Crain's Detroit Business, Feb. 3, 2020 issue by Crain's Detroit Business

THE CONVERSATION Ping Ho, majority owner or partner in four Detroit restaurants, talks of her path from Singapore to New York to Corktown.

SPORTS BUSINESS: The Ilitch family hits jackpot with legal sports betting. PAGE 3

PAGE 22

CRAINSDETROIT.COM I FEBRUARY 3, 2020

AUTOMOTIVE

BorgWarner to buy Delphi to stave off EVs’ impact

WELLNESS

SURVIVAL OF THE FITNESS

BY DUSTIN WALSH

Electric vehicles accounted for a mere 1.8 percent of U.S. autos sold last year. Yet the business is restructuring the entire automotive sector and forcing vulnerable suppliers to weld together. Last week, BorgWarner Inc. struck a deal to acquire Delphi Technologies in an all-stock deal that values Delphi at about $3.3 billion. The deal will unite two auto suppliers facing substantial financial pressure from the predicted shift to electric vehicles. Both companies’ engine and transmission businesses are seen by analysts as entering a period of decline, but are hoping a coupling will create enough volume to sustain. Experts say this is the start of a long and possibly painful consolidation throughout the industry. That will come at a time when some are predicting sales of internal-combustion engines — and perhaps autos overall — may have peaked for all time. “I believe the merger to be one of many to come, and one of necessity,” said Marcus Hudson, executive director at Calderone Advisory Group in Birmingham. “Suppliers are positioning themselves for the move to electric vehicles as well as declining automotive volumes. The merger allows BorgWarner, specifically, to continue to compete in traditional powertrains while setting it up to transition, however slowly, to the age of electronic vehicles.” Under the terms of the agreement, which has been approved by the boards of directors of both companies, Delphi Technologies stockholders would receive 0.4534 shares of BorgWarner common stock per Delphi Technologies share. That equates to about $1.6 billion worth of Delphi Technologies stock. See DELPHI on Page 18

Amina Daniels’ 2020 goal is differentiating her Live Cycle Delight further from competitors. | SYLVIA JARRUS FOR CRAIN’S DETROIT BUSINESS

Boutique fitness business accelerates, but competition can mean heavy lifting BY ANNALISE FRANK

The fitness studio business is accelerating in metro Detroit, with consumers seeking ever-creative ways to burn calories and get fit.

NEWSPAPER

But that means heavy competition. Options for niche exercise programs are seemingly endless in Detroit, its suburbs and the rest of the country: pilates, yoga, barre, CrossFit, high-intensity interval training, kickboxing, Zumba dance classes and indoor cycling, to name a few. Some chains or local gyms entering the metro Detroit market narrow in on specific offerings, like New York-based dance-cardio fitness chain AKT, New Yorkbased rowing chain Cityrow and indoor cycle studio Rebel Cycle Studio LLC. Others’ offerings are more gen-

POLITICS

Is a grand bonding bargain brewing? Just before Christmas, Gov. Gretchen Whitmer heralded the state’s early payoff of $3.2 billion in bonds issued by her predecessor to smooth out Chad the cost of unemLIVENGOOD ployment insurance debt Michigan employers racked up during the Great Recession. It’s exactly the kind of debt Whitmer has been loathe to take on to smooth out the high cost of teacher pensions for school districts strained by legacy costs and just a recession away from a full-fledged fiscal crisis. Last year, Whitmer rejected out of hand a proposal concocted by a group of conservative West Michigan businessmen to issue $10 billion in bonds and invest the proceeds through the Michigan Public School Employees’ Retirement System to refinance the annual cost of pensions for retired public school employees. Admittedly, I was more than a little skeptical of the idea, having chronicled the disastrous pension bond debt deal that landed the city of Detroit in bankruptcy. In a memorable one-liner, Whitmer said the pension-bonding plan was “retrieved out of Gov. Snyder’s trash can.” See LIVENGOOD on Page 18

FOCUS | REAL ESTATE

eral, but come out of need or demand for fitness options. Felicia Maxwell’s Fit 4 Life Health and Fitness, for example, opened in August 2017 in Detroit’s northwest corner, which lacked a neighborhood gym. More entrants to the market can create clusters of businesses. Downtown Royal Oak, for example, has at least 10 specialized workout studios. In Detroit, where Amina Daniels says she opened one of the city’s first new-wave boutique fitness studios, she’s feeling the burn. See FITNESS on Page 21

MOBILE HOME PARK ON CASS LAKE COULD GIVE WAY TO LUXURY APARTMENTS. PAGE 10 Q&A WITH JOHN MCLAREN, COO OF SUN COMMUNITIES. PAGE 11

NEED TO KNOW

CORONAVIRUS

THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT ` DELTA SUSPENDS FLIGHTS TO CHINA THE NEWS: Delta Air Lines, the dominant carrier at Detroit Metropolitan Airport, said Friday that it will temporarily suspend all U.S. flights to China beginning Feb. 6 through April 30 because of concerns about coronavirus. The airline said it would continue to run flights through Feb. 5 to give customers trying to leave China the opportunity to do so. WHY IT MATTERS: Metro Airport is a main hub for travel to China. Delta flies daily nonstops to both Beijing and Shanghai. Increasing cutoff of travel to China could have serious global economic effects.

` THOMA BRAVO EXPLORES $2B SALE OF COMPUWARE THE NEWS: Thoma Bravo is exploring options including a potential sale of Detroit-based Compuware Corp. that could value the mainframe software provider at around $2 billion, including debt, Bloomberg News reported, citing people familiar with the matter. The technology-focused private equity firm is working with a financial adviser on the sales process, said the people, asking not to be identified because the matter is private. WHY IT MATTERS: Thoma Bravo took the tech company co-founded by Peter

Karmanos Jr. private in 2014 in a deal valued at $2.5 billion. It carved out Compuware’s application performance management division, renamed it Dynatrace Inc. and took it public last year.

` KARMANOS: I APPEALED TO TRUMP FOR KWAME CLEMENCY THE NEWS: Compuware co-founder Peter Karmanos Jr. made news by telling Deadline Detroit’s Charlie LeDuff that he forwarded a letter from former Detroit Mayor Kwame Kilpatrick last year to President Donald Trump for clemency. Kilpatrick is serving 28 years in federal prison on corruption charges. “What you witnessed was a modern-day lynching,” Karmanos said on LeDuff’s podcast. WHY IT MATTERS: Karmanos has been there for Kilpatrick in the past as well, offering him a job at Compuware after he resigned as mayor. (It’s also worth noting that the interview was a viral moment for Deadline Detroit, which Karmanos himself bankrolled originally and into which he put new investment in 2018).

`TRUMP TOUTS END OF NAFTA IN WARREN VISIT TO DANA THE NEWS: President Donald Trump touted the signing of the United States-Mexico-Canada Agreement Thursday at the Warren plant of Dana Inc. “We just ended a nightmare

Kalitta ferries citizens out of China in wake of virus

known as NAFTA,” Trump said on stage in front of employees and a few hundred supporters. “They took our jobs for a long time. We now have the United States-Mexico-Canada Agreement. It’s a whole different ballgame. It’s the greatest agreement we’ve ever made.” Trump signed the agreement Wednesday.

A plane operated by Kalitta Air in Ypsilanti Township evacuated 201 Americans last Tuesday from the epicenter of the coronavirus outbreak in China, according to published reports. The contract air freight company owned by Motorsports Hall of Fame drag race champion Conrad “Connie” Kalitta was chartered by the U.S. Department of State. Representatives from Kalitta Air did not respond to phone calls seeking comment. The Boeing 747 flew from Wuhan to Anchorage, Alaska, where passengers were screened for symptoms of the deadly virus that has infected thousands in China and killed more than 200 as of Friday, the Anchorage Daily News reported. All of the passengers passed the screening, and the plane flew on to Los Angeles. The Centers for Disease Control and Prevention had confirmed six cases in the U.S. as of Friday including two in Chicago, but none in Michigan.

LARRY PEPLIN FOR CRAIN’S

WHY IT MATTERS: The bipartisan approval of the USMCA was the fulfillment of a campaign promise by Trump, and he celebrated the victory in a state that will be crucial to his re-election chances this fall. He won Michigan by the thinnest margin of any state in 2016.

The Kalitta Air 747 at the Anchorage airport. | MICHAEL DINEEN/ASSOCIATED PRESS

`MAY MOBILITY SHAKES UP LEADERSHIP THE NEWS: Self-driving shuttle company May Mobility has revamped its senior management team. COO Alisyn Malek will leave her position with the company at the end of this week, but will retain an advisory role. Her departure follows the exit of former chief technology officer Steve Vozar, who left last week. Both are co-founders of the

company. “After we wrapped up that fundraising, I thought about what I wanted to lean into next,” Malek said. “I’m really proud of everything we accomplished, and the team we’ve brought in. I trust that they’re going to keep killing it and continue to grow the company.”

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WHY IT MATTERS: Their departures come at a time when the company plans an expansion. Ann Arbor-based May Mobility closed a $50 million investment round in December that will enable it to deploy its six-passenger electric vehicles on routes in more communities.

INSURANCE

SPORTS BUSINESS

AAA wants to take driver’s seat in Carolinas Auto Club Group preps for changes in Michigan BY CHAD LIVENGOOD

dent arrived in 2013. DMC and Henry Ford, with headquarters 2.5 miles from each other with Wayne State in the middle, are critical to the future of the WSU’s medical school. In a wide-ranging interview with Crain’s, Schweitzer acknowledged the importance of developing a strong working relationship with the university board and also working to improve relations with DMC and Henry Ford. “I met with almost every (board) member and it was very positive, not contentious,” he said. “They are professional and care about the legacy of the university.”

The Dearborn-based Auto Club Group is continuing its expansion into growing southern states while preparing for the first major disruption in Michigan’s auto insurance market in nearly half a century. At the beginning of January, Michigan’s AAA property-casualty insurance company and Richardson travel club completed a merger with AAA Carolinas, making it the second-largest AAA club in North America with 13.5 million members. In an interview last week with Crain’s, Auto Club Group CEO Joseph Richardson Jr. said the merger will not result in any job losses at the company’s Dearborn or Tampa headquarters as it adds a third headquarters in Charlotte where AAA Carolinas has been based. “We have more openings that we can find people to be able to fill,” Richardson said in an interview at the Auto Club Group’s Dearborn headquarters. “Clearly we’ll find efficiencies in contracts and expenses ... and we’ll continue to add jobs as we have across all geographies, especially in the state of Michigan.” The Auto Club Group has 165 current job openings among its Michigan workforce of nearly 3,800 employees, a company spokesman said. Richardson said the federation of AAA clubs plans to invest in expanding AAA’s 20 percent market share in North and South Carolina, two states where the population is growing and AAA has 3 million members. “What we bring to the Carolinas, the Auto Club Group, is capital, to be able to invest in the Carolinas and grow the Carolinas along with the other 13 states we do business in today,” Richardson said. Auto Club Group’s acquisition of AAA Carolinas — the financial terms of which were not disclosed — included a network of 36 car care and repair shops that carry the AAA brand. The club plans to open 15 car washes in the Carolinas as it expands into other areas of the vehicle maintenance business, Richardson said. At the same time, the Auto Club Group is getting ready for a potential upheaval in Michigan’s auto insurance market as reforms to the no-fault law go into effect July 2 that, for the first time, will allow motorists to opt out of purchasing unlimited medical coverage for auto accidents.

See DEAN on Page 20

See AAA on Page 17

HOUSE RULES

MotorCity Casino in Detroit is owned by Marian Ilitch, whose family also owns the Detroit Tigers and Red Wings. | GETTY IMAGES

With sports betting, MLB ponders rule change for Ilitches BY KURT NAGL

The bill passed in December legalizing sports and online gambling in Michigan lacks any language addressing the dual ownership of a professional sports team and casino. The Michigan Gaming Control Board, which regulates Detroit’s three casinos, said it is not considering any special rules or provisions regarding the potential conflict of interest, nor is any other state agency with a hand in rulemaking. In fact, the one entity that puts restrictions on gambling, Major League Baseball, is reworking its rules to allow the Ilitch family to offer a full sports book at MotorCity Casino Hotel. The casino is

“WE WOULDN’T WANT ANY OF OUR OWNERS TO BENEFIT ONE WAY OR ANOTHER ON WHETHER THEIR TEAM WINS OR LOSES THE GAME.” — Kenny Gersh, executive vice president of gaming and new business ventures, MLB

owned by Marian Ilitch, whose family also owns the Detroit Tigers and Red Wings, and controls Little Caesars Arena, home to the Red Wings and Pistons, and Comerica Park, where the Tigers play. “Generally, under our policies, if an owner of a team also owns a sports betting operation, that own-

er wouldn’t be able to take bets on that owner’s team,” said Kenny Gersh, executive vice president of gaming and new business ventures for MLB. “We’re looking to adapt our policies to see if there’s a way that if there is separation between the owner of a club and the operations of a sports book as it relates to baseball, then we may get comfortable with it.” Gersh said that under MLB’s current rules, the Ilitches would not be allowed to take bets on Major League games because of a conflict of interest. He said he expects a workaround deal between the league and the casino to be reached shortly after the league’s owners meet during the first week of February. See BETTING on Page 19

Sports betting by the numbers  $150 billion spent on illegal gambling each year in the U.S.  $190 million expected to be wagered on sports at Michigan casinos in first year of legal gambling  $19 million expected to be generated yearly for state from sports and online betting tax  8.4 percent state tax on sports betting revenue, plus 1.25 percent city tax for Detroit’s casinos  20 states have legalized sports gambling so far SOURCES: MICHIGAN GAMING CONTROL BOARD AND AMERICAN GAMING ASSOCIATION

HEALTH CARE

New Wayne State med school dean faces challenges BY JAY GREENE

The new dean for the Wayne State University medical school is a talented researcher, a respected administrator and chair of the department of radiology at the Stony Brook University School of Medicine in New York. He’s also stepping into a volatile situation. Is Mark Schweitzer ready for the challenges facing him when he starts his new job on April 27 as medical school dean and also vice president of health affairs of the university? Schweitzer comes into the job knowing that the boss who hired him, M. Roy Wilson, M.D., Wayne

Mark Schweitzer

State’s president, is under fire by half of the university’s board of governors, who have asked him to resign. The issues those trustees have with Wilson are multifaceted. Much of the rancor started with a threeyear contract extension the board approved in December 2018 in a contentious 5-3 vote. It also stemmed from efforts the university made to negotiate an affiliation agreement with six-hospital Henry Ford Health System. The board members also blame Wilson for not doing more to improve the deteriorating 100-yearold relationship with six-hospital Detroit Medical Center — deterioration that began before the presi-

FEBRUARY 3, 2020 | CRAIN’S DETROIT BUSINESS | 3

REAL ESTATE INSIDER A rendering of the Hudson’s site project from late 2018. | SHOP ARCHITECTS PC

Hudson’s site tower will not be tallest in Michigan after all The state’s tallest building is not under construction after all. Envisioned at one point to be up to 912 feet tall, the development on the site of the forKirk mer J.L. Hudson’s PINHO department store in downtown Detroit isn’t going to top the 727-foot Detroit Marriott at the Renaissance Center on the Detroit riverfront, said Matt Cullen, CEO of Dan Gilbert’s Bedrock LLC real estate company. The RenCen hotel is the tallest building in the state. “It will not be the tallest,” Cullen said of the Hudson’s tower in response to a question from the Detroit Free Press. He said a determination will be made by June on the precise height as well as a hotel operator. “I think what we concluded is we wanted an iconic building, we wanted to have a lot of characteristics relative to retail and public space and a worldclass hospitality component and other things, and the need to be the tallest wasn’t on our list of highest priorities,” Cullen said. Cullen’s revelation came following remarks and a question-and-answer session with Sandy Baruah, president and CEO of the Detroit Regional Chamber, at the Detroit Policy Conference last week. At the time of a December 2017 groundbreaking ceremony, the project was expected to be complete in 2022 and have 330-450 residential units; 103,000 square feet of retail, food and beverage space, plus a street-level market; 168,000 square feet of event and conference space; and 263,000 square feet of office space. Another 93,000 square feet of exhibit space was planned, along with at least 700 parking spaces in a below-ground garage. The development, still a hole in the ground, is now anticipated to be complete in 2023. Kumar Kintala, director of development for Bedrock, said that the project is expected to reach ground level by the middle of this year. The architecture firms on the project are Detroit-based Hamilton Anderson Associates and New York City4 | CRAIN’S DETROIT BUSINESS | FEBRUARY 3, 2020

based Shop Architects PC. The general contractor is Southfield-based Barton Malow Co. The project is one of four Gilbert has underway that, at the time that a public incentive package was approved, totaled about $2.14 billion. Combined, they received a total of $618.1 million in so-called “transformational brownfield” tax incentives from the state. The other projects are the $830 million Monroe Blocks project immediately east of the One Campus Martius Building, the $311 million redevelopment of the Book Tower and Book Building on Washington Boulevard, and the $95 million addition to the One Campus Martius building where Gilbert has his Quicken Loans Inc. headquartered.

