, activities and goals that others in the area can see in real time. Users are also notified when a person who matches their profile interests checks in at a space near them. There are no names or profile pictures on the app to eliminate unconscious bias and protect privacy, and users collaborate on their own terms, Chapman said. Plain Sight is headquartered in One Campus Martius in downtown Detroit with three full-time employees and two contractors, not including Chapman. The app had a soft launch in June, allowing a small group access. Last Thursday and Friday, it hosted a “scavenger hunt” in the city during which users met and mingled at seven sites: Central Kitchen + Bar, Madcap Coffee, Bamboo Detroit, Airea Studio, Grand Circus, Dessert Oasis and TechTown. Participants included Dhani Jones, ex-NFL linebacker and vice president of business development at Rock Ventures; Dennis Archer Jr., CEO of PR firm Ignition Media Group; and Anne Ward, CEO of home fragrance brand Curio. Chapman said he is the majority owner of the startup. He said Gilbert is the lead investor, but declined to say how much he has invested or what stake he has in the company.

CRAIN’S

Chapman said he is targeting $300,000 in revenue next year. For round one of seed funding set to launch in December, he said the startup is appealing to early stage investors from the Midwest and beyond. The app has two potential revenue streams: from users and event space owners. Neither pay for the app yet. Starting next year, business owners will be charged to advertise their restaurants, bars and banquet halls as meetup spaces for those in the Plain Sight community. Chapman said the company is also considering launching a premium user platform. The idea is to create a monetized version of the app geared toward headhunters. The Chattanooga, Tenn., native moved to Detroit in 2016 for a leadership role at the Quicken Loans Community Fund, which is the mortgage giant’s philanthropic arm. One of his main accomplishments was spearheading the annual pitch competition Detroit Demo Days, which has provided nearly $3.5 million in funding to small businesses in Detroit. Chapman left that role in November but continues to advise the program. A check from Detroit’s biggest pocketbook isn’t the only factor keeping his tech startup in the city, Chapman said. As he watches more entrepreneurs flee the crowded and expensive West Coast scene, he sees an opportunity to help establish Detroit as a Midwest tech hub. “I would love to see Detroit be a hub for technology, especially for founders of color,” he said. Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

TITLE SPONSOR

KEY THEMES WE’LL EXPLORE:

MONDAY

It’s the buzz phrase in the industry and covers everything from surprise billing to patient education and physician engagement.

OCT 28

Health Care Innovation

The Henry, Dearborn

Health Care Literacy

8:30AM - 1:30 PM

INDIVIDUAL TICKET: $185 RESERVED TABLE OF 10: $2,000 YOUNG PROFESSIONAL TICKET: $129.50 Available to attendees under the age of 35

Telehealth is’t the only technology that’s changing the delivery of health care. We talk to entrepreneurs about how an idea gets to market and becomes a standard of care.

Health Care Policy

We explore the potential impact of Medicaid work requirements, auto no-fault reform and alternative health benefits.

