Crain's Detroit Business, Nov. 11, 2019 issue by Crain's Detroit Business

Health industry braces for possible fallout from marijuana use PAGE 3

Editorial: Kmart’s legacy in Detroit PAGE 8

CRAINSDETROIT.COM I NOVEMBER 11, 2019

CRAIN’S MICHIGAN BUSINESS

TRYING TO STAY AFLOAT

Flint’s ‘comeback story’ at odds with its bleak fiscal outlook

Standing on the stage of Flint’s recently rehabilitated Capitol Theatre, Mayor Karen Weaver delivered a State of the City address last month touting progress in business attraction, blight elimination and replacing the pipelines that tainted the city’s water. “When I took office, I promised we’d have a comeback story like no other,” said Weaver, who became mayor four years ago during the depths of Flint’s water crisis. “As you can see, Flint, we’ve made a lot of progress and we’ve made it together.” Left unmentioned in Weaver’s

hourlong address was any assessment of the state of the city’s finances and legacy costs, which are showing signs of deterioration despite a good economy, restored local control, promising downtown redevelopment projects and an influx of state taxpayer and philanthropic aid. “She created distractions because she didn’t want to talk about the finances of the city,” said state Rep. Sheldon Neeley, who narrowly unseated Weaver by 205 votes in last Tuesday’s city elections. See FLINT on Page 20

THE CONVERSATION

DENNIS BERNARD  ‘Guy who sells money’ worries about Detroit’s comeback. PAGE 22

DALE G. YOUNG FOR CRAIN’S DETROIT BUSINESS

| BY CHAD LIVENGOOD

More in this report  CEO of the BTL Group: “I want Flint to be the next water capital of the world.” PAGE 10  Health care accelerator opens second location in Flint. PAGE 11  Kettering’s president shares college’s secret for turning out more patents than Stanford. PAGE 12

 Company offers alternative to urban clutter of e-scooters and bikes. PAGE 14

NEWSPAPER

BY TOM HENDERSON

The formation of a new angel investor group in the state, the Flint Angels, is expected to be announced Monday. The Flint Angels will be a partnership with the Grand Angels of Grand Rapids, which follows the model of other

new angel groups around the state. In February, a partnership with a new angel investor group in Southeastern Michigan, the Woodward Angels, was announced at a meeting at the Shinola Hotel in Detroit. See ANGELS on Page 21

ECONOMY

Survey shows wave of pessimism Executives express gloomy perspective on market outlook for 2020 BY DUSTIN WALSH

Flint Angels to launch investor group with statewide network

A wave of pessimism is sweeping across corporate America. A year after record economic and business optimism, prolonged trade tensions with China and political uncertainty from the White House and U.S. Congress have left CEOs and executives with a gloomy perspective, according to the 15th annual Mergers and Acquisitions Outlook Survey by Detroit-based

law firm Dykema Gossett PLLC. Only 38 percent of respondents, who were C-suite officers and senior executives from companies with revenue ranging from $1 million to $1 billion, are now bullish on the U.S. economy, compared with 64 percent in last year’s survey. That’s also led to a significant drop in how those executives view the M&A outlook for 2020, with only 33 percent of respondents viewing the market positively in 2020 versus 65 percent last year.

“Not having a resolution with China seems to be really driving the results,” said Tom Vaughn, partner and co-chair of the firm’s M&A practice. “The current administration, from a business and trade regulation standpoint, seems to be having a negative impact. If we didn’t have this much uncertainty on trade, business would be a lot more positive on the administration.” See DYKEMA on Page 20

NEED TO KNOW

OFF TO THE RACES

THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT ` RECREATIONAL WEED TAKES A BEATING

` DIA TO SEEK EARLY RENEWAL OF OPERATING MILLAGE

THE NEWS: Cities and townships asking voters whether to allow recreational marijuana businesses mostly found voters don’t want them. Out of 10 communities statewide posing the question in last Tuesday’s election, only Lincoln Park voted to allow them.

THE NEWS: The Detroit Institute of Arts plans to seek an early renewal of its operating millage in Wayne, Oakland and Macomb counties during the March primary. The museum’s board voted Monday evening in favor of approaching officials in the three counties to get their approval to renew the millage two years before it expires.

WHY IT MATTERS: The votes signify that although voters may favor legal weed in principle, they don’t necessarily want it being sold right next door. More than 70 percent of the state’s municipalities have opted out of allowing the businesses.

WHY IT MATTERS: Founders is the 14th-largest brewery in the U.S. and largest in Michigan, but it has seen boycotts and some outlets stop selling its products. The reopening plan is part of a PR blitz aimed at recovering its image after moves and comments criticized as tone-deaf or worse after details of the lawsuit were revealed.

WHY IT MATTERS: TCF Chairman Gary Torgow led the effort to get seven companies to contribute $5 million each to the neighborhood fund. The move offers insight into TCF’s expansion strategy in the company’s relatively new headquarters city, where it previously had only a single branch in downtown Detroit.

` STATE BUDGET IMPASSE FAILS TO BREAK

` FOUNDERS BREWING TRIES TO STOP FOUNDERING THE NEWS: Grand Rapids-based Founders Brewing said it wouldn’t reopen its Detroit taproom until next year after closing it amid fallout from a racial discrimination lawsuit. The taproom says it will donate profits it estimates at $2 million through 2022 to as-yet unidentified charities.

town in Grandmont Rosedale, the neighborhood chairman Gary Torgow chose as the bank’s target for more than $5 million in planned investment as part of Detroit’s Strategic Neighborhood Fund.

WHY IT MATTERS: The museum has been aiming to raise a $400 million endowment to help pay operating costs, but that would spin off only about $20 million a year. The DIA’s operating budget has risen to $38 million for fiscal 2020 from $25 million in 2012.

` TCF BANK OPENS BRANCH IN GRANDMONT ROSEDALE THE NEWS: TCF Bank plans to open its first Detroit branch outside down-

2 | CRAIN’S DETROIT BUSINESS | NOVEMBER 11, 2019

THE NEWS: Gov. Gretchen Whitmer and Republican legislative leaders say they are “very close” to agreeing to restore some funding she vetoed more than a month ago, but remained at odds as of Thursday over limiting her ability to unilaterally shift money within individual state departments when the Senate adjourned until next week. WHY IT MATTERS: The Democratic governor vetoed an unprecedented amount of funding after being sent a budget in which she had no input following a breakdown in road-funding talks, which has left numerous nonprofits and government programs scrambling to fill newly created holes in their budgets.

Penske makes a big deal Racing impresario and industrialist Roger Penske, at 83 years of age, made a deal to acquire Indianapolis Motor Speedway and the IndyCar Series racing league. Experts were unsure how to value the deal and Penske told The Associated Press: “I haven’t paid anything yet.” The deal adds another dimension to a track record that includes building empires not only in racing, but in trucking, manufacturing and auto dealerships through Penske’s Bloomfield Hills-based Penske Corp. The Hulman family, which owned the track, saw Penske as its best bet to preserve the history and legacy of the legendary speedway because of his deep roots and love for racing. As four-time Indy 500 winner A.J. Foyt told the Associated Press: “The one thing about Roger is that when he goes and does something, he does it first class.” Team Penske owner Roger Penske celebrates his team’s win at the Indy 500 last May. | GETTY IMAGES VIA BLOOMBERG

` STRYKER CORP. AIMS TO BE ONE-STOP SHOP THE NEWS: Kalamazoo-based medical device maker Stryker Corp. has made a deal to acquire Amsterdam-based Wright Medical Group NV, which makes orthopedic products, in a $4 billion cash deal. It’s one of the biggest acquisitions by a Michigan company this year.

WHY IT MATTERS: The industry that makes joint replacements and a host of other devices has been consolidating in a bid to offer hospitals and physician practices a full suite of products and become one-stop shops. Stryker says it may seek more smaller deals as it tries to expand on its $1.26 billion in orthopedics sales last year.

PEOPLE

CANNABIS

Lewand leaving Shinola at year’s end

Former Lions president mum on new job

GETTY IMAGES/ISTOCKPHOTO

BY CHAD LIVENGOOD

MARIJUANA’S MYSTERIES

Health industry prepares for potential fallout from increased use BY JAY GREENE

The legalization of medicinal marijuana has led to more widespread use for pain relief and other issues, but not all doctors are sold on it. While Michigan is one of 33 states to legalize medical marijuana and is one of eight to regulate marijuana for medicinal and recreational uses for adults, very few clinical studies have been conducted on overall effects on health, according to the Michigan State Medical Society, which is advocating for more research. “We still lack a lot of research on the use of (marijuana)” and the active ingredient THC (tetrahydro-

cannabinol) and CBD (cannabidiol),” said Mohammed Arsiwala, M.D., president of the medical society. “The use of (marijuana) CBD (oils and in edibles) has come into a lot of favor with individuals with chronic pain. We have significant concerns with adolescents and pregnant women because of other risk factors.” Arsiwala said doctors believe there needs to be more discussion on the health effects of marijuana and the differences between hempbased CBD oils and edibles and marijuana-based CBD products that contain high or uncertain levels of THC. “We should be talking and researching the long-term health ef-

fects. We haven’t done that yet,” he said. Joel Kahn, M.D., a cardiologist in Bingham Farms at the Kahn Center for Cardiac Longevity, said there is widespread confusion about the effects of hemp CBD products and marijuana CBD products. Hemp-based CBD oils and similar products hit the market in Michigan about the same time the state approved recreational use in 2018. The U.S. government approved hemp use in December as part of the federal farm bill. Hemp-based CBD oil products can be purchased at most grocery stores, pharmacies and some gas stations, Kahn said. See MARIJUANA on Page 18

Mohammed Arsiwala, M.D., is president of the Michigan State Medical Society.

A refreshed look for Crain’s city books have shared a family name, but like most siblings growing up, they’ve developed their own personalities and styles. Now it’s time for a family reunion, to take stock, learn from each other, share best practices and use the strength of our family name to continue to grow,” Linden said. Changes include different headline type that is sharper and allows us to pack in more words to help aid understanding. We’ve changed bylines, promos and story labels, all with the intent of helping busy read-

ers navigate the news more easily. We’ve also introduced new features. On Page 2, you’ll find a new briefing column called Need to Know that looks at the biggest stories of the previous week. It’s intended to combine the best of our previous Week on the Web and Michigan Briefs columns and offer quick analysis that helps readers understand why the news matters and what’s next. In addition, a new Q-and-A interview column on the back page called The Conversation debuts this

“TOM WAS INSTRUMENTAL IN LEADING OUR TEAM AND PREPARING SHINOLA FOR THE EVOLUTION OF ITS NEXT PHASE OF GROWTH.” — Tom Kartsotis, Shinola founder

TO OUR READERS

You might notice that Crain’s looks a little different this week. As part of preparations for our 35th anniversary next year, we’ve refreshed the design of the publication. The redesign was overseen by Crain’s creative directors Tom Linden and David Kordalski, who have executed similar redesigns of Crain’s publications in Chicago, Cleveland and New York that aim to give the newspapers a common and modern look and feel. “Since their inception, the Crain

The clock is ticking on Tom Lewand Jr.’s time as CEO of watch and luxury goods maker Shinola/Detroit LLC. Shinola announced Friday that Lewand will leave the Detroit-based luxury retailer at the end of the year to “take on a new professional role.” The company and Lewand did not disclose his new job. “Decisions like Lewand these are never easy,” Lewand said Friday in a statement. “However, the amazing business and civic climate in our community has afforded me the chance to consider some once-in-a-lifetime professional opportunities, which I look forward to sharing at the appropriate time.” Lewand, 49, became Shinola’s CEO in June 2016 after being fired as president of the Detroit Lions following a sweeping front office restructuring by

week. It aims to give readers a snapshot of prominent personalities in the metro Detroit business community and offer insight, in their own words, into what makes those people tick. As we adopt this new look, there is one thing that will never change: Our commitment to bringing news and insight that’s most relevant to business readers. We’re looking for feedback on the redesign. Please send comments to Managing Editor Michael Lee at malee@crain.com.