“I THINK WHAT WE CONCLUDED IS WE WANTED AN ICONIC BUILDING, WE WANTED TO HAVE A LOT OF CHARACTERISTICS RELATIVE TO RETAIL AND PUBLIC SPACE AND A WORLD-CLASS HOSPITALITY COMPONENT AND OTHER THINGS, AND THE NEED TO BE THE TALLEST WASN’T ON OUR LIST OF HIGHEST PRIORITIES.” — Matt Cullen, CEO, Bedrock LLC

The Book Tower/Book Building project is expected for completion in 2022 and the addition to One Campus Martius is under construction, expected to be completed this year. The design on the delayed Monroe Blocks project is now to finish by the middle of this year, bumped back from the first quarter as was envisioned in August. Cullen said Bedrock is moving the Monroe Blocks project back in the development sequencing because of the planned Detroit Center for Innovation project announced in October with billionaire developer Stephen Ross, a Detroit native, as well as the University

of Michigan. Bedrock expects to prioritize that project, which could top $750 million on the site that was to house the Wayne County Consolidated Jail, over the Monroe project. “I think the decisions that go into those first two projects, the Innovation Center and Hudson’s, will start to inform what we are designing for Monroe,” Cullen said.

Caesura for proposed high-rise by Opera House Michigan Opera Theatre is scrapping its effort, at least for the time being, to develop property it owns in downtown Detroit. The nonprofit had envisioned a high-rise of up to 480 feet over 34 stories for the 0.8-acre surface parking lot next to the Detroit Opera House and the seven-story Detroit Opera House Parking Center at the corner of Broadway and John R streets. It’s the most recent in a string of scaled back or scrapped developments in Detroit as increasing construction costs have made many projects financially unviable. “We received several proposals from qualified developers but have decided not to proceed at this time, in part, due to market conditions,” said Erica Hobbs, communications manager for Michigan Opera Theatre, in an email. Michigan Opera Theatre’s April request for proposals said it wants to increase revenue through a ground lease of the property and increase the revenue brought in by its 700-space parking deck built in 2005. “The proposals we received did not significantly improve our revenue over what we already earn from the surface lot and the parking center,” Hobbs said in the email. “Ultimately, we are looking for a development that maximizes our economic growth and our ability to expand artistic and community offerings. We have placed the project on hold for now and may re-visit. In the meantime we have a number of immediate needs inside the Opera House to improve accessibility and create a better, more comfortable environment for our patrons and guests.” Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

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HEALTH CARE

Beaumont Grosse Pointe to launch $19M surgical center project Renovation to increase size of operating rooms, create 900-square-foot hybrid surgical suite BY SHERRI WELCH

Beaumont Hospital Grosse Pointe will launch a $19 million project to expand its surgical center this month. The project will increase the size of its nine operating rooms, creating in one a 900-square-foot hybrid surgical suite that combines surgical equipment, tables and lights with fixed, advanced imaging systems and other equipment enabling less invasive procedures. The surgical center at the hospital will be named for Urban Science CEO James Anderson and his wife Patricia, in honor of a $5 million gift from the couple, the largest ever made to the hospital. The donation will support the new hybrid operating room, as a centerpiece of the surgical center renovation, and an endowment that will fund the purchase of equipment and continued training and education for surgeons and other medical staff. While not uncommon at larger hospitals, hybrid surgical suites or operating rooms are a luxury most Lynch community hospitals don’t have, said hospital president James Lynch, M.D. “For a community hospital to receive this wonderful gift from the Beaumont Foundation and the Andersons ... (will serve) the people of Grosse Pointe well for many years to come,” Lynch said. Hybrid operating rooms are safer

A rendering of the James and Patricia Anderson Surgical Center at Beaumont Hospital in Grosse Pointe. | HARLEY ELLIS DEVEREAUX CORP.

Urban Science CEO James Anderson and his wife Patricia made a $5 million gift to Beaumont Hospital Grosse Pointe. | JOHN F. MARTIN PHOTOGRAPHY

for patients because they give surgeons the ability to do more invasive operations in the same operating room, such as with cardiovascular procedures, Lynch said. At the same time, they enable less invasive surgeries by providing room for surgical robots and a rotating imaging system to provide real-time views during surgery. Young surgeons around the country train with that type of advanced equipment, Lynch said. “This will allow us to be competitive for the best and brightest,” he said. The ability to perform high-resolution imaging during an operation or

procedure is of critical importance in minimally invasive vascular surgery, but also has applications in complex orthopedic, neurosurgical, thoracic and trauma cases, said Dr. Nicholas Gilpin, chief medical officer, in an emailed statement. “Most hybrid ORs in existence are used primarily for vascular surgery, but there is considerable opportunity for other types of surgery as well,” Gilpin said. Electrical system upgrades are already underway at the Grosse Pointe hospital to prepare for the work that will begin this month, Lynch said. The work will take place in phases,

with one operating room taken offline at a time and a goal of completing the renovations by early summer 2022, Lynch said. The landlocked hospital will enlarge its operating rooms by absorbing storage rooms and similar spaces within its current footprint, he said. “As technology has moved forward … more and more equipment is needed in each one of our rooms,” Lynch said. “The renovation allows us to rightsize all of our operating rooms.” The larger operating rooms will also permit more medical students, residents and fellows to observe and take part in procedures, Beaumont said. Southfield-based Harley Ellis Devereaux Corp. is the architect on the project, and Sterling Heights-based Roncelli Inc. is the general contrac-

tor. Just under half or $2 million of the Andersons’ gift to the hospital will create the James and Patricia Anderson Advanced Surgical Technology and Training Endowment Fund. It will fund ongoing training and continuing medical education for surgeons, anesthesiologists, interventionists, nurses, technicians and other members of the surgical team and the purchase of advanced equipment as it becomes available. “The endowment will help ensure the hospital’s surgical teams stay ahead of the curve, learning and practicing leading-edge, technological advances,” said James Anderson, a Grosse Pointe Shores resident, in a news release. Contact: swelch@crain.com; (313) 446-1694; @SherriWelch

Beaumont Farmington begins system integration, job transfers BY JAY GREENE

Beaumont Hospital Farmington Hills is restructuring several clinical services and reassigning employees as part of Southfield-based Beaumont Health’s ongoing systemwide integration plan. The clinical services changes at the 330-bed Farmington Hills hospital includes closing an inpatient pediatric unit, one medical-surgical unit and downsizing a rehabilitation unit. Some 67 employees will be affected. The moves at the Farmington Hills osteopathic hospital are part of an integration and cost-reduction program that the Southfield-based system began in January 2019, five years after the merger with Oakwood Healthcare and Botsford Hospital that formed eight-hospital Beaumont Health. Changes at Beaumont Farmington Hills are intended to improve patient care, reduce costs, increase efficiencies and streamline operations, officials have said. More changes at hospitals and in the corporate office are expected as Beaumont seeks to complete the promises of its 2014 merger that initially were billed as saving $134 million annually, Crain’s reported when the merger was announced. “The health care landscape is constantly changing and we need to 6 | CRAIN’S DETROIT BUSINESS | FEBRUARY 3, 2020

“THE HEALTH CARE LANDSCAPE IS CONSTANTLY CHANGING AND WE NEED TO ADAPT.” — Mark Bohen, Beaumont’s senior vice president and chief marketing and communications officer

adapt,” Mark Bohen, Beaumont’s senior vice president and chief marketing and communications officer, said in a statement. “Across the nation, and here in Michigan, patients are thinking of themselves more as consumers. They are shopping more for medical services than ever before. We know patients are interested in outpatient and retail services, so we are responding to what our patients are telling us and focusing on new services like outpatient centers and urgent care.” It is unclear how much Beaumont has saved since the integration and cost-cutting program began in early 2019, but more than 225 employees, managers and executives have been laid off or transferred to other assignments. Still, in interviews last year, Beaumont said the system grew its workforce by about 3 percent both in 2018 and 2019. However, Beaumont officials said more is necessary in 2020. During the first three quarters of 2019, Beau-

mont’s operating profit margins declined to 3.7 percent, compared with 3.8 percent in 2018 and 4 percent in 2017. Beaumont hasn’t released its 2019 financial report. Earlier this year, Crain’s was told by Beaumont officials that corporate executives recently completed an analysis of the Farmington Hills hospital, formerly Botsford. They said the goals of the changes are to maintain quality and safety while increasing efficiencies, improving utilization and reducing avoidable costs. Here are the clinical areas Beaumont plans to restructure: ` Closing the six-bed inpatient pediatric unit. The unit only serves one patient per day on average, Beaumont said. “Children needing pediatric inpatient care will be transferred to Beaumont, Royal Oak or other nearby hospitals,” Beaumont said in a statement. ` Closing one 30-bed medical-surgical unit. “By consolidating medical surgical units, we can better meet the needs of our patients and families,” Beaumont said. ` Reducing the number of staffed inpatient rehabilitation beds to 11 beds from 16 beds due to a declining average daily census of 10 to12 patients, said Beaumont, adding that more care is provided in outpatient settings. From 2018 to 2015, the hospital experienced a decline of discharges

to 176 from 244, according to American Hospital Directory of Louisville. Due to the various changes, 55 staff members who include registered nurses, nurse assistants and unit secretaries will lose their positions. Beaumont said they are being offered comparable, open positions at Beaumont Farmington Hills to ensure continuous employment. Beaumont also has targeted elimination of 12 non-patient care employees. Workers are being offered other positions within the Beaumont system. Some employees have already been placed, Beaumont said. Overall, these moves affect about 3.5 percent of Beaumont Farmington Hills workforce of 1,900 employees. Beaumont employs about 38,000 people overall. In 2018, Beaumont Farmington Hills posted operating income of $47 million on net patient revenue of $410.6 million, for a 11 percent margin. However, because of unspecified “other expenses” of $50.3 million, Farmington Hills earned net income of $3.9 million, according to Medicare cost reports provided by American Hospital Directory.

Integration efforts Over the past year, Beaumont Health has moved to streamline its inpatient operations, cut costs and

create a nimbler health system that has more outpatient locations for patients. For example, Beaumont has sold its interest in five nursing facilities, 90 percent of its home health and hospice company and home medical equipment business. Three years ago it also unified its payroll, accounting and benefit systems and created a common pay scale for its employees. At the same time, Beaumont has formed joint ventures with two for-profit companies, WellStreet Urgent Care of Atlanta, to open a chain of 30 urgent care centers, and King of Prussia, Pa.-based Universal Health Services to build what ultimately will be a 150-bed behavioral health hospital in Dearborn. It also plans to develop at least three major outpatient centers in Lennox Township in Macomb County, another center somewhere in Wayne County with NexCore Group LLC of Denver and a third mixed-use center on its Royal Oak campus with an unspecified developer. Beaumont also is working with employed physicians and those on its eight hospital medical staffs on a variety of managed care and other clinical service integration efforts. Contact: jgreene@crain.com; (313) 446-0325; @jaybgreene

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treat them in an institution without that continuum of care. We grew into special needs adoption. Our goal is to create families if we can’t restore children to their biological families. We also use a community-based approach to delinquency. Although kids don’t come in with identiﬁed sexual abuse as an issue, I would guess that 40 percent of our kids have been sexually abused. We developed a program with court involvement and consequences for behaviors where we treat kids who’ve been victimized. We also run a youth assistance program with county governments to keep kids and families out of the system. We are an approved outpatient behavioral mental health clinic. Burns: What are you hoping to achieve looking forward? Ennis: Today Ennis has over 200 kids available for adoption. We pay, or the state pays through us, age appropriate reimbursement and medical subsidies to raise these children. We did 125 adoptions last year; 95 percent were children aged 0 to 13 and the majority were aged 4 or 5. Burns: What’s the best way to get ahold of you? Ennis: Our website is enniscenter.org. Or call 888-200-8915 and we can connect you to our facilities located in Genesee, Livingston, Monroe, Oakland, St. Clair and Wayne Counties.

Mario Nanos, Co-Founder and President, Families Against Narcotics (FAN) Washtenaw County Chapter and Dr. Chad Brummett, Co-Director, Michigan Opioid Prescribing Engagement Network (Michigan OPEN)

Larry Burns: What do parents need to know about the opioid and heroin crisis? Mario Nanos: They need to take an active interest in the lives of their kids. They need to have “school connectedness.” Read emails from the school, get to know the kids that your kid hangs out with. Larry Burns: Tell us more about Michigan OPEN. Dr. Chad Brummett: The Michigan Opioid Prescribing Engagement Network was started in 2016. At that time, really no one was talking about who gives the ﬁrst prescription or how excess pills ﬁnd their way to the street. About 6 percent of people who come in not using opioids become new chronic users. About 70 percent of what we prescribed went unused. If we project that out, with 44 million surgeries a year in the U.S., we’re talking about billions of pills in excess that are in medicine cabinets for decades. Burns: Are we making progress with prescriptions? Brummett: Absolutely. Our state is unique in that Blue Cross Blue Shield of

Michigan funds a network of collaboratives with all 72 major hospitals coming together three times a year to talk about surgical quality. We partnered with them because they had a captive audience. They were already getting information from patients so we could make real world prescribing recommendations that were patient centered. We still care about attending to pain. These last 24 months, we’ve reduced prescribing for general surgery by about 70 percent – down from an average of about 50 pills to 10 pills per prescription. Pain has not changed, satisfaction has not changed and reﬁll requests have not increased. Burns: Mario, what are you hoping to achieve with FAN in 2020? Nanos: We meet on the second Monday of every month and we’ve got an amazing lineup of guest speakers scheduled, many focusing on stigma because that is a barrier that keeps people from accessing care. Other free programs include Yoga for Recovery and Exercise for Recovery, in partnership with Orangetheory.

Wassim Mahfouz, Executive Director, Leaders Advancing and Helping Communities (LAHC)

Larry Burns: Tell us about LAHC. Wassim Mahfouz: Leaders Advancing and Helping Communities is a nonproﬁt human services organization. We’ve been serving the community in Southeast Michigan for the past 30 years. We provide programs focused on education and youth development, public health and social services. We run one of the largest scholarship assistance programs in the area at a nonproﬁt scale, where every year we provide over $100,000 in scholarships to students who are college bound. To date, we’ve invested over $1.5 million in educational scholarships. We also offer career development and training, youth leadership, diversity education, college preparation. We offer a wide array of social services such as hunger relief efforts. We have our annual turkey drive, our clothing drive, and provide basic necessities to incomeeligible families and the homeless population throughout Wayne County. Burns: Tell us about your new location. Mahfouz: In 2017 we bought a church building, St. Clement Church, on the east side of Dearborn.

It has 20,000 square feet of space and allows us to increase the programs and reach more people. Burns: You recently received a grant from The Children’s Foundation. Call you tell us about that? Mahfouz: We provide nutrition and physical ﬁtness education at local schools including basic information on how to eat healthy, stay active, limit screen time, eat in a family setting and read labels. Burns: Is there an issue with opioids and addiction in your community? Mahfouz: We have a major issue in the community we serve and it has been a taboo for too many years. Families try to sweep it under the rug, not because they don’t want to seek help, but because of the stigma that comes with it. We offer a substance abuse prevention program that includes prevention education for youth in local middle and high schools. We teach them about stressors and leading factors that push someone to abuse substances; examples are peer pressure, lack of decision-making skills or trauma. We also educate parents by providing them with classes about mental illness and substance abuse. We connect families with centers that provide intervention, whether they’re inpatient facilities or outpatient facilities. And prevention, prevention, prevention—it all starts at home.

COMMENTARY

Artificial intelligence will require oversight, regulation

EDITORIAL

Michigan’s roads: A tale of half-measures L

isten to any local spending debate in any metro Detroit city, and there’s one thing you’re certain to hear: “What about the roads?” That’s the ubiquitous, all-purpose argument against any project that involves spending money or raising local taxes. Voters want to see progress on the crumbling roads they bump along before they’ll shell out, for example, for a library millage. Gov. Gretchen Whitmer’s move to borrow $3.5 billion for highway improvements is not going to change that. The unilateral move unveiled in her State of the State address, which was speedily approved by the State Transportation Commission and doesn’t need SIMPLY PUT: IT’S legislative approval, applies to interFAR CHEAPER TO only states and other state-maintained MAINTAIN roads — basically, ROADS THAN IT those with a U.S. or M designation like IS TO FIX THEM Woodward or Gratiot ONCE THEY HAVE avenues. The other 90 perCRUMBLED. cent of roadways in the state that voters drive on won’t be eligible for the funding. The bonding program was criticized by Republicans and some business groups as saddling the state with debt down the road that will again leave the state too strapped to maintain the roads. But the fact is that further deterioration only makes the cost curve for road improvements get steeper. As roads worsen, the cost to fix them rises drastically. Simply put: It’s far cheaper to maintain roads than it is to fix them once they have crumbled. Preventive maintenance costs $116,000 per lane mile. Resurfacing costs $820,000. And rebuilding a road that can’t be salvaged costs $3.45 million per lane mile.

