Crain's Detroit Business, June 22, 2020 issue by Crain's Detroit Business

CATCHING UP WITH SMALL BUSINESS OWNERS AMID CRISIS Three months of turbulence have strained most businesses. Coronavirus, shutdowns, a tanking economy, police violence and social unrest: It’s been an overwhelming mix. And it’s even tougher for small businesses in Detroit, where challenges pile up on a good day. We caught up with several we’ve profiled before and checked in on how they’re doing. PAGE 18

THE CONVERSATION Veteran events producer Jon Witz says industry isn’t doomed. PAGE 19

THE ECONOMY Corporate bankruptcies likely to surge in second half of 2020. PAGE 3 CRAINSDETROIT.COM I JUNE 22, 2020

HEALTH CARE

DOWNTOWN DETROIT

WAITING FOR WORKERS

Beaumont deal could mean more expansion BY JAY GREENE

Townhouse Detroit has yet to reopen but is targeting July; the lack of an office lunch crowd will be a major challenge for downtown eateries. | NIC ANTAYA FOR CRAIN’S DETROIT BUSINESS

Quiet office districts present a major challenge for downtown restaurants, shops THE LIGHTS ARE STILL OFF AT CENTRAL KITCHEN + BAR in the First National Building. Next door, the Roasting Plant coffee shop facing the usually bustling Campus Martius park also remains shuttered. That’s largely because the primary customer base of both trendy establishments is still encamped at home, where they’ve been running some of Michigan’s largest businesses remotely since mid-March amid the coronavirus pandemic. Two weeks into the reopening of Southeast Michigan’s bars, restaurants and retailers, downtown Detroit remains

Chad

LIVENGOOD

NEWSPAPER

mostly desolate on weekdays — and probably will be for much of the summer and possibly into the fall, depending on whether COVID-19 makes a resurgence in Michigan’s largest and hardest-hit city. The work-from-home dynamic for Detroit’s office workforce is going better than many executives expected in March when workers started sheltering in place. Employees wary of the virus or juggling child care issues at home are opting to remain home as long as their bosses let them. See WAITING on Page 17

Lower cost borrowing, economies of scale, additional working capital and expansion in Michigan are four of the major reasons to merge eight-hospital Beaumont Health with 28-hospital Advocate-Aurora Health, say system executives. Last Thursday, Beaumont Health signed a nonbinding letter of intent to explore an asset merger with Advocate Aurora Health, the ninth largest nonprofit health system in the country. If completed later this year as executives hope, the combined 36-hospital Beaumont-Advocate-Aurora system would create a $17 billion revenue company with more than 100,000 employees, 2,500 employed doctors, 650 outpatient sites and a medical school partnership. It would become the nation’s seventh-largest not-for-profit health system by revenue, behind Livonia-based Trinity Health. But several critics of the deal say bigger is not necessarily better and the merger could lead to higher prices for employers and patients. On the other hand, they also say financial benefits could accrue to the merging health systems, helping improve quality and patient outcomes. See BEAUMONT on Page 16

FOCUS | ANN ARBOR REAL ESTATE  Student housing worries: Vast stock of off-campus private student housing could face a reckoning, depending on U-M’s fall semester plans. PAGE 8 Closures mount: COVID-19 takes a toll on usually strong downtown Ann Arbor. PAGE 9

NEED TO KNOW

THE DEFIANT BARBER

THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT ` WHITMER EXTENDS STATE OF EMERGENCY THE NEWS: Democratic Gov. Gretchen Whitmer has extended Michigan’s coronavirus state of emergency through July 16, keeping in place her ability to temporarily alter laws while she continues to loosen economic restrictions that have been in place since late March. Whitmer’s state of emergency had been set to expire Friday. It has been the subject of multiple legal challenges, including a lawsuit from the Republican-controlled Legislature that remains pending in the Court of Appeals. WHY IT MATTERS: The state of emergency is the underlying legal authority Whitmer has used to temporarily suspend certain laws, prohibit landlords from evicting tenants during the coronavirus pandemic and place restrictions on businesses that have been allowed to reopen.

` DETROIT PENSION FUND TAKES ON ELON MUSK THE NEWS: Tesla Inc. directors, including Elon Musk, awarded themselves massive compensation packages over a three-year period that improperly siphoned hundreds of millions of dollars out of the electric-car maker’s coffers, a pension fund representing Detroit police and firefighters said in a lawsuit filed Wednesday in Delaware. Tesla’s board members used their positions to

“enrich themselves at the company’s expense,” lawyers for the Police and Fire Retirement System of Detroit said in the 78-page complaint.

justed unemployment rate dipped in May to 21.2 percent from the revised up rate of 24 percent in April. WHY IT MATTERS: The figures are much higher than the national unemployment rate, which was 13.3 percent for May.

` WEISERS PLEDGE $30M TO DIABETES INSTITUTE Elon Musk

WHY IT MATTERS: Musk has for years been a lightning rod over executive compensation. In 2018, Tesla shareholders approved a controversial long-term incentive plan that offered the entrepreneur the chance to reap more than $50 billion from stock-option grants if the company increased its market capitalization to $650 billion and achieved other objectives.

` LOCAL EMPLOYMENT FIGURES LAG NATIONAL PICTURE THE NEWS: Metro Detroit continued to purge jobs in May despite a rosier national and statewide employment picture. The unemployment rate in the metro area increased to 23.2 percent in May, up from 21.5 percent in April, according to data released Wednesday by the Michigan Department of Technology, Management, and Budget. The unemployment rate for metro Detroit is up 18.7 percentage points since May 2019. For Michigan, the seasonally ad-

THE NEWS: Former real estate developer Ron Weiser, chairman of the University of Michigan Board of Regents, and his wife, Eileen, have committed $30 million to the Ann Arbor-based university to fund diabetes research and therapies. The gift will establish the Elizabeth Weiser Caswell Diabetes Institute, named for the Weisers’ daughter, whose husband and two of her three sons have Type 1 diabetes. WHY IT MATTERS: Anchored by a group of more than 250 researchers in diabetes, diabetic complications, obesity and metabolism, the institute will centralize and coordinate campus resources. It will bring together 20 departments within Michigan Medicine and 14 other UM schools.

` PISTONS HIRE NEW GM FROM OKLAHOMA CITY THE NEWS: The Detroit Pistons hired former Oklahoma City Thunder executive Troy Weaver as their new general manager Thursday. The 52-year-old Weaver

State drops license suspension of Owosso barber `The state of Michigan has lifted the suspension of a barber’s license, but he still faces a hearing for cutting hair while shops and salons were closed by Gov. Gretchen Whitmer. An administrative law judge on Tuesday granted the state’s request to lift Karl Manke’s suspension. Regulators said an “imminent threat” to public health no longer exists at the Owosso barbershop. Manke, 77, reopened his shop on May 4 in defiance of Whitmer’s order to keep barbershops and salons closed to prevent the spread of the coronavirus. Manke’s barber and business licenses were subsequently suspended, but he kept cutting hair. He still faces a July 15 hearing on the formal May 12 complaint filed by the Department of Licensing and Regulatory Affairs, known as LARA. Barbershops, salons and nail spas were allowed to reopen June 15 across Michigan. Karl Manke | DALE G. YOUNG

spent the past 12 seasons with the Thunder, including three-plus years as vice president of basketball operations. He served eight seasons as vice president/assistant general manager. WHY IT MATTERS: The Pistons had been without an official GM since overhauling their front office two years ago.