Lions owner Martha Firestone Ford. He previously spent 20 years in the Lions organization. “Tom was instrumental in leading our team and preparing Shinola for the evolution of its next phase of growth. He will be missed,” Shinola founder Tom Kartsotis said Friday in a statement. “The board and I are very confident in our capable senior team and their ability to lead Shinola into its next chapter.” Lewand’s plan to leave Shinola’s C-suite follows the March 2018 departure of Shinola President Jacques Panis, who had been with Kartsotis since the inception of the company in 2010. Panis was replaced by Shannon Washburn, who was previously Shinola’s vice president of watch development. In July 2018, Panis became CEO of Troy-based lab-grown diamond startup New World Diamonds LLC. Lewand replaced Steve Bock, a former Fossil Group Inc. division president, who became CEO of Shinola sister retailer C.C. Filson Co., a Seattle-based manufacturer of upscale outdoor gear, clothing and luggage. Shinola manufactures luxury watches, leather goods and bicycles in Detroit and has 25 retail stores across the globe. Lewand is the son of attorney F. Thomas Lewand, who is retiring at year’s end as Detroit Mayor Mike Duggan’s group executive for jobs and the economy. NOVEMBER 11, 2019 | CRAIN’S DETROIT BUSINESS | 3

REAL ESTATE INSIDER

The University of Michigan Credit Union paid $5.6 million for the former First Presbyterian Church property in 2017. | KIRK PINHO/CRAIN’S

Site planning ongoing for historic church property, credit union says The University of Michigan Credit Union says it is still working on a site plan for the historic former First Presbyterian Church at 2930 Woodward Ave. Kirk that it purchased PINHO more than two years ago. “We have been working diligently to make sure that our site plan will exceed the needs of our membership and the community,” Haley Burrill, media coordinator for UMCU, said in an email. Additional questions were not answered, and no one was made available for an interview. At the time of the purchase, Tiffany Ford, the president and CEO of UMCU, said it was planning to build a 4,000-square-foot branch with 12 full-time employees on some of the 2-acre property’s surface parking. More details were expected in the first quarter of 2018, but none have been released. It certainly isn’t the only project in the city or even in the Brush Park neighborhood that has stalled or been slow to get out of the ground, even as construction crews continue to work on the City Modern development on 8.4 acres of what was just a couple years ago mostly vacant land. The property has about 150 parking spots, in addition to the church, a sanctuary and renaissance room. The credit union paid $5.6 million for the property in August 2017, according to city of Detroit land records. UM Credit Union was founded in 1954 and has $907.34 million in assets and nearly 95,000 members, according to its 2018 year-end financial report. First Presbyterian Church opened in 1891 at Woodward Avenue and Edmund Place in Detroit. According to Historic Detroit, which tracks Detroit 4 | CRAIN’S DETROIT BUSINESS | NOVEMBER 11, 2019

The building at 1400 Rosa Parks Blvd. in Corktown has been home to Lightweight Innovations for Tomorrow, commonly referred to as LIFT, since 2015. | COSTAR GROUP INC.

“WE HAVE BEEN WORKING DILIGENTLY TO MAKE SURE THAT OUR SITE PLAN WILL EXCEED THE NEEDS OF OUR MEMBERSHIP AND THE COMMUNITY.” — Haley Burrill, media coordinator for UMCU

buildings and architecture, the building was designed by the architecture firm Mason & Rice. It was added to the National Register of Historic Places in 1979. The website says the Ecumenical Theological Seminary was gifted the church in 2002, a decade after it leased the space from the First Presbyterian Church. The credit union is letting the seminary stay in the space.

Pontiac’s Old Fiero Powerhouse imploded The old Fiero Powerhouse in Pontiac at the former Fisher Body Plant was imploded last weekend. The nearly 19-acre property at 824 St. Clair St. near Baldwin Avenue and East Kennett is anticipated to remain vacant, according to Vernon Gustafsson, Pontiac’s city planner. It is owned by RACER (Revitalizing Auto Communities Environmental Response) Trust, which was created

during the General Motors bankruptcy in 2009. A marketing brochure for the property says it is zoned for heavy manufacturing.

LIFT staying in Corktown building five more years The Lightweight Innovations for Tomorrow, commonly referred to as LIFT, has renewed its lease in a 100,000-square-foot Corktown building at 1400 Rosa Parks Blvd. for another five years. The manufacturing institute, which is operated by the American Lightweight Materials Manufacturing Innovation Institute, is partially funded by the U.S. Department of Defense. It moved into the building in 2015. Nigel Francis, CEO and executive director of LIFT, said: “Both the Department of Defense and the state of Michigan put a stake in the ground by establishing this institute in the heart of American manufacturing. We are proud to be driving advanced manufacturing forward by developing unique technology innovations and educational tools for the nation right here in Detroit.” The landlord is West Fort Street Properties LLC, an entity registered to real estate investor Neal MacLean in Royal Oak, according to city property records. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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Farmington Hills, MI 48334 Roadrunner Transportation Systems Inc. sold its Roadrunner Intermodal unit to Universal Logistics Holdings. | ROADRUNNER

FACEBOOK.COM/CRAINSDETROIT

Universal Logistics acquires competitor trucking business for $51.25 million Illinois-based company sells Roadrunner Intermodal unit BY ANNALISE FRANK

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.

Universal Logistics Holdings Inc., the Moroun family trucking giant, has acquired a transportation and chassis management services business for approximately $51.25 million. Downers Grove, Ill.-based freight transportation company Roadrunner Transportation Systems Inc. offloaded its Roadrunner Intermodal unit, the companies announced in Tuesday news releases. The price is subject to capital adjustments. Universal Logistics (NASDAQ: ULH) CEO Jeff Rogers said in a release that Roadrunner Intermodal was a “strong competitor” and he

6 | CRAIN’S DETROIT BUSINESS | NOVEMBER 11, 2019

ing performance and returns on invested capital,” Roadrunner CEO Curt Stoelting said in the company’s release. The sale comes after third-quarter losses for Roadrunner due to the General Motors Co. strike and a malware attack, according to trade publication Transport Topics. Universal Logistics — ranked by Crain’s as the 20th-largest publicly held company in Southeast Michigan by revenue — reported net income of $52.2 million on revenue of $1.46 billion in 2018, compared with $1.2 billion the previous year. Annalise Frank: (313) 446-0416 afrank@crain.com

Richard Gabrys, retired Deloitte executive and power broker, dies at age 78 BY ANNALISE FRANK

gvsu.edu/SupportLakerEffect

sees opportunity in combining to add capacity. The addition ups Universal’s intermodal drayage fleet to more than 2,500 tractors and estimated annual revenue of more than $500 million, the release said. Roadrunner used some proceeds from the deal to repay debt tied to Roadrunner Intermodal and for transaction costs. The rest is open for “general corporate” uses, Roadrunner said. The intermodal unit recorded $125 million in revenue for the year ending Sept. 30. Its sale is “another step forward in our strategy to simplify our portfolio by focusing on our value-added logistics and asset-light LTL segments to improve our operat-

Richard Gabrys, the retired vice chairman of Deloitte LLP who served on dozens of nonprofit and corporate boards, died Monday. He was 78. The community advocate, family man and Brooklyn Dodgers fan spent 42 years with Deloitte before retiring as a vice chairman in 2004. He was a global and U.S. leader in Deloitte’s manufacturing and automotive areas, and served as global advisory partner for companies such as BorgWarner Inc., Dow Chemical and General Motors Co. Over his time with the business advisory firm, he also worked with public utilities, health care organizations and other sectors. He acted as operations leader for Deloitte’s Financial Institutions Industry Group, served as the U.S. representative on its Global Banking Committee and was the managing partner for Deloitte’s Michigan practice. Crain’s named the longtime public accounting professional one of its Most Connected people in 2015.

Gabrys, born in 1941 in Brooklyn, New York, was passionate about his family, faith, sports, baseball cards, mentoring and serving communities. He served on a Gabrys wide variety of high-profile for-profit and nonprofit boards including Barbara Ann Karmanos Cancer Institute, Dana Corp., TriMas Corp., La-Z-Boy Inc., the Detroit Institute of Arts, Ave Maria University and chaired boards including those of the Michigan Chamber of Commerce, Detroit Economic Growth Corp. and the Detroit Medical Center. He even stepped in as interim dean of the Wayne State University business school in 2005. Gabrys also headed up a family investment business called Mears Investments LLC. “Dick was a man of both brilliance and incredible integrity. He was a key founding Renaissance board member

at a time when our fund was just a dream,” Chris Rizik, CEO and fund manager for Ann Arbor-based Renaissance Venture Capital Fund, said in an emailed statement. “He was also a mentor, adviser and friend to me, and I will miss him greatly. He was simply a giant in the Detroit community. Dick’s word was gold. He was both frank and completely honest, and he helped countless young professionals in this town to develop into leaders, following his sterling example.” He is survived by his wife of 53 years, Eleanore; sons Michael and Steven; daughter Allison; and five grandchildren. Visitation will be held 3-8 p.m. Monday, Nov. 18, at A.J. Desmond & Sons funeral home at 32515 Woodward Ave. in Royal Oak. A funeral mass is scheduled for 10 a.m. Tuesday, Nov. 19 at Holy Name Catholic Church, 630 Harmon St. in Birmingham. Visitation at the church starts at 9:30 a.m. Annalise Frank: (313) 446-0416 afrank@crain.com

Norman A. Yatooma ATTORNEY AT LAW

ICV Partners LLC agreed to purchase Diversified Restaurant Holdings in a deal announced the same week it made public its purchase of JK & T Wings Inc., another large Buffalo Wild Wings franchisee based in Shelby Township. | BUFFALO WILD WINGS

New York City firm to buy Diversified Restaurant Holdings in $130M deal Southfield-based group owns 64 Buffalo Wild Wings stores BY KURT NAGL

Diversified Restaurant Holdings Inc., the Southfield-based restaurant group that owns 64 Buffalo Wild Wings stores in five states, is being sold to a New York City-based private investment firm in a deal valued at $130 million. ICV Partners LLC agreed to acquire Diversified Restaurant Holdings (Nasdaq: SAUC) in an all-cash transaction, the companies said last week. The deal is expected to be complete by the end of the year or early 2020. The purchase of the struggling company, which is one of the largest BWW franchisees in the country, comes a few months after it scrapped a $22.5 million plan to acquire nine additional stores in Chicago. Amid a general decline in fast casual dining, the restaurant group had been hemorrhaging cash, losing $5 million last year, including $2.3 million in the fourth quarter, on revenue of $153.1 million. News of the deal caused a surge in the company’s stock value, which had steadily declined in the past few months. It had been trading at 47 cents when the market closed Tuesday and was trading at $1.04 at the market’s close Wednesday. As part of the deal, ICV Partners will pay common stockholders $1.05 per share, the release said.

THE PURCHASE OF THE STRUGGLING COMPANY COMES A FEW MONTHS AFTER IT SCRAPPED A $22.5 MILLION PLAN TO ACQUIRE NINE ADDITIONAL STORES IN CHICAGO. The investment firm will also assume the company’s outstanding debt and transaction balances. Its long-term debt totaled $96.6 million, according to a second-quarter earnings report. Its net loss for the quarter was $469,257. “This transaction validates the strength of our franchise, creates a strong future for our employees and provides a significant platform from which ICV can continue to build, while also rewarding our stockholders for their commitment,” Michael Ansley, founder of Diversified Restaurant Holdings, executive chairman and acting CEO, said in the release. Ansley, who founded the company in 1999, will leave once the purchase is complete, said Craig Mychajluk, investor relations spokesman for Diversified Restaurant Holdings. Ansley also founded fast-casual burger chain Bagger Dave’s Burger Tavern Inc. in 2008. It operated 26 locations at its peak but

was spun off from the restaurant group in 2016. The chain has just eight locations now, according to its website. Diversified Restaurant Holdings employs about 2,500 people, mostly at the restaurant level. Mychajluk said restaurant workers will keep their jobs, and some administrative employees and managers will be retained, but details are still being worked out. ICV’s deal to buy Diversified Restaurant Holdings follows its agreement announced Monday to purchase Shelby Township-based JK & T Wings Inc., according to an ICV news release. The restaurant group owns 42 Buffalo Wild Wings locations, mostly in Michigan. CEO Kent Ward and President Brian Carmody will “continue as investors” in the company, the release said. Crain’s left a message with a company spokesperson for more details. Buffalo Wild Wings was acquired by Atlanta-based Roark Capital Group in 2017. Since the acquisition, the restaurant chain has undergone a large rebranding effort, including a new menu design, new food offerings, large national ad campaigns and enhanced food presentation — most notably, a switch from plastic baskets to metal trays earlier this year. Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

StockX hires chief financial officer who helped Shutterfly go public BY KURT NAGL

Dan Gilbert-owned StockX is hiring an IPO-savvy chief financial officer on the heels of the company achieving unicorn status with a $1 billion valuation in the spring. John Kaelle is the Detroit-based company’s first CFO, according to a news release. Kaelle has 25 years of professional finance experience and helped social media firm Shutterfly Inc. launch an $80 million IPO in 2006. He enters a company with its own ambitions to go public. StockX, dubbed the “stock market of things” with its roots in sneakers, has seen

tremendous growth since launching in 2016 and appears to be positioning for an IPO. Kaelle steps into a changing C-suite, helmed Kaelle by e-commerce veteran Scott Cutler, who took over for co-founder Josh Luber in June. The company hired in September its first chief marketing officer, Deena Bahri. Questions about Kaelle and the company’s potential IPO plans were

emailed to a spokeswoman. “I’m thrilled to be joining the StockX team at such a pivotal time for the company,” Kaelle said in the release. “I am excited about the opportunity to play a role in the next chapter of the StockX story.” StockX closed on a $110 million Series C investment round in the spring led by global investment firms DST Global, General Atlantic and GGV Capital. It was the largest in Michigan venture capital history, elevating StockX among other the “unicorns” in the state — Ann Arbor-based Duo Security, Plymouth-based Rivian and Rochester-based OneStream Software.