Servicing a big bond debt comes at a cost. So does further delay. The problem is that even borrowing $3.5 billion is a half-measure. Since that money can only be used on state-maintained interstates and main arteries, voters are going to see their local roads, maintained by municipalities, continue to deteriorate without additional funding directed toward them. That’s not going to satisfy anyone, and the cry of “what about the roads” will continue to bedevil any project local governments want to undertake. Large, simple solutions as the governor has proposed — a 45-cent gas tax or a large bonding program — are appealing but are not realistic as a long-term solution. A permanent funding measure that would give Michigan the roads our economy needs would likely need to be cobbled together from multiple sources — a gas tax, a strategic toll-road strategy, local-option taxes earmarked for roads, bonding. It will also take a rewrite of the deeply flawed Public Act 51, used to apportion money to roads, that will steer money to the streets most heavily trafficked and in the worst shape. This will take lots of serious negotiation, the kind we haven’t seen much of in this debate so far. Maybe an exchange of other financial priorities, as suggested by Chad Livengood on Page 1, could be a path. You know, old-fashioned politics. After all, this debate doesn’t have to be over. The right deal would mean the state wouldn’t have to float the bonds.

Facial recognition is the technology most widely associated with the dangers of artificial intelligence — as well as being the most publicized. Lesser known, but utilized by many more governments and companies, are algorithmic or automated deJennifer Lord is cision-making systems. a civil and Both these AI-based employment technologies are part of a rights attorney growing trend to autowith Pitt mate government serMcGehee Palmer & Rivers vices, increase efficiency and reduce headcount. in Royal Oak. Here in Michigan, an AI-based benefits-management program adopted by the state of Michigan’s Unemployment Insurance Agency malfunctioned in a spectacular manner and falsely accused about 40,000 innocent claimants of benefits fraud over a three-year period. Our law firm represents these Michigan residents in a class action lawsuit, which seeks justice for the unfair and harmful consequences they suffered after being falsely accused of fraud by the ADM system, known as MiDAS. Over the course of three years, MiDAS rendered incorrect fraud determinations over 93 percent of the time. In addition to false fraud accusations, MiDAS also set in motion an automated process which authorized aggressive collection practices, including the illegal seizure of tax refunds, levying of bank accounts and wage garnishment. The additional, collateral damages inflicted by the MiDAS system include bankruptcies, evictions, divorces, lowered credit ratings, criminal charges and countless emotional and psychological repercussions. Unfortunately, the debacle that took place when the state of Michigan employed an ADM system is hardly an isolated incident. There have been dozens of similar, harmful incidents involving AI-based technologies in other states. For example: ` The state of Oregon installed an ADM system to administer its disabilities benefits program. A subsequent lawsuit alleged that the state’s

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.

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 | FEBRUARY 3, 2020

AI-based system instituted a 30 percent across-the-board reduction in hours of service for all program recipients. ` An AI-based system was employed in Arkansas to determine the level of services to be provided for low-income residents with physical disabilities. A civil suit filed by recipients alleged the computerized program reclassified 30 percent of those receiving aid as ineligible, including many who had received benefits for many years. ` Prosecutors in Washington, D.C., were establishing sentencing guidelines for juvenile offenders on recommendations generated by an AI-based technology. A lawsuit filed later alleged that the sentences recommended by the program were biased and unfair. Based on what we’ve learned about AIbased decision-making systems, the technology has proven it IT’S HIGH TIME can streamline and THAT OUR LOCAL, improve efficiency in the administration of STATE AND various public aid and FEDERAL benefits programs. However, as we’ve LAWMAKERS seen in Michigan and ADDRESS THE other states, these sophisticated algo- RAPIDLY rithms are also prone INCREASING USE to delivering information and determina- OF AI-BASED tions that are unfair, PROGRAMS... unfounded and harmful to disadvantaged and vulnerable populations. Because AI is a relatively new technology, there are precious few laws or regulations on the books regarding its adoption and implementation in the public sector. It is critical that we establish a regulatory framework in which AI-based technologies are properly vetted to ensure that the determinations and information they render are fair, unbiased and won’t create more harm than good. As we move into a new decade, it’s high time that our local, state and federal lawmakers address the rapidly increasing use of AIbased programs in government settings and pass measures that will protect the integrity of these critical programs and the health and safety of recipients.

GETTY IMAGES/ISTOCKPHOTO

BY JENNIFER LORD

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

In changing world, design is Detroit’s untapped strength BY DON TUSKI AND OLGA STELLA

Designers are the key to Detroit’s future. That may seem like a bold claim, but it is one that we feel even more confident making after Olga Stella is the reading the special report on executive w o rk f o rc e director of trends, “When Design Core Tech Joins the Detroit. Team,” in the Jan. 20 issue of Crain’s Detroit Business. The article argues that to generate the greatest economic returns from artificial intelligence and automation, Don Tuski is the companies will need to redefine president of the processes and College for Creative Studies business models in addition to inin Detroit. creasing the technical ability of their workforce to work with new technology. Not only will this result in cost savings, but more importantly, better services and products. How can our region be the leader of the fourth industrial revolution like we were for the third? By leveraging — and growing — our inherent advantage in design. Design skills and mindsets are the key to creating the business models and processes that make technology relevant to the real world. The talent to lead this change is here in the region already, but it must be amplified and empowered. Most importantly, it must evolve to respond to changing market demands to create the cutting edge, not just be on it. Steve Jobs is quoted as saying, “Design is not what it looks and feels like. Design is how it works.” Designers are creative problem solvers that imagine new systems for objects, environments and activities within a set of constraints. A 2017 report by the United Kingdom’s Design Council found that 43 percent of workers using design skills were more likely to be in jobs requiring and generating innovation, compared with an average of just 6 percent for the wider U.K. workforce. These skills extend beyond architecture, product and graphic design to services and systems, user experience, and the interaction of people and products with technology. Designers are now part researcher, maker, social scientist, natural scientist and engineer, as well as social worker and community organizer. When their leadership is tapped, they can create new business models that are relevant and adaptable. McKinsey and Co’s 2018 “The Business Value of Design” report found that the companies that were best at deploying design practices increased revenue by 32 percent and returns to shareholders by 56 percent more than their industry counterparts did over a five-year period. College for Creative Studies and other local design programs are

turning out the talent that can devel- will need to embrace inclusion as a op these business models, joining core principle. Artificial intelligence the 97,000 people working in re- used to drive Industry 4.0 must be designed in a search, engiway that avoids neering and de- THE TALENT TO LEAD THIS bias. sign across every Increasingly, sector in our re- CHANGE IS HERE IN THE designers are gion. The Detroit REGION ALREADY, BUT IT emphasizing region is 16 inclusion in times more con- MUST BE AMPLIFIED AND their practice centrated in in- EMPOWERED. to reach people dustrial and that may othercommercial designers than the national average. wise be excluded, due to age, race/ This is our competitive edge, and we ethnicity, physical ability, language, geography or income. This means cannot afford to lose it. To stay relevant in a changing inclusive business models that can world, business models of the future reach more customers, increase sat-

isfaction, and minimize product retrofit costs. Innovations, like the touchscreen, result when designing for inclusion and serve everyone. As the only UNESCO City of Design in the United States, Detroit has already set its sights on becoming an inclusive design capital. Over 60 businesses, institutions and organizations are working together to make that a reality. Detroit’s design talent must understand the diverse cultures of the world, researching what works and what doesn’t. We must double down on these regional design strengths, not just to stay abreast of the trends but to leapfrog them. Both Singapore and

Helsinki have adopted tools and pedagogy that integrate design methods into primary and secondary education. They are training problem-solvers for the future, workers who will have the creative mindset and problem-solving skills to harness artificial intelligence to create new processes, systems and innovations, and ultimately, new economic value. When it comes to automation and artificial intelligence, it’s not enough to play the game. You need to design the game, and Detroit has the talent to do that. College for Creative Studies and Design Core are committed to help — is your company ready?

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FEBRUARY 3, 2020 | CRAIN’S DETROIT BUSINESS | 9

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Plans underway to replace mobile home park on Cass Lake with luxury apartments BY KIRK PINHO

post-World War II mobile home park in Keego Harbor may be replaced with a luxury apartment complex. Within about two years, Ara Darakjian and his Birmingham-based Tir Equities LLC hopes to begin construction on the 5.33-acre site on Orchard Lake Road overlooking Cass Lake in the tiny Oakland County community nestled between Sylvan Lake and Orchard Lake Village. In the end, the 93 mobile home sites, of which only about 65 are currently occupied, are to be turned into the Residences at Cass Lake project with about 250 high-end apartments and 50,000 square feet of retail if Darakjian can get the needed approvals and financing. Darakjian wouldn’t disclose the development cost. It would be unique in the area not just in its sheer scale of up to 72 feet but also in its raw ambition and motive — converting needed housing for low-income residents into luxury apartments for renters paying perhaps three times as much or more per month.

10 | CRAIN’S DETROIT BUSINESS | FEBRUARY 3, 2020

Darakjian views the Residences at Cass Lake as a legacy project for him and his family. “Very rarely is a mobile home park repurposed because they are very profitable, very profitable, but this one screams to be repurposed because it is right on Cass Lake,” Darakjian said. “The only way it made sense to repurpose the community was to build a project of this size, because anything smaller than this didn’t make sense. I could just keep it going as it was. At the end of the day, it’s a business. You have to make money.” Whereas those who rent at the mobile home park pay about $400 per month for the lot and, if they rent the mobile home, $400 to $450, rents at the Residences at Cass Lake would be more than $2 per square foot with an average unit being about 1,000 square feet. At full occupancy based on those figures, it would be over $500,000 in rental income per month just for the residential space and not including retail, compared to, at most, $79,000 for the mobile home park with 93 units paying the maxi-

mum $850 for the land and mobile home. It would have an array of amenities, including three restaurants, a gym and grocery service, among other things. “It'll offer turndown service, housekeeping services, laundry service, transportation, air and hotel travel arrangements,” he said. The project hasn’t been without backlash, particularly in its early stages. Some residents of the mobile home park were vocally opposed and expressed concerns in 2018 about the plan during planning commission meetings. A Change.org petition opposing the project garnered 2,200 supporters. Darakjian chalked the outcry up to “a bad element in the community” that “spread all these rumors” about evictions and “kicking people out.” “None of that was true,” Darakjian said. “That person is no longer there. They’ve decided to move on. And now all of those rumors have gone.” See CASS LAKE on Page 12

“THE ONLY WAY IT MADE SENSE TO REPURPOSE THE COMMUNITY WAS TO BUILD A PROJECT OF THIS SIZE, BECAUSE ANYTHING SMALLER THAN THIS DIDN’T MAKE SENSE. I COULD JUST KEEP IT GOING AS IT WAS. AT THE END OF THE DAY, IT’S A BUSINESS. YOU HAVE TO MAKE MONEY.” — Ara Darakjian, managing member, Tir Equities LLC

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Q&A: John McLaren, COO of Sun Communities Exec discusses company history, trends BY KIRK PINHO

DESIGNHAUS

Boulder, Colo. native John McLaren ventured east to Michigan in 2002 to take a job with Southfield-based manufactured housing and recreational vehicle community REIT Sun Communities Inc. — without visiting first. “There was a bit of trepidation with that,” the 49-year-old who is now the company’s president and COO said with a laugh. In the 18 years since, Sun Communities has undergone rapid changes and growth, more than doubling in size since 2013 and tripling its stock value to $157.91 per share as of Jan. 24. The father of four has three sons, two in the Marines and one preparing to enter the Marines, as well as a daughter at the University of Michigan. He is a graduate of the University of Colorado Boulder and Regis University in Denver. McLaren spoke with Crain’s last month about the company’s history and industry trends in the manufactured housing/recreational vehicle space, as well as why Sun Communities is investing in Australia. ` Crain’s Detroit Business: You’ve grown from 67,000 home sites in 2013 to more than 140,000 today. What’s driving that? John McLaren: We have about 144,000 home sites in portfolio now. I would say we really embarked wholeheartedly on acquiring operating communities in 2011. It’s a combination of things. There was some generational changeover in terms of the ownership and leadership of many communities, for one. Two, Sun has been in manufactured housing and recreational vehicle business for nearly 45 years, so we have some pretty strong relationships in what is really a small industry, when you think about it, that have developed over that period of time. For people that we have always kept in touch with, if there was a time they wanted to exit the business, there was a little bit of a natural feel that helped make Sun a logical choice (to sell to). We try to look at some of the objective side, but also there’s an intrinsic thing that goes on. Probably the best example that I can give you to that is our entry in 2012 in RV, more family camping-type resorts, particularly along the East Coast. That started in early 2013 with 10 properties along the East Coast called Morgan RV. The bottom line is that they were exceptionally well-located assets like Old Orchard Beach, Maine, one on Cape Cod, two on Chesapeake Bay — places where it would be next to impossible to get entitlements to build anything there today. But they needed a certain level of investment. When we made that investment in the RV business, for a lot of these campgrounds, there might be three or four generations that came there. Then we put the

investment in and because it’s such a tight-knit sort of community, word got out and more people started coming to us because they saw the work and care we put into those resorts and, in the end, you have people spending their entire lives in those communities. I think that gave us a leg up in the conversations to talk about acquiring some of those resorts, a big part of the strategy overall. One of the things we focus the most attention on has been the continuous reinvestment into the communities. They are just an incredible option for affordable housing, which is a big issue across the nation. It’s important to make sure people have a neighborhood they are proud to call home. ` Nationally things have been slow in terms of home shipments, although they have been improving since the recession. Where do you see the industry headed? I assume not anything like the 13,000 units a year it was in Michigan’s heyday. I think some of it is going to be dependent upon how well the industry does in terms of the affordable housing conversation. We have a lot of projects now, on top of our acquisitions we do year-in, year-out, (and we’re) doing a lot of development. We have two development pipelines, one of which is expansion of existing communities where we have land that we own and is entitled and zoned and we can add, for example, an additional 100 sites to an existing operating community. Then there is a second path with greenfield, ground-up development. We’ve been doing a fair amount of that,

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“ONE OF THE THINGS WE FOCUS THE MOST ATTENTION ON HAS BEEN THE CONTINUOUS REINVESTMENT INTO THE COMMUNITIES. THEY ARE JUST AN INCREDIBLE OPTION FOR AFFORDABLE HOUSING, WHICH IS A BIG ISSUE ACROSS THE NATION.” — John McLaren, COO, Sun Communities

starting with a property out in California called Cava Robles. That’s located in Paso Robles. That’s central California wine country, where there are 300 wineries surrounding the area. We built a 332-site RV resort there with vacation cottages. That project even took a couple years to get done because the entitlement process is still a very arduous process to get through. Relating that back to your question on shipments of homes, we need to be doing everything we can as an industry to really push that dialogue forward. What’s unique for Sun is that we have completed projects now where we can show them the kind of innovation and thought that’s going into the community itself, as well as the kind of thought and innovation in terms of the type of home product that’s being built for the manufacturers today. I think Sun is in a unique position to lead the path because we also opened up a project outside of Myrtle Beach called Carolina Pines and a new development in Granby, Colo., called River Run, and then we also opened up one adjacent to that called Smith Creek. While it’s not quite open yet, it’s being built to directly address the affordable housing needs for that area. Why I say I think Sun is uniquely positioned is because I go to a lot of these meetings with various municipalities and as you can imagine, it’s a long process. It takes a lot of conversations and collaborations and feedback. We are in a position now where we are showing them actual things we’ve done, not just renderings. Our hope is that will sort of break the ice on this a little bit.

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a lasting and powerful professional network

Call (248) 879-2725 or visit broad.msu.edu/crains to get started.

SPIROS ASSIMACOPOULOS PRESIDENT & CEO MICHIGAN BREAD EMBA, CLASS OF 2018

See MCLAREN on Page 12

FEBRUARY 3, 2020 | CRAIN’S DETROIT BUSINESS | 11

FOCUS | REAL ESTATE

MCLAREN

From Page 11

` What trends are you noticing from the production side of things? The cost of wages has increased. There is unprecedented need for (skilled) trades, as everybody knows. You can’t read anything without reading about that. That’s impacted things in terms of costs. We see more of that in terms of what our consumers want in the product, meaning the types of finishes they want in their homes vs. 10 years ago, programmable or remotely operated thermostats that are going to support environmental needs and conservation. Our consumers are asking for a lot of that. That also is, of course, increasing the cost of production and what a house costs when it comes across the line, and that’s impacting the home prices as well.