BREAKOUT SESSION SPONSOR

MAJOR SPONSOR

PRINT SPONSOR

PROMOTIONAL PARTNER

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

SWITCH FROM PAGE 1

“The retroactivity is like salt in the wound, where we would have to repay the taxes that have already been collected,” said Ron Caniff, superintendent of the Kent County Intermediate School District. Last month, Caledonia school Superintendent Dedrick Martin and Caniff suggested in a letter to a Switch lobbyist that the school districts would drop their opposition to the legislation if the company would donate $1.3 million over eight years to STEM education programs for students in Caledonia. “We would prefer an amicable resolution to this issue,” the school chiefs wrote in the Sept. 20 letter obtained by Crain’s. In a reply three days later, Switch’s lobbyist rejected the school officials’ “demands related to” the legislation, Senate Bill 455. “The terms and nature of your demands are unfortunate and unnecessary,” Natalie Stewart, vice president of government and public affairs at Switch, wrote in the reply letter obtained by Crain’s. “Switch seeks positive approaches with our community partnerships. ... However, if the sole basis of our relationship is for Switch to make large financial payments to purchase support for legislative initiatives such as SB455, we must respectfully decline.” State Sen. Peter MacGregor, a Kent County Republican, said the letter from the school superintendents amounted to a form of “extortion” four days before the Senate voted 2711 in favor of the bill. “It’s disappointing that that’s the type of letter that the school district is relying on to generate revenue either through taxing them or some sort of agreement — or some sort, I don’t know if I should say it, some sort of extortion — that we’ll shut up if you pay up,” said MacGregor, R-Rockford. “It’s disturbing.” In an interview, the Caledonia superintendent said Switch officials “encouraged” the school district to propose a “win-win situation” similar to the payment in lieu of taxes agreement the company inked with Gaines Township in 2016 under which it paid $109,326 to the township last year. “Then (Stewart) turned it around and was like, ‘This is not a negotiation, we don’t need this and we’ll take our chances (with the Legislature),’” Martin told Crain’s. “... I was really a little upset that she tried to put it that we were trying to extort her. ... We’re just asking them to follow the law.” School groups are aligned with the Michigan Data Center Alliance — an industry group — in fighting the legislation in the House, where it’s been assigned to the Commerce and Tourism Committee. “We strongly oppose this misguided legislation because it provides a special carve-out for a single data center that just entered the Michigan market,” said Carrie Wheeler, executive vice president of Liquid Web, a Lansing-based data center. In 2015, the Michigan Data Center Alliance fought Switch’s initial attempt to get exempted from the 6 percent sales and use tax for its capital investment at the former Steelcase R&D center in Gaines Township on the southeast side of Grand Rapids. Wheeler leads the industry group. As a compromise, lawmakers nixed a total exemption of property tax for Switch in 2015 and agreed to exempt

crainsdetroit.com

DALE G. YOUNG FOR CRAIN’S

Switch Inc.’s pyramid towers over the landscape in Caledonia on the southeast edge of Grand Rapids. The building was originally built to be the distinctive headquarters of the Steelcase company, but now houses the giant “server farm” of Switch.

Big investment

Stewart

MacGregor

sales and use tax for all data centers. “In the competitive field of data centers and information technology, lawmakers should be promoting tax fairness, not be picking winners and losers to advantage a single company with political clout and well-connected lobbyists,” Wheeler said in a statement. Switch’s lobbying team in Lansing includes the multi-client firm Public Policy Associates Inc. and Brandon Dillon, a former state representative and Michigan Democratic Party chairman. State Rep. Steve Johnson, R-Wayland, opposes the additional tax relief for Switch, which is located in his 72nd District. “There are other data centers that aren’t in Ren Zones and (Switch is) claiming they’ll leave if we don’t give them another break? I say good riddance,” Johnson told Crain’s. “They are the type of company focused on hiring a bunch of lobbyists and throwing a bunch of money at lawmakers with hopes of getting these special sweetheart deals.”

Tax dispute Switch company officials have portrayed the legislation as a technical correction to what they believed would be 15 years of operating property-tax free through a Renaissance Zone designation that was estimated to save the company $1.1 million annually on its tax bills. “This is not a new deal, this is not an expansion, this is no new incentive,” Stewart told Crain’s. “We’re just trying to codify what the intent of our original agreement was.” But the agreement the company signed with the Michigan Strategic Fund specified “the company and the owner acknowledge that the benefits provided under (the law) do not include relief from the payment of certain property taxes relating to bonds, school sinking fund obligations and special assessments,” according to state records reviewed by Crain’s. Late last year, Snyder’s Treasury Department ordered Gaines Township to assess Switch for the taxes that had gone uncollected for nearly three years. Separately, Switch has a “payment in lieu of taxes” agreement

Brinks

Martin

with the township and Kent County as part of the 2016 deal to move into the Pyramid building, which had sat empty for nearly a decade. Between 2016 and late 2018, Gaines Township did not send Switch any property tax bills because local officials “did not have” the MSF agreement that said they were owed, said Jeffrey V.H. Sluggett, a Grand Rapids attorney representing the township. The Treasury Department flagged the issue during “a normal state review,” Sluggett said. Switch paid the 2017 and 2018 tax bills in January and immediately appealed them to the Michigan Tax Tribunal. In a filing to the state’s tax court, Switch’s attorneys at Foster Swift Collins & Smith P.C. said the company “continues to support various state and philanthropic initiatives in Michigan in the spirit of karma and positive corporate citizenship.” In late August, the new Switch legislation was introduced by Senate Appropriations Chairman Jim Stamas, a Midland Republican who did not return a message seeking comment. MacGregor is the lone co-sponsor. Stewart said the legislation seeks to resolve a conflict between the Renaissance Zone Act that says the property owner is exempted from paying the disputed taxes and the state’s general property tax statute. “We believe the Renaissance Zone Act was the controlling authority on all of this, which is proven by the fact that for two-and-a-half years we never received a (tax) bill on this,” Stewart said. State Sen. Winnie Brinks, a Grand Rapids Democrat who voted in 2015 to exempt Switch and other data centers from sales and use taxes, voted against SB455 on Sept. 24 with six Democratic senators and four Republicans. Brinks said Switch’s original agreement with the Michigan Economic Development Corp. “is pretty clear” that the company would be on the hook for school debt, which amounts to 7 of the 7.89 mills of disputed property taxes. “I have concerns with them trying to rewrite history … and doing so at the expense of schools is not what we signed up for four years ago,” Brinks said of Switch.