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NOVEMBER 11, 2019 | CRAIN’S DETROIT BUSINESS | 7

COMMENTARY

ANNALISE FRANK/CRAIN’S DETROIT BUSINESS

Let’s not forget

EDITORIAL

Taking stock of Kmart’s legacy in Detroit

ast week saw the final local whimper of what was once a metro Detroit retail titan. Sears Holdings Corp., which owns Kmart, said it would close the last two Kmart stores in metro Detroit, the location of the chain’s birth, as part of a bigger plan to close about a third of its remaining stores. As the Warren and Waterford Township outposts of the chain that started with the S.S. Kresge dime store in downtown Detroit in 1899 prepare to shut down, it’s worth weighing the company’s legacy, which is THE BIGGEST still large. LEGACY OF THE There was a time RETAIL PIONEER when Kmart was the largest retailer in IS ONE THAT America, and went far EXISTED BEFORE beyond its namesake stores. Flash back on KMART DID AND that Kmart Corp. of the 1990s, run out of THAT WILL BE its sprawling Troy AROUND LONG headquarters by CEO Joseph Antonini. In AFTER THE many ways, it was STORES emblematic of retail at the time, owning DISAPPEAR. more than 2,000 Kmart stores but also big-box chains including Borders, Builder’s Square and Pace Membership Warehouse. Over time all of those chains were spun off, sold or shut down. But one can’t help but wonder what things might look like if Kmart had continued and built on that more diver-

sified big-box portfolio and properly invested in e-commerce opportunities. Barnes & Noble, Home Depot and other big boxes are, after all, still around. They’re challenged by retail disruption, but haven’t been undone by it. Size doesn’t protect you from disruption or your own operational missteps like failing to invest in the future. Now, Kmart and Sears are being sold for parts — the company says it will recoup substantial money on real estate deals for the closed stores — and it appears that the inevitable conclusion is that they will cease to exist. But legacies will remain. One big legacy in metro Detroit is that headquarters complex in Troy, owned by Somerset Collection owner Nathan Forbes, which still awaits redevelopment. It sits on valuable property, and we hope the right project comes along to bring it back to full use. But the biggest legacy of the retail pioneer is one that existed before Kmart did and that will be around long after the stores disappear. That would be the Troy-based S.S. Kresge Foundation, endowed by the company’s founder in 1924. Over the past decade, Kresge has had a major impact on Detroit, underwriting ambitious projects including the rebirth of the Detroit riverfront and the creation of the QLine. As Kmart has deteriorated, the foundation has been a key player in its hometown’s rebirth, and will be for the indefinite future. That’s a legacy worth having.

Last month, I attended a very special ceremony: My wife of 10 years became an American citizen. She’s been a very proud Canadian but finally decided, after four kids born in the U.S., that it was time. I had never been to a naturalization ceremony before. Neither of us knew what to expect. The ceremony took place downtown at the federal courthouse on Fort Street. The room was completely packed with people — families dressed in their best outfits, waving little American flags, thrilled at the idea of becoming American citizens. An 80-year-old man sitting in front of us was by far the most enthused. When the judge, Mark Goldsmith, arrived, he talked about how his parents were persecuted for their religion and fled to America for a better life. He explained how even he sometimes takes being an American for granted and he wished all Americans would appreciate their rights as citizens a little more. He explained that it’s a citizen’s duty to vote. No matter if it’s city, state or federal elections, the judge passionately described the importance of voting for all Americans. Then he welcomed the group to the United States of America.

CRAIN

Publisher

It was a very moving ceremony and made me feel extremely proud to be a U.S. citizen. I wish more people could have heard the judge’s speech. As we head into another election year, I hope everyone can remember what a privilege it is to live in this country. And that we don’t take the opportunity to vote for granted. KC Crain is president of Crain Communications Inc. and publisher 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.

LETTER TO THE EDITOR

Protect patients with continued oversight TO THE EDITOR: For more than eight years, I have had the privilege of serving Michigan citizens as a commissioner representing the business community on the Certificate of Need Commission. The purpose of CON is to review the most complex health care services to balance cost, quality and access for Michigan residents. There is an effort underway to undermine this work. 35 other states have a CON Commission, but unless you work in the administration side of health care, chances are you have never heard of it. For transparency sake, I am a free-market, limited-regulation Republican. The company I founded and am proud to have grown in Michigan is fortunate to work for some of Michigan’s finest employers. My company’s mission is to negotiate for client health benefits that embrace quality and value and fight against rising health care costs. Almost always, I believe we suffer from excessive government regulation. If health care were a free market in the United States, the CON Commission would not be necessary. But until consumers of health care services are responsible for the costs of transaction when seeking services, there needs to be minimum oversight to ensure against inappropriate utilization of services. The CON Commission regulates a small number of health services, but they are the most complex and expensive treatments, such as open-heart surgery, bone marrow transplants and organ transplants, to name a few. In the last few years, a specialty cancer treatment called Chimeric Antigen Receptor T-cell therapy has made its way into cancer treatment protocols for leukemia and lymphoma. CAR T is a

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited for length or clarity. Send letters to Crain’s Detroit Business, 1155 Gratiot Ave, Detroit, MI 48207, or email crainsdetroit@crain.com. Please include your complete name, city from which you are writing and a phone number for fact-checking purposes. 8 | CRAIN’S DETROIT BUSINESS | NOVEMBER 11, 2019

type of treatment in which a patient’s T-cells (a type of immune cell) are removed and changed in the laboratory so they will attack cancer cells. It is extremely expensive, ranging from $400,000 to $700,000 just for the CAR T therapy product. Thousands more dollars are spent on the process in follow-up care. As patients receive the new altered cells there is a reaction in their body that has to be carefully managed. CAR T therapy is new and has not been regulated by the CON Commission before. Due to the high cost and expertise needed to administer CAR T therapy, the CON Commission thought it imperative to review its regulations. The commission sanctioned a diverse group of leading oncologists, CAR T experts and industry representatives representing hospitals that currently administer CAR T therapy and those that do not to study the issue in depth. After over a year of review, they made a recommendation that there should be no limit on the number of health care facilities administering CAR T therapy, however they recommended a quality standard known as FACT accreditation. FACT is a process that requires providers to maintain the highest level of quality for patients. There is an effort to set aside this requirement in the Michigan Legislature, led by strong special interests from the pharmaceutical industry who do not want any oversight. We cannot let drug companies dictate our state’s health policies. This is why I am standing with doctors and insisting that patients be protected. Robert Hughes Advantage Benefits Group Grand Rapids

Sound off: Crain’s considers longer opinion pieces from guest writers on issues of interest to business readers. Email ideas to Managing Editor Michael Lee at malee@crain.com.

OTHER VOICES

Changing the narrative on funding higher education BY JAYSON BOYERS

While many have criticized Gov. Gretchen Whitmer for eliminating the Michigan tuition grant and the Michigan competitive grant, I actually applaud Jayson Boyers is her goals of president of building up the Cleary workforce and University. helping Michigan students achieve higher education without incurring debt. The governor has the right to push policy she believes is best for Michigan voters. Elections do have consequences. Of course, the Michigan tuition grant is one of the best returns on investments the state spends in higher education — $2,400 per student, which accounts for 2 percent of the state education budget and helps the neediest students afford higher education. It’s a small number for a big outcome. It’s an admirable goal to strive for free higher education. I wish we could provide this to everyone. It’s a complicated conversation with no easy answers. But not everybody will be successful at a community college or a public university. Often, private colleges offer more attention via small faculty-to-student ratios, and more ability to counsel students on the best way to pay for a degree. All institutions are united in our concern over the seemingly insurmountable college debt crisis. It’s the student loan system that is broken. No one’s talking about it in the way they need to be. The people defaulting on student loans are most often the individuals who do not finish college, who have $10-15,000 in debt. Which means completion might be a bigger issue than the cost of college. How can we counsel students to not only choose the right institution for their higher education needs, but finish what they start? Losing these grants could be another nail in the coffin for private institutions, or it could be the kick in the pants needed to change the way we fund higher education. It might inspire innovation in finding other funding sources, or counseling students differently before they enroll. This argument between the governor and the state Legislature shows us how important it is to start a conversation on how we position our next generation here in Michigan for success. The first step is to agree and understand that not every student is right in every type of institution. So we must expand the choices available to students today. There are public universities, which admittedly are not inexpensive anymore, and there are community colleges, which certainly offer the lowest tuition costs. And then there are private colleges. If a student can’t afford any of these options, what good is it to have choices? If free tuition shifts public universities to target a greater share of out-of-state students, reducing acceptance rates of in-state students, who does it really benefit? There is a way to navigate college

and find ways to pay for it that gives loans, to take everything the governstudents the power to become in- ment offers, beyond the actual cost formed consumers. One way we do of tuition. Doing so increases the college that is by counseling students loan crisis and against taking makes post-colevery dollar of- HIGHER EDUCATION life much, fered to them in NEEDS TO BE A QUEST FOR lege much harder. It loans. also does not S o m e t i m e s , LIFE-BUILDING, LOOKING teach fiscal restudents need to sponsibility and borrow money to AT THE LONG GAME. HOW we, as instituafford higher ed- MUCH WILL YOU EARN 10 tions, are remiss ucation. Someif we don’t cautimes there is re- YEARS OUT? tion and counsel ally no other way. I wish there were, and maybe students in this process. We need a mindset shift, to apone day we’ll get there. But in most cases, it’s not necessary to max out proach education as an informed

consumer, asking important questions about what provides the greatest benefit for each student and their unique needs. Private colleges graduate 21 percent of all bachelor’s degrees in Michigan. We need to innovate the way we think about, and deliver, higher education. We must partner with high schools for dual enrollments and early college programs. We must help students earn credits while still in high school so they need less time — and pay less tuition overall — once they get to campus. Universities and colleges feed the economies where they are located in Michigan, investing $3.3 billion col-

ACCELERATING TOWARD A CLEANER FUTURE

lectively each year. We provide jobs. We arm students with skills and credentials to enter the work force. We provide culture and ties to the local community. Higher education needs to be a quest for life-building, looking at the long game. How much will you earn 10 years out? How will you contribute to your community? How do we, as institutions, create good citizens? We all want Michigan to be successful, but that doesn’t come from creating only one or two ways to get there. It comes from helping each person find their place. And that means we must fund many paths to get to the same goal.

We’re accelerating our carbon emission

reduction goal, cutting emissions in half by 2030, and by 80% a decade earlier than planned. And we’re doing it while providing affordable and reliable energy. Together, we can speed Michigan toward its cleaner energy future.

Learn how you can get involved at journeyto80.com NOVEMBER 11, 2019 | CRAIN’S DETROIT BUSINESS | 9

INVESTOR GROUP Flint Angels to launch in partnership with statewide network.

CRAIN’S MICHIGAN BUSINESS: FLINT

PAGE 1

“I WANT FLINT TO BE THE NEXT WATER CAPITAL OF THE WORLD.”

SOLAIR WATER INC.

— Jonathan Quarles, CEO of SolAir

Steven Barber (left), operation manager for SolAir Water Inc., Isaiah Oliver, president and CEO of Community Foundation of Greater Flint, and Jonathan Quarles, founder and CEO of SolAir, in front of a pilot array of panels at Berston Field House in Flint.