` CORRECTION ` A column on Crain’s May Days of Giving campaign in the June 15 issue incorrectly described CARES Act tax deductibility rule changes. The cap on deductions has been raised to 100 percent of adjusted gross income, up from a normal cap of 60 percent.

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Bankruptcies a trickle — but that won’t last Wave anticipated in second half of 2020 BY DUSTIN WALSH

See NEW CEO on Page 17

See BANKRUPTCIES on Page 15

ON FRAUD ALERT

GETTY IMAGES/ISTOCKPHOTO

The DMCVB efforts to market the region to attract meetings, conventions and tourism are funded primarily by a 2-percent assessment on occupied hotel rooms that hotels with more than 35 rooms in Wayne, Oakland and Macomb counties collect, Alexander said.

Detroit’s bankruptcy court has seen nary a corporate filing in the past three months as the economy tanked, but that doesn’t mean struggling companies won’t end up insolvent. Only one commercial bankruptcy has been filed in the U.S. Bankruptcy Court of the Eastern District of Michigan since Gov. Gretchen Whit- Wybo mer ordered businesses closed across the state to combat the spread of COVID-19. On March 24, the same day Whitmer’s “Stay Home, Stay Safe” order went into effect, Bedside Angels Home Care LLC in Ypsilanti filed for Chapter 11 reorganization. The inhome care business that started in 2015 to care for the owner’s grandmother fell behind in payments to a non-credit check business funder before the pandemic hit the state. No corporate bankruptcies have been filed in the region since the Coronavirus Aid, Relief, and Economic Security Act was passed on March 27. The courts were temporarily closed to in-person proceedings but digital filings remained ongoing throughout the closures. Comparatively, there were eight bankruptcy filings between March 24June 18 in 2019, when Michigan’s unemployment rate was as low as 3.7 percent in a strong economy, compared to an unemployment rate of 23.2 percent in May 2020 and the lowest consumer sentiment levels since late 2012. Experts believe many businesses are currently surviving on government loans, relaxed bank protocols, rent deferments and negotiations with customers. But their time is running out and a wave of bankruptcies is expected to splash down in the Eastern District starting in the coming months. “It’s unavoidable and inevitable,” said Steve Wybo, senior managing director of Birmingham-based turnaround firm Conway MacKenzie Inc. “Even the sharpest V-curve (economic recovery) possible won’t save everyone. Many companies went three months with no revenue and lots of those companies can’t go three months and survive in the long term.” For now, businesses are being floated by stimulus in the CARES Act, such as the Payment Protection Program which provides cash-flow assistance loans to small businesses. As of June 12, more than 115,000 businesses in Michigan have received more than $15.7 billion in PPP loans. However, the program’s limitations forced some businesses not to take the loans or not use them.

Banks warned to stay on guard for criminal unemployment transactions “THIS FRAUDULENT ACTIVITY MAY COME IN VARIOUS FORMS BUT OFTEN COMES IN THE FORM OF OUT-OF-STATE ACH TRANSACTIONS.” — Department of insurance and financial services memo

BY NICK MANES

Michigan’s banking regulators have alerted financial institutions in the state about new efforts criminals are undertaking to use bank accounts to collect fraudulent unemployment insurance payments. The state Department of Insurance and Financial Services and Unemployment Insurance Agency last week alerted banks to the type of fraud they could be unwittingly party to without “increased scrutiny” of electronic payments, or ACH payments. “It has come to our attention that banks here in Michigan and around the country are seeing a sharp increase in unemployment insurance

fraud,” according to a memo obtained by Crain’s from Aaron Luetzow, acting director of the banking division within DIFS. “This fraudulent activity may come in various forms but often comes in the form of out-of-state ACH transactions.” A specific example of the type of potential fraud goes like this, according to the memo: A bank customer would be recruited online by a fraudster who would offer a fee for granting access to the customer’s bank account. The customer would then be asked to withdraw the funds and wire them to the perpetrator using a different bank. Other times, criminals will deposit and pull the money out without the knowledge of the account holder.

“We strongly advise increased scrutiny of ACH transactions, especially those outside the norm for customer accounts,” the memo states.

Being vigilant Banks large and small say they’re at a heightened sense of awareness now that the potential vulnerability has been exposed. It comes at an already challenging time for financial institutions, given a sputtering economy due to the COVID-19 pandemic and resulting relief programs such as the Paycheck Protection Program, which inundated banks with applications for the potentially forgivable loans. See FRAUD on Page 15

TOURISM

Successor to retiring convention chief will face crisis head-on BY SHERRI WELCH

As the Detroit Metro Convention & Visitors Bureau searches for a new CEO, it will look for someone with not only destination marketing expertise, but turnaround skills as well. The bureau has slashed its budget by more than half by furloughing 60 percent of its employees and cutting other costs, following the cancellations of 104 meetings and conventions so far this year due to COVID-19. Its budget, $19 million early this year, has dropped to $9 million, taking it back to its level in 2009-10 after the Great Recession. For the region, the loss of events

over the past few months adds up to $200 million lost in direct spending on hotels, food and beverage and any other expenses, plus additional losses from tourAlexander ists who didn’t come, said CEO Larry Alexander, who publicly announced his retirement last week, after alerting the DMCVB’s board to his year-end retirement plans before COVID-19 took hold of Southeast Michigan.

“I think this is the worst that I’ve seen, and it’s my third crisis, having gone through 9/11 and the recession of ‘09,” he said. He’s optimistic the tourism and convention and meetings will return to Detroit, based on feedback from economists and meeting planners. But it’s a question of how long before they do and to what degree. “It appears that it may take between 12 quarters and 18 quarters for the travel industry to return to where it was before COVID. Those are some of the predictions out there,” Alexander said. But even then, “we don’t know what the other side is going to look like. … will it be a half … or a third as

strong?” he said. “Confidence has to be built up in the traveling public and meeting planners to rebuild and secure business locations like they did in the past.”

Lost funding

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

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Last month, home sales fell 67.9 percent from 8,867 in May 2019 to 2,845. | GETTY IMAGES/ANDY DEAN PHOTOGRAPHY

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May home sales shattered record lows, but June is picking up

Contact Laura Picariello at lpicariello@crain.com

Kirk

PINHO

April: â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;m the worst single-family housing market in Metro Detroit in at least 15 years!â&#x20AC;? May: â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;m gonna set my beer down here for you to grab and hold after I step 6 feet away. Please use hand sanitizer

and/or gloves.â&#x20AC;? The single worst month for home and condominium sales in at least 15 years in the multiple listing service was decidedly dethroned last month, according to data released this month. Farmington Hills-based Realcomp Ltd. II says May shattered Aprilâ&#x20AC;&#x2122;s yearover-year sales plunge in overwhelming fashion. Last month, home sales fell 67.9 percent from 8,867 in May 2019 to 2,845; they tanked by 46 percent in April across the MLSâ&#x20AC;&#x2122;s 15 counties. In-person home showings were banned for the first portion of May, people generally were required to stay at home and the economy continued its precipitous drop, Home sales are also down 25.4 percent year-to-date, falling to 24,533 from 32,904 in the same time period. Pending sales in the MLS are also down 13.9 percent year-over-year, falling from 9,093 to 7,833 last month; year-to-date, that figure is down 22 percent, dropping from 37,493 to 29,252. However, Karen Kage, CEO of Realcomp, said that pending home sales

for the first two weeks of June are faring much better, up 16 percent yearover-year, from 4,599 June 1-15, 2019 to 5,330 for those same two weeks this month. She said the sales that closed in May probably would have occurred in March or April were it not for stayhome orders. â&#x20AC;&#x153;Buyers have been quicker to return to the housing market in force than sellers, who have been showing a bit more reluctance to list their homes than is typical for this time of year. But trends are improving and as states and localities continue to moderate their COVID-19 policies, real estate activity is expected to continue to improve in the coming weeks,â&#x20AC;? Realcomp said in its summary of its data.