A rendering of the Residences at Cass Lake. | DESIGNHAUS

CASS LAKE

` What’s the future like for small operators? It seems there has been a lot of consolidation and roll-up in the industry in the last decade or so. There are a fair amount of privateequity investments coming into the asset class and they are aggregating portfolios. There are many, many thousands of manufactured home and RV community resorts throughout the U.S. I don’t think it will ever get to the point where there’s just a few people holding. As far as the quality of communities themselves, they are all different shapes and sizes. Our strategy has always been looking at the location of the assets themselves and, functionally, how it fits in terms of the portfolio overall — and more importantly, how it might fit three, five and 10 years down the road. I don’t see some sort of national consolidation that would be anything that’s like, from a percentage standpoint, materially different than what it is today.

From Page 10

Yet affordable housing is still an issue in the state’s wealthiest county, where the poverty rate is 8.2 percent. The area median income in Oakland County is $76,300 for a four-person household and $61,100 for a two-person. According to U.S. Census Bureau data, the majority of renting households making less than $35,000 per year are cost-burdened, meaning that they pay more than 30 percent of their household income on rent. For those making less than $20,000 per year (29,543 housing units), 89.5 percent of those, or 26,453, are cost-burdened, while for those making $20,000 to $34,999 (24,434 housing units), 80.5 percent (19,674 housing units) are cost-burdened. That percentage decreases dramatically to 41.5 percent (9,189 households) for those making $35,000 to $49,999 (22,126 households), according to Census data. The project will require dozens of residents to move, but Darakjian said he has tried to mitigate the pain. “The community at large is really very much for it because they unfortunately don’t want the mobile home park there anymore,” he said. “We did everything we could on our end to really soften the blow. We’re not moving fast on the project, and there’s no way I’m going to kick somebody out of their home. I’ve made a commitment very simply to say, ‘Hey, I want to give you guys more than ample time, we’ll even provide some support and some help for you to find a different place to live once we get to that point.’” The financial support offered, Darakijian said, was between $1,500 and $2,500 per resident, plus logistical support helping residents find other communities to live. In an Oakland Press article a year ago, the newspaper noted concerns from nearby residents about the project’s height and setback. Darakjian said he originally didn’t plan to offer financial assistance for residents but changed that after hearing from the community. “Funds will be distributed only when a construction date has been determined and will be on an as needed basis,” Darakjian said. “All requests will be processed through our management company.” Robert Kalman, Keego Harbor’s mayor, said he hasn’t heard much from the public about the project recently, perhaps because the site plan has received planning commis-

Ara Darakjian of Birmingham-based Tir Equities LLC

sion approval already. “While we had quite a bit of public commentary and opinion when the project was first announced, lately I personally have not received much feedback — positive or negative,” he said. “The No. 1 question that I do receive today is, ‘When are they starting to build?’” Jered Ottenwess, Keego Harbor’s city manager, said the city and Tir Equities are in the process of negotiating a development agreement and that upon completion, it would be sent to the city council for approval, perhaps in March or April. He said no local tax abatements or other incentives have been requested at this point, although state incentives could be a possibility. Kalman acknowledges that Keego Harbor is a changing community, but doesn’t believe affordable housing is going away in the area. “Keego Harbor has been a diverse community for years. While our city is going through a change, if you look at the region that we are in, a lake community in Oakland County with West Bloomfield schools, and compare it to surrounding cities, we offer a variety of affordable housing options. There are apartments and rental homes available, as well as a variety of cottage style homes near Cass Lake and Sylvan Lake. The change that we are going

12 | CRAIN’S DETROIT BUSINESS | FEBRUARY 3, 2020

| KIRK PINHO/CRAIN’S DETROIT BUSINESS

through will not eliminate affordable housing.”

Big plans Darakjian is no stranger to challenging development efforts; the Keego project would be his largest. In Birmingham, he filed a federal lawsuit against the community for a request for proposal selection process he felt was rife with favoritism for a project on a 4-acre site west of Old Woodward Avenue and north of Willits Street downtown. In May 2016, the city issued requests for qualifications to Morningside USA out of Chicago; Woodward Bates Partners LLC, which consisted of Ron Boji, John Rakolta Jr., Paul Robertson and Victor Saroki; Southfield-based Redico LLC and Birmingham-based architecture firm McIntosh Poris Associates; and Tir Equities. In September 2017, a request for proposals was issued, with proposals from Woodward Bates, Redico and TIR Equities received in January 2018. By May 2018, the city’s Ad Hoc Parking Development Committee recommended Woodward Bates Partners to the city commission, which directed city staff to negotiate with the developer on the property. By June, Tir Equities — which is named after the Armenian god of wisdom and knowledge — was

eliminated from consideration. His company’s project would have brought with it a 15-story tower — a controversial proposal in a city that generally limits downtown development to no more than five stories, with just a few exceptions — along with 60,000 square feet of retail; 371 apartments; 22,000 square feet of commercial space; a park, plaza and other features, according to the lawsuit. The tower would be “stepped” downward to reach a four-story height at the street level “to reflect the design and tradition of existing buildings,” the lawsuit says. Ultimately in July 2019 Darakjian lost the case, but not his nerve for big projects. “For us, this is a family asset,” Darakjian said. “It’s not going anywhere. When we build it, we’re not building it to sell it. We’re not building it to turn it and flip it. This is a legacy asset for us.” If built, the Residences at Cass Lake would be managed by FirstService Residential out of New York City and its amenity package would be by Live Unlimited, a subsidiary of FirstService, Darakjian said. Grand Rapids-based Rockford Construction is the contractor and Designhaus Architecture out of Rochester is the architect. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

` Talk a little bit about your move into Australia with Ingenia. We made a 10 percent investment in the head stock for Ingenia and established a 50-50 joint venture for development there. What attracted us to that was really the Australian market, from our point of view, within manufactured is probably 20 years in its development behind the U.S. It struck us as interesting, being able to plug in 20 years worth of knowledge. When you grow a business and go through a cycle, there are things you learn and having that opportunity to go through a cycle again can be powerful. ` What’s one way in which the Australian market trails ours? For example, something really simple, like the way we have evolved to collect and utilize data, as well as to be able to process applications to live in a community and things like that. Operational things that we might see in a given community that make sense from an efficiency standpoint, or what we have learned throughout the years. Things like that are ultimately going to serve to grow the business the right way. It’s not a knock on the Australian market as much as it is you don’t know what you don’t know, and that’s where we can plug in and be of some strength there. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

FINANCE

Techstars Detroit accelerator program halts operations due to lack of funding Had financial backing from major automotive companies BY NICK MANES

A Detroit technology accelerator aimed at growing the region’s mobility sector has shut its doors due to a lack of funding. Techstars Detroit Accelerator — which previously operated as Techstars Mobility and had financial backing from several of the region’s major automotive companies including Ford Motor Co. and Lear Corp. — is halting operations, according to the text of an email written by managing director Ted Serbinski and obtained by Crain’s. “We did not secure enough funding for 2020,” Serbinski wrote. “It’s clear the entire automotive mobility industry is tightening as sales slump, and we hit the trough of disillusionment with autonomy.” In an interview with Crain’s on Thursday, Serbinski said that over the last 12 months he’s seen what he views as a “perfect storm” in the automotive industry as major companies work on high-level shifts like autonomy and electrification. The companies, Serbinski said, are beginning to hit pause on some of their investments in those areas as the timeframe in which they may emerge remains unclear. “The perfect storm that hit the industry changed faster than we did,” Serbinski said. Serbinski declined to give the specific amount of funding needed to put on the accelerator each year, but said the organization invests $120,000 each year in 10 different companies. With the necessary funding, the program could run again by as soon as 2021, he added. In his email to supporters, Serbinski wrote that Techstars Detroit had helped to fund 54 startups over a span of five years, adding that he remains active with the companies. “An experiment for Techstars, Detroit showed you could build a world-class program in an emerging market, in a hyper-competitive industry, that was going through a transformational change,” Serbinski wrote. “More importantly, the program proved that wonderful and talented mentors from around the region and globe would graciously support the founders,” he continued. “Truly, an incredible community formed around this program and region. It’s

Norman A. Yatooma ATTORNEY AT LAW

• • •

Lear partnered with Techstars Detroit offering them space at its downtown Innovation Center office as well as serving as a corporate sponsor and on its board. | COSTAR REALTY INFORMATION INC.

Serbinski

Heintz

wonderful to see all the new activity as Detroit continues to grow in startup and VC activity.” Observers of the Detroit startup community heaped praise on the role that Techstars Detroit played in the creation of the startup economy. “Techstars laid down roots in Detroit at a pivotal time in the city’s evolution into an entrepreneurial ecosystem, where we’ve seen a 54 percent increase in the number of startups in the last five years,” said Emily Heintz, founder and managing director of EntryPoint, an Ann Arbor-based entrepreneurial research firm that produced a report last year on the entrepreneurial ecosystem in Detroit. “Detroit’s entrepreneurial ecosystem is now in a different and better place than it was five years ago when the accelerator first launched,” Heintz wrote in an email to Crain’s. Chris Rizik, CEO and fund manager of Ann Arbor-based Renaissance Venture Capital Fund, called

“TECHSTARS LAID DOWN ROOTS IN DETROIT AT A PIVOTAL TIME IN THE CITY’S EVOLUTION INTO AN ENTREPRENEURIAL ECOSYSTEM, WHERE WE’VE SEEN A 54 PERCENT INCREASE IN THE NUMBER OF STARTUPS IN THE LAST FIVE YEARS.”

the news that Techstars Detroit would halt operations “unwelcome,” but also noted the growth of Detroit’s startup economy over the last five years since the organization’s inception. “There are now dramatically more options for startups to find education, mentorship and capital,” Rizik wrote in an email to Crain’s. “For Techstars, the down side of this transformation is that the corporations, foundations and economic development organizations that have been its funding lifeblood now have more alternatives for entrepreneurship funding that may be closer to their organizational missions.” — Automotive News contributed to this report

Nomination deadline approaches for Crain’s 20 in their 20s program Past honorees have launched companies, risen precociously to executive ranks, brought bright new ideas to their organizations and made a tangible difference in their communities. Winning candidates will be notified directly and honored in a special

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

— Emily Heintz, founder and managing director, EntryPoint

CRAIN’S AWARDS

Know a rising star in Detroit businsess? Time is running out to nominate them for Crain’s 20 in their 20s. The deadline to nominate is Friday, Feb. 7. Nominees will be invited to complete a separate application, due Feb. 14.

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

edition of Crain’s Detroit Business on May 4. Go to crainsdetroit.com/nominate for more information or to nominate a candidate. For questions, contact special projects editor Amy Bragg: abragg@crain.com or (313) 4461646.

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FEBRUARY 3, 2020 | CRAIN’S DETROIT BUSINESS | 13

NONPROFITS

COURTS

FIN

Kresge secures $33.1M for national loan guarantees backing public investments

BY N

BY SHERRI WELCH

say you don’t have to build an entire social investment practice. You The Troy-based Kresge Founda- can join a vehicle ... that’s stood up tion has secured $33.1 million in with some big foundations that commitments from nine U.S. foun- have strong expertise in this space, dations, a nonprofit lender and one get your toes wet and see what you health system to participate in a think.” Kresge made a $10 million comfirst-of-its kind guarantee pool that helps community development in- mitment to the guarantee pool. vestments secure cash loans. Other investors include: The Annie At its current level, the Commu- E. Casey Foundation, The Californity Investment Guarantee Pool is nia Endowment, Chan Zuckerberg “likely to unlock Initiative, CommonSpirit Health, $150 million or Gary Community Investments, Jesmore for invest- sie Ball duPont Fund, Phillips ment in new af- Foundation, Seattle Foundation, fordable hous- Virginia Community Capital and ing units, for Weingart Foundation. small businessThe Rockefeller Foundation has es to land the not yet committed to serving as a seed money guarantor but is supporting the they need to get work with a grant to fund operato work and to tions at program manager Locus. Seybert allow those The goal is to grow investor comc o m m u n i t i e s mitments to over $75 million for most affected by climate change to greater impact in under-resourced access the leading climate mitiga- communities across the country, tion tools,” Kresge President and organizers said. CEO Rip Rapson said in a release. For its part, Kresge has been usThe pool expects to make its first ing its assets to guarantee loans batch of guarantees before the end here in Detroit for more than a deof the second quarter, said Aaron cade, Seybert said. Seybert, managing director, social Those projects have supported investment practice, Kresge Foun- efforts including the Detroit Develdation, which has already made opment Fund, Detroit Home Mortseveral loan guarantees in Michi- gage and the former Woodward gan, most in Detroit. Corridor Fund. The guarantee pool will back Kresge currently has seven loan projects across the U.S., with some guarantees totaling $15 million in geographic preference given to the commitments active in Michigan, focus areas of some of the other all but one in Detroit, said Krista guarantors, including: California, Janke, senior communications offiColorado, Delcer. aware, Florida, “WE’RE TRYING TO MAKE IT The topic of Georgia, Maryfoundation-led land, New Mex- EASY TO SAY YOU DON’T loan guaranico, North Carcame up as HAVE TO BUILD AN ENTIRE tees olina, Texas, a possible way Virginia and SOCIAL INVESTMENT to support Seattle. long-deferred Having ac- PRACTICE. YOU CAN JOIN A capital imcess to the pool VEHICLE ... “ provement will save projprojects at De— Aaron Seybert, managing ect organizers director, social investment troit Public from spending practice, Kresge Foundation Schools Comyears trying to munity District locate and assemble financing for schools last year during the 2019 the projects, Seybert said. Mackinac Policy Conference. The guarantees will back projects Seybert brought it up during a deemed risky by traditional lend- meeting there, and he brings it up ers, allowing the project to secure at work tables in Detroit focused on loans. Guarantors would only con- things like workforce development tribute funding if the loans are and early childhood programs. called for lack of payment and “One potential way to help solve share in any costs. a problem is to take on risk in a difLocus Impact Investing, a sub- ferent way,” he said. “It doesn’t have sidiary of Virginia Community Cap- to be a grant. Things like DPSCD’s ital, will serve as the program man- bonding is an example.” ager, underwriting guarantee The guarantees can help but are commitments as well as monitor- only a part of the approaches needing and managing the portfolio for ed here, Seybert said. both impact and risk. “Detroit is now dealing with deep Its experienced administration, structural issues. Figuring out how along with the shared risk in the to pay for things that have been nepool, will give funders that don’t glected for years is one thing,” he have broad experience in serving as said. “Figuring out how to take care a guarantor the ability to try it out. of them in the future is another.” “We’re lowering the barriers to entry,” Seybert said. Contact: swelch@crain.com; “We’re trying to make it easy to (313) 446-1694; @SherriWelch 14 | CRAIN’S DETROIT BUSINESS | FEBRUARY 3, 2020

The pension fund invests and pays out benefits on behalf of retired Detroit police and firefighters. | FRANK DEANDRO VIA WIKIMEDIA COMMONS

Detroit police, fire pension fund board sues fund’s investment committee Trustees try to undo hefty raise for fund’s deputy officer BY CHAD LIVENGOOD

A dispute over executive compensation between the board of trustees of Detroit’s Police and Fire Retirement System and the pension fund’s investment committee has spilled over into federal court. The Police and Fire Retirement System’s board of trustees took the unusual step last week of suing its own investment committee to undo a hefty raise for the pension fund’s deputy chief investment officer, who resigned in late December to become a higher-paid independent contractor in January. The lawsuit was filed in U.S. Bankruptcy Court in Detroit under Detroit’s original 2013-2014 municipal bankruptcy case because the investment committee was set up through the city’s Chapter 9 reorganization. In the past 13 months, the pension fund’s investment committee has twice increased the compensation of Chief Investment Officer Ryan Bigelow by 30 percent from $242,000 to $315,000. The investment committee also has hiked the pay of Bigelow’s deputy, Kevin Kenneally, from $162,781 to an “excessive $285,000 per year (a 70 percent increase) plus an ‘incentive payment’ representing retroactive pay for 2019 in the amount of $60,000,” according to the lawsuit. Kenneally resigned his payroll position from the two retirement systems on Dec. 27 and was rehired as an independent contractor for just the PFRS Investment Committee at the $285,000 annual salary level with a $60,000 “incentive payment” that served as a retroactive compensation for 2019, according to the lawsuit. Investment committee documents attached to the PFRS board’s lawsuit show Robert Smith, a Cleveland-based investment adviser at the firm Cerity Partners who chairs the PFRS investment committee, signed a contract with Kenneally that began Jan. 6.