FROM THIN AIR

Partnership brings clean water-bottling technology to Flint BY TOM HENDERSON

In the national public consciousness, Flint plus water equals disaster. Or so it has for the last five years. A clean-tech company in Arizona and a Flint Northern High School graduate are partnering to write a new equation: Flint plus water equals revenue — plus money for the Flint Water Fund. The Flint water crisis began in 2014 when the city switched its municipal water source to the Flint River from the Detroit River. But the water wasn’t treated properly, resulting in lead leaching into the water supply and raising the lead levels of city residents. The Flint graduate is Jonathan Quarles, a 37-yearold serial entrepreneur who has an MBA from Florida A&M and is CEO of a Detroit-based consulting firm, the BTL Group. 10 | CRAIN’S DETROIT BUSINESS | NOVEMBER 11, 2019

The company is Scottsdale-based Zero Mass Water Inc., a 2015 spinoff from Arizona State University that uses what it calls hydropanels to pull clean water from air. It has raised $65 million in venture capital, including a round of $25 million in October 2018 that was led by Breakthrough Energy Ventures, the VC arm of Microsoft founder Bill Gates. In September, Cody Friesen, the company’s founder and CEO and professor of materials science and engineering at ASU, won the $500,000 Lemelson-MIT prize for his patented process for pulling water from air. The prize, the largest cash prize for U.S. inventors, is awarded by the Portland, Ore.-based Lemelson Foundation and administered by the School of Engineering at the Massachusetts Institute of Technology. Zero Mass panels have been installed in more than 30 countries on six continents, many of them in places

where water is scarce, countries including Australia, India, Jordan, Lebanon, Indonesia and the Philippines. Arrays range from individual use at home to hospitals, schools, offices and community-scale applications. The hydropanels combine solar panels with water-absorbent material. The solar panels create the electricity that runs the system as well as generate heat that condenses water from the ambient air, which collects in the absorbent material. Minerals are added to the water. Two 15-hydropanel pilot arrays, funded by the Community Foundation of Flint, have been installed in the city, at City Hall and at Berston Field House, each producing the equivalent of up to 4,500 half-liter bottles of water per month, available for free to visitors, who bring their own bottles to fill at the tap. See WATER on Page 16

More in this report  Health care accelerator opens second location in Flint. PAGE 11  Historic bank building reimagined as Hilton Garden Inn. PAGE 12

 Robert McMahan talks about Kettering’s secret for turning out more patents than Stanford. PAGE 12  Company aims to offer alternative to urban clutter of e-scooters and bikes. PAGE 14

FOCUS | CRAIN’S MICHIGAN BUSINESS: FLINT

Health care accelerator opens second location

XLerateHealth, incubator for startup and early stage companies, chooses downtown Flint BY TOM HENDERSON

XLerateHealth of Louisville, Ky., generally regarded as the nation’s leading incubator for startup and early stage health care companies, has opened a second operation in downtown Flint and in September held a pitch event for its first cohort of six startups in the Ferris Wheel building. XLerateHealth was founded in 2013 and since then has held a series of 12-week boot camps for more than 60 early stage health care companies. Of those, more than 80 percent are still operating — an extremely high percentage for startup companies — and they have raised $50 million in equity funding and created more than 250 jobs. Later-stage companies affiliated with XLerate but past the boot-camp stage have raised more than $500 million. In September, the National Institutes of Health awarded XLerateHealth a Phase II $1.5 million grant to continue helping 24 universities in six southeastern states and Puerto Rico commercialize health care technologies. The grant, managed by the National Institutes of General Medical Sciences, brings total funding to XLerateHealth and its partners to more than $3.6 million through 2021. The NIH also made a supplemen-

The XLerateHealth Flint team: Sebastian Alvim (left), Jackie Wilmot, Bob Saunders and Mary Auge. | XLERATEHEALTH

tal grant of $250,000 to XLerateHealth for its Ideas to Products program, which helps faculty, students and researchers get their technologies ready for commercialization. In October, XLerateHealth was one of 60 winners nationwide of the U.S. Small Business Administration’s Growth Accelerator Fund Competition. The award was $50,000. The competition has been held for five

years and XLerateHealth is one of just two accelerators in the U.S. to win the award four times. In 2016, before the Ferris Wheel building was restored in a $7.5 million project by Skypoint Ventures LLC, a venture-capital and real-estate development firm headed by Phil Hagerman, Hagerman began visiting accelerators around the country, including XLerateHealth. “We reached out to a

lot of accelerators,” he said, including WeWorks in New York, 1871 and Matter in Chicago, the Beauty Shop in Pittsburgh and Cintrifuse in Cincinnati. “XlerateHealth was the only pure health care accelerator we looked at,” he said. He returned to visit XLerateHealth, this time with representatives form the Mott Foundation, Genesys HealthCare and the University of Michigan-Flint. They were sold that these were the folks they wanted helping grow health care companies in Flint and Michigan. “We went down there and were blown away. We were really excited to bring them here. Their success rate is amazing,” said Hagerman. “We were pretty raw here, and they brought a lot of sophistication and experience.” The Flint operation is funded by the Charles Stewart Mott Foundation and 100K Ideas, a nonprofit housed in the Ferris Wheel building to help would-be entrepreneurs turn their ideas into companies. XLerate’s co-founders were Jackie Wilmot, the CEO, and Bob Saunders, the chairman. “Phil came to us when he had a gleam in his eye about what he wanted the Ferris Wheel to be,” said Saunders. Wilmot is a perinatal clinical nurse

specialist by training who got her MBA from the University of Louisville and spent nine years at Humana Europe Ltd. in a variety of roles, including overseeing clinical product design and development, before returning to Louisville. Saunders is a general partner in Chicago-based OCA Ventures, a venture-capital firm focused on health care companies. (XLerateHealth does not invest in its companies but helps them find funding.) From 1997-2009 he was a managing director at Louisville-based Chrysalis Ventures, and coinvested in a deal with Rick Snyder when the former governor was a venture capitalist. That investment was in HealthMedia Inc., a provider of webbased behavioral interventions that made a nice return for investors when it was sold in 2008 for $185 million to Johnson & Johnson. “We’re the longest-lasting health care accelerator in the country,” said Saunders. Of the few others that were in existence when XLerateHealth launched, “some have disappeared, some turned into venture capitalists.” They may be the oldest, but they are hardly alone. Saunders said there are more than 100 health care accelerators around the country now. See XLERATE on Page 16

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The astrophysicist (and art historian) talks about Kettering University’ssecret for turning out more patents than Stanford

 Crain’s Detroit Business: You were a venture capitalist. Not many university presidents have a background in physics and venture capital.

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How many presidents of top engineering schools majored in art history as undergraduates? At least one, but likely not many more than that: Robert McMahan, who has been the president of Kettering University in Flint since 2011. The school was founded as General Motors Institute, an educational and training arm for the automaker. Don’t let that art major fool you. McMahan earned a dual major from Duke University; the second major was in physics. He went on to get a Ph.D. in physics from Dartmouth and completed postdoctoral studies at the Harvard University-Smithsonian Center for Astrophysics. He was a research professor in the University of North Carolina at Chapel Hill’s Department of Physics and Astronomy from 1989 to 2010 and served as senior adviser for science and technology to the governor of North Carolina and as executive director of North Carolina’s Office of Science and Technology from 2003-2008. He also founded a research company and became a venture capitalist.

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way,” said Tim Herman, CEO of both the Uptown Reinvestment Corp., a A new hotel in Flint sums up the nonprofit economic development organization, and the Flint & Geneongoing rebirth in the central city. It is a new hotel, but not a new see Chamber of Commerce. “It will building. The 101-room Hilton Gar- provide business and leisure visitors den Inn is scheduled to open in the with upscale accommodations in second quarter next year, after a downtown Flint and expand the cus$36.5 million, 148,000-square-foot tomer base for our local restaurants, rehabilitation that began last Decem- arts and cultural institutions and ber and is scheduled to be finished community events.” Financing for the project was a some time in the second quarter. Historic tax credits of $5.5 million en- joint effort of the URC, the building owner; the Michigan sure the restoration of as much of the origi- “THE FACADE OF THE Economic Development Corp.; the nal detail as possible. Charles Stewart Mott When the 11-story BUILDING AND THE Foundation; Skypoint Genesee County Sav- STRUCTURE ARE Ventures LLC, a venings Bank opened in ture capital and re1920 at 110 W. Kears- PRETTY INTACT FOR al-estate developley St. and Saginaw A BUILDING THAT IS ment firm based in Street, it was Flint’s another historic second skyscraper. 100 YEARS OLD.” building recently renNo expense was — Nate Lindsey, senior downtown, spared in the design project architect for Kraemer ovated the Dryden Building; by Tracy & Swartout, then one of New York’s preeminent the Local Initiatives Support Corp., a architectural firms. The new hotel New York-based nonprofit created in will also incorporate the old five-sto- 1979 by executives from the Ford ry Sherman Building, a long-vacant Foundation that supports communioffice building that is adjoined to the ty development projects across the U.S.; Huntington Bank and Old Nabank building on the west side. The original bank building was in tional Bank. The hotel will be managed by Fairthe Italian Renaissance Revival style, and it underwent an extensive art fax, Va.-based Crescent Hotels and Resorts. Two Flint-based firms, D.W. Lurdeco renovation in 1947. “The transformation of the historic vey Co. and Sorenson Gross are jointly Genesee County Savings Bank into a managing construction of the project. modern Hilton Garden Inn will sym- Detroit-based Kraemer Design Group bolize to the region and beyond that is serving as architect, interior designer the revitalization of Flint is under- and historic consultant.

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Robert McMahan: I come from a long line of entrepreneurial physicists. I didn’t realize how lucky I was at the time, but people would come to dinner who would go on to win Nobel prizes. My father, Bob, and my uncle, Michael, helped found Control Laser, which later

became Quantronix. They made large industrial lasers. As a kid, I was always walking through labs watching people burn holes in metal. I remember as a kid seeing a guy’s tie catch on fire from his laser. My dad and uncle developed an application for Xerox. They invented an ion laser based on a research tool that had high heat but was compact and usable in a commercial applications. Lasers then were an exotic technology but this company my father and uncle started, when laser printers came out,

Robert McMahan

their company invented the lasers for that.  You used the word entrepreneurial. You founded your own R&D firm, McMahan Research Laboratories, in Cambridge in 1988. The original business model was advanced imaging R&D. We worked with the Navy, we worked with NASA to build sensors. After I sold it to GretagMacbeth in 2000, I stayed with that company in an executive position for a few years, then

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Though there is an emphasis on historic accuracy, one modern touch will be a rooftop bar on the old Sherman Building. It will overlook a new park being built behind the hotel and the nearby Buckham Alley, which has evolved as a gathering space one block from the main street of Saginaw. “We’re a manager of premier, upscale properties,” said Michael George, the president and CEO of Crescent Hotels, which primarily manages Hilton and Marriott properties. “We were very impressed by the Mott Foundation and the other partners.” He said this project will have much more customization than a typical Hilton Garden Inn. “There is a lot of creativity and flexibility with the building. It’s a premier historic building in the center of the city with a dream team that’s been assembled, in terms of architecture and interior design,” he said. “It’s going to be the centerpiece of the city. For example, most Hilton Garden Inns have cookie-cutter restaurants. This one will be uniquely designed. It won’t just be a hotel restaurant, it will be a destination restaurant.” The restaurant, art deco in design, will be Italian, with the name yet to be decided upon. It will be off Saginaw Street and include the bank’s large original vault. George said the goal is to do with the former bank building what was done with the old Hotel Syracuse in Syracuse, N.Y., another 100-year-old building that had been long closed and fallen into disrepair. “Now, it is a Marriott and is the dominant player in upstate New York. We want to do that here. I feel the pulse of this building when I walk through it, and feel the pride of walking through it The Genesee County Savings Bank opened in 1920 in downtown Flint. | FLINT AND GENESSEE COUNTY CHAMBER OF COMMERCE

joined In-Q-Tel. That was an interesting model. It was a created by the intelligence community as a nonprofit to foster technology for intelligence applications for the CIA and the National Security Agency. It came out of the recognition that private sector venture capital was often driving innovations faster than government agencies. We syndicated deals with traditional VC firms around the country to flesh a lot of technologies out. Every time you use a smartphone or use Google Maps, you’re using technology we fostered. ` I went to high school with twins who went to GMI and on to long careers in the auto industry. I am well aware of the school’s reputation for turning out graduates with a strong practical background and time spent working in the private sector as they progress toward their degrees. Is there a focus on research as well as a practical engineering education? We’re celebrating our centennial this year. The school was founded by people who shared a philosophy with Charles Kettering, who said if we taught pianists the same way we taught engineers, we’d make them study music theory for 12 years before we let them ever touch a piano. When we became private in 1982, we expanded the number of companies we worked with from one family of companies to 600 companies worldwide, across all domains. Not just auto but aerospace, biomedicine and finance. We have state-of-the-art research labs across the whole range of disciplines. We just opened an advanced research mobility center right in the

middle of campus, the same size as the MCity mobility center at the University of Michigan. We are among the most successful universities in the country in attracting research funding. [Editor’s note: That adds up to $18.3 million from government, philanthropic and private-sector grants for 435 projects in the last seven fiscal years.] ` I was surprised to find out Kettering doesn’t have a Technology Transfer Office. We don’t operate on that model. Under the traditional model, the federal government pays big money for a university to do research. The university does the research, then licenses the technology to a company or to faculty or to a student. We don’t operate under that model. We work much more collaboratively with companies. Traditionally, a company pays, say, $1 million for research to solve a problem. The university comes back and says ‘We solved the problem.’ The company says, ‘Great, what is it?’ And the university says, ‘We can’t tell you. The university owns that.’ And the company says, ‘What in the blankety blank did I pay you for?’ That’s the National Science Foundation model. If we work with a company and they pay for research, the company owns it. And if one of our students works at a company and develops IP, the company owns it. We are not in the licensing game. We are in a partnership game that generates a lot of IP and creates huge opportunities for companies to work with us. ` Kettering made surprising news in the world of university research when

and envisioning what it can become.” “The facade of the building and the structure are pretty intact for a building that is 100 years old. It definitely has some good bones to work with. The copper cornices are still there, which was a surprise. In Detroit, a lot of the copper cornices on buildings have been removed,” said Nate Lindsey, the senior project architect for Kraemer. He said being true to the building’s art deco history is particularly important. “Art deco is a big part of Flint’s history,” he said. Lindsey described the building as complicated, but in a good way. Of having to stay true to historical design, “It’s exciting more than being a burden. It makes for a longer process, but there are structural surprises you uncover.” He said one of the most exciting finds so far was in a customer service area of the bank that was two stories high. On the second floor balcony that overlooked the two-story opening, a wooden railing and barrier had been installed during a 1970s remodeling, one that was definitely not done with historical accuracy in mind. “We peeled back that wood covering and found etched glass going all the way around. That was one of the most exciting things we’ve come across,” he said. The building had a series of plaster eagles that had been removed or damaged during the years but show up in old photos. They are being recreated. “This has been a great project. The guy doing it is a real artist,” said Lindsey. An application has been submitted to recognize the building on the National Register for Historic Places. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2 a study led by Harvard economist Raj Chetty, on behalf of the Equality of Opportunity Project at the Watson Institute at Brown University in Providence, R.I., was published in 2017. The study was on patents granted per alumnus. No. 1 was Cal Tech, No. 2 was MIT. No. 3 was Harvey Mudd College. Kettering was No. 4. We were ahead of Stanford. We were ahead of Carnegie Mellon. The Economist called us to see who we were and what was going on.* It’s because of the relationship we have with our corporate partners. We host a dinner for Kettering alumni at the Detroit Athletic Club in conjunction with the Auto Show. I’ll ask about patents and it’s not unusual for those at my table to hold 100 patents. *This is what The Economist wrote in an article on Dec. 4, 2017: “It should be no surprise that the colleges that produce the most inventors per student are MIT, CalTech and Harvey Mudd, three of America’s most competitive engineering schools. But again, factors beyond raw ability seem to matter. The college which produces the fourthhighest share of inventors in the data set is little-known Kettering University in Flint, Michigan — edging out brand-name institutions like Stanford and Carnegie Mellon. This despite the fact that their students enter with much lower SAT scores and parental wealth. Robert McMahan, Kettering’s president, who himself holds five patents, credits the university’s unique history (until 1982 it was part of General Motors and retains deep ties with the car industry) and its requirement that students repeatedly alternate between classrooms and job rotations.”