â&#x20AC;&#x153;BUYERS HAVE BEEN QUICKER TO RETURN TO THE HOUSING MARKET IN FORCE THAN SELLERS, WHO HAVE BEEN SHOWING A BIT MORE RELUCTANCE TO LIST THEIR HOMES THAN IS TYPICAL FOR THIS TIME OF YEAR.â&#x20AC;? â&#x20AC;&#x201D; Karen Kage, CEO of Realcomp

Median sale prices in the MLS inched upward 0.5 percent from $185,000 in May 2019 to $186,000 last month; that figure is up 5.3 percent year-to-date, from $170,000 in 2019 to $179,000 this year. New listings fell by

21 percent in the MLS, from 14,558 to 11,505, and 26 percent year-to-date, from 53,879 last year to 39,873 this year. â&#x20AC;&#x153;That would have driven those prices up a little bit,â&#x20AC;? Kage said of the decline in inventory. Here is the breakdown for Metro Detroit: ` Metro Detroit region: Sales fell 70.1 percent to 1,707 properties, down from 5,702 in May 2019, while median sale prices dropped 3.8 percent, from $200,000 to $192,500. ` City of Detroit: Sales fell 60.1 percent from 411 in May 2019 to 164 last month, while median sales prices rose 5.5 percent from $43,610 to $46,000. ` Wayne County: Sales fell 67.7 percent from 2,007 to 648 last month, with a 0.5 percent increase in the median sales price to $144,750, up from $144,000 in May 2019. ` Oakland County: Sales fell 72.3 percent to 551, down from 1,990 in May 2019. Median sales prices fell 1.9 percent to $255,000 from $260,000. ` Macomb County: Sales dropped 69.8 percent, from 1,354 to 409. Median sales prices dropped 2 percent to $175,000, from $178,500. ` Livingston County: Sales fell 71.8 percent to 99 properties, down from 351 the prior year. Median sales prices rose 1.4 percent to $283,800, up from $280,000. ` Washtenaw County: Sales fell 64.5 percent to 648 units, down from 2,007 in May 2019. Median sales prices rose 0.5 percent to $144,750 from $144,000. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

CRAINâ&#x20AC;&#x2122;S AWARDS

Last chance to nominate a Notable Woman in Design Time is running out to recognize Michiganâ&#x20AC;&#x2122;s women leaders in design. The deadline to nominate a candidate for Notable Women in Design is Friday, June 26. After being nominated, candidates will receive an email and have 4 | CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS | JUNE 22, 2020

until Friday, July 3 to complete a separate application. Honorees will be featured in a special section in Crainâ&#x20AC;&#x2122;s Detroit Business on September 14. Weâ&#x20AC;&#x2122;re looking for accomplished women leaders from all sectors of de-

sign, including commercial, architectural, industrial, package, fashion, graphic and web design. For more details or to nominate, visit crainsdetroit.com/nominate or contact Special Projects Editor Amy Bragg via email: abragg@crain.com.

RETAIL

Gardner-White aims to capture market left by Art Van closure Auburn Hills-based company shifts strategy to attract customers, talent after rival’s bankruptcy BY LAILA HMAIDAN

In an effort to drive up sales in 2020, Gardner-White Furniture Co. Inc. is working to take over a market that lost its biggest player to bankruptcy in early March. The Auburn Hills-based company strategy? Staffing up and pulling a page from Art Ven Furniture’s marketing playbook. G a r d ner-White hired The Sussman Agency to overhaul its marketing efforts. The Southfield-based marketing and advertising firm worked with Wa r r e n - b a s e d Stewart Art Van Furniture for 10 years prior to its bankruptcy and closure. Now it plans to reshape Gardner-White’s approach to appeal to new customers. The marketing and advertising agency aims to connect the Gardner-White brand on a more emotional level with consumers. As part of the move, two industry veterans, Jeanette McNamara and Andrea Tignanelli, were hired, both of whom were marketing executives at Art Van. “What we are going to do is simply include more people who have not shopped at Gardner-White. Art Van had a much broader appeal to the market. We plan on broadening out that appeal not just with advertising but with product because we can’t just say we have something, we have to bring in more furniture, new ideas and change how they go to market,” said Alan Sussman, president of The Sussman agency. Gardner-White plans to refine its in-store merchandising strategy, promotional plan and product lineup. Announcements on those plans will be made in the next few months. Gardner-White President Rachel Tronstein Stewart plans to lead the company into its next chapter to become consumers’ first choice now

nual sales and operates a 500,000-square-foot distribution center in Auburn Hills.

State of the industry

“It’s an interesting moment to be in home furnishing because everyone’s home has been turned into a school, office, movie theater and restaurant,” Gardner-White President Rachel Tronstein Stewart said. | GARDNER-WHITE

that its main mid-market competitor is gone. “It’s an interesting moment to be in home furnishing because everyone’s home has been turned into a school, office, movie theater and restaurant. People are thinking about their homes more now than they ever have,” Stewart said of the shift in work habits during the coronavirus pandemic.

Boosting the team First, the company is focusing on hiring 250 people to add to its team — positive news for metro Detroit’s job market. Art Van’s bankruptcy left thousands out of a job the same month the country went into lockdown. The positions available at Gardner-White come with benefits packages, including health care coverage that begins on the first day of employment. “We are looking to fill various corporate, customer service, sales, drivers and warehouse positions immediately,” Stewart said in a news release. She also encouraged former Art Van employees to apply. “We feel for all the thousands of Art Van employees who found themselves without a job and without health care. We are

CRAIN’S AWARDS

Best-Managed Nonprofit nominations open July 6 Crain’s Best-Managed Nonprofit program this year will focus on how nonprofits are adapting their operations to continue meeting their missions in the age of COVID-19. This could include efforts related to how your organization has shifted to deliver programs, manage volunteers or fundraise in response to safety concerns that have become a way of life and of doing business in the wake of the pandemic. Nominations open July 6 on Crain's website and close at 5 p.m. Aug. 7. Finalists must appear for in-person interviews with judges the morning of Monday, Oct. 19. Applicants will be considered with similar-sized organizations. The winners will be profiled in the Nov. 30 issue, receive a “best-managed” logo from Crain’s for use in

promotional material and will be recognized at Crain’s Newsmaker of the Year luncheon early next year. Applicants for the award must be a 501(c)(3) with headquarters in Wayne, Washtenaw, Oakland, Macomb or Livingston counties. Applications must include an entry form, a copy of the organization’s code of ethics, a copy of its most recent audited financial statement and a copy of its most recent IRS 990 form. First-place winners within the past 10 years are not eligible; neither are hospitals, HMOs, medical clinics, business and professional organizations, schools, churches or foundations. To submit a nomination, go to CrainsDetroit.com/nominate. Questions? Email senior reporter Sherri Welch at swelch@crain.com.

reaching out to them and would welcome them to come and apply,” she said. Stephen Viscusi, founder of The Viscusi Group, an executive recruiting firm that specializes in hiring talent for the interior furnishings industry, said it would be naive not to go after people who already know furniture and have a customer base that they can bring to the business. “I am quite confident by them recruiting Art Van executives they will bring their customers and know-how expertise,” Viscusi said. “The salespeople were the everyday bread and butter of the business. They are knowledgeable and were experts at upselling the customer because they knew how to put together the best fabrics and furnishings. If you have a

quality salesperson that knows how to explain the product, chances are, I’d spend more money.” Art Van filed for Chapter 11 bankruptcy protection in early March, three years after its late founder, Art Van Elslander, sold the company to a Boston-based private equity firm, Thomas H. Lee Partners LP . A Dallas-based equity firm is also looking to hire previous Art Van employees, more than 1,000 to be precise. The private equity firm obtained 27 former Art Van stores with plans to reopen as Loves Furniture. Southeast Michigan locations acquired by Loves include Warren, Royal Oak, Livonia, Waterford, Ann Arbor, Westland, Howell, Shelby Township and Taylor. Gardner-White has 11 stores, does more than $150 million in an-

Its expansion comes at a rocky time. Although consumer spending on furnishings and durable household equipment has been on the rise since 2015 according to the Federal Reserve Economic Data, the coronavirus-related shutdowns and spread of COVID-19 led to a drop in consumer confidence. Revenue growth for the furniture stores industry is expected to decline 4.2 percent in 2020, according to IBIS World. Although consumers increased their spending at furniture stores by 90 percent last month, sales are still down by more than 21 percent from the previous year, the Associated Press reported. Despite the shifting economic uncertainty and new competition in town, Sussman believes the success of Gardner-White will be based on trust — something he believes Gardner-White has earned with four generations of a local family-owned business. “It’s night and day … here is a company in business for 75 years, it’s part of the fabric of their family. A venture capital (firm) comes in thinking this is a good deal, I want to make some money, so what they do is come in, make some money and sell,” Sussman said. “You don’t see a lot of long-term business when they are venture capital, they are looking to make a quick hit. That’s not what Gardner-White is about.”

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JUNE 22, 2020 | CRAIN’S DETROIT BUSINESS | 5

COMMENTARY

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

As fall tuition comes due, so do more questions

COMMENTARY

Project Green Light has helped make city safer Mary

KRAMER

Group Publisher and 94 during that same period in 2019. During that same time, the city also improved street lighting and hired more patrol officers. What critics see as “mass surveillance,” I see as business owners securing their premises by monitoring activity to keep their customers and employees safe. It’s one tool among many in community policing. Let’s remember: High crime rates and poor schools have pushed residents out of Detroit for decades. Duggan is focused on increasing Detroit’s population as fervently as Detroit public schools chief Nikolai Vitti is on improving education in the city. The bigger question, I think, is what happens after a suspect is identified and enters the justice system. If guilty, does the punishment fit the crime? Is the guilty party a candidate for a program to address underlying issues that led to the crime? Without some kind of intervention, is he or she liable to commit a crime again? That’s an important conversation policy makers and community leaders must have. Meanwhile, I suspect many Detroiters feel safer stopping for gas, visiting a convenience store or shopping for groceries when they see a Green Light.

ROOT

Executive Editor ful of a second wave of infections. That’s understandable but doesn’t help students and parents make critical financial and career-planning decisions now. UM’s fall payment plan, which spreads the semester cost into monthly installments, starts billing in June. But what are we actually paying for? How many classes will meet in person, and what kind of labs, clubs and extracurricular opportunities will still be available? Again — faith. This spring’s virtual coursework was disappointing for my Wolverine. Her professors were engaged and accommodating, but given the cost of attending a Big Ten university, remote lectures are no substitute for in-person learning. All of which spells trouble for traditional higher education in Michigan, particularly smaller and more affordable regional institutions. A Brookings Institution report last week showed the pandemic has hit those campuses especially hard. Declining enrollment is hammering places like Western Michigan, Central Michigan and EMU. Unlike their bigger counterparts, they have fewer options to shore up their budgets. State aid to Michigan’s 12 universities increased by just 0.9 percent in the 2019-20 fiscal year, well below the 1.75 percent rate of inflation. Universities are under more scrutiny than ever as families make tough choices about cost, debt and the value of a four-year degree. If COVID drives even more students away, some may not survive the long slog toward a vaccine. My daughter and her classmates debated taking the term or even the year off if classes remained online-only. UM’s signal toward in-person instruction convinced her, reluctantly, that returning made sense. She’s so close to the finish line. Like so much else in These Uncertain Times, only time will tell. Kelley Root is the executive editor of Crain’s Detroit Business.

Mary Kramer is group publisher of Crain’s Detroit Business.

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

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. 6 | CRAIN’S DETROIT BUSINESS | JUNE 22, 2020

Kelley

LARRY PEPLIN FOR CRAIN’S

Peaceful protests over the death of George Floyd are leading to important and urgent conversations about race and justice throughout the country, from dinner tables to board rooms (even on Zoom). But in Detroit, one demand by protesters — to eliminate Project Green Light — could hurt the city more than it helps. City officials argue the real-time video surveillance initiative that started in 2016 has reduced crime and has wide community support. In a press briefing this month, Mayor Mike Duggan said: “When (protesters) take a position that we should get rid of Green Light, the great majority of community activists in Detroit don’t agree with that.” I’m not a “community activist” by definition, but as a crime victim and 30-year city resident, I’m with the mayor on this one. I suspect other crime victims — and many business owners — will be, too. When I was carjacked on Jefferson Avenue around 6:30 a.m. in 2008, I believe the crooks targeted me when I stopped to get gas. I THE GREEN was rear-ended a LIGHT MAP ON half-block away. Would that have hapTHE CITY’S if the crooks WEBSITE SHOWS pened knew they were on “candid camera”? MOST Today, the Green COMMERCIAL Light map on the CORRIDORS ARE city’s website shows most commercial SATURATED BY corridors are saturated by cameras. The CAMERAS. cost to a business is under $5,000 for equipment and monthly fees to maintain that vary, but are about $3,000 a year. The investment seems to pay off — and might actually reduce the cost of business insurance. Since Project Green Light was created, carjackings have dropped nearly 60 percent in one review. A city report in 2019 showed 222 occurring during January-June in 2015

The first installment of my daughter’s fall 2020 college tuition payment came due last week. I paid it with a bit of reservation and a lot of faith. Faith that the University of Michigan will prioritize safety, whatever return-to-class looks like. Faith that UM’s plan to offer at least some in-person instruction is worth the high cost of living in Ann Arbor. Faith that my daughter’s senior-year classes, and ultimately her liberal arts degree, will serve her well in the chaotic and uncertain time in which she will graduate. Plenty of parents, and students, are wondering what college will look like post-COVID, from cramped dorm rooms to cavernous lecture halls. My daughter is lucky to have her own room in a house off campus, but many others are questioning whether the traditional — and expensive — communal college experience makes sense during a pandemic. Meanwhile, we wait for any scrap of news about fall plans. But specifics are hard to come by as universities try to balance safety with the potential blow to their bottom line. Coronavirus has forced some creativity: Eastern Michigan University, for example, is offering single dorm rooms at a much lower cost this year to lure students to campus during a time when enrollment is already declining. Will it work? “It’s hard to read the tea leaves in the middle of a pandemic,” EMU President James Smith told Crain’s reporter Kurt Nagl last week. Michigan State is trying to keep newly admitted freshmen engaged by allowing them to get a low-cost jump on their studies. For the first time, the university is offering freshmen and transfer students the chance to enroll in up to two summer courses at a substantial discount. “We know the last few months have been stressful … We hope this opportunity helps you engage with the Spartan family right away,” an assistant dean, James Lucas, wrote in a June 10 email to students. Grand Valley State says it’s already well-suited to social distancing given that 80 percent of its dorms offer private rooms and bathrooms. And in a June 2 memo to students, UM promised “a public health-informed fall semester on our three campuses safely and with as much in-person instruction as possible.” More details are coming — presumably. Many universities are reluctant to be specific as the state gradually re-opens, no doubt fear-

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

Immigrants should acknowledge their debt to Black people BY QUAID SAIFEE

I have been blessed to live in this country for the last 30 years. I became a United States citizen in 2001. I co-founded a company before even becoming a Quaid Saifee is citizen, and that president of has enabled me Troy-based to support a faminformation ily of five. For technology somebody like company WIT me, who is living Inc. the American Dream and none of the nightmare, it has been a good bargain. My story is not unique. There are millions of immigrants like me who came to study in the United States and now work in IT or for major corporations. Most of my fellow Indian American immigrants live a comfortable life in a suburb, far from the hassles and problems of urban America. Normally, the belief is that immigrants come here, work hard and then achieve the American Dream. Many of us believe that since we were not here during America’s dark past, and neither were our ancestors, it should not concern us. But this mindset keeps immigrants in a dangerously comfortable bubble while allowing us to reap the benefits of being a minority in this country with no understanding of who has truly suffered the most. When the company I co-founded in 1996 got into trouble because of the .com bubble bust, a friend of mine advised me to get my company certified as a Minority Business Enterprise from a local organization called the Michigan Minority Business Development Council, now part of the National Minority Supplier Development Council. Throughout the U.S., major corporations with good intentions or internal quotas to meet seek out MBEs to do business with. My company, WIT, had a breakthrough because of its status as an MBE. A major corporation in Michigan became one of our biggest clients and that gave our business the push it needed. Although they may be minorities, the experiences of non-Black people of color cannot be compared to that of Black Americans in this country. Black people have suffered the most while also contributing the most. Without their struggle for equal rights, I would not have been able to build a home in this country. The Immigration and Nationality Act of 1965 could not have passed without the passage of the Civil Rights Act of 1964. I am figuratively standing on the shoulders of Civil Rights giants. We immigrants acquired our privilege because of the struggle of our Black brothers and sisters. Now we are shafting them by calling ourselves a disadvantaged minority. The founding of America brought destruction to indigenous nations and the building of America brought a barbaric brutality on Black people. It is not lost on me that non-Black people of color face their own set of struggles in this country, whether they are an immi-

grant or not. But ultimately these came Jim Crow, and finally, the struggles are not the result of hun- present-day era of mass incarceradreds of years of oppression that tion as a result of a brutal police are deeply woven into every major state. For many immigrants, this institution in America, proWE IMMIGRANTS ACQUIRED OUR ducing a hardto-escape cycle PRIVILEGE BECAUSE OF THE STRUGGLE OF of trauma and often poverty. OUR BLACK BROTHERS AND SISTERS. NOW Our Black broth- WE ARE SHAFTING THEM BY CALLING ers and sisters suffered through OURSELVES A DISADVANTAGED MINORITY. 244 years of slavery after being brought here in history, pain, struggle, and experichains. Even after so-called eman- ence is invisible. We simply remain cipation, they suffered through bystanders or worse. So I am asking Corporate Amerilynchings and constant terror. Then

ca, when they publish their numbers on diversity and minority business dealings, to distinguish between Black people and nonBlack people of color. I have a background in statistics and analytics, and I know well how numbers can be deceiving. By using the broader word diversity, Corporate America has been intentionally or unintentionally hiding the real numbers. When a corporation publishes that it does 15 percent of its business/spending with minorities, this could and often does mean that out of that 15 percent, around 12 percent is spent with Asian businesses,

2 percent with Black businesses, and 1 percent with Latino/a businesses. When a company says that it is committed to diversity within its ranks, this could mean they hire lots of Asians, but it does not speak to how many Black employees they have or are willing to have. Silicon Valley is the starkest example. It is about time Corporate America reveals the true numbers of Black participation and inclusion in their respective organizations. And I hope immigrants realize that our silence, our complicitness, and our willful ignorance are a shame to direct at the very people on whose shoulders we stand.

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FOCUS | WOMEN IN LEADERSHIP

‘Once in a person’s career’

Lockton’s Elaine Coffman on taking a risk, leading a team and recruiting young talent BY RACHELLE DAMICO | SPECIAL TO CRAIN'S DETROIT BUSINESS

Nonstop phone calls from a persistent recruiter turned into a career opportunity for Elaine Coffman. Last year, Coffman had a 17-year career with insurance agency Marsh & McLennan, with no plans to move on. Then, a recruiter with Lockton Companies, a global insurance brokerage, called her repeatedly about a job opportunity. “Detroit’s a major market for any firm working in the employee benefit business insurance space and to have the opportunity to launch an office comes along once in a person’s career,” Coffman said. “It was time for me to take a risk and do something that I’ve never done before in a business that I care a lot about.” Now, Coffman is president of the Michigan office of Lockton Companies, the world’s largest independent insurance brokerage. The Kansas City, Missouri-based firm has 7,500 employees and generated $1.88 billion in revenue last year. Lockton opened its first Michigan office in Detroit in 2016. The firm plans to open an office in Birmingham this year and an additional office in Grand Rapids next year. Coffman is tasked with attracting and building a team to lead Lockton’s expansion in the state. As president, she is responsible for the overall growth of Lockton’s Michigan team. Coffman and her team provide and administer benefits and property and casualty insurance to help companies protect their people, property and reputation. “In hard times, complex times, people need great advisers,” Coffman said. “An individual employer can’t create the wheel themselves to solve all these things.” ` What drew you to the insurance business? I was dating my husband, Jason, at the time. We met at Wayne State University and he was going to an Andersen Consulting (now Accenture) career fair. I knew some people in their health care practice who had also gone to WSU, so I went with him. When we left I said, “You know, I might want to apply for a job here.” He looked at me like, “What?” I had functional knowledge going into Andersen Consulting, because I had worked for a broker helping employers with their health care plans in college. (Andersen Consulting) hired finance grads and could teach us how to code and do project plans. It was great because I got to do something very different than I’d ever done before and I learned a lot in the two years. While I was at Andersen Consulting in their health care practice, I worked on the insurance plan side in Denver for Blue Cross (Andersen’s client). Once you know an industry and enjoy it, your career progresses naturally in it. Jason and I both worked for Andersen Consulting in separate states for four years. It was time for me to get off the travel wagon, especially because it

12 | CRAIN’S DETROIT BUSINESS | JUNE 22, 2020

“He said, ‘Our CEO is coming into town next week,’” Coffman said. “‘He’s told me my only job is to make sure that he has a meeting with you.’” Coffman met with Lockton’s CEO and a group of leaders at the Detroit Athletic Club, where she planned to tell them that she wasn’t interested. Instead, the group hit it off, and Coffman was excited to learn that she’d have the opportunity to build a team for the firm’s Detroit office.

“IN HARD TIMES, COMPLEX TIMES, PEOPLE NEED GREAT ADVISERS. AN INDIVIDUAL EMPLOYER CAN’T CREATE THE WHEEL THEMSELVES TO SOLVE ALL THESE THINGS.” — Elaine Coffman

The Coffman File Education: Bachelor’s degree in finance, Wayne State University Career ladder: While attending Wayne State University, Coffman worked for Health Decisions, a Southfield-based consulting firm, where she helped employers with their health care plans as an account manager and financial analyst. After graduating from WSU in 1993, Coffman worked as an analyst for Andersen Consulting (now Accenture), a global health consulting firm headquartered in Dublin, Ireland. Coffman worked in the health care practice of the firm’s Detroit office, where she helped clients improve processes, products, services and software through data analysis and project management. Two years

wasn’t going to be my long-term passion. I later joined SelectCare doing clientfacing work. My passion has always been the employer side of this business. That’s where I’ve stayed. ` What were some early leadership lessons for you? I had my first management job at SelectCare, where I led a team of account managers. You think your job is to solve problems, but a lot of times your job is to listen, understand people and help them work through things themselves. I learned that as a leader, you have to be able to treat people like adults, be a macro manager and work with them. People need to understand why we’re doing something

later, Coffman left Accenture for SelectCare, a health care insurance provider based in Troy. Coffman started as an account manager and worked her way up through the management ranks to vice president of marketing, becoming the youngest VP in the organization. She remained at SelectCare for five years until joining Great-West Healthcare, a national health care and retirement services provider that was headquartered in Denver, Colorado. Coffman worked as a regional manager of Great-West’s Michigan office. Next, Coffman joined Troy-based insurance agency McGraw Wentworth in 2002 (which sold to Marsh & McLennan Agency in 2012), where she worked for 17 years. Coffman was a shareholder, business owner

and what we’re trying to accomplish. It’s important to set a common goal for the team as opposed to just for myself. Good leaders also have to learn how to do hard things, whether that’s counseling someone out of a job or helping somebody improve their performance where they’re struggling. That was an early challenge for me. High performers on your team can’t be the ones to bear the burden for your low performers. I’m not going to manage to the lowest common denominator, I’m going to manage to the highest. We’re going to get everybody up there or they’re not going to be on the team. It sounds harsh, but you owe it to your talented people to make sure that’s the team that they have.

and practice leader at the insurance agency, where she specialized in the automotive industry. In her roles, she consulted with clients to engage and retain talent and helped shape the direction of the organization. Coffman left Marsh & McLennan in 2019 to join Lockton Companies as president. Mentors: Coffman’s grandmothers and her mother were early mentors who helped inspire her careers. “Each of these women encouraged me to be anything and everything I could be,” Coffman said. “No boundaries, no expectations of what I should or shouldn’t do.” Current role: President — Michigan office and shareholder, Lockton Companies

` What drew you to Lockton? From my first conversation with them to throughout the interviewing process, Lockton focused on culture and people first. It wasn’t this dry conversation about revenue, growth and sales. It was a conversation about how I build a team and have a high performing culture. I’ve got leadership here that I would run through walls for because of how committed they are. I haven’t felt that in a while. One of the reasons I took the job is that I was going from a publicly traded company to a privately held one. Lockton is the eighth largest global broker in the world and we’re the only one in the top 10 that’s privately held.

When I was a shareholder at Marsh & McLennan, our profit targets were somewhere around 10-13 percent. With the publicly traded private equity firms now that dominate Southeast Michigan, profit targets are 35-40 percent. You just can’t service clients the same way. The gross margin requirement made it impossible for me to keep doing the level of work I wanted to do for my clients. Lockton hasn’t been acquired and they don’t acquire other businesses. They got there organically and it’s allowed them to have a strong culture. More of the revenue dollars are delivered to the front lines rather than being thrown to shareholders. ` You’re building Lockton’s Michigan office. How do you find good candidates? Recruiting in our industry is interesting. Between 20-50 percent of our industry is retiring in the next five years. Not many millennials are looking to graduate from college and start in the insurance industry. We’ve had to come at this differently. We’ve been on campuses recruiting some of our younger talent. Lockton’s got a great internship and post-graduate program. We have a couple of people starting a two-year training program to prepare them for service roles. We’re already investing in the future, which is rewarding. We also have experienced talent we’ve pulled in who were in positions at companies that have overloaded them with more clients than they can actually support. They want to spend more time taking care of their clients. We think a privately held model in Detroit is going to end up attracting the best talent from our industry. We’re also going to have two offices, one in Detroit and one in Birmingham. (Employees) have the option to work from either office. ` What’s one of the most substantial insurance claims you’ve seen at Lockton? We have a client at another Lockton office where they have (an employee) that’s been in the hospital for over a year. The bill last year was $24 million for the year and it’s an ongoing claim. If you’re an employer with 300 employees and you’re not Walmart or Ford, your business could go under if you’ve got to pay a medical claim like that. Good advisers will be ahead of those issues as much as they can and will bring every solution to bear to solve a problem like that. See COFFMAN on Page 14

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PEOPLE ON THE MOVE

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HEALTH CARE

Cole, Newton & Duran CPAs

Doolin Haddad Advanced Dentistry

Christopher Boloven has been named managing partner and chief operating officer at Cole, Newton & Duran CPAs (CND). Christopher is also the chief legal officer at CND and managing member of CND Law. He will be responsible for overseeing the direction of the firm for current and long-term profitability, while managing employee growth and development. He specializes in tax planning, tax controversy, corporate, business and commercial law, mergers and acquisitions, probate and estate planning law.

Nina Daws, DDS has joined Doolin Haddad Advanced Dentistry, a Rochester dental practice focused on cosmetic, implant and restorative dentistry. Dr. Daws holds a Doctor of Dental Surgery degree with honors from the University of the Pacific and a B.S. in biomedical engineering from the University of California, Berkeley. “Dr. Daws shares our patient-focused commitment to providing optimal dental care using the latest dental approaches, technology, and safety protocols,” Dr. Jeff Haddad said.

CONSTRUCTION

HEALTH CARE

Roncelli, Inc.

Henry Ford Health System

Roncelli, Inc. appointed Gino Roncelli as the construction company’s new vice president. Gino brings a wealth of construction industry experience to this role. Before being named Vice President, Gino served in executive positions as Principal and General Counsel, building business opportunities in the Detroit construction market. Gino demonstrates a keen understanding of Roncelli’s position in the industry. He plans to lead the company forward into new markets and opportunities.

David J. Breen is the new chair of Henry Ford Health System’s Board of Directors. Breen, a resident of Grosse Pointe Park and retired business leader, leads the 14-member board responsible for the fiduciary and governance oversight of the health system. This includes financial and management performance, strategic planning and community relations advocacy. In 2016 Breen retired from PricewaterhouseCoopers after a 42-year career serving in national and global management roles.

FINANCE

Federal government rolls out simplified paycheck protection forgiveness forms BY NICK MANES

The EZ application applies to borrowers who: ` Are self-employed and have no employees, or ` Did not reduce the salaries or wages of their employees by Tierney more than 25 percent, and did not reduce the number or hours of their employees. ` Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25 percent.

Both applications give borrowers the option of using the original eightweek covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. The extended period in which loans can be used is the result of legislation signed earlier this month by President Donald Trump. Michael Tierney, president and CEO of the Community Bankers of Michigan trade group, concurred that the new forms will make for a much simpler process for all parties and should save hours of work. The updated forms, Tierney said: “are exactly what small business owners, bankers and CPAs needed.”

` CONTRACTS

` EXPANSIONS

` Near Perfect Media, Bloomfield Hills, a public relations firm, has been named the agency of record for The Inn on Water Street, Marine City, a hotel; Plymouth Technology Inc., Rochester Hills, an oil and natural gas company; and United Way of Great Toledo, Toledo, Ohio, a social services organization. Websites: nearperfectmedia. com innonwaterstreet.com ptiwater. com unitedwaytoledo.org ` DeMaria, Detroit, a construction firm, was awarded the contact to build a service garage for D’Angelo Brothers Utilities, Farmington Hills, an excavating contractor. The project includes building a 23,000-squarefoot vehicle maintenance garage with wash bay and office area at 30790 Eight Mile Road in Farmington Hills. Website: demariabuild.com ` Siren PR, Royal Oak, a communications firm, has new contracts with: Royal Oak Downtown Development Authority; Brinker Group, Detroit, commercial contractors; The Headhunters LLC, Bloomfield Hills, a recruiting and placement firm; and Wightman, Royal Oak, an architecture and engineering firm. Websites: siren-pr.com, romi.gov/101/Downtown, brinkergroup.com, theheadhunters-us.com, gowightman.com

` Chase Plastic Services Inc., Clarkston, a distribution service, completed an expansion of its South Bend Central Distribution Center, originally built in 2016. The $4 million addition, which broke ground last year, increases the warehouse capacity by more than 60 percent with an added 80,000 square feet to accommodate additional storage for more than 9 million pounds of material, giving a total capacity of 206,000 square feet. The updated facility includes five additional loading docks as well as a new blender, equipment upgrades and expanded repacking capacity. Also, Chase Plastics recently announced an agreement with Lanxess Corp., Pittsburgh, Pa., a specialty chemicals company, to supply Durethan PA6 (Polyamide 6) and Pocan PBT (Polybutylene Terephthalate) to Chase Plastics’ lineup of thermoplastics. Websites: chaseplastics. com

dence analytics that analyzes data sources for use in health data mining. Website: mmsholdings.com

COFFMAN

“WOMEN HAVE STRENGTHS IN TERMS OF BEING ABLE TO BUILD CLIENT RELATIONSHIPS AND MANAGE LARGE CLIENT ACCOUNTS.”

The Trump administration on Wednesday rolled out “revised, borrower-friendly” loan forgiveness applications for recipients of the federal Paycheck Protection Program. The new forms, which include an EZ forgiveness application, are each five pages and require fewer calculations and less documentation, the U.S. Small Business Administration and U.S. Treasury said in a joint statement. “These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan,” according to the statement.

DEALS&DETAILS

ENGINEERING / DESIGN

From Page 12

Spalding DeDecker

It’s also interesting that the polar vortexes in the Midwest have cost insurance companies more than the wildfires in California because of water damage claims. The whole industry is challenged by claim levels hitting insurance dollars. Then we have to deliver the message back to employers that premiums are going up. It’s the challenge of the overall industry right now. I’ve never seen the level of claim activity on the business insurance side and the health care side that we do today.

14 | CRAIN’S DETROIT BUSINESS | JUNE 22, 2020

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` Now that businesses are starting to reopen, what should they be thinking about during the COVID-19 pandemic? Reopening plans will vary significantly for each organization and location based on industry. Company leaders need to assess their workforce to determine what is right for their business and develop a plan accordingly.

` NEW PRODUCTS ` MMS Holdings, Canton Township, a clinical research organization, launched Datacise, a tech platform for data science and real-world evi-

— Elaine Coffman

There is a lot for leadership teams to consider. That starts with logistics, including daily arrival and departure procedures, workplace safety measures and sanitation, social distancing and PPE, and testing and contact tracing. Before bringing employees back, employers should look at the company’s productivity under the current working model versus bringing every employee onsite. Determine if work-from-home strategies make sense long term and prioritize which roles need to return first and when. It is also an important time to reassess employee benefits, travel and attendance policies. Most importantly, all businesses need to follow Centers for Disease Control and Occupational Safety

` NEW SERVICES ` TrialAssure, Canton Township, a software company, is giving academic institutions free access to TrialAssure Registry for two years, allowing academics to register and share clinical trial results in a timely manner according to federal government guidelines. Website: trialassure.com

` NEW SERVICES ` Collins Einhorn Farrell PC, Southfield, a law firm, has launched a new website, ceflawyers.com. New features include a news page, a blog categorized by areas of interest, updated biography pages and careers and diversity pages. ` Qualitech, Bingham Farms, a techology company, has upgraded the computer network of Signal Restoration Services, Troy, a property restoration general contractor, with professional Datto Managed switches, Datto Managed power devices and multiple APCs by Schneider Electric. Websites: qualitech.net, signalrestoration.com and Health Administration return-towork guidelines to help keep employees safe and mitigate risk. Lockton has developed a comprehensive COVID-19 testing guide and return-to-work site toolkit that is an excellent and thorough resource for companies of all sizes across industries. ` Do you have any advice for women who are hoping to join the industry? This industry is a fantastic industry for anybody that’s looking to invest and build a career because there’s so many people that are going to retire. There’s a ton of opportunity. About 45 percent of people that are entering our industry are women. There’s only 18 percent in the C-suite, but that’s going to change drastically in the next 5-8 years. I believe that it’s a great industry for anybody starting their career, but women in particular have the ability to be successful. Women have strengths in terms of being able to build client relationships and manage large client accounts. Women have strong emotional intelligence and it takes strong emotional intelligence to do this job.

From Page 3

Banks and landlords are also much more forgiving right now, allowing businesses to default on loans temporarily or break traditional contract requirements on receivables, for example. Since the Great Recession, banks had positioned themselves with more liquidity making them able to “absorb higher credit losses” during the coronavirus recession, the U.S. Federal Reserve said in its semi-annual report in May. “The global banking system is more resilient and better placed to sustain financing to the real economy as a result of regulatory reforms enacted, and measures taken by the banking industry, in the aftermath of the 2008 global financial crisis,” the report said. And because the future is so murky — Who will win the presidential election? Will there be a second wave spike of COVID-19 cases? Will there be more economic shutdowns? — it’s nearly impossible for a company to create a reorganization plan for bankruptcy court, said David Dragich, partner at Grosse Pointe-based The Dragich Law Firm PLLC. “One of the underlining premises for a Chapter 11 bankruptcy is that the business is viable on a go forward basis; it’s a reorganization tool to restructure contracts and debt,” June 15, said. 2020“Unless there is and Dragich until there is a viable business, companies are not going to just file a bankruptcy for the sake of it. They

“THE PROBLEMS WILL HAVE MOVED TO THE PROFIT AND LOSS (BALANCE SHEET) PERFORMANCE. WE’RE EXPECTING A BLOODBATH IS GOING TO OCCUR.” — Steve Wybo, senior managing director, Conway MacKenzie Inc.

GETTY IMAGES/ISTOCKPHOTO

BANKRUPTCIES

need a plan in place and right now they don’t have one.” Instead, companies are working with people like Dragich and Wybo to stretch their payables and survive the coronavirus recession long enough that the economy turns around. The economy entered a recession in February and economists are be-

FRAUD

From Page 3

“There’s a lot going on, so it adds stress to the system,” said Patricia Herndon, executive vice president for government relations for the Lansing-based Michigan Bankers Association. DIFS Director Anita Fox said her department’s fraud unit will work with the Michigan State Police to investigate the use of bank accounts to defraud the state’s unemployment trust fund.

Large-scale problem State labor officials said earlier this month that 1-in-7 unemployment claims could be fraudulent, causing the UIA to halt weekly payments to about 340,000 claimants. UIA said Friday more than 200,000 of those claims have been cleared of suspected fraud. About 100,000 of the claims have been flagged as potentially fraudulent, the labor department said. “Our exposure to potential criminal activity could be in the hundreds of millions of dollars,” Jeff Donofrio, director of the Michigan Department of Labor and Economic Opportunity, said on June 5. Since March 15, when the coronavirus pandemic triggered mass business shutdowns and unemployment claims, the state agency has received 50,000 reports from individuals reporting that an unemployment claim was falsely filed in their name. More than 40,000 of those fraud reports have been filed with the state since May 1, labor department spokesman Jason Moon said. In May 2019, there were 144 instances of identity theft and fraud reported to UIA and 1,773 reports filed in all of 2019, Moon said. The labor department has set up a

December 2, 2019 Herndon

Donofrio

task force to review every claim on hold to verify the identity of the claimants. The state also has hired an unnamed forensic accounting firm to assist in its fraud investigation. Moon said “dozens” of unemployment insurance cases have been referred to law enforcement agencies. “These cases often involve large fraud rings,” Moon said. “The UIA will continue to work with law enforcement through the task force to help identify, locate and prosecute suspected criminals.” Rampant unemployment insurance fraud extends far beyond Michigan. While there’s no exact measure of how many fraudulent claims have been made, states from Washington to Maine say they’ve seen an increase and numerous federal agencies are working to fight it. “About 10 percent of (unemployment insurance) payments are improper under the best of times, and we are in the worst of times,” Scott Dahl, the inspector general for the U.S. Labor Department, told the House Subcommittee on Government Operations earlier this month, according to an Associated Press report. Dahl estimated that at least $26 billion in benefits could be wasted, with the bulk of that going to fraudsters. “It just came to our attention yesterday,” Fox said Thursday. The attempts at fraud are impacting banks in different ways. At Troy-based Flagstar Bank, Michigan’s eighth-largest bank, the institution is seeing two

coming less sure of a V-shaped recovery. Goldman Sachs revised up last week its forecasts for gross domestic product and unemployment in 2020, but the economy remains troubled CRAIN ’S Dof ETROIT BUSINESS through the end the year. Goldman predicts the U.S. unemployment rate will be at 9.5 percent by the end of 2020, down from 13.3 percent in May.

Michigan, however, has suffered far worse from the coronavirus recession and related industry shutdowns brought on by Gov. Gretchen Whitmer. For Michigan, the seasonally adjusted unemployment rate dipped in May to 21.2 percent from the revised up rate of 24 percent in April. The employment picture is even

primary ways in which the bank and its customers could be the victims of fraud, according to Meghan Wandrie, vice president and fraud manager at the bank. Rau In some cases, customers will have unemployment claims filed in their name. More frequently, customers find themselves the unwitting victims of fraudsters simply using their back account without their knowledge. Given the economic times with increased unemployment, financial uncertainty and states scrambling to process unemployment insurance claims,

Wandrie said it’s less than surprising that there’s a surge in attempts at fraud. “It’s a perfect Bermuda Triangle storm of vulnerability,” Wandrie said. At Flagstar, the attempts at fraud are occurring on essentially a daily basis now, Wandrie said, adding that the amounts can vary from a couple hunCRAIN’StoDthe ETROIT dred dollars tensBofUSINESS thousands of dollars or more. Customer-facing employees in call centers and branch locations tend to be the first line of defense at catching the attempts and they are closely backed up by technology tasked with catching unusual deposits. Smaller community banks are also watching for fraud. Chelsea State Bank, for instance, earlier this month caught a fraudulent unemployment claim filed in the name of one of its

more bleak in metro Detroit, which recorded an unemployment rate of 23.2 percent in May, up from 21.5 percent in April, according to data released last week by the Michigan Department of Technology, Management, and Budget. Those record-high unemployment numbers will undoubtedly return to roost and cause a rash of bankruptcies in the third quarter, said Robert Dye, chief economist for Comerica Inc. “One of the indicators that drives both personal and corporate bankruptcies is the unemployment rate,” Dye said. “We expect the unemployment rate to come down a little bit from the lockdown spikes but not go back to anywhere close to where it’s been in recent years. A lingering high unemployment rate tells me there will be a lot of stress on individual households and thus a lot of stress on businesses. The stress is accumulating and is bound to force some businesses into bankruptcy.” Wybo predicts bankruptcies will start showing up in the Eastern District court by mid-August when the federal programs dry up and receivables are no longer being paid throughout industry supply chains. “Banks will start seeing a lot more companies in default on their covenants (debt agreements), and it won’t be from just short-term dips in liquidity,” Wybo said. “The problems will have moved to the profit and loss (balance sheet) performance. We’re expecting a bloodbath Page 1 is going to occur.” Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh employees, which had a good deal of personal information, bank President Joanne Rau said. Ultimately, catching fraud and watching out for customer vulnerability and the institution’s own financial vulnerability means remaining vigilant, sources said. “What it comes down to is ensuring we’re following policy and the fundamentals of banking,” Rau said. “If something doesn’t feel right we need to elevate it to the next level.” Wandrie echoed that, noting that customers need to maintain vigilance. “Always fall back to your mom’s quote,” Wandrie said. “If it sounds too good to be true, it probably is.” — Crain’s Detroit Business Senior Editor Chad Livengood and The Associated Press contributed to this report.

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Restaurants in metro Detroit confront uncertainty, adapt to survive in new climate BY MALIQUE MORRIS

Luciano DelSignore, a Detroit born chef and restaurateur, was already looking ahead when Gov. Gretchen Whitmer announced that restaurants could reopen earlier this month. The precarious state of the economy amid a global