The PFRS board is asking U.S. Bankruptcy Judge Thomas Tucker to invalidate Kenneally’s contract, which is through a limited liability corporation, KJK Associates, that was formed Nov. 22, state records show. In an interview with Crain’s, Smith defended the compensation packages for Bigelow and Kenneally, which he said were designed after the committee hired a compensation consultant who studied the market for the current salaries of pension fund managers. “Our goal wasn’t to increase compensation. Our goal was to make sure

“OUR GOAL WASN’T TO INCREASE COMPENSATION. OUR GOAL WAS TO MAKE SURE WE PAID OUR TOP INVESTMENT PROFESSIONALS COMPETITIVELY.” — Robert Smith, Cerity Partners

we paid our top investment professionals competitively,” Smith told Crain’s. “It’s a very competitive workforce environment out there. And employees have a lot more choices than we used to.” The pay raises for Kenneally were designed to keep him from leaving for higher-paying jobs, Smith said. “Top organizations across the world do that to make sure they’re paying people in a competitive way,” he said. Under the governance set up in Detroit’s bankruptcy, Bigelow, Kenneally and the investment staff work for both the Police and Fire Retirement System and the General Retirement System and report to respective investment committees, whose founding members were appointed by then-Gov. Rick Snyder. The Snyder administration set up the investment committees to re-

move strategic investment decisions from the power of pension fund trustees, whose roles were largely relegated to governing the administration of pension benefits to retirees after Detroit’s bankruptcy. The lawsuit claims the PFRS Investment Committee’s “excessive raises” for Bigelow and Kenneally are being paid for out of just PFRS funds, resulting in “paying a disproportionate share for work performed for both retirement systems.” Where the investment committee and the PFRS board of trustees differed was whether the investment committee members can set Kenneally’s compensation, Smith said. “We believe we have the authority to set the compensation for our professional people,” Smith said. After the board and investment committee hit an impasse on the compensation of the deputy chief investment officer, the two sides decided to follow the conflict resolution procedures spelled out in Detroit’s 2014 bankruptcy Plan of Adjustment and take their dispute to the judge, Smith said. Tucker inherited the case from former Judge Steven Rhodes after Rhodes retired. “What the bankruptcy judge says matters, and I think the investment committee is fully prepared to honor that decision, and I expect the (Board of Trustees) will do so as well,” Smith said. “This is not intended to be the first toe in the water, this is just saying, ‘Just resolve this question.’” Appointed by the governor, the investment committee members are unpaid, but get their travel expenses reimbursed for attending meetings in Detroit. The Farmington Hills-based law firm Couzens, Lansky, Fealk, Ellis, Roeder & Lazar P.C. filed the complaint in federal bankruptcy court on behalf of the PFRS Board of Trustees. Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood

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FINANCE

Startup ToDoolie closes on $425,000 funding round Platform connects homeowners with college students seeking work doing routine chores BY NICK MANES

A Grosse Pointe Park-based technology startup has closed on a $425,000 pre-seed funding round, just ahead of beginning a stint at a top accelerator program. Executives with ToDoolie Inc., which operates out of the Bamboo co-working space in downtown Detroit, will spend the next three months working with the competitive Techstars Chicago accelerator program. ToDoolie, which launched in Detroit in May, operates a platform connecting homeowners with college students seeking work doing routine chores like raking leaves and cleaning garages. The three months in Chicago, coupled with the new funding from a mix of local and national venture capital and angel investors, will allow the company to finish developing a mobile application and launch in a new, still undetermined market, said Sergio Rodriguez, the company’s co-founder and CEO. Additionally, Rodriguez said, the added capital should allow for improved user and customer experiences. While Rodriguez said that further capital injections are possible in the coming weeks, the recently closed

ToDoolie co-founders Sergio Rodriguez (from left), Armando Arteaga and Jose Romo-Puerta started the company as a way to pay for school while maintaining a flexible schedule. | NICK HAGEN

$425,000 round included funding from the newly formed Bamboo Angel Group, Invest Detroit Ventures and others.

Rodriguez told Crain’s that ToDoolie generated about $50,000 in revenue last year and hopes to grow that to around $500,000 this year.

While the company’s founders will spend the duration of the accelerator program in Chicago, Rodriguez said he intends to continue op-

erating the company from Detroit. Venture capital activity in Michigan has been on the rise, as Crain’s reported earlier this month, but Rodriguez noted that this level of funding for an early stage company still remains rare in Southeast Detroit’s growing startup economy. “It’s difficult for pre-seed companies to actually raise a round of investment,” Rodriguez said. “It’s something that doesn’t happen that often in Detroit and when it does happen I don’t think we do a good job ... promoting those things. Detroit as a growing startup ecosystem, it’s important to show that it can be done and it’s happening.” Amanda Lewan, the co-founder and CEO of nascent angel fund and co-working space Bamboo Detroit, echoed a similar sentiment in an interview with Crain’s. “We have a growing venture capital community, but it’s still difficult to raise a seed round,” Lewan said. “So I think it’s a testament to [Rodriguez] that they kept growing and learning and testing their business model. It takes time to grow and scale, so we’re excited to see where their next evolution comes [from].” Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes

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Skyrocketing costs of prescription and some generic drugs are affecting the budgets of our customers and members. So, we’re doing something about it. Blue Cross Blue Shield of Michigan is joining the Blue Cross Blue Shield Association, the nonprofit Civica Rx and other Blue Cross plans across the United States to invest in an effort to make affordable generic drugs that are safe and effective. It’s just another way Blue Cross is putting the health of our members first. Visit mibluesperspectives.com/civica to learn more. Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association.

d FEBRUARY 3, 2020 | CRAIN’S DETROIT BUSINESS | 15

FINANCE

CALENDAR

Ann Arbor-based Michigan Angel Fund closes fourth fund of $2 million

 TUESDAY, FEB. 4

BY NICK MANES

A Southeast Michigan angel investing fund closed in January on its fourth $2 million investment fund. Ann Arbor-based Michigan Angel Fund IV LLC closed on the fund with 49 accredited investors, according to a Jan. 10 Form D filing with the U.S. Securities and Exchange Commission. This fourth fund has so far closed on three investments and plans a total of 10, fund manager Skip Simms said. Simms is also a senior vice president at Ann Arbor Spark, a nonprofit entrepreneurial service organization and startup incubator.

Simms

Falzon

Since 2012, he said, the MAF has attracted 146 individual investors or family offices over the four rounds. Simms said he believes the funds have been “highly successful in terms of getting high-net-worth households

to at least explore angel investing, and learn what it’s about.” As part of this latest round, MAF finished 2019 with investments in three Ann Arbor-area companies: Akadeum Life Sciences Inc., Ripple Science Corp. and SkySpecs Inc. The MAF investment, for example, was part of a $2.5 million round for Ripple Science earlier this month. Ripple Science CEO Peter Falzon declined to disclose the specific investment amount from MAF, but called it “significant.” “They showed interest early and helped us get ready,” Falzon said of the Michigan Angel Fund’s involvement.

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Alberici Global Automotive Constructors

IFF

Foley & Lardner LLP

IFF has promoted Alexis Dishman to Managing Director of Lending for Michigan, Ohio, and Education. Drawing on nearly 20 years of lending experience, she is responsible for working with nonprofits to finance their facility needs and for providing strategic direction for IFF’s lending teams in Michigan and Ohio. Alexis also serves on the Boards of Directors for both Jefferson East Inc. and Michigan Women Forward. In 2013, she was recognized by Crain’s Detroit Business as one of the “40 Under 40”.

Daljit S. Doogal will become a member of Foley & Lardner LLP’s Management Committee effective February 1, 2020, for a term ending January 31, 2026. Daljit is a partner and business lawyer with Foley, where he is the chair of the firm’s national Business Law Department. He is also a member of the Transactions, Private Equity & Venture Capital and International Practices, and Automotive and Manufacturing Industry Teams. Daljit is a former managing partner of the Detroit office.

Alberici Global Automotive Constructors, LLC is pleased to announce the promotion of Aaron Walsh to General Manager of Automotive Operations. Aaron succeeds Mark Okroy, who will continue to support the company in an advisory role. Aaron has 11 years of experience managing complex automotive projects throughout North America. He is a graduate of Michigan State University, where he obtained a B.S. in urban and regional planning and an M.S. in construction management. Alberici Global Automotive Constructors has been providing reliable service to the world’s leading automotive manufacturers and suppliers for more than 60 years and is routinely ranked among the nation’s top automotive construction companies.

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Crain’s People on the Move showcases industry achievers and their companies the 3, 2020 16 | CRAIN’S DETROIT BUSINESS | to FEBRUARY Detroit business community. Contact: Debora Stein at dstein@crain.com

Brieden Consulting Group Brieden Consulting Group promoted Amber Slezak to Senior Director of Business Analytics. In this role, Amber will be responsible for planning and executing data analytic reports for clients and overseeing the development of the Business Analyst team. Hans Brieden, President of Brieden Consulting Group stated “Amber has always shown initiative in the performance of her duties, even going above and beyond what is expected of her. She has been a key component of the success of this organization.”

Ari-El Enterprises, Inc. Ari-El Enterprises Inc. (Ari-El), a real estate investment and management company with offices in Southfield, Michigan is pleased to announce the promotion of Scott Leibovitz from Vice President to President of Ari-El. Ari-El, a family business founded by Arie Leibovitz in 1979, operates over 3 million square feet of commercial income producing real estate. Arie Leibovitz, now Chairman, will be assisting with the longterm vision for the company.

Leadership Oakland Breakfast of Champions — Mark Ostach. 7:30-9 a.m. Leadership Oakland. Leadership coach Mark Ostach will discuss “Creating a CulOstach ture of Digital Wellbeing,” on how devices impact the mind, body and spirit and provide techniques to improve the digital wellbeing of an organization. MSU Management Education Center, Troy. $45 members; $65 nonmembers. Contact: Susan Hollady, phone: (248) 495-4781; email: shollady@leadershipoakland.com; website: leadershipoakland.com

 UPCOMING EVENTS Pure Michigan Business Connect — Meet the Buyer: Doing Business with the Government. 8:30 a.m.-noon. Feb, 18. State of Michigan. Information on how to sell products or services to the government with roundtable discussions. Scheduled participants include: state of Michigan, Wayne County, MDOT, city of Detroit, Great Lakes Water Authority, Wayne County Airport Authority, city of Dearborn, city of Livonia, city of Romulus, Detroit Water Authority. DNR Outdoor Adventure Center, Detroit. Free. Contact: Salifou Mahaman, email: mahamans@michigan. org; website: pmbc.connect.space/ doing_biz_gov/details Positive Links Speaker Series: Lindy Greer. 4-5 p.m. Feb. 18. University of Michigan. Lindy Greer, associate professor of Management and Organizations at Greer Michigan Ross and the faculty director of the Sanger Leadership Center, speaks on “How to Create Positive Team and Organizational Hierarchies.” Ross School of Business, Ann Arbor. Free. Contact: Center for Positive Organizations, contact: cpo-events@umich.edu or (734) 647-8154. Starting on the Path to Why: How Mission-Driven Decision Making Affects Your Business, Career and Life. 11:30 a.m.-1:30 p.m. Feb. 20. Wom-

en’s Exchange of Washtenaw. Fundraising consultant Patricia Berry will lead the workshop. Information will include how to identify a core mission, how to apply the core mission to arrive at decisions and how to evaluate outcomes. 2900 S. State St., Ann Arbor. $30 by Feb. 13; $35 after Feb. 13; $40 at the door. Website: wxwbusiness.com/events/upcoming-events 2020 MICHauto Summit. 11:45 a.m.3:30 p.m. Feb. 25. Detroit Regional Chamber. Industry leaders and stakeholders will address key industry issues, provide program updates and release MICHauto’s latest edition of the Michigan is Automobility report. College for Creative Studies. $75 chamber members and MICHauto investors; $125 nonmembers. Contact: Katy Palahang, phone: (313) 596-0384. 17th Annual East-West Business Connection “Envision Success.” 9:30 a.m.-4 p.m. March 5. Asian Pacific American Chamber of Commerce. Program includes keynote, networking, exhibits and lunch. Laurel Manor, Livonia. $80 member; $105 nonmember. Contact: Leonie Teichman, email: leonie@apacc.net; website: apacc.net 8th Annual Great Lakes Data & Analytics Summit. 8 a.m.-5 p.m. March 12. WIT Inc. Program includes information about upcoming trends in the analytics field. Speakers will include data analytics leaders from Steelcase, Carhartt, Signet Jewelers and TD Ameritrade. The featured keynote speaker is Alan Jacobson, chief data and analytics officer at Alteryx who will present “Alter Everything, Including Your Organization’s Culture of Analytics.” Detroit Marriott Troy. $189. Contact: Erin AdairGuy, phone: (800) 257-1490; email: eguy@witinc.com; website: witinc. com/great-lakes-data-summit Leadership Oakland Breakfast of Champions — Priscilla Archangel. 7:30-9 a.m. March 31. Leadership Oakland. Priscilla Archangel, Ph.D., will discuss “Managing Professional Risks: Priorities and Decisions.” MSU Management Education Center, Troy. $45 members; $65 nonmembers. Contact: Susan Hollady, phone: (248) 495-4781; email: shollady@ leadershipoakland.com; website: leadershipoakland.com Email calendar items to cdbdepartments@crain.com

DEALS&DETAILS  MERGERS & ACQUISITIONS  Kelly Services Inc., Troy, a staffing company, acquired Insight, Cherry Hill, N.J., an education service staffing company with experience in partnering with school districts in Illinois, Massachusetts, New Jersey and Pennsylvania. The staff will merge with Kelly Education division. Website: kellyservices.com  HED (Harvey Ellis Devereaux Corp.), Southfield, an architecture and engineering firm, merged with Puchlik Design Associates, Pasadena, Calif., a health care architecture firm specializing in acute care, longterm care and clinic design, to expand the firm’s health care design practice into southern California. Website: hed.design

 Albireo Energy, Edison, N.J., a building automation and energy services platform and one of Detroit-based private equity firm Huron Capital Partners LLC’s ExecFactor initiatives, acquired Advanced Automated Systems Inc. Yorba Linda, Calif., provider of building automation and energy management services. Terms were not disclosed. Also, Huron Capital’s High Street Insurance Partners, Traverse City, an insurance brokerage platform, acquired InPro Insurance Group, Troy, an independent insurance agency. Terms were not disclosed. Websites: huron capital.com, AlbireoEnergy.com, advancedautomated.com, highstreet partners.com, inproagent.com Submit items for Deals and Details to cdbdepartments@crain.com

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Gretchen customer and howWhitmer best to allocate resources. Position joyed charging no-fault carriers their signed last May, motorists will be able based in Detroit, Chicago, or New York City. to choose from different tiers of per- highest rates for years, appear to be Visit more information bracing for a new business model — afsonalcrain.com/careers/ injury protectionforcoverage: and available positions. $50,000, $250,000, $500,000 or unlimit- ter fighting auto insurers for years to preserve unlimited PIP coverage. ed. The Michigan Health & Hospital AsMotorists who have qualified health insurance plans or Medicare plans that sociation plans to launch a public eduBusiness Development Sales Associate cover injuries from auto accidents will cation campaign this spring after marbe able to opt out of PIP coverage alto- ket research showed 53 percent of The Global Polymer Group a Business Development/Sales insurance consumers were unaware of gether to save hundreds, andisinlooking some for the forthcoming changes inand the law. cases thousands, of dollars annually. Associate who will be expected to work with inactive accounts new is is nottoabout It’s a fundamental in Michiprospects to pre-sellchange the brand with the “Th objective set uprelitigating a meetingthe is about educating and gan’sthe 47-year-old law that with Regionalno-fault Manager. Theyre-will law, workthis with the sales teamdrivers to help sureofpatients are protected, quired motorists to carry more expenestablish relations to ensure a smoothmaking transition the account. The ” sive unlimited medical coverage in said Ruthanne Sudderth, senior vice Business Development Associate will need to be able to effectively exchange for post-accident medical president of public affairs and commuresearch uncover new states, opportunities both endemic and nonnications at MHA. care that’sand unmatched in other endemic clients. MHA’s public education campaign particularly for drivers, passengers and motorcycle riders who suffer traumatic will focus on educating drivers about why they should purchase a higher levbrain injuries. VisitIncrain.com/careers/ for more information el of PIP coverage and not opt out of Michigan, the Auto Club Group owns three auto insurance carriers — the benefit, Sudderth said. and available positions. “We want folks to understand that AAA Michigan, Fremont Insurance Co. and Meemic Insurance Co. — with a buying the most coverage they can afcombined 1.5 million customers. The ford is probably going to be best for insurer’s three carriers control about their families,” Sudderth said. 15.8 percent of the private auto insurance market in Michigan. is currently seeking ‘Competition will be key’ Crain Communications an Accounts Receivable Richardson PennsylvaSpecialist. Thisworked positioninwill report to the Accounts Receivable Manager nia’s will insurance industryin inour thedowntown late AtDetroit the Autolocation. Club Group, and be located Thecompany ideal 1980s when the commonwealth overleaders are focused on trying reincandidate will be highly motivated, have an upbeat attitude and to must hauled its no-fault law and opened up force their value in a business that facbe a team player. the market to more consumer choice es disruption, Richardson said. and new competition. When other states have made VisitWhether crain.com/careers/ for more information motorists will shed unlimchanges to their no-fault laws to limit and positions. ited available medical coverage remains to be the financial exposure of insurers, it seen, Richardson said. has attracted other national carriers to “Ultimately, that will be an individu- the marketplace. al discussion that whether you do or Brand name national carriers such don’t save any money will be choices as Travelers, Geico, Nationwide and that you’ll make through the coverage Safeco have largely stayed out of the Share your success limits that you choose,” he said. Michigan market in recent years as PIP with custom The new law comes with mandatory claims and premiums skyrocketed. rollbacks in just the PIP portion of auto “Competition be key here,” Reprints,will E-prints insurance premiums that insurers are Richardsonand said. “Competition breeds more! supposed to achieve through a first-ev- the opportunity to be able to affect er medical fee schedule that will be im- price, whetherLaura it’s current or future. Contact Picariello at posed on hospitals, doctors, imaging “We think, longer term, this will be a lpicariello@crain.com centers and rehabilitation specialists in viable market to do business in and July 2021. continue to grow.” Under the law, the medical coverage levels of $50,000, $250,000 and Contact: clivengood@crain.com; $500,000 call for average mandatory (313) 446-1654; @ChadLivengood