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NOVEMBER 11, 2019 | CRAIN’S DETROIT BUSINESS | 13

FOCUS | CRAIN’S MICHIGAN BUSINESS: FLINT

Don’t leave your scooter there

Kettering grad-founded company aims to clean up urban clutter of e-scooters, bikes BY TOM HENDERSON

Kuhmute Inc., a startup founded by two graduates of Flint’s Kettering University, hopes to provide docking and charging stations for the electric scooters and electric bikes that are proliferating in cities around the country. Those stations would solve what has become a burgeoning 21st century clutter problem. Renters of those scooters and bikes just leave them wherever they are when they are done with them — on lawns, in the middle of sidewalks, even in garbage cans. The companies that own the scooters and bikes hire truck drivers to find their machines, gather them up, recharge them overnight and return them in the morning. Kuhmute is based in the Ferris Wheel business incubator in downtown Flint and has gained some fundraising traction as it develops its prototypes and negotiates with various scooter and bike companies to become their partners. It currently has 40 e-scooters and eight pilot docking stations in Flint, some downtown, some on the Kettering campus and some on the campus of the University of Michigan-Flint. Phil Shaltz, the president and CEO of Flint-based Shaltz Automa-

Sidd Saxena (left), founder and CEO of White Fox Scooters; Sean Orchison, operations manager; and Wes Freidnash, director of government relations. White Fox is partnering wtih Kuhmute for e-scooter docking and charging. | SIDD SAXENA

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14 | CRAIN’S DETROIT BUSINESS | NOVEMBER 11, 2019

tion Inc., a provider of automation equipment and systems to the auto industry, invested $500,000 in the company and is making its pilot docking stations. The company also placed second last May in the Comeback Capital Bowl pitch competition in Youngstown, Ohio, winning $75,000, of which $25,000 came from Comeback Capital of Cleveland and the rest from EV Private Investments LLC of Boca Raton, Fla., and Right Side Capital Management of San Francisco. Kuhmute was co-founded by CEO Peter Deppe, who graduated from Kettering in June with a degree in electrical engineering, and by CTO Scott Spitler, who graduated last spring with a degree in computer science. Before graduating, Deppe worked part time for 100K Ideas, a nonprofit project in the Ferris Wheel that invites people to come in and talk about their business idea and get advice and vetting. Then he had one of those 100K ideas, himself. “I’ve been investing in young people and companies in Flint for a long time,” said Shaltz, who is also a founding member of the new Flint Angels investing group. (See related story, Page 1.) “My kids live in L.A., so I go there quite a bit. These scooters are everywhere, haphazardly. You literally have to be careful walking down the street. It’s a huge problem for the community. I even saw scooters upside down in a garbage can,” said Shaltz. “When I saw Peter’s idea, I jumped on it immediately. When I invest, it’s more in the person than the product. Peter is one of those guys you want to attach your wagon to.” Kuhmute will be delivering its first handful of docking stations to

White Fox Scooters Inc., a Manhattan-based e-scooter startup that has landed some customers in Jersey City, N.J. Shaltz said his company will make the first few docking stations but as volumes ramp up, he’ll help Kuhmute build a supply chain for larger volumes. “I took a big enough stake so they don’t have to run after money and be desperate. It helps Peter be an entrepreneur based in Flint and manufacture here, and that’s what we’re all about,” he said. Phil Hagerman is the co-founder and retired CEO of Flint-based Diplomat Pharmacy Inc. (NYSE: DPLO)

“I TOOK A BIG ENOUGH STAKE SO THEY DON’T HAVE TO RUN AFTER MONEY AND BE DESPERATE. IT HELPS PETER BE AN ENTREPRENEUR BASED IN FLINT AND MANUFACTURE HERE, AND THAT’S WHAT WE’RE ALL ABOUT.” — Phil Shaltz, president and CEO of Flint-based Shaltz Automation Inc.

and CEO of Flint-based Skypoint Ventures LLC, a venture-capital and real-estate development firm. He said Skypoint is one of four general partners in Comeback Capital, a VC firm that invests in early stage Midwest companies. Of Shaltz’s investment in Kuhmute, Hagerman said: “That’s a lot of validation from a guy who has been in the transportation space.” Sidd Saxena is the founder and CEO of White Fox, which was

founded a year and a half ago and is raising a seed round of $1 million. He will differentiate his company by having docking and charging stations for his scooters. He said he has contracts with the Holland Hotel, Hamilton House Apartments and 3 Journal Square Apartments in Jersey City to supply scooters for their customers and tenants and has signed a contract for space next to the train station that takes Jersey residents into Manhattan. “We’ll be the first docking electric scooter company in the country,” he said. He said he will get his first two docking stations from Kuhmute this month for his first 10 scooters. “We’ll have seven docking stations and 40 scooters in the few weeks after that. Kuhmute’s docking stations will be a big help for us. We’ll be one of their biggest customers. Our growth and their growth will be tied together.” Deppe said he has been in negotiations with some of the larger players in the e-scooter and e-bike space, but declined to mention them by name before any contracts are signed. Larger, more established e-scooter and e-bike companies than White Fox include Fremont, Calif.-based Neutron Holdings Inc., which does business as Lime; Bird, which claims to operate in more than 100 cities, including Atlanta, Kansas City, Mo., Indianapolis, Vienna, Austria, and Paris, France; Spin, a company founded in San Francisco in 2016 with operations in more than 40 U.S. cities and college campuses; and Dallas-based Boaz Bikes, which joined the other three in Detroit when it launched in the city in May. All of them operate on the dockless model. Lime raised a $12 million funding round in 2017, the year it was founded, and has operations in Seattle; South Bend, Ind.; Key Biscayne, Fla.; and South Lake Tahoe, Calif. Santa Monica, Calif.-based Bird announced in October it had raised a funding round of $275 million, giving it a valuation of $2.5 billion. Last November, Ford Motor Co. announced it had bought Spin for $100 million. Most e-scooters are manufactured in China. “I met regularly with them as they were forming their company,” said Robert McMahan, the president of Kettering University, of Kuhmute’s co-founders. “They are two very bright but typical Kettering graduates. The most impressive thing about the Kuhmute guys is they are the quintessential Steve Jobs, Steve Wozniak pair. One is the tech guy soldering circuit boards. The other has the business and marketing vision. “They have a very compelling business model. The urban scooter space is quite crowded but without a lot of companies that are in their space. I use these scooters when I travel and they really are becoming a nuisance. ... The Kuhmute guys have really thought this through very well.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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FOCUS | CRAIN’S MICHIGAN BUSINESS: FLINT

WATER

From Page 10

A much larger full-scale production facility of 1,000 panels is planned for the spring, if a site can be determined. The panels are already in storage in Flint. Each panel will produce about five liters of water a day. Zero Mass will sell all of the water to SolAir Water Inc., a company Quarles founded in June. Quarles said he has been an entrepreneur for as long as he can remember, going back to his days as an 8-year-old paperboy for the Flint Journal. “It’s always been in my DNA,” he said. He started with a small route, kept adding to it over the years and eventually had upwards of 300 customers, he said. Quarles founded the BTL Group in 2003, and its website lists among current and past clients Comcast, the Hylant Group, Coca-Cola, Covisint, Comcast, the NAACP and the Detroit Economic Growth Corp. It also has an office in Atlanta. The BTL Group includes BTL Ventures, which invests in health care, technology and real-estate development companies. Quarles said it currently has two out-of-state companies in its portfolio, has had two successful exits in the last two years and is doing diligence on two more deals, one a Detroit-based company. He said he invests his own money and syndicates individual deals to other investors. Quarles said he is also an avid angel investor and has started and grown more than 10 businesses, including a custom-design T-shirt company and a printing company. Quarles’ LinkedIn page lists executive positions since 2001 including Detroit-based Lochbridge; Detroit-based Covisint LLC; Detroit-based Tower Defense & Aerospace LLC; the Detroit Economic Growth Corp.; the City of Detroit, as senior adviser to Mayor Kwame Kilpatrick from 2006-2008; and the Tavis Smiley Group. Late in 2017, Friesen, Zero Mass’ founder, contacted Flint Mayor Karen Weaver to tell her about his company and suggest they might work togeth-

Water distilled from air is available for free bottling at two sites in Flint. | SOLAIR

er. In 2018, she flew to Scottsdale to visit the company, and in January this year she visited company officials at their booth at the Consumers Electronic Show in Las Vegas, where she posted a video about the hydropanel technology and announced a partnership between the city and the company. In February, Weaver signed a nonbinding memorandum of understanding between Zero Mass, the Community Foundation and the city of Flint, which called for the company

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PEOPLE ON THE MOVE 16 | CRAIN’S DETROIT BUSINESS | NOVEMBER 11, 2019

to operate a hydropanel operation at the city’s water treatment plant for five years with the option of renewing the lease for another five years. In June, the City Council approved a contract that would lease the plant land to Zero Mass for $7,500 a month, but it was later determined that the land at the plant wouldn’t support the weight of the panels. Zero Mass then considered installing the array at the city’s closed Pierce Park Golf Course but dropped the plans in August after neighbors expressed concerns about giving over public green space to a private business. Meanwhile, Zero Mass hired the BTL Group as a consultant, to help the company reach out to Flint area communities, civic groups and community leaders. Quarles wanted to do more than consulting, and eventually he and officials at Zero Mass agreed that he would launch a company that would buy and sell the water produced by the hydropanels. Quarles said 10 percent of sales will be donated to the Flint Water Fund. “He was doing some consulting work for us, and it seemed like a good fit. We are a tech provider. Any time we are working on a big project, we need to work with community leaders, and J.Q. is well integrated into the community. He’s from Flint and his vision aligns with ours,” said Kaitlyn Fitzgerald, the director of brand at Zero Mass. She said the name “Zero Mass,” reflects the culture of the company. “We are very data driven. We have zero inertia, zero mass. When

we need to pivot, we do it instantly.” “I’m an angel investor and originally I was going to find a Flint entrepreneur to invest in, but I couldn’t find the right guy and I said, ‘I’ll start it off and eventually hand it off to someone else,’” said Quarles. Quarles said that after the Pierce Park site fell through, he was offered a 7.5-acre site on the south side of Flint that was controlled by the city’s land bank. But he said an environment review showed the land too contaminated to put in a water facility and he is looking at other sites. Quarles said he hopes to raise $200,000 to $300,000 from friends and family, from a Kickstarter campaign and from accredited investors. On Nov. 14, he will be pitching at the Ferris Wheel 10K pitch competition at the business incubator downtown, with a first-place prize of $10,000. He said the money will be used to buy two bottling machines, find some space in Flint to house them and ramp up a marketing campaign. Short-term, the water will be bottled at a facility in Detroit. He said sales would be through a number of channels, to retail stores and hospitality operations. He said he has been talking to would-be customers and signed a purchase order with an NGO in October to buy water when it becomes available. “I want Flint to be the next water capital of the world,” said Quarles, whose big picture includes eventually getting the federal government to locate water R&D facilities on vacant property in Flint. SolAir employs three now, including Quarles. A 1,000-panel site isn’t the end goal. “We could go to 3,000 panels eventually,” he said. He said he has started talks with officials in Newark, N.J., which discovered its water had excessive levels of lead because of old, leaching lead water lines, and would like to expand SolAir operations to other cities. “Jonathan Quarles is the quintessential serial entrepreneur. He is taking on some of the most important challenges we face. Clean water is essential to life and because of that, may be one of the most impactful startups not only in Flint or Michigan but in the world,” said David Ollila, the president and chief innovation officer of Skypoint Ventures, a Flintbased investment firm and real-estate development firm that oversaw the $7.5 million renovation of the Ferris Wheel building in downtown Flint that now serves as a business incubator and home to the 100K Ideas program, a nonprofit Ollila founded to offer support to would-be entrepreneurs. Quarles is also applying for grants, and the Michigan Economic Development Corp. is helping him find suppliers and assisting with site selection through Pure Michigan Business Connect, MEDC’s B2B connection platform. “Pure Michigan Business Connect is excited to collaborate with SolAir, an innovative startup. Building partnerships with SolAir and Michigan suppliers will continue to help deliver on SolAir’s mission of providing clean water to Flint,” said Natalie Chmiko, the vice president of Pure Michigan Business Connect. “Our PMBC team is proud to work alongside SolAir as they grow and create real change here in Michigan,” she said. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

XLERATE

From Page 11

Wilmot said Flint made sense for XLerateHealth’s expansion for several reasons. One was the Ferris Wheel building that could serve as a home for its boot camps. Second was the proximity to all the health care and VC activity in the Ann Arbor area. “What really impressed us were the three hospital systems in Flint: Genesys, McLaren and Hurley. We were so enthusiastic Flint opened up its arms to us,” she said. XLerateHealth has two fulltime employees in Flint. Mary Auge, who previously was the director of research and planning at Genesys, is director of business development, and Sebastian Alvim, who has a master’s degree in international economics from the Lisbon School of Economics & Management, is a program director.