Under the terms of its MSF agreement, Switch pledged a minimum investment of $151.1 million and the creation of 103 new jobs by Dec. 31, 2021, at the 600,000-square-foot Pyramid building that Steelcase built for $111 million in the late 1980s. To date, the company and its clients have invested $155 million and Switch is in the third and final phase of the build-out within the Pyramid building. Between Switch, its clients and construction companies, the project has created 800 direct and in-direct jobs, Stewart said. Switch plans to break ground next spring on an expansion of up to 400,000 square feet of server space, Stewart said. The company adds space in modular units, based on demand. But the company’s lobbyist has warned lawmakers that its future expansion plans could be scuttled if Switch and its clients are subject to property taxes. Twenty-eight other states have tax laws exempting property taxes on data server equipment, which is often replaced or upgraded every two to three years, not allowing for full depreciation on its value, Stewart said. “Our whole business model is based on customer demand,” she said. “And the fact of the matter is (customers) can go to 28 other states and not have to pay those special assessments and the personal property tax. That’s our concern.” Margo Burrage, a spokeswoman for Dart Container, said the Lansing-area manufacturer decided to house its backup server at Switch in 2017 “because it is the highest-rated center closest to our mid-Michigan operations and a provider in a cost-effective nationwide data/phone line network.” The battle over Switch’s tax liability comes when the Republican-controlled Legislature and Democratic Gov. Gretchen Whitmer are deeply divided over how to pay for basic state services amid a stagnant tax base. “All of these little exceptions have an impact on who’s footing the bill for all of the services we all enjoy — anything from schools to roads and infrastructure,” Brinks said. Caniff, the superintendent of the Kent County ISD, said Switch’s pursuit of the additional tax relief four years after securing significant “tax advantages and tax avoidance” could open the door to other data centers seeking carve-outs. “Today it might be Switch, but who’s next? Will other companies in Renaissance Zones want the same treatment?” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

Editor-in-Chief Keith E. Crain Publisher KC Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Lisa Rudy, (313) 446-6032 or lrudy@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Product Director Kim Waatti, (313) 446-6764 or kwaatti@crain.com Digital Portfolio Manager Tim Simpson, 313-446-6788 or tsimpson@crain.com Creative Director David Kordalski, (216) 771-5169 or dkordalski@crain.com Assistant Managing Editor Dawn Riffenburg, (313) 446-5800 or driffenburg@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Senior editor, Chad Livengood, (313) 446-1654 or clivengood@crain.com Special Projects Editor Amy Elliott Bragg, (313) 446-1646 or abragg@crain.com Design and Copy Editor Beth Jachman, (313) 446-0356 or bjachman@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

REPORTERS Annalise Frank, breaking news. (313) 446-0416 or afrank@crain.com Jay Greene, senior reporter, health care. (313) 446-0325 or jgreene@crain.com Anisa Jibrell, breaking news. (313) 446-1612 or ajibrell@crain.com Kurt Nagl, breaking news. (313) 446-0337 or knagl@crain.com Kirk Pinho, real estate. (313) 446-0412 or kpinho@crain.com Dustin Walsh, senior reporter, economic issues. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter, nonprofits and philanthropy. (313) 446-1694 or swelch@crain.com

MEMBERSHIPS CLASSIC $169/yr. (Can/Mex: $210, International: $340), ENHANCED $399/yr. (Can/Mex: $499, International: $799), PREMIER $1,299/yr. (Can/Mex/ International: $1,299). To become a member visit www.crainsdetroit.com/ membership or call (877) 824-9374