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Receivership sale of assets of Visiting Physicians BusiMolex, LLC seeks Advanced Quality Planning (AQP) Engineers ness Residential Physicians for Rochester Hills, MI to work w/product dev team members to dev & mainAssociation, PLLC & RPA Management, Inc. includes account tain quality plans of a global design center for electronic cable assemblies. receivables, 7 vehicles, outstandMaster’s in Ind Eng/ Quality/Risk Advertising Section Mgmt/related field +2yrs exp OR Bachelor’s ing insurance, Medicare and Medin Ind Eng/ Quality/Risk Mgmt/related field +5yrs exp req’d. Req’d Skills: Qualicaid claims, office equipment, ofity eng w/ new product dev process w/electronic connector production facility fice furniture, medical supplies, in auto industry, problem solving methodologies (8D, root cause analysis) & and intellectual property. corrective action implementation; Supply Chain, Risk Analysis, GD&T, SupContact Sonya Goll at (248) port Environ Testing (Eng design/Design Validation/Process Validation), Proc354-7906 ext. 2234 or sgoll@ ess Improvement Coach, Change Mgmt, PFMEA/DFMEA, Control Plans, additional sbplclaw.com To placeforyour listing,inforcontact PPAP, Suzanne Janik at 313-446-0455 or email sjanik@crain.com APQP, Qualifying Suppliers using CPK, IATF, SPC, MSA, Poke-Yoke, mation, form purchase agreeSix-Sigma, Minitab. 30% travel req’d. ment, financials of business, and www.crainsdetroit.com/classifieds Send resume to: MLXjobs@kochind.com, Ref: JH deadlines for offers.

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to drive improvements into productivity, capability & speed throughout the divisional product dev. Master’s in Ind Eng or related field +2yrs exp or Bachelor’s in Ind Eng or related field +5yrs exp req’d. Req’d Skills: exp w/electronic connectors in auto industry w/business improvement projects, setting up product dev processes, & project mgmt; PLM solutions (teamcenter, enovia, windchill), SAP, JIRA, Agile, data modeling & visualization dev using Qlik, Power BI, Tableau); REQUEST FOR PROPOSALS Receivership sale Six Sigma. Send resume to: MLXjobs@kochind.com, Ref:of AJassets

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Last chance to nominate Notable Women in Finance Know a remarkable woman CFO, banker, wealth manager, venture capitalist, CPA or other financial professional in Michigan? The deadline to tell us about her is almost here. Nominate a Notable Women in Finance and we may honor her in a special recognition section on April 27. The nomination deadline is Friday, Feb. 7. Nominees will be invited to complete a separate application, due Feb. 14.

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FEBRUARY 3, 2020 | CRAIN’S DETROIT BUSINESS | 17

DELPHI

bined companies better growth potential in the changing automotive landscape. “BorgWarner has the electric powertrain hardware while Delphi Technologies brings electrical hardware and electronic/software controls for electric powertrain,” Hilgert said. “The combined company has the capability to provide a complete battery electric-vehicle powertrain, excluding batteries. Increasing penetration of these technologies will at least partially offset declining numbers of internal combustion engines.” But BorgWarner is choosing scale over profit margins with the Delphi acquisition, a move that doesn’t solve the changing calculus of electrification, Calum MacRae, director of automotive product development at data analytics firm GlobalData, said in a statement. “Similar in rationale to the PSA and FCA merger, the recently announced move ... will help the two companies wrestle with the new challenges presented by the (connected, autonomous, shared and electric) megatrends and come up with the age-old response of scale economies,” MacRae said. “However, this is just a short-term fix for the long-term issues that these businesses face. No doubt there will be other mergers of a similar ilk that will ratchet down costs but not lead to sustainable long-term competitive advantage. “Now BorgWarner, along with Delphi Technologies, (itself the legacy business when the more alluring portfolio was carved out to form Aptiv), is just one of many old-school mechanical engineering companies looking to address the disruption coming down the road by making its core operations more efficient,” he said.

Delphi Technologies, based in the U.K. with a Customer Technical Center in Auburn Hills, was one of two companies to split from Delphi Automotive in 2017. The other was Aptiv Plc, focused on new technology including advanced safety systems and self-driving car software. The split left the smaller Delphi Technologies to focus on supplying engine and transmission parts. Delphi was the world’s largest parts maker when General Motors Co. spun off the company in 1998. Its stock has been on a steady decline since the spinoff, down more than 25 percent year-to-date at $9.80 per share before Tuesday’s market open. BorgWarner has fared slightly better, thanks to its $951 million acquisition of alternator supplier Remy International Inc. in 2015. “What we needed was great electromechanical product, turbochargers, dual clutches, all of those products we have in spades. What we needed to complement that is motor technology. And the third leg of that stool for us is power electronics capability,” then-CEO James Verrier told Crain’s in 2016. It was all part of the company’s stated plan to reach $15 billion in revenue by 2020. BorgWarner is expected to fall well short of that goal, projecting total 2019 revenue of roughly $10.1 billion. The announcement of the Delphi deal wasn’t well received by Wall Street. BorgWarner shares (NYSE: BWA) fell about 9 percent last week as of Thursday afternoon.

“In essence, every bit of the growth sales tax on gasoline, none of which to crowd out future growth in funding for classroom instruction and of the School Aid Fund needs to go to goes directly to roads. Replacing that $800 million in pensions in order to meet (the 2038 teacher salaries. The West Michigan Policy Forum goal),” said former House Speaker sales tax revenue from fuel to keep business group has been trying to Jase Bolger, who consults for the West schools and cities whole is the bane make this case to policymakers that Michigan Policy Forum and has been of every state legislator’s existence the state needs to change how it fi- shopping the pension-bonding plan right now. House Speaker Lee Chatfield has nances pensions for 315,000 school around Lansing since last summer. “That means no increase in per pu- repeatedly said he won’t have any employees and retirees to stave off a pil (funding for schools). That means conversation about road funding that new fiscal crisis. One of the reasons Whitmer has re- no increase or raises for teachers,” doesn’t include removing the sales tax on fuel to “ensure that every single sisted a pension refinancing or bond- Bolger added. Snyder’s lieutenant governor, Bri- penny that’s paid in taxes at the pump ing plan is her Democratic political allies at the Michigan Education Asso- an Calley, acknowledges that the is a penny that goes toward roads.” Shirkey and Chatfield have made 2038 payoff date was “very aggresciation are flat-out opposed to it. The teachers’ union has been mis- sive.” It was designed to force tough pension funding and sales tax at the characterizing the concept as a legis- decisions after years of underfunding pump, respectively, their red-line issues before they’ll lative raid of consider even a the pension WHITMER’S WILLINGNESS TO ISSUE $3.5 BILLION IN modest tax increase fund. Whitmer has repeated NEW DEBT TO FIX CRUMBLING ROADS WHILE RESISTING to fund Whitmer’s road reconstruction these mislead- A NEW SCHOOL EMPLOYEE PENSION-FINANCING blitz. ing statements. Perhaps Shirkey In her State of STRATEGY GOT ME THINKING: WHAT’S THE DIFFERENCE? and Chatfield could the State address last week, she panned the idea by past governors and legislators and get further if they reframe the need to as “diverting money from the teacher the substantial losses incurred refinance pension debt as a means of pension system to fill some pot- during the Great Recession. As a re- freeing up more money for schools, sult, pensions have gone from 5 per- classrooms and an underappreciated holes.” That’s just not true. The only thing cent of the school aid budget to more teaching profession that’s facing a talent crisis. getting diverted in Lansing is mainte- than 21 percent annually. “If Senator Shirkey came to me If policymakers don’t want to take nance money from MDOT’s budget for the next quarter-century to repay on bonds, the other option would be and suggested that, I would hear him to simply extend the payment sched- out,” Whitmer told me last week. “But Whitmer’s new road bond debt. Despite the governor’s rhetoric, ule another 10 years to lower the an- he hasn’t.” Whitmer cautiously left the door she’s still open to issuing bonds for nual pension payments. Extending the pension fund payoff open to doing a deal on better-fithe pension system or changing the schedule by five years would free up nancing pensions for retired and acamortization schedule. The escalating school employee $477 million; extending the amorti- tive school teachers, support staff pension costs is due in part of a pay- zation schedule by 10 years would and administrators. “Some people have suggested that ment schedule Snyder implemented to free up $800 million in savings. When Senate Majority Leader this is a way to lock in a guaranteed help make the state debt-free by 2038. The state’s annual contribution to Mike Shirkey floated this idea, it was payment for teachers’ pensions,” school employee pensions is set to soar posed as a way to free up cash in the Whitmer said Thursday. “I don’t from $3.5 billion to $5 billion in five School Aid Fund that could be re- know that the teachers agree with short years, according to projections place revenue that would be lost if that. And I, most importantly, would lawmakers removed the 6 percent want to know what the teachers feel from Whitmer’s own administration.

about any suggestion that we even touch dollars that should be going into their pensions.” To be sure, there’s an inherent risk in borrowing money to pump into investments just to artificially lower the annual cost of the underlying pension debt. But there’s also risk in running up new debt on MDOT’s credit card just because the governor and Legislature can’t agree on new revenue or cutting other government programs to pay for critical transportation infrastructure. The West Michigan Policy Forum’s consultants looked at how a $10 billion bond would have fared had it been invested in 2007-2009 in chunks of $3.33 billion. In today’s market, that $10 billion would be valued at $20.5 billion from a 7.3 percent rate of return, according to a presentation the policy forum has made to other business groups. In arguing in favor of borrowing $3.5 billion for highway reconstruction, Whitmer said it was “akin to taking out a mortgage to build a new roof.” “Sometimes for long-term investment, the wisest thing you can do is lock in a low interest rate and actually fix the problem,” Whitmer said. Bolger makes the same argument for selling bonds to prefund a pension fund that’s at least $32 billion underfunded. If we follow the governor’s argument, issuing bonds to shore up the school employee retirement fund and lower payments for taxpayers over three decades would seem to be no different than borrowing from future generations to fix some damn roads.

From Page 1

Before the deal’s announcement, Delphi Technologies (NYSE: DLPH) had a market value of about $844 million and around $1.5 billion in long-term debt, according to filings. BorgWarner (NYSE:BWA) is worth about $7.9 billion. Upon closing of the transaction, current BorgWarner stockholders are expected to own about 84 percent of the combined company, while current Delphi Technologies stockholders are expected to own approximately 16 percent. The deal is expected to close in the second half of the year. BorgWarner’s biggest deal to date is the $950 million acquisition of Remy International in 2015, according to data compiled by Bloomberg. “This exciting transaction represents the next step in BorgWarner’s balanced propulsion strategy, strengthening our position in electrified propulsion as well as our combustion, commercial vehicle and aftermarket businesses,” Frédéric Lissalde, president and CEO of Auburn Hills-based BorgWarner, said in a news release. “Delphi Technologies will bring proven leading power electronics technologies, talent and scale that will complement our hybrid and electric vehicle propulsion offerings. As a combined company, we look forward to delivering enhanced solutions to our customers while driving increased value for our stockholders.” In 2019, automakers sold a total of 329,528 electric vehicles, nearly half of them Tesla Model 3s, according to data compiled by InsideEVs. That’s a tiny fraction of the more than 17 million vehicles sold last year in North America.

LIVENGOOD

From Page 1

But given the political reality that Whitmer is unlikely to get a tax increase for roads or schools out of this Republican-controlled Legislature, maybe it’s time to rummage around the nerd’s trash can for discarded ideas. Whitmer’s willingness to issue $3.5 billion in new debt to fix crumbling roads while resisting a new school employee pension-financing strategy got me thinking: What’s the difference? The state already owes a debt to retired school employees. Whitmer and the Legislature can skip the MPSERS payments in future years when, say, a recession causes a dramatic loss in sales tax revenue from consumer spending. But they can’t skip bond payments without maiming the state’s credit rating, which would likely cause the cost of borrowing for all levels of government in Michigan to soar. Bonding for roads and pledging the Michigan Department of Transportation’s dedicated funding from fuel taxes and vehicle registration for future repayment is just putting money to work now and trying to stave off a point-of-no return deterioration of pavement conditions. Service on bonds will have to get paid before MDOT spends a dime maintaining state-owned roads. Bonding for the teacher pension fund in a period of low interest rates also would be putting money to work. And it could free up nearly $1 billion in funds in the School Aid Fund that are currently dedicated to an escalating pension debt that threatens

The Borg Warner-Delphi deal will unite two auto suppliers facing substantial financial pressure from the predicted shift to electric vehicles. | KRISTOFFER TRIPPLAAR/ SIPA USA

But automakers are being forced BorgWarner and Delphi, due to autoby governments around the world to makers requiring fewer innovations, improve fuel efficiency and cut emis- said Michael Robinet, executive disions and are turning to smaller, rector of automotive advisory serlighter engines and electrifying their vices at IHS Markit. “Traditionally, these suppliers lineups. The industry has also been hit by sluggish economic growth and were able to renew their margins the U.S. trade war with China. “IT COULD WELL BE THAT WE HAVE PASSED And with new mobility THE PEAK OF AUTOMOTIVE PRODUCTION.” t e c h n o l o g i e s — Bosch CEO Volkmar Denner seemingly the wave of the future, autos themselves with new technology, then it deteriomight be getting more scarce. rates over time due to pricing pres“It could well be that we have sure, etc. But when you’re not renewpassed the peak of automotive pro- ing your technology in traditional duction,” Bosch CEO Volkmar Den- powertrain, the ability to renew those ner was quoted by Reuters as saying margins becomes more difficult.” Richard Hilgert, senior automotive last week. Profit margins have taken a hit for equity analyst for Morningstar Inc., traditional engine suppliers, like said the deal at least gives the com-

18 | CRAIN’S DETROIT BUSINESS | FEBRUARY 3, 2020

Bloomberg News contributed to this report. Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh

Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood

KURT NAGL/CRAIN’S DETROIT BUSINESS

The only sign of sports betting at MotorCity is a sign near a walled off construction area in the casino promising a “whole new way to play.”

BETTING

Marian Ilitch, 87, invested in MotorCity in 1999 and became sole owner in 2005, there appeared to be a major rub with that rule. The Ilitches said then that patriarch Mike Ilitch, who died in 2017 at the age of 87, owned the Tigers and his wife was not involved with the team. MLB was fine with that arrangement for years. The death of Mike Ilitch complicated the question of who in the family owns what. The Ilitch organization has long said Marian, founder and chairwoman of Ilitch Holdings, has no involvement in the Tigers and that son Christopher Ilitch, president and CEO of Ilitch Holdings, controls the team and has no hand in the casino.