The first Flint cohort The accelerator announced it first cohort of six companies in July. They are: ` Bisep, a Niagara Falls, Ontario-based company that makes a device that connects a person’s wheelchair with his or her walker, allowing for better stability when getting up and walking. ` El-Opira, a spinoff from Wayne State University that uses advanced biomedical imaging technologies to better diagnose skin and brain cancers and precisely delineate the borders of tumors during surgery. ` HealthFreelance of Plymouth, an online hiring platform for improving what it calls the gig economy for health care workers, connecting them with employers such as medical offices, pharmaceutical manufacturers, hospitals and research institutions. ` Melius Outcomes of Ann Arbor, which offers a Web-based software platform that analyzes data and alerts hospital staff earlier about quality issues and provides online training videos and references for fixing those issues. `Crown Mallard of East Lansing, which has designed a better system for dispensing disposable gloves used in health care and food services, reducing exposure to outside contaminants. ` TheraB Medical of Lansing, which developed a wearable phototherapy blanket called the SnugLit, which wraps around babies born with jaundice. Unlike lights now used to eliminate jaundice, the SnugLit can provide therapy to the entire baby while it is being held and forming a bond with the mother. Currently, the baby is taken from the mother and put in front of lights that require constant monitoring and repositioning to treat the baby adequately. Of the benefit of being in the accelerator program, Alexa Jones, TheraB’s founder and CEO, said: “XLerate Health pushed our team to go back out into the field and continue doing customer-discovery interviews. For us, this meant taking our prototype into more hospitals to get feedback from labor and delivery nurses, as well as begin discussions with hospital purchasing. XLerateHealth also helped us consider aspects of our business model that needed more time and attention. For us it was details around reimbursement strategy, and how we can accurately convey our messages in an investor pitch.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

DEALS&DETAILS  CONTRACTS

 MERGERS & ACQUISITIONS

 CKC Agency, Farmington Hills, a public relations firm, has added clients: JVS Human Services, Southfield, a nonprofit; Metro Detroit Youth Clubs, Royal Oak, a nonprofit; and Michigan.com, Detroit, a media marketing company, as well as two of the brand’s annual events, the Detroit Free Press/TCF Bank Marathon and the Freep Film Festival. Website: ckcagency.com

 Star Truck Rentals, based in Grand Rapids with locations in Plymouth and Warren, a truck leasing and maintenance business, acquired the South Bend, Ind.-based operations of Schilli Nationalease. The acquisition involves 10 employees, leased rolling stock and a 20,000 square foot, 7 acre shop facility. Star already operates in Goshen. Website: StarTruckRentals.com

 EXPANSIONS

 MOVES

 Frost Brown Todd LLC, Cincinnati, Ohio, a law firm, has opened an office at 900 Victors Way, Suite 330, Ann Arbor. Michigan attorney Terrence Reeves joined the firm from Pepper Hamilton’s Detroit office and will work with startup, emerging company and venture capital fund clients. Website: frostbrowntodd.com

Judson Center, Farmington Hills, an agency that provides autism programs, behavioral health services, child and family services, employment services for persons with disabilities, and primary care for all ages, has moved its Ann Arbor site for Autism Connections to a larger space at 3917 Research Park Drive, Suite B-1A, Ann Arbor. Phone: (734) 794-2930. The Packard Road Ann Arbor location of Judson Center continues to offer children and family services, including foster care, adoption, early head start and family preservation programs. Website: judsoncenter. org

 Spalding DeDecker, Rochester Hills, an engineering and surveying firm, recently opened an office in Grand Rapids. Website: sda-eng.com  General Assembly, New York, N.Y., a school providing online and in-person classes in design, marketing, technology, produce design and development and data, has opened a location at Bamboo Detroit, 1420 Washington, Suite 301, Detroit. Website: generalassemb.ly

Plum Health DPC, Detroit, a medical facility, has moved into a 1,700 square foot space at 1620 Michigan Ave., Suite 125, The Corner, a mixed-use development on the former Tiger Stadium site at Michigan Avenue and Trumbull. Website: plumhealthdpc.com

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NOVEMBER 11, 2019 | CRAIN’S DETROIT BUSINESS | 17

MARIJUANA

From Page 3

“Further study is needed (on marijuana-based products). There can be an increase in heart rate from using CBD products containing THC,” Kahn said. “Users should be concerned about the quality of the products they are using, but shouldn’t be concerned if it is hemp.” Both hemp and marijuana are derived from the cannabis sativa plant. Hemp is the female plant and has no THC, or just trace amounts. Marijuana is the male plant that has seeds and flowers and can contain as much as a 30 percent concentration of THC. Another difference is hemp is legal under federal law and marijuana is still illegal. Kahn said people shouldn’t confuse buying hemp CBD products at health food stores and buying CBD products at a regulated marijuana store or online. “I am unconcerned about hemp oil and effects on the heart,” Kahn said. “It can be used for pain, sleep, stress and anxiety.” But purchasing CBD oil in a medical marijuana clinic can pose risks for a variety of people with medical conditions, doctors said. “If you walk into a medical marijuana clinic and buy (marijuana-based) CBD oil, you can also buy a range of THC mixture, low, medium or high, based on your recreational desire,” Kahn said. Kahn said he doesn’t recommend people with heart conditions use marijuana in any form. “Someone with a fragile cardiac status I would caution them to avoid (marijuana) because of the THC,” Kahn said. “Maybe try hemp-based products for sleep, anxiety, and buy lowest THC concentration.”

Treatment for pain Daniel Clauw, M.D., an anesthesiologist and director of the Chronic Pain and Fatigue Research Center at Michigan Medicine in Ann Arbor, said there are good and bad side effects to using marijuana for treating aches, pain and seizures. Each patient should understand the effects on their bodies, he said. “There are a lot of things to use to treat aches and pains without using drugs,” said Clauw, adding that exercise, better sleep and reducing stress can help. “As you move into medications to treat pain, we don’t know where cannabis lies” from a research standpoint. However, Clauw said, many emerging studies are showing that CBD alone can be effective in treating pain. CBD alone has no side effects, no psychoactive or addictive aspects, he said. “A lot of people are using high-THC cannabis to treat pain. They should be using CBD alone. Or if they prefer, high CBD, low THC marijuana products,” Clauw said. Since marijuana has been legalized, Clauw said, one of the problems is that salespeople at dispensaries do not have medical pain management training. “They are selling high-THC strains,” he said. “When (patients) use high THC levels for pain, they are overshooting the dose, and it is not what they should be using for analgesic pain.”

Emergency medicine doctors sound first alarm Andy King, M.D., an emergency medicine physician at Detroit Medi-

Hemp-based CBD oil products on display at Kroger. | JAY GREENE/CRAIN’S DETROIT BUSINESS

cal Center and assistant professor of emergency medicine at Wayne State University medical school, said hospitals in Colorado and in Michigan, including DMC, have been reporting a growing number of people who are coming into ERs with marijuana poisoning and overdose symptoms. King, who also is medical toxicology fellowship director at DMC, said ER doctors are also starting to see a significant increase in children and adolescents coming in with various marijuana-related medical problems. “Most of the time if an adult gets too much, they are OK, but if children come in they usually have a higher (marijuana) dose and sometimes have to be put on a ventilator” for breathing assistance, King said. “There is no good antidote.” Arsiwala said a large concern of physicians is the growing number of edible marijuana products being used by pregnant women and adolescents, especially children with still developing brains. While Clauw also said edibles are preferred by patients for treating pain, emergency room doctors are seeing a big spike in overdoses because people don’t understand the dosages are high. “Some edibles are incredibly potent. You take a little gummy bear and you are super-high for 24 hours ... paranoid,” he said. “Kids are doing it.” King said he has seen people report to the ER with cannabis-induced tachycardia, dangerously rapid heart rates, a situation that can be fatal.

Poison Center sees increased calls Edible marijuana products also are causing problems, King said. More than half of calls made to the Michigan Poison Center at Wayne State

18 | CRAIN’S DETROIT BUSINESS | NOVEMBER 11, 2019

holds about 10 mg of THC,” King said. “That’s what you see in a gummy bear. That’s a dose for a novice person to take to get the psychedelic or enjoyable effects of THC. These edibles can go up to 10 times that amount.”

Growing problem? Kahn

King

“WE KNOW SMOKING CIGARETTES FOR A LONG TIME CAUSES CANCER, COPD, LUNG DISEASE, STROKE, HEART DISEASE. WE THINK IT IS THE SAME FOR SMOKING POT, BUT WE CAN’T SAY WITH CONFIDENCE.” — Mohammed Arsiwala, M.D., president of the Michigan State Medical Society

University concerning marijuana exposure through edibles like brownies, chocolate bars, candy and gummies involved children as young as 6 years old. Since the beginning of the year, the Michigan Poison Center at WSU has received 420 calls related to marijuana exposure, 104 of them involving children under 18 years old. In 2014, the poison center received one call for pediatric exposure to edible pot. By 2018, the number had risen to 46 and so far this year through August, there have been 59 reports. Younger children, 2 or 3 years old, can become unresponsive and may stop breathing, requiring a breathing tube and ventilator. “A typical marijuana cigarette

Michigan is second only to California in the number of registered medical marijuana patients, according to Kaiser Health. Since 2008, Michigan has allowed the sale of THC-containing products to people who have obtained a prescription from a physician for specific diagnoses, primarily chronic pain. In 2012, Colorado and Washington became the first states in the nation to legalize marijuana for recreational use. Colorado has accumulated more than $1 billion in tax revenues generated since legalization. Michigan is now rated as the second-largest medical marijuana market with 283,770 patients. The Michigan House Fiscal Agency has estimated that marijuana sales will near $949 million in 2020, bringing in about $100 million from the 10 percent excise tax and 6 percent sales tax. But danger signs are on the horizon, Michigan doctors say.