ADVERTISING Sales Inquiries (313) 446-6032; FAX (313) 393-0997 Director, Program Content Kristin Bull, (313) 446-1608 or kbull@crain.com Senior Account Executive John Petty Senior Account Manager/Political Specialist Maria Marcantonio Advertising Sales Lindsey Apostol, Mark Polcyn, Sharon Mulroy People on the Move Manager Debora Stein, (917) 226-5470, dstein@crain.com Events Director Kacey Anderson Director of Marketing Christina Fabugais-Dimovska Senior Art Director Sylvia Kolaski Director of Media Services Joseph (Sam) Tanooki, (313) 446-0400 or sabdallah@crain.com Integrated Marketing Specialist Keenan Covington Classified Sales and Sales Support Suzanne Janik

CUSTOMER SERVICE Single copy purchases, publication information, or membership inquiries: Call (877) 824-9374 or customerservice@crainsdetroit.com Reprints: Laura Picariello (732) 723-0569 or lpicariello@crain.com Crain’s Detroit Business is published by Crain Communications Inc. Chairman Keith E. Crain Vice Chairman Mary Kay Crain President KC Crain Senior Executive Vice President Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly, except the last issue in December, by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Contents copyright 2019 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is prohibited.

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

THE WEEK ON THE WEB

RUMBLINGS

Sonder to open 168 units in downtown Detroit

LSAT to change after blind man’s lawsuit

OCTOBER 4-10 | For more, visit crainsdetroit.com

onder Inc. expects to open 168 of its apartment-like short-term rentals in two buildings in downtown Detroit beginning next month. Forty-five of the one- and two-bedroom units are expected to be available for rent in the former Lawyers Building at 139 Cadillac Square while the remaining 123 are expected this winter in the former Gabriel Richard Building at 305 Michigan Ave. Ellen Schulz, the Chicago-based general manager of the properties, said Sonder, which is headquartered in San Francisco, “brings consistency and quality of a hotel stay with a space that feels like an apartment.” Sonder operates in 22 cities across the globe. Anticipated rates specifically for the Detroit properties weren’t disclosed during an interview last week with Schulz, but on average, they rent for $129 per bedroom per night nationwide, Sonder spokesman Suhaib Habibullah said. The company is on track for $400 million in revenue this year and in July, it netted $225 million in Series D and other funding, he said, although anticipated revenue figures for the Detroit locations were not made available. “We were comfortable in that downtown area in terms of having the immediate demand,” Schulz said. “We do a sale underwriting process to understand the economics of all locations and they came across as places where we could offer a great stay and build a solid foundation around.” Sonder is master-leasing the space from the building owners, Schulz said. The company’s entry into the Detroit market comes amid a wave of new hotel space in and around downtown and a debate over shortterm rentals as a public policy issue. “We saw an opportunity to offer an alternative, stay somewhere that feels a little more like home and a bit more of a consistent approach,” Schulz said. Messages were left with the buildings’ respective owners, Mike Ferlito, president of Detroit-based developer Ferlito Group, and Joe Barbat, founder and chairman of Barbat Holdings LLC, a West Bloomfield Township-based real estate investment and management company, and Houze Living LLC. He is also the CEO and chairman of West Bloomfield Township-based Wireless Toyz. At various stages, both projects were planned to be multifamily residential. The Lawyers Building project was revealed in October 2017 and the Gabriel Richard Building has been in the works since Barbat bought the building.

BUSINESS NEWS J The U.S. Army extended BAE Systems Inc.’s contract by up to $269 million for production of its armored Bradley Fighting Vehicle. The Arlington, Va.-based defense contracting company with operations in Sterling Heights was tapped for 168 upgraded Bradley A4 fighting vehicles, according to a news release. J From the minds behind the Hei-

KIRK PINHO/CRAIN’S DETROIT BUSINESS

The former Lawyers Building at 139 Cadillac Square downtown is expected to become Sonder Inc. space starting next month.