From Page 3

While terms have yet to be agreed upon, he said, the arrangement will likely involve a separation between the Ilitches and revenue from betting on MLB games. A likely scenario would be MotorCity turning over any baseball betting activities to an independent operator. “We would want the Ilitches to not be operating the sports book as it relates to baseball,” he said. “We are working closely with the Ilitch family on making sure they can offer a compelling product to sports fans without having a conflict. We wouldn’t want any of our owners to benefit one way or another on whether their team wins or loses the game.” Ilitch Holdings declined to make anyone available for an interview for this story and would not comment further than a statement sent by MotorCity to Crain’s two weeks ago. “As a premier destination for entertainment in Detroit, we look forward to offering sports betting and online gaming to our guests and fans,” the statement said. “Over the coming months, we will be actively exploring this matter further with key stakeholders to ensure that we deliver a best in-class experience that operates in strict regulatory and league compliance.” The opportunities for the Ilitches’ sports operations to feed its gambling operations are vast, especially under a regulatory framework with few constraints. Rep. Brandt Iden, R-Oshtemo Township, chief sponsor of the bill that legalized sports gambling in Michigan, said the Ilitches’ ownership interests were not considered when the legislation was drafted. “(There is) no specific language that deals with owners of franchises, but obviously, Ilitch Holdings and others, if they own a casino, that’s all controlled by the Michigan Gaming Control Board,” he said. The board, which is aiming to implement on-site sports gambling by early spring in time for March Madness and online betting in the next year, has no plans to establish rules on conflicts between sports ownership and sports betting.

Marian Ilitch

“The agency never has considered special rules related to MotorCity Casino,” board spokeswoman Mary Kay Bean said in an email. “The Legislature had full information about the ownership of MotorCity Casino, the Detroit Tigers and the Detroit Red Wings and passed a law without any restrictions on wagering.” Bean said that any restrictions must be enacted by the leagues, which have historically strongly opposed sports gambling but are now looking to cash in on it. When the U.S. Supreme Court in 2018 struck down a federal law that had banned state-sanctioned sports gambling, leagues rushed to the table for a piece of the estimated $150 billion spent illegally gambling in the country each year. Even the MLB — which has been vigilant in preventing gambling on games since the infamous “Black Sox” scandal in 1919 and is dealing with fallout from a cheating scandal by the Houston Astros and Boston Red Sox — is scrambling to make deals with casino operators. Gersh said the MLB policy change would not impact any other current team owners, as the Ilitch family’s dual ownership of a franchise and casino is unique to the league. This wouldn’t be the first time MLB has softened its rules to benefit the Ilitches. The league has long banned team owners from having any involvement in casinos or wagering. When

Major money on the table Legal sports gambling marks a new era for sports. The activity is likely to seep into every aspect of the industry — from fan experience and game broadcasts to advertising and marketing — except, leagues hope, the actual play. Sports gambling in Michigan eventually will extend far beyond casinos. Once online betting is implemented, sports fans will be able to make legal bets anywhere — in their living rooms, say, or in the stands at Little Caesars Arena. “If you are a league or a team affiliated with a casino, like Ilitch Holdings, now all of a sudden you’ve got several things to keep in mind,” said David Carter, associate professor at University of Southern California’s Marshall School of Business who tracks the sports business industry. One of those things is the stadium experience, Carter said. While Comerica Park is owned by the Wayne County Stadium Authority and Little Caesars Arena by Detroit’s Downtown Development Authority, the Ilitches operate them. That means the family controls everything from sponsorships and signage to tenants and capital improvements. “What the entire sports business industry is wrestling with now is how to successfully integrate gambling into the fan experience,” Carter said. “What’s the best use of the real estate?” As an example of what that experience could look like, the Ilitches could

“WHAT THE ENTIRE SPORTS BUSINESS INDUSTRY IS WRESTLING WITH NOW IS HOW TO SUCCESSFULLY INTEGRATE GAMBLING INTO THE FAN EXPERIENCE. WHAT’S THE BEST USE OF THE REAL ESTATE?” — David Carter, associate professor at University of Southern California’s Marshall School of Business

replace the outgoing Kid Rock restaurant at Little Caesars Arena with a mobile sports betting lounge sponsored by MotorCity. That’s theoretical, of course, but similar things are happening at stadiums in other cities. Capital One Arena in Washington, D.C., which, like Little Caesars Arena, houses an NBA and NHL franchise, announced in October it would become the first professional sports venue to open a sports betting lounge. Physical betting kiosks wouldn’t be allowed outside a casino under Michigan law, but once internet gaming goes live, betting on mobile phones inside professional sports stadiums is fair game, Bean said. Legal sports gambling has big implications for broadcasting, too. The Ilitches own the TV rights to Tigers and Red Wings games, which they have licensed to Southfield-based Fox Sports Detroit in a 10-year deal believed to expire next year, Crain’s reported in May. Under the deal with Fox, the network pays about $50 million annually to the Tigers and about $25 million annually to the Red Wings for their broadcast rights to live games, Crain’s reported. If sports gambling increases interest and viewership like the leagues expect, the value of those rights could skyrocket, Carter said.

Sports gambling in Detroit Detroit’s three casinos are investing millions of dollars to open sports books. MGM Grand Detroit opened its sports lounge, without betting until the state implements it, a month before the sports gambling bill even

passed, and has advertised it heavily with billboards in Detroit. Greektown Casino-Hotel told Crain’s it will spend millions to put a new sports lounge at the center of its gaming floor. Construction on the sports gambling area at MotorCity has started. On each floor of the two-level casino are areas blocked off by temporary walls where a sports bar and live entertainment area once were, a casino employee said Jan. 26. A sign near the space read: “Sports book coming soon! Same space, a whole new way to play.” The four major sports leagues are expected to generate $4.2 billion per year in the regulated sports gambling market, from advertising and sponsorships, tickets sales, merchandise and data purchase sales, according to the American Gaming Association. Deals between leagues and casinos will generate revenue likely to make its way into team owners’ pockets. While the bill legalizing sports betting in Michigan makes no mention of professional sports franchise owners, it does include language that allows leagues to profit. Michigan joins just two other states, Illinois and Tennessee, requiring casinos to purchase data from leagues for “in play” wagers. The rule applies to wagers made during a live game. For example, if a person bets that Miguel Cabrera hits a home run to right field on the next play, the casino would have to buy “official” data from MLB to determine if the bet was won or lost. The bill does not specify the requirement other than to say data must be purchased on “commercially reasonable” terms. The gaming control board said it is working to better define that. Bringing gambling into sports heightens the chances for corruption, but it is better to make it legal and monitored than keep it underground, said Andrew Kline, who played for the St. Louis Rams and is managing director of Los Angeles-based Park Lane, an investment bank that advises sports teams and businesses. “I think that at the end of the day, it’s going to be a good thing for sports,” he said. Contact: knagl@crain.com; (313) 446-0337; @kurt_nagl

FEBRUARY 3, 2020 | CRAIN’S DETROIT BUSINESS | 19

Ahh, spa

Metro Detroit businesses offer new concepts in wellness to those seeking holistic options BY JAISHREE DREPAUL-BRUDER SPECIAL TO CRAIN’S DETROIT BUSINESS

Spas across metro Detroit are going beyond the basic massage and facial. And for their clientele, the appeal transcends being “pampered” for the day. New treatments — from salt rooms to float spas — are marketed to people seeking to improve their health and well-being. “People are becoming a lot smarter in how they care for themselves, rather than just relying on the quick-fix pill from the doctor,” said Sean Hodgson, co-owner of Motor City Float. “There have been so many new published studies demonstrating the benefits of non-conventional treatments and the lasting effects they can have on oneself physically, mentally and spiritually.” Meta Physica Wellness Center co-owner Anahi Hollis said the rise of seemingly offbeat spa treatments is connected to a lack of access and affordability in the health care system. “With the lack of affordable health care, many of our clients are starting to look for different, more holistic options to incorporate into their routine rather than looking to conventional options,” she said. “We see people every day who are choosing to take a proactive approach to prevention, pain and stress management.” Here are just a few of the more nontraditional spas and treatment options now available in metro Detroit. MOTOR CITY FLOAT 1203 W. 14 Mile, Clawson motorcityfloat.com The signature offering at Motor City Float is flotation therapy, which is used to treat a range of ailments. Promoting rest, reducing stress and soothing chronic pain and inflammation are just some of the reported benefits. Once you check in to Motor City Float, you’ll be shown to a private room with a tank filled with clean, body-temperature water that’s laden with magnesium-rich Epsom salts. Your room blocks out sight and sound

oxygen to your blood, accelerating the natural healing processes. A single session costs $40 and there are package options.

Float pod suites at True Rest Float Spa in Farmington Hills boast showers, an oxygen bar and an Oasis Room. | TRUE REST FLOAT SPA A salt room experience at Salinair | SALINAIR SALT ROOM SPA VIA FACEBOOK

More online To check out the healthy eating scene in metro Detroit, go to crainsdetroit.com

as you float, your body made extra-buoyant by the mineral-rich water. Float sessions range from $65 to $90 and there are options for memberships and packages. Booking a treatment on what the center calls “Wellness Wednesdays” might be a good way to test the waters for a reduced floating cost of $40. Other services include infrared sauna and massage therapy. TRUE REST FLOAT SPA 30911 Orchard Lake Road, Farmington Hills truerest.com The only Michigan franchise of this

national spa brand boasts float pod suites with showers, an oxygen bar and an Oasis Room. A float session costs $79 and monthly memberships are available. Given that there are reports that flotation therapy can help with PTSD, it’s apt that the company is committed to helping veterans and active military members. True Rest provides free floats on the 11th of each month to those who fall in these categories, provided they book in advance and have appropriate military ID. You can choose to go without any sensory stimulation, opt for short

DEAN

From Page 3

Schweitzer said an expanded affiliation with Henry Ford and continued relations with DMC would be a positive step for Wayne State. “We have a valued arrangement with Henry Ford and DMC now,” he said. “It is important for the university and the health professions school to (further explore relationships). We will have to see what evolves. The affiliation agreement was a positive step. The board has every right to question it because they are protecting” the university’s assets and autonomy. But does Schweitzer believe Wayne State should restart talks with Henry Ford? In fact, the negotiations were never formally terminated by the board. Shortly after a contentious March 2019 meeting, Henry Ford CEO Wright Lassiter III announced a pause in talks until the board became more unified. “I have an open mind,” Schweitzer said. “It has tremendous potential. Let’s do it in the best way.” Another sensitive issue Schweitzer will face is pediatrics. A dispute between Wayne State and University Pe-

New Wayne State medical school dean Mark Schweitzer with 2018 graduate of the dual MD-PhD degree program at Stony Brook University. Schweitzer mentored the student who had cerebral palsy and ended up in a residency program at Stanford University hospital. | MARK SCHWEITZER

diatricians, once a Wayne State-affiliated faculty practice group, has led to UP striking up an affiliation with Central Michigan University. In response, Wayne State formed its own clinical group, Wayne Pediatrics, where faculty pediatricians can practice and take care of Detroit’s children. “All I can say is we need to train medical students in pediatrics,” Schweitzer said. “It is an unfortunate situation. Before it happened, training at (DMC)

20 | CRAIN’S DETROIT BUSINESS | FEBRUARY 3, 2020

Children’s Hospital (of Michigan) was amazing. It will continue to be. I have an open mind on how to go forward.” Schweitzer said he understood why former WSU medical school Dean Jack Sobel and pediatrics Chair Herman Gray took the difficult step of creating a new practice. “Sometimes you have to make decisions that have the least bad option,” he said. On research, Schweitzer said he is committed to building up Wayne

music interludes or bring your own music. You also get to control your lighting depending on your comfort level and needs. A second True Rest location is coming soon to Rochester Hills, according to True Rest’s website. CRYOSPA DETROIT 32828 Woodward Ave., Royal Oak cryospadetroit.com Cryotherapy is definitely for the adventurous — and extreme cold-tolerant. Some of the purported benefits include strengthening the immune system, reducing stress and skin rejuvenation. Its advocates say it is especially good for athletes suffering from injuries — some report that it is more effective (and bearable) than a traditional ice bath. The treatment at CryoSpa Detroit in Royal Oak takes a mere three minutes: You step into a chamber and your body is surrounded by hyper-cooled air created by liquid nitrogen, with temperatures in the chamber dropping below -250 degrees Fahrenheit. The extreme sub-zero temperatures, practitioners claim, cause your body to flush out toxins, while your heart pumps more State’s medical research portfolio. “I understand research as much as I do clinical. At Stony Brook, I started ranked No. 80 in radiology research. Now we are 28 or 30. That is a trajectory I want to continue at Wayne State.” Research expenditures at Wayne State amounted to about $239 million in 2018, which placed the university 68th in the nation among public institutions and 99th overall, according to the National Science Foundation. The University of Michigan ranked second among all institutions behind Johns Hopkins University with $1.4 billion. If WSU were to combine research departments with Henry Ford, which accounted for about $94 million in 2016, as the 2018 affiliation letter of intent proposed, it could create a $333 million-plus research enterprise that would rank about 74th among all institutions. “Working with Henry Ford on research is something I want to see increased,” he said. “We share a lot of common goals.” Schweitzer also said he wants to boost medical school fundraising. In 2018, the medical school exceeded its capital campaign fundraising goal of $190 million and set an annual record with $36.3 million, but experienced a

SALINAIR SALT ROOM SPA 131 W. Auburn Road, Rochester Hills salinair.com Halo therapy (salt therapy) is the specialty of Salinair Salt Room Spa located at 131 W. Auburn Road in Rochester Hills. Halo therapy is said to help with a variety of health issues, primarily respiratory issues. Salt therapy has been a tradition in Europe since the mid-19th century. As the founders of halo therapy in the United States, Salinair has built its reputation on customer care and standards at its state-of-the-art center. The award-winning spa features two rooms that are designed to replicate the anti-inflammatory, breathe-easier benefits one would get from a natural salt cave. There is a salt room for adults that features zero-gravity leather recliners and a family room for those with kids under the age of 10. A salt room experience costs $25 for adults and a family room session costs $60. Package deals are also available. META PHYSICA WELLNESS CENTER 1701 Trumbull St., Detroit metaphysicamassage.com Meta Physica Wellness Center offers a three-pronged approach to wellness: therapeutic massage and bodywork, private infrared saunas and an organic raw juice bar. One of its popular services is the Rain Drop Technique massage ($85$120). During this full body pampering session approximately 130 drops of various essential oils are applied to detoxify the body, bolster immunity and reduce stress. Meta Physica also offers holistic treatments including acupuncture, cupping and craniosacral therapy. Other pros: competitive pricing, a sauna happy hour and a curated retail area with products that are not easy to find in Detroit. decline in 2019. WSU officials said 2020 so far is on the upswing again. “For any leader, fundraising is important. At a state institution, it is limited and unpredictable. We need a new medical school building. Philanthropy will help. I will make this a priority,” he said.

Who is Dean Schweitzer? First, no, Dean Schweitzer never played rugby, as someone has suggested by his rugged appearance. He played soccer and was all-county in track and field in high school in Plainview, N.Y. He also is a Metallica fan. Even into his 30s, he braved the Metallica “mosh pits.” But over the 30 years he has been a professional doctor, administrator and researcher, Schweitzer has recorded an impressive list of accomplishments. He has served on many advisory panels for the National Institutes of Health and Food and Drug Administration. He was a researcher for more than 30 NIH clinical trials. He also has served as the presiding officer of the Radiological Society of North America and the International Skeletal Society. Still, Schweitzer, now 57, said his years growing up in New York and later

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FITNESS

lights and dance moves, opened in Troy in 2017 and has since closed, according to owner Revan Hermiz. He said he plans to reopen elsewhere in Oakland County, attached to a bigbox gym.

From Page 1

Detroit native Daniels opened Live Cycle Delight in 2017 in West Village after winning a $50,000 Comerica Hatch Detroit grant. The next year, she opened a nearby sister studio called LCD Hot to accommodate growing yoga demand. “Fast forward to now, it’s pretty challenging because we have so many boutique offerings and not enough people,” Daniels said. “We have lost customers from areas where there are more options.”