Downsides of weed King and Arsiwala said more research is needed on how pot affects the organs of adults and children. “We know about alcohol, cocaine and opioids. We don’t have the same data for marijuana,” Arsiwala said. “We know smoking cigarettes for a long time causes cancer, COPD, lung disease, stroke, heart disease. We think it is the same for smoking pot, but we can’t say with confidence.” King said ER doctors at DMC and

Wayne State plan to conduct more studies on marijuana. “There is one syndrome that is being studied now: cannabinoid hyperemesis syndrome. We see this a lot more in the ER,” King said. CHS is a condition that leads to repeated and severe bouts of abdominal pain and vomiting. “(Patients entering ERs with these symptoms) are heavy users of marijuana,” King said. “There is no blood test for it. We are pretty sure it is tied to pot use, but it is hard to convince them to stop.” Sometimes patients are hospitalized because of the pain and the need to conduct tests to rule out other problems, he said. King said one of the biggest surprises he has concluded about patients coming in for marijuana-related issues is misconceptions people have about pot. “People aren’t aware of the downsides of marijuana use like they know the risks of smoking cigarettes or using (methamphetamine) or opioids,” he said. “Some use it recreationally. You can get inebriated. They think when you smoke pot you just drive slower, but it decreases reaction times. You are more prone to accidents.” Long-term pot use could affect the lungs like tobacco smoking does. “We can’t yet say one way or another,” King said. “Smoking unfiltered pot can allow more tar into the lungs, more carbon monoxide than other cigarettes, more particulates. You might see more chronic bronchitis or COPD.” Arsiwala agreed. “We don’t know what we don’t know,” he said. “This is why more people need to stop and think about what they are putting into their bodies.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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DYKEMA

FLINT

From Page 1

Vaughn comes to this conclusion based on the previous year’s survey results on M&A activity, which were stronger thanks to corporate tax cuts — which lowered the corporate tax rate to 21 percent from 35 percent — from the Tax Cuts and Jobs Act of 2017. Fueling the skepticism are worries that a Democrat win in the 2020 presidential and congressional

Neeley, who will be sworn in Monday as Flint’s new mayor, inherits a municipal government that financial experts believe is in danger of slipping back into state receivership, watching its pension fund go broke or following the path Detroit charted six years ago into bankruptcy court. “I’m going to try to build us a pathway out (of insolvency),” Neeley told Crain’s. “But I first have to know what I’m dealing with.” The financial challenge mirrors what mayors and emergency managers before him have been wrestling with for years: a declining population and stagnant tax base coupled with legacy costs dating back to a different era of the city where General Motors was born. Since 2013, Flint’s municipal employees pension fund has dropped from 53 percent funded to 36 percent funded, according to city audits. And while the Weaver administration has built up a $18 million general fund balance, the most recent budget adopted by City Council projected Flint will spend $1.7 million more than it collects in taxes this fiscal year — and continue to spend down its reserves until running up a $2.78 million deficit in 2023. At the start of the 2019 fiscal year, Flint’s sewer fund was flush with $33 million in cash on hand. But the City Council’s recent budget envisions running up deficits the next four fiscal years and spending down the fund balance to $2.9 million, city records show. “The scary part is unemployment nationally is 3.5 percent,” Flint’s former Chief Financial Officer Hughey Newsome said in an interview with Crain’s. “What happens if we have a downturn and it really exposes Flint’s economic challenges?” “This is a big challenge for the city because right now there’s very little reason to believe the fund balance is going to recover because the revenues are not there,” Newsome added. Newsome resigned from the Weaver administration in March, in part because of what he deemed “dysfunction” on City Council and constant infighting with the mayor over governance of the city — less than a year after former Gov. Rick Snyder withdrew the final remnants of state control of Flint’s finances. “How on earth are you going to solve this problem without cooperation between the mayor and City Council?” Newsome said. “It’s inescapable how intertwined they are.”

“ANY TIME YOU LAYER ON ADDITIONAL REGULATIONS, YOU MAKE IT TOUGHER FOR BUSINESSES TO COMPETE, AND IT ULTIMATELY IMPACTS THE M&A MARKET.” — Brian Demkowicz, managing partner and co-founder, Huron Capital Partners LLC

elections could result in an attempt to undo those corporate tax cuts. Presidential candidates Elizabeth Warren and Bernie Sanders have both proposed higher taxes on corporations and their wealthy leaders as well as a stiffer regulatory environment, which may also be pushing down optimism. As part of her financial reform plan, Warren has proposed an additional 7 percent corporate levy on every dollar above $100 million in profits, a plan she says would rake in $1 trillion from businesses over 10 years. Sanders proposes to raise the corporate tax rate back to 35 percent and ban stock buybacks. Both candidates have suggested reforms on corporate operations. “As we’ve seen in many industries, any time you layer on additional regulations, you make it tougher for businesses to compete, and it ultimately impacts the M&A market,” Brian Demkowicz, managing partner and co-founder of Detroit private equity firm Huron Capital Partners LLC, said in the survey. Despite fears over the U.S. economy and trade tensions with China, the Asian nation topped the respondents’ list of anticipated outbound M&A activity from the U.S. China wasn’t even in the top four in 2018. “Trade tensions between the U.S. and China are arguably higher than they were a year ago,” the survey said. “But U.S. companies might be trying to establish a foothold in China so they can sell products there, figuring it will only get harder to ship goods to the world’s second-largest economy.” Vaughn also said recent movements in trade negotiations between the two nations may be leading business executives to believe the nearly two-year spat may be coming to an end. Last week, China and U.S. negotiators agreed both countries would roll back some of the tariffs currently on the books if, and when, a trade deal is struck. The 19-month trade dispute has resulted in tariffs slapped on $360 billion worth of goods from China and $75 billion on U.S. goods exported to China. American consumers and businesses have paid an additional $38 billion in tariffs between February 2018 and September 2019 as a result of the trade war, according to lobbying group Tariffs Hurt the Heartland in a report released last week. Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

‘Potential disaster’ looms Intertwined in Flint’s efforts to recover from a disastrous water switch under Snyder’s emergency manager are attempts to revitalize what was once one of Michigan’s most prosperous cities in the two decades that followed World War II. Long-vacant downtown department store buildings have been rehabilitated. A Hilton Garden Inn hotel is planned for the long-vacant Genesee County State Savings Bank. Lear Corp. has opened a 600-employee seat plant to supply Flint’s General Motors truck assembly plant, which remains a mainstay employer for the city where GM was founded 111 years ago. Mahindra North America Inc. has eyed the barren site of Flint’s once-sprawling Buick City complex for a new $1 billion automotive assembly plant for off-road and delivery vehicles.

20 | CRAIN’S DETROIT BUSINESS | NOVEMBER 11, 2019

Construction workers renovate an old bank building on Saginaw Street in Flint’s downtown business district on a recent afternoon. | DALE G. YOUNG FOR CRAIN’S DETROIT BUSINESS

Flint’s dwindling pension assets Flint’s pension fund for retired city workers has slipped from 53 percent funded in 2013 to 36 percent funded, a 32 percent loss in assets valued at $197 million at the end of the 2018 fiscal year. The retirement fund for 1,800 retired city workers pays out about $51 million a year in benefits but is collecting just two-thirds of that amount annually in city and employee contributions as well as investment returns. PENSION ASSETS

FUNDED PERCENTAGE

2013

YEAR

$291,869,102

53%

2014

$265,563,662

48%

2015

$253,510,974

47%

2016

$208,965,319

38%

2017

$203,099,493

37%

2018

$197,128,499

36%

SOURCES: CITY OF FLINT’S COMPREHENSIVE ANNUAL FINANCIAL REPORTS FOR FISCAL YEARS 2013-2018; CRAIN’S RESEARCH AND ANALYSIS

But the outlook for Flint’s municipal finances remains bleak as the city’s property values have continuously fallen and city leaders brace for a population loss in next year’s census. Flint’s main revenue sources are property and individual income taxes, along with state revenue-sharing,

CRAIN’S DETROIT BUSINESS GRAPHIC

which is tied to population. Flint’s current fund balance — about 33 percent of the city’s annual general fund — is largely a result of Flint paying just half of the $40 million needed annually to keep its pension fund from plunging into insolvency, according to the city’s former CFO and a Michigan

State University economist who has studied Flint’s finances. “Their short term is looking better because they’re not paying the full cost of what they really should be paying,” said Eric Scorsone, an associate professor and director of the MSU Extension Center for State and Local Government Policy. Newsome characterized Flint’s financial outlook as “a potential disaster on the horizon that the city is not, for better or worse, situated to deal with.” City Council President Herbert Winfrey said the deficit spending will end with the election of Neeley, a three-term state representative who previously spent nine years on City Council. “That’s going to change in a matter of weeks,” Winfrey said. “We have to be prudent. And I think we’re going to have that now.”

‘Burning assets big time’

Outg narr Tues

Newsome, who was Weaver’s third CFO in less than four years, said the city’s pension fund is so “hopelessly upside down” it may necessitate an-

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Flint to join other Genesee County communities in the Karegnondi Water Authority (KWA) and leave Detroit’s water system after half a century. Kurtz moves to use Flint River for temporary water source while new KWA pipeline to Lake Huron is constructed.

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July-September 2013: Michael Brown returns for second stint as emergency manager; Saginaw city administrator Darnell Earley appointed emergency manager.

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April 2014: Earley and then-Mayor Dayne Walling flip a switch in a ceremony at Flint’s water plant from the Detroit Water and Sewerage Department (DWSD) to treated water

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Flint: A timeline of events Early 1970s: Flint had a population of 190,000 residents and General Motors employed 80,000 in Genesee County plants. 1999: GM begins closing plants at its sprawling Buick City complex. 2000: Flint’s population had fallen to 125,000. 2002: Demolition of Buick City begins. 2002-2004: Flint’s first period of state receivership under Gov. John Engler; former Baker College CEO Ed Kurtz serves as emergency financial manager. April 2011: Gov. Rick Snyder signs Public Act 4, giving emergency managers new powers to sideline

elected officials and cancel contracts. November 2011: Snyder appoints Michael Brown emergency manager. August 2012: Brown forced out after Public Act 4 suspended pending November statewide referendum vote; Kurtz returns for second tour of duty as emergency manager. November 2012: Michigan voters repeal emergency manager law. December 2012: Legislature passes new emergency manager law, Public Act 436, that keeps Kurtz in place. March 2013: In an effort to lower water costs for residents, Flint City Council approves Kurtz’s request for

Flint’s financial records show its pension fund for city employees has shed nearly 26 percent in asset value between the 2015 and 2018 fiscal years, as taxpayer and employee contributions and investment returns have made up two-thirds of the annual pension payouts of $51 million. “They’re clearly burning assets big time,” said Scorsone, a former deputy state treasurer. “This isn’t sustainable. The math just doesn’t work. You can’t keep doing it this way.” Flint’s pension plans pay out nearly $8 million more in retiree benefits each year than the city of 96,000 residents spends annually on police and fire services, parks and recreation, assessing property tax bills, the mayor’s office, clerk’s office, City Council and all other city services combined, a Crain’s analysis shows. Under the control of state emergency managers, Flint closed its traditional defined benefit pension plan to newly hired city workers, police officers and firefighters and moved toward a hybrid defined contribution. In 2017, Flint revamped its pension fund to move retirees out of “asset-poor” divisions and lower its overall payments. That move has helped the city build up its current fund balance, Newsome said. With nearly 1,800 retirees drawing monthly pension checks, Flint’s annual legacy costs are projected to rise annually as employees still in the pension plan retire, Newsome said. “That cost is going to continue to increase and the projected funding ratios will get worse,” he said. Flint also isn’t putting away any savings for a $279 million unfunded retiree health insurance benefit that has been the source of years of litigation. Emergency managers previously whittled down the other post-employment benefits liability from $850 million by restricting medical benefits, records show. In 2018, the city’s auditors warned in an annual financial report that the projected $17.9 million retiree health insurance cost in the 2019 fiscal year “is nearly insurmountable for a city in the fragile financial state in which Flint finds itself.”

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Outgoing Flint Mayor Karen Weaver narrowly lost a re-election bid last Tuesday. | WIKIMEDIA COMMONS

other state takeover or Chapter 9 bankruptcy to lower legacy costs. “You’re going to have to do something — is it bankruptcy or a state takeover?” Newsome said. “There are no easy plays here.”

from the Flint River. Complaints from residents about the smell, taste and color of the city’s water began within weeks. The water was not being treated with corrosion-controlling chemicals that caused toxic lead in water pipelines to leach into water. January 2015: Snyder re-assigns Earley to be emergency manager of Detroit Public Schools. Gerald Ambrose, a financial adviser to Earley, is appointed emergency manager. April 2015: Ambrose steps down as emergency manager but keeps Mayor Dayne Walling partially sidelined by order that vested the city administrator with power over finances and hiring.

Flint’s worsening general fund and pension finances comes less than 19 months after Snyder dissolved the Receivership Transition Advisory Board in April 2018. The RTAB is a state panel of public and private sector financial experts that was put in place after Flint’s financial emergency was officially declared over in April 2015. The board maintained oversight of Flint’s finances while local control was gradually restored.

October 2015: Under pressure from scientists who discovered elevated lead in the water and bloodstreams to Flint children, the Snyder administration switches Flint back to Detroit’s water system. November 2015: Clinical psychologist Karen Weaver elected mayor, unseating Walling. She declared a state of emergency over the city’s water quality, forcing Snyder to eventually follow suit in January 2016, which brought national attention. April 2018: Snyder dissolves state oversight board charged with monitoring Flint’s finances and announces end of state distribution of

Weaver took office in November 2015 and regained control of city departments in February 2016 after the Snyder administration restored some of her powers that the city’s last emergency manager had turned over to an appointed city administrator, whom Weaver fired. But the RTAB remained in place and was seen as a source of continued tension with the Snyder administration given its role in causing Flint’s water crisis and the mistrust it bred in state government and whether the city’s water is safe to drink. Weaver pushed for the RTAB board to be disbanded and full governance power restored to her and the City Council. Lansing real estate developer Joel Ferguson was one of the RTAB board members. In an interview with Crain’s, Ferguson said he urged Snyder not to dissolve the board. “I just told them I didn’t feel this was the time to cut everyone loose where the governor’s office didn’t have some control and oversight,” said Ferguson, a Michigan State University trustee and chairman of Ferguson Development LLC. “They felt they were getting pressured and they went ahead and dissolved us,” Ferguson added.