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

$90M

The cost of the Detroit Pistons’ new training center and headquarters in New Center

31,000

The number of homeowners in Wayne County who are regularly behind on their taxes

$100,000

Size of the fine Walled Lake’s Iron Laboratories LLC will pay for violating cannabis reporting regulations

delberg Project is Heidelburgers, a restaurant planned to open next summer on Detroit’s east side in the McDougall-Hunt neighborhood, Heidelberg Project President and CEO Jenenne Whitfield said. The concept will be piloted Oct. 19 with an “edible art” dining experience at the Heidelberg Headquarters Guest House. J Mayor Mike Duggan, Wayne County Executive Warren Evans and other local officials announced a proposal last week that would lower the monthly payment plans for homeowners who owe back taxes by wiping out 6 percent interest penalties and other fines that were piled on their unpaid tax debts. J Three federal unfair labor practice charges have been filed against Detroit Medical Center related to the six-hospital system’s decision on Oct. 1 to lay off its highly trained police authority officer workforce and outsource security. The complaints were filed by Troy-based Michigan Association of Police, Public Employees and Firefighters, which represents 59 certified police officers at two DMC hospitals and is in the process of petitioning for a union at a third for another 20-28 officers. J A two-screen movie theater in

Hamtramck, an avant-garde jazz collective and a puppet performance are among 36 ideas to win a piece of $1.4 million in the Knight Arts Challenge Detroit. J Detroit Public TV, Ideastream in Cleveland and two other public media stations have launched an initiative aimed at bolstering training, staff diversity and job opportunities, and at sharing best practices about operations. J When the Detroit Pistons organization’s 250 employees finish moving to the team’s new $90 million training center and headquarters later this month, it will mark the basketball team’s full transition to Detroit after four decades in the suburbs. J A Walled Lake-based medical marijuana testing lab has agreed to pay a $100,000 fine after the state shut it down for allegedly violating regulations for reporting results. Iron Laboratories LLC entered a settlement agreement with the state’s Marijuana Regulatory Agency, a division of the Licensing and Regulatory Affairs, after the agency suspended its license and shut it down Aug. 16. Macomb County health officials are investigating seven cases of Legionnaires’ disease reported at McLaren Macomb hospital in Mount Clemens. Six of the seven cases were reported since the middle of September, according to a news release from the Macomb County Health Department, which is handling the investigation alongside the Michigan Department of Health and Human Services.

REAL ESTATE NEWS J Vester Square, a cluster of businesses and parking lots, could start to slowly morph into a multifaceted dining and shopping campus east of downtown Ferndale. J Allen Park Digital Cinemas rolled the credits for the final time Oct. 10. The small theater at the corner of Allen Road and Philomene Boulevard is permanently closing, said MJR founder and CEO Mike Mihalich, who owns the location separately from the soon-to-be sold MJR chain.

Southfield law firm’s settlement of a West Bloomfield Township man’s lawsuit over law school admission testing accommodations for visual impairment has national implications. Eight years after Angelo Binno originally filed a federal lawsuit, the nonprofit Law School Admission Council that administers the Law School Admission Test, commonly known as the LSAT, has agreed to find ways to make the test work for people with disabilities, according to a news release from Nyman Turkish PC, a national litigation and disability law firm, and LSAC. Binno sued LSAC in May 2017 in U.S. District Court in Detroit. The more recent litigation came after Binno’s 2011 lawsuit against the American Bar Association with attorney Richard Bernstein — now Michigan’s first Supreme Court justice who is blind — was dismissed. Nyman Turkish managing partner Jason Turkish has handled the case for around seven years, his entire legal career so far, first as co-counsel with Bernstein and then lead counsel

Binno

Turkish

since Bernstein was elected to the state’s high court, he told Crain’s. “I’m really proud of Angelo. ... He’s totally changing the game for folks who are blind,” said Turkish, who added that he is also legally blind. “For the last 25 years it has been a huge barrier to entry for the profession.” Binno alleged that the LSAC violated the Americans with Disabilities Act and the Michigan Persons with Disabilities Civil Rights Act when the organization denied his request to waive the LSAT’s analytical reasoning section. Binno said his visual impairment prevents him from drawing and diagramming, which that part of the test requires.

GATHER VIA INSTAGRAM

Gather restaurant on Gratiot Avenue in Detroit and Cøllect bar on the second floor will change hands this week after its owners sold the businesses.