Besting the competition

Industry growth The market for fitness may be crowding for some, but that comes as more Americans choose to exercise regularly. More than 71.5 million people went to one or more of the nearly 40,000 health clubs in the U.S. in 2018, or nearly 24 percent of the population, according to the International Health, Racquet & Sportsclub Association. It’s the highest annual figure recorded yet since IHRSA started collecting the data in 1987. Those clubs raked in $32.3 billion in revenue in 2018, a 7.8 percent hike from the previous year. Michigan had just more than 1,000 health clubs last year, according to the Boston-based not-for-profit association. The IHRSA figures don’t include specialized, boutique studios, such as those for cycling, CrossFit or yoga. IHRSA estimates their U.S. count at 7,000-10,000 and market share at 42 percent. Customers at these studios pay an average of $94 in monthly dues, above an across-the-board average of $52. Scott Marcus, a real estate professional who fell in love with high-end workout studio franchise Orangetheory Fitness in Florida and brought it home to Michigan, said a plethora of new fitness concepts has entered the metro Detroit market since he opened his first studio in Canton Township in 2014. Big-box gyms such as Planet Fitness and L.A. Fitness populate the region, offering a lower-cost option. Planet Fitness, the biggest gym chain

in the state, offers memberships starting at $10 a month. It has 8-10 locations planned over the next two to three years, on top of more than 80 open across the state. But small studios offer something else. “One reason today’s members have migrated toward boutique studios has a lot to do with their ability to engage, support, encourage and inspire people,” IHRSA said in its most recent data report for media, released in October. Members like working with a group, Marcus said. They also get a coach, while paying less than for a personal trainer. “Even with the growth of big-box gyms, it really has no effect on our

membership in any of our locations,” he said. “These high-end gyms (like luxury chain Equinox) can come in and there’s enough demand out there, people getting into fitness, that it really hasn’t hurt. And the same with online concepts, like Peloton. There’s still an idea that people want to be surrounded by other people.” Marcus has eight Orangetheory locations in the region. The latest opened Jan. 23 in Detroit’s New Center neighborhood. There are 21 in Michigan, 1,200 in the U.S. and a total of 1,400 worldwide. The Floridian chain sells its fitness training as technology-backed, focusing on metrics such as heart rate, how fast you run a mile or amount of body fat. Memberships

are $59-$159 a month. “We’ve always been very data-driven,” Orangetheory CEO Dave Long told Entrepreneur.com in 2018. “Even when we were smaller, we spent a lot of time analyzing the demographics and psychographics around where we wanted to go. What you have to try to determine is, how many customers do you need to be successful in any given market or location? What’s that person’s age, income and gender?” It hasn’t been rosy for everyone: Michigan and Ohio chain Cyclebar closed its Troy location without warning in August, WXYZ-TV (Channel 7) reported. And Area 45 Fitness, a gym that promoted itself as an other-worldly experience with glow

becoming a father helped him become the doctor and administrator he is now. “I was born and raised in a working-class suburb of New York City. My mother got very ill when I was a kid and died when I started college,” he said. “I was put into a position of responsibility for my family at an early age, and it was formative in my development in medicine and as a manager.” “My career path emanates from my seminal experience at City University in Harlem (where he earned his bachelor’s degree). I was in a six-year medical (doctorate degree) combined program and graduated from med school (from State University of New York at Buffalo) at age 23.” At age 27, he became board-certified in radiology. Ten years later he became a full professor. He met his wife, Sheryl, during his first year of college. “We’ve been married 35 years. We have two disabled children. They are adults (ages 27 and 31) and live with us,” said Schweitzer, noting this is one reason he serves as a physician in the Paralympic Games. Schweitzer has served as a consultant for several professional sports teams, including the New York Mets, New York Islanders, New York Nets, Philadelphia 76ers and Philadelphia

Eagles. He has also consulted for numerous college teams and the 2010 Winter Olympics and Paralympics in British Columbia. One discussion with board members and Wayne State faculty that impressed people in interviews was his discussion about diversity and inclusion. “I believe in diversity. My point is too many people think it is just checking a box. That is not true diversity. It is inclusion and equality,” he said. “That is two steps beyond checking a box. I gave the example of my children when they first went to public school.” Schweitzer said five disabled children at the school were kept in a separate room away from classmates. “Wayne State doesn’t do that. City Colleges doesn’t do that. We have inclusion classrooms. Students are mixed. The next step is making sure the leadership matches society overall. I want student body diversity. Wayne State has quite diverse leadership. It is what attracted me here.” In fact, it is what caused Schweitzer to leave Canada after five years. In 2008, Schweitzer left New York Hospital for Joint Diseases as chair of radiology and accepted a position at the University of Ottawa. He left Ottawa in

2013 for several reasons. “There were three reasons we went there. Our children are very important to us, and we know we are not going to be around forever. We (felt Canadian) society would have great social net and a better landing pad for them (when we are gone),” Schweitzer said. “I am a firm believer that no one deserves to die when they are born, and you shouldn’t die young or be sicker or disabled because you are poor,” he said. “That is intrinsically wrong. (The Canadian) medical system treats everybody equally. (The U.S. system) should treat people equally.” But after Schweitzer accepted a position and signed a five-year contract at the University of Ottawa, he found out Canada restricts immigrants in becoming full-fledged citizens. “No immigrant can take resources from a citizen. We found out our kids would not become citizens” and would not become eligible for additional care if he and his wife weren’t alive and supporting them directly. “I could have asked for special dispensation. The prime minister was my patient. I could have asked him, but I couldn’t bring myself to do that,” Schweitzer said.

Why Wayne State?

Some chains or local gyms entering the metro Detroit market narrow in on specific offerings, like New York-based rowing chain Cityrow. | CITYROW VIA FACEBOOK

“I like the challenge of trying to solve problems and making a difference,” he said. “Whenever you change your position, No. 1 is a desire for a new challenge. (At Stony Brook) I set out to accomplish (20132020) what I set out to accomplish. I turned around (the department) financially, academically and clinically. My motivation is a new challenge, but also education. I am focused on education and working with trainees.” Schweitzer said he loves the idea that Wayne State is the largest single-campus medical school in the nation with 1,200 medical students. “It is not that I want the destination. I want the patient,” he said. “There are issues with DMC, pediatrics, the challenges of the city of Detroit and Michigan.” On the administrative challenges, Schweitzer said he is accustomed to managing a large budget, working with doctors and employees. “I didn’t just run a radiology department. I have 600 employees, 60 MDs, five imaging centers, three hospitals and a $135 million operating budget and a $15 million capital bud-

Live Cycle Delight owner Daniels said she sees more national franchises popping up in Detroit, and other aspiring entrepreneurs taking cues from her business model. Both of those take customers away — especially if they are nearby — and drive up demand for instructor talent, she said. “You see one business that is successful and you want to try to be successful, like that business,” she said. “There’s not necessarily a lot of thought as to where businesses should go ... With expansion, who hurts the most are the small businesses who have been here.” Live Cycle Delight’s sales rose 4 percent in 2019, but Daniels called it her “most challenging” year to date, due to competition and the opening of her second location. After initial deals, the studio charges $25 for a drop-in class, $110 for a five-class package and $130$175 for a month unlimited. Other fitness options by Live Cycle Delight on the east side include Detroit Body Garage, Rebel Cycle Studio and recently opened yoga studio Santo Santo. Daniels said she wants to expand outside Detroit — but not yet. Her 2020 goal is differentiating Live Cycle Delight further from competitors. The studio prides itself on highly trained teachers and close-knit community, but Daniels wants more sustainability. She plans to run pilates teacher training classes and eventually yoga, and wants to hire a fellow through Venture for America to develop products Live Cycle Delight could sell. “The next year is really about staying here, increasing our marketing and trying to find more talent, which continues to be the hardest thing,” she said. “I can’t think about expanding if home is not taken care of.” Contact: afrank@crain.com; (313) 446-0416; @annalise_frank get,” he said. “It is a large, complex organization. I am a people person. It is difficult. But I am not uncomfortable with conflict.” In 2019, Wayne State’s medical school had a budget of about $253 million with 2,190 employees. Schweitzer said his goal is to make Wayne State a top 30 or 40 medical school. “We have the foundation and the people for that. That is my vision,” he said. “I love the idea the mascot of the university is a warrior. We and our students should be warriors for the health of the city of Detroit.” While he expects many challenges at Wayne State, Schweitzer said his career so far has prepared him. “My gut tells me that the issues will prioritize themselves,” he said. “Things will come to a head at any one time. I have my own contingency plans on how to address them, but I remain flexible. From what I understand, whatever issues DMC has, it is a phenomenal place to train. I would like our students to train there. Henry Ford is phenomenal place to train, and I want to continue the mission of the school.” Contact: jgreene@crain.com; (313) 446-0325; @jaybgreene

FEBRUARY 3, 2020 | CRAIN’S DETROIT BUSINESS | 21

THE CONVERSATION

Marrow owner: from Singapore to New York to Corktown MARROW, THE ROYCE, NEST EGG: Ping Ho is majority owner or partner in four Detroit restaurant and bar properties from West Village to Corktown. The Singapore-born Brown University graduate came to Detroit in 2015 after working with entrepreneurs in Shanghai and spending a decade at Warner Music Group in New York City. Ho started with downtown wine shop and bar The Royce, then West Village butcher shop and restaurant Marrow with chef Sarah Welch in 2018. Now she, Welch and the operators of Corktown brunch spot Folk are threading together a joint venture. | BY ANNALISE FRANK ` Crain’s Detroit Business: What led you from New York to Detroit? A mix of personal and professional timing. So, 10 years (at Warner) and I knew I wasn’t meant to — I mean, it was a great job, I learned a lot, I got an MBA in the process, but I was never truly passionate about the music business. Some people are. I knew I just didn’t want to age into it. There’s nothing more depressing than, like, an aging executive who’s overpaid and unhappy. So, what’s the big idea, right, to pivot and get into owning your own business? My partner then, she was also in the same place … the big pivot was Detroit. She grew up in Michigan, Lapeer and Flint. So we would fly in to visit her family and started noticing … there’s interesting things happening (in Detroit), but also it’s wide open when it comes to things like a wine bar downtown. So we joined (the Comerica Hatch Detroit startup fundraising contest). The week of finals was when we moved to Detroit. ` Your more recent business move was to form Nest Egg LLC with Kiki Louya and Rohani Foulkes of Folk and the Farmer’s Hand bodega, which is closed for the time being. How is that? And you’ve opened your seafood restaurant, Mink, in the former Farmer’s Hand space. That was always the idea, the concept of just joining forces on that little corner of Corktown. I think we’ve formed a very unique collaboration where it’s really about bringing together two existing businesses and then opening up a new one, right, under one umbrella. But the overarching vision is the same. We share a lot of common values, sustainability, local products. And building a work culture that is inclusive, it’s empowering to minorities,

are all salaried. And I think that helps with retention, and yeah, traditionally, under the hourly model, the back of house gets a little screwed. If you want the best cooks, you do have to pay them market rate. With front of house, what we look at is effective hourly (pay). A breakfastbrunch spot is very different from something like a wine bar, like the Royce, where you’re selling retail wine and cutting cheese and bartending. Then there’s something like Marrow, where check averages are higher, and servers here do get paid a lot, but they also have to hustle. It’s interesting. The effective hourly (pay) at Folk, even though it starts at a higher base, is not necessarily higher than the Royce and definitely not higher than at Marrow. So, we have enough learning to see how different models apply to our different affiliate businesses.

to women. And paying a fair wage, and beyond that. So, we’re just at the beginning of things. And also as Corktown evolves, we’re just hoping we can together grow the business. The winter months are always slow, and we introduced (alcoholic) beverages to Folk. We’re looking at some nighttime activations at Folk to utilize the space. ` When I talked to Kiki Louya before, she said they wanted to introduce alcohol at Folk and increase revenue. What’s it like to come in and kind of help a business be more profitable? Is there something difficult or delicate there? Absolutely. Oftentimes JVs are challenging. You’re trying to fuse together two different entities operating under two different cultures. So we’re definitely in the process of figuring out some kinks, just merging and creating efficiencies that translate across both entities. But we’re working through it and I think it’s been positive, we’re moving in the right direction. So things like just tightening up labor. Kiki and Rohani have a very specific way of dealing with labor. ` You mean their service charge, instead of tips. We have maintained that high hourly base for staff at Folk and tweaked a little. There’s no mandatory tipping, but there is an 18 percent service fee and then on top of that, (now) there’s a suggested line item where guests who are happy can give an additional "wellness tip," so to speak, but we don’t call it a tip there. It’s contributing to the wellness fund. Because at the end of the day, we’re all looking at, "What’s the net effective hourly wage for someone doing front of house?" A lot of the backof-house staff, including at Marrow,

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Ping Ho is majority owner of The Royce wine bar and Marrow restaurant and butcher shop.

` You have mentioned before and I’ve read that you aim to support women in the industry and minorities. In that vein, how does being a member of the LGBT community factor into your leadership? I do think the formation of teams, predominantly women-led, I wouldn’t call it by design, but I naturally do feel collaborations with women are easier and women are more open. I think Detroit has been very good for (collaboration), people are generally open to new ideas and sharing information. And the LGBT angle, yeah, we have a very queer, I guess, group as well, but it’s just because we’re open to diversity. When you start out with the mindset of being inclusive, it just happens. And at the Royce, I throw a monthly LGBT party called the G Party. That was something, from day one, that my ex-partner and I did because, to us, it was important to have that kind of visibility in a predominantly straight business.

REPORTERS

Annalise Frank, city of Detroit. (313) 446-0416 or afrank@crain.com Jay Greene, senior reporter, health care and energy. (313) 446-0325 or jgreene@crain.com Nick Manes, finance and technology. (313) 446-1626 or nmanes@crain.com Kurt Nagl, higher education, business of sports. (313) 446-0337 or knagl@crain.com Kirk Pinho, real estate. (313) 446-0412 or kpinho@crain.com Dustin Walsh, senior reporter, economy and workforce, manufacturing, cannabis. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter, nonprofits and philanthropy. (313) 446-1694 or swelch@crain.com MEMBERSHIPS

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RUMBLINGS

Local franchisee is one of Bar Louie’s biggest creditors BAR LOUIE’S EIGHT SOUTHEAST MICHIGAN locations are likely to survive the private equity-owned gastropub’s bankruptcy — but local franchisees are one of the chain’s biggest creditors. The Addison, Texas-based company filed for Chapter 11 bankruptcy protection in Delaware on Monday after its owner Sun Capital Partners Inc. closed 38 restaurants, including its Flint location. Bar Louie’s corporate parent, BL Restaurant Holdings LLC and affiliates, entered a prepackaged plan to sell the company and its 72 corporate-owned restaurants to its lenders under what’s known as a “stalking horse” bid. More than $5.7 million of that debt is owed to a franchisee, Bloomfield Hills-based BL Development

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Group LLC, owned by Anthony Marougi and Zubin Antia. The franchisee sold its eight Bar Louie locations in Michigan, Tennessee, Alabama and Florida to BL Restaurant Holdings in 2017 in separate deals. Marougi and Antia are still owed $2.9 million each for the Novi and Auburn Hills locations. BL Restaurant Holdings agreed to buy back the restaurants for $2.3 million with a 9 percent interest rate that began compounding on Aug. 30, 2018, according to the contract included in the court documents. Marougi did not respond to emails concerning the bankruptcy. The duo opened another Bar Louie franchise last year, spending $450,000 to renovate the former Blackfinn Ameripub in downtown Royal Oak.

22 | CRAIN’S DETROIT BUSINESS | FEBRUARY 3, 2020

Two James Spirits

` TWO JAMES TO INVEST $2M IN NEW CORKTOWN BAR TWO JAMES SPIRITS IS SERVING UP another round of expansion, this time across the street from its Corktown home on Michigan Avenue. The Detroit-based distillery owner David Landrum is investing $2 mil-

lion into the build-out of a 10,000-square-foot building he owns at 2442 Michigan Ave. Inside it will be a new restaurant concept called Supergeil — a tasting room, event space and small area for spirits production, Landrum said. He had been kicking around the idea for the past couple of years with friend and chef Brendan McCall, who will run the kitchen. Supergeil is a Berlin-inspired, Mediterranean-influenced restaurant focused on fast-casual, healthy fare. “Geil” is hip German slang that translates roughly to “cool.” The menu’s centerpiece will be Döner Kebab, famous street food in the Deutschland that Landrum fell in love with during multiple visits there. Mediterranean meats and fresh vegetables will also be menu staples.

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THE BIGGEST NAMES IN NEWS IN ONE ROOM

NEWSMAKER OF THE YEAR Stephen Ross,

Chairman and founder, The Related Cos.

T0P NEWSMAKERS/2019 Andrew Brisbo

Executive director, Michigan Marijuana Regulatory Agency

Gary Jones

Former president, United Auto Workers

Our annual Newsmaker of the Year luncheon has highlighted business leaders for more than three decades. Come hear how our new class made news and connect with influencers from across the state. The event will feature remarks from 2019 Newsmaker of the Year Stephen Ross, chairman and founder, The Related Cos.. Our Best-Managed Nonprofit awardees and inaugural Newsmaker Hall of Fame inductee Dan Gilbert, founder, Quicken Loans, will also be recognized.

FRIDAY, FEB. 21

MGM GRAND DETROIT • 11 A.M. – 1:30 P.M.

TICKETS: $90 individual tickets $1,000 reserved table of 10 ARE YOU A CRAIN’S DETROIT MEMBER? Email us at cdbevents@crain.com to receive your individual ticket discount.

Fran Parker

Founding executive director, UAW Retiree Medical Benefits Trust

David Provost

Chairman, TCF Bank

Suzanne Shank

President and CEO, Siebert Williams Shank & Co., LLC

Tom Shea

CEO, OneStream Software

Mark Stewart

COO, North American Operations, Fiat Chrysler Automobiles

Gretchen Whitmer

Governor, State of Michigan

M. Roy Wilson

President, Wayne State University

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