‘A whole lot of fires in Flint’ Adding to Flint’s precarious fiscal future has been near-constant political infighting between Weaver and the City Council — and among city council members themselves. Newsome, a Harvard Business School-trained financial consultant who came to Flint from the private sector, resigned in late March after just 18 months on the job. In a resignation letter, Newsome cited a culture of “political one-upsmanship” on City Council and a “witch hunt” to oust the mayor, who earlier survived a recall attempt. Shortly after Newsome departed, the city’s auditing firm, Saginaw-based Yeo & Yeo, resigned. A representative of the firm did not return a message seeking comment. Council members aligned with Weaver disagree that the city’s finances are headed in the wrong direction. “We’re on the uptick,” Councilman Maurice Davis said. “Everything is pretty solvent around here.” When asked about the 36 percent funded pension plan, Davis replied: “We plan on rectifying that shortly,” but offered no plan for doing so. “Call me in about a year and a half,” Davis told a Crain’s reporter. “We ain’t even out of the water crisis yet. We’re putting out a whole lot of fires in Flint.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

bottled water after tests show lead levels in the water below federal limit. August 2018: Lear Corp. opens new 156,000-square-foot vehicle seat assembly plant on part of the former Buick City site. The new plant employs 600. January 2019: Flint’s population estimated at 95,000. September 2019: GM’s Flint Truck Assembly, engine and tool & die plants employ a combined 5,996 hourly and salary workers. Nov. 5, 2019: State Rep. Sheldon Neeley elected Flint’s 94th mayor. SOURCE: CRAIN’S DETROIT BUSINESS RESEARCH

ANGELS

From Page 1

The Flint Angels will be a legal affiliate of Grand Angels Holding Co. LLC, the holding company for the Grand Rapids-based Grand Angels which does business as the Michigan Capital Network. The Grand Angels are considered the most active angel investor group in Michigan and one of the most active in the Midwest. In 2017, the Grand Angels helped launch the Ka-Zoo Angels as an affiliate in Kalamazoo. As they do with both the Woodward Angels and the Ka-Zoo Angels, the Grand Angels will handle back-office operations with the Flint Angels, and the various angels groups will share deal flow. The Flint Angels held an introduction meeting in September. Among those committed to joining are Phil Hagerman, the co-founder and retired CEO of Flint-based Diplomat Pharmacy Inc. (NYSE: DPLO), and Phil Shaltz, the president and CEO of Flint-based Shaltz Automation Inc., a supplier of automation equipment to the auto industry. Organizers hope to have 1520 members by year’s end. Hagerman has been a driving force in the redevelopment of downtown Flint. A $6.8 million renovation of the historic Dryden Building was completed in 2016 and it is now home to Skypoint Ventures LLC, Hagerman’s venture capital and real-estate development firm. One of those real estate developments was of the historic Ferris Building next door to the Dryden, named for the Ferris Brothers Fur Co. that occupied it for many years. It underwent a $7.5 million renovation and is now a business incubator and tech center called the Ferris Wheel Innovation Center. Shaltz has been a key investor in downtown Flint, as well. Appointed in April to the executive committee of the Michigan Economic Development Corp., he was one of four investors in Uptown Developments LLC, which was formed in 2002 to buy and renovate real estate downtown. According to the Uptown web site, he has an ownership stake in six restaurants downtown and is the founder of The Flint Diaper Bank and the I’m Concerned About the Blueberries initiative. He is also the lead investor in Kuhmute Inc., a startup based in the Ferris Wheel that is developing docking and charging stations for rented e-bikes and e-scooters. (See related story, Page 14.) Another member is a newcomer to town, Leven Wilson, founder and CEO of The Renew Group, a Tampa-based nonprofit that provides a range of services for the disadvantaged and which has opened an operation in the Ferris Wheel, providing enrichment programs for elementary students and mentoring, coaching and job skills for underemployed single adult women. (See related story, Page 11.) “What I’m excited about is everything going on at the Ferris Wheel,” said Tim Parker, president of the Grand Angels. “They’re creating a lot of businesses and those businesses will get to the point where they have a funding gap, and that’s where we typically invest.” Hagerman said that he likes the idea of angel investing “but I lack the time and rigor to do proper due diligence. For me, it’s easy to fall in love with someone’s idea, but hav-

“WE BRING PEOPLE IN WITH A VARIETY OF BACKGROUNDS TOGETHER TO LOOK AT DEALS. FLINT DEAL FLOW WILL LARGELY BE WHAT THE MEMBERS ARE INTERESTED IN, BUT THE FLINT ANGELS WILL CO-INVEST IN DEALS STATEWIDE.” — Tim Parker, president of the Grand Angels

ing a back-office team helps in determining if there is enough structure in place for an investment to make sense. I fall in love very easily, but a good data point for me is if I’m giving someone a nine or a 10, and everyone else is giving them a four or a five.” “We reduce the risk,” said Parker. “We bring people in with a variety of backgrounds together to look at deals. Flint deal flow will largely be what the members are interested in, but the Flint Angels will co-invest in deals statewide. We’ll help Flint companies, and we’ll help Flint investors reach out geographically.” The plan now is for the Flint Angels to hold six pitch events a year, with entrepreneurs getting the word out on what they are doing and how much money they need. Parker said he has been meeting with other angel groups around the state and hopes to soon announce a formal relationship with another established angel group. “I am super excited that Flint will now have an angel group. It means more capital on the street for the growing number of entrepreneurs in our state. It’s also a further indication that qualified households are genuinely interested in taking a little risk to get better returns on their capital assets,” said Skip Simms, a vice president of Ann Arbor Spark, managing member of the Ann Arbor-based Michigan Angel Fund and manager of the Michigan Angel Community, an organization promoting the growth of angel investing in the state. “The Grand Angels’ support for communities interested in creating angel groups provides the infrastructure so people can be comfortable moving forward. The work we are doing at Spark in the form of angel education and facilitation goes hand in glove with what Tim [Parker] and the Grand Angels are offering,” said Simms. The Flint Angels will host a pitch event on Nov. 20 at the Ferris Wheel. The event, held in partnership with Pitch Club Michigan, is free and open to the public. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

NOVEMBER 11, 2019 | CRAIN’S DETROIT BUSINESS | 21

THE CONVERSATION

‘Guy who sells money’ worries about Detroit’s comeback

crainsdetroit.com

BERNARD FINANCIAL GROUP, SOUTHFIELD: Dennis Bernard, 60, founded Bernard Financial Group in 1991 in a small subleased office without a computer because he couldn't afford one. The firm has grown to north of $1 billion in loan origination annually and $4.2 billion in servicing, with the vast majority of it being in Metro Detroit. He and his team have had a hand in much of the financing in downtown Detroit the last several years. He is a graduate of Miami University in Ohio and Case Western Reserve University in Cleveland. | BY KIRK PINHO He spoke with Crain's Detroit Business over lunch at Mandaloun Bistro in Bingham Farms. ` What worries you most about the market right now? First of all, everything worries me. I’m a worrier. What am I worrying about between 4 a.m. and 5:30 a.m. when I finally get out of bed? I worry about Detroit’s comeback. We’re doing well. Our markets are good. For the first 30 years of my career, I lied about Detroit. Now, I can’t even say how good it was. I used to tell people, you know, to get money here, how good it was, but it really wasn’t true. You know, there were little pockets or little things that we had, but we had issues. Now that I’m worried that more money is coming here, more out-ofstate developers are coming here, more local people who are jumping from 30-unit apartment complexes in development to 400 units, or building office or hospitality. I’m worried that we’re going to have a large, well-known development go bad and go into foreclosure. And that’s when I’m afraid that the New York and San Francisco and the international money will say, “See, they’re not ready yet,” and burst that growing bubble. Does that make sense? That’s what worries me. ` How does the market look different in five years? This is going to sound terrible. I hope interest rates are higher in five years. And that sounds terrible for a guy who sells money. I think there will be a strengthening of our economy. So Detroit, nationally and internationally is doing better. I’m not so sure that we always need a 2 1/2-percent, 10-year Treasury. There’s nothing wrong with a 3 1/2 or 4-percent, 10-year Treasury bill. Buildings can be built and the rent rolls can meet themselves and properties can survive. So I am hoping that we are on firmer ground

because if we have a recession right now, there is not much room that the Fed or the markets can do. There’s not a lot of quantitative easing. We’ve already done that. I’m hoping overall, five years from now, the overall health of the economy is better. I hope Detroit continues to grow. And I think we will, with reasonable stuff, with workplace housing coming on in the city. Industrial is just starting to find itself. ` You can do spec in industrial all day long. So five years from now, I would like to see and I do believe that our market will be fully organic, that it’s not relying on the Dan Gilbert/Bedrocks of the world or the Olympias of the world and that it is growing because we do have all these newer and younger and fresher developers. Some of our real estate families that have been around forever are active again and creating. We have new people like Ashley (Capital), who came to town. It wasn’t that they came for one (development). Right now we’re seeing people come to town to do one. They hear what’s going on. They come from Toronto. They come from New York. They come from Israel, they come from L.A., you know, they want to do one deal. I hope it becomes organic, so that it’s a natural progression and we start to grow into the neighborhoods again, we start to redo some of the suburbs again. ` Your son’s at the firm now. People are going to wonder whether that’s a natural sort of succession planning taking effect for you to retire? I’m not going to retire, OK? I’m not going to retire. I love deal making. We’re very fortunate. We built a good firm, so obviously we’ve done well financially. I

love deal making. I’ve had so much fun the last seven years being involved in the renaissance of the city of Detroit. I love doing things that others can’t do. Doing a construction bridge loan on One Campus Martius that people didn’t think could be done, the ability to build on top of the building and structure it a certain way, working on some of the things we’ve done in the suburbs. I love that. I do want to get out of the day to day operation. My son (Joshua Bernard) spent five years preparing, working both for a national bank and a huge private equity firm you know in New York on Wall Street, so he’s come back to work for us. He’s brought a Rolodex that we didn’t even have. He’s brought a great Rolodex. There’s a work ethic. And I have some really wonderful team leaders. So everybody’s getting a piece of the company. The business is going to go on. And I’m looking forward to a few years just being a dealmaker, a rainmaker, working on deals.

novels. And in 1893, there was the last publication, the last edition of all of his original models, and I was able to, with the help of John L. King, get them all. I’m on a 10-year course to read all 43 of Dumas’ books. They’re rare books and they were able to help me track them down. Some are in really good shape. Others not so good shape. I’m about halfway through.

Dennis Bernard is founder of Bernard Financial Group.

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` What’s on your reading list? I’m a huge reader. I have a library at home with a couple thousand books, and I collect some weird books. My favorite author is Alexandre Dumas, who wrote my favorite book, “The Count of Monte Cristo,” and also “The d’Artagnan Romances,” which is The Three Musketeers, which is one of the six volumes. He wrote 43

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READ AN EXPANDED INTERVIEW ON CRAINSDETROIT.COM/THECONVERSATION

CUSTOMER SERVICE

RUMBLINGS

Ishbia looks back at 12th man days, leadership in new book Mat Ishbia, president and CEO of fast-growing Pontiac-based United Wholesale Mortgage, is ostensibly a better businessman than basketball player. He’s grown United Wholesale from a 12-person company to the nation’s largest wholesale mortgage lender with a record $41 billion in mortgages last year. He expects the company, which last year moved its 4,500 employees to a new 900,000-square-foot building in Pontiac, to surpass $100 billion in mortgages this year. Ishbia was the 12th man off the bench for the 2000 National Champion Michigan State Spartans basketball team. The 5’10” guard played a total of 40 minutes during his three-year collegiate career. But the lessons he learned from famed

Izzo even wrote the book’s foreword. “Mat wasn’t born to be some sort of dominant athletic specimen,” Izzo wrote. “It wasn’t in his DNA to be 6’5” or have a 40-inch vertical jump, but he was born and raised to be a workhorse.” Ishbia

Ollila

coach Tom Izzo defined Ishbia’s strategy as a business leader. So much so that Ishbia penned a book about it: “Running the Corporate Offense: Lessons in Effective Leadership from the Bench to the Boardroom,” was released last month. The book highlights how Ishbia used Izzo’s teachings to build his business and inspire his employees.

22 | CRAIN’S DETROIT BUSINESS | NOVEMBER 11, 2019

` DAVID (OLLILA) WINS OVER BACKCOUNTRY GOLIATH When internet retail giant Backcountry.com sued a small Michigan ski maker in a trademark dispute involving the use of “backcountry,” Flint-based entrepreneur David Ollila promised a big fight. The legal battle ended with little bloodshed Wednesday when the outdoor retailer said it was withdrawing the federal lawsuit against

Marquette Backcountry Ski. The move followed an outpouring of protest on social media. Ollila, who had vowed “an eye for an eye” with a counter lawsuit, changed his stride after Backcountry.com reached out to him to “work together,” Ollila said. Backcountry. com will buy his company instead and make donations to fund In addition to the purchase, Ollila said the company agreed to make a donation to entrepreneur incubators Invent@NMU, which Ollila founded, and the Flint Ferris Wheel Innovation Center, which Ollila runs. The amount is undetermined but likely in the “tens of thousands” of dollars. “I’m never one where I feel destruction is the answer,” Ollila said of the deal.

Single copy purchases, publication information, or membership inquiries: (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.

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