Gather, Cøllect owners sell Eastern Market businesses T

he owners of Gather restaurant and beer bar Cøllect have sold the Detroit businesses. In a Tuesday post on Gather’s social media accounts, co-owners Kyle and Lea Hunt indicated that Oct. 10 would be their last day at the establishments. “We’ve decided to sell business to focus on family and simplicity,” the post says. “This week is bittersweet, we cannot thank you all enough for all the support the last couple years.” They did not say to whom they sold the businesses. The owners declined to comment to Crain’s on Tuesday. Gather, at 1454 Gratiot Ave. at the edge of Eastern Market, prides itself for serving seasonal and locally sourced food. It opened in 2017 after an extensive build-out and a long liquor license process. The restaurant

closed briefly in September 2017 when co-founder and chef Nate Vogeli left the business. Chef Jessi Patuano took over. Cøllect, a 1,200-square-foot bar above Gather that opened in October 2018, featured 14 more taps of craft beers from around the world, such as a sour ale with elderflower and an apricot Berliner Weisse from Copenhagen. The social media post made no mention of Huddle, a walk-up window serving frozen custard owned by the husband-wife team that opened in August in downtown Detroit by Parker’s Alley. Kyle Hunt said that the new owners should be making an announcement soon. The Hunts are expanding the ice cream business and will introduce an ice cream truck in the spring, he said.

T:10.875” S:10.25”

“ With a broken

mixer on one of our busiest days, closing shop wasn’t an option.“ Chase for Business Customer Kamal Grant Owner, Sublime Doughnuts

Learn more at chase.com/BusinessCredit

Products and services described as well as associated fees, charges, interest rates and balance requirements may diﬀer among diﬀerent geographic locations. Chase business checking account required. Subject to approval. Additional terms, conditions and restrictions apply. Participants compensated. JPMorgan Chase Bank, N.A. Member FDIC. Equal Opportunity Lender.

T:14.5”

S:14”

Whatever happens, get access to cash with a Business Line of Credit from Chase.

A cable outage ouldn't be the end of your work day. AT&T Internet for Business has 99.9% reliability, unlike second-rate cable internet. It operates on AT&T’s integrated network and features Internet Backup. So even if you lose power, you won’t lose internet.

S:13.5"

Act now

to enjoy a $100 AT&T Visa® Reward Card* with fast, 1GB service. Go to att.com/BizInternet2, call 855-366-6255 or visit a local store to take advantage of this oﬀer today.

Read the Terms of Service at: www.att.com/internet-terms. Acceptance of Terms of Service is required. Geographic and service restrictions apply to AT&T Internet services. Go to https://www.att.com/smallbusiness/explore/internet.html to check qualification. Internet speed claim(s) represent maximum downstream and/or upstream speed capabilities. Actual speeds may vary and are not guaranteed. Many factors can affect actual speeds, including site traffic, content provider server capacity, internal network management factors, device capabilities and use of other services. Prices and offers subject to change without notice. Term commitments, Early Termination Fees, credit restrictions and other terms, conditions, and limitations may apply. Advertised services not available in all areas. Offer, terms, and restrictions subject to change and may be modified or terminated at any time without notice. AT&T Internet Promotion - $100 AT&T Visa® Reward Card* offer available through 12/31/2019. Offer available to new AT&T Internet for Business and AT&T Business Fiber subscribers or customers migrating from FastAccess® Business DSL or AT&T High Speed Internet Business Edition to AT&T Internet for Business or AT&T Business Fiber. Offer not eligible for renewals or speed upgrades. Offer is not available to local, state, or federal government entities, e-rate eligible entities or Rural Health Care (RHC) entities. Customer must have active service in good standing for a minimum of 60 consecutive calendar days and must remain active at time of redemption to qualify for $100 AT&T Visa® Reward Card* (“Reward Card”). A maximum of one Reward Card may be issued per account (i.e. phone number to which AT&T Internet line(s) is/are billed). Qualified subscribers must complete the online redemption process at the AT&T Business Reward Center at https://rewardcenter.att.com/Smallbusiness/default.aspx by the date provided in the redemption letter to obtain Reward Card. *Reward Card: Will be sent letter with redemption requirements. Redemption required w/in 60 days from reward notification mail date. Reward Card delivered within 3-4 weeks after redemption to customers who maintain qualifying service(s) from installation date and through reward fulfillment. Card expires at month-end 6 months after issuance. For Cardholder Agreement, go to rewardcenter.att.com. The AT&T Visa Reward Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and can be used everywhere Visa debit cards are accepted in the United States, US Virgin Islands, and Puerto Rico. Not available for withdrawal of cash. The Bancorp Bank; Member FDIC. Visa U.S.A. Inc. is not affiliated with AT&T or this offer. AT&T is not responsible for lost, late, mutilated, misdirected or postage-due mail. Void where prohibited, taxed or restricted. May not be combined with other offers, discounts or promotions. Offer, terms, and restrictions subject to change, and may be modified or terminated at any time without notice. Credit restrictions and other conditions and limitations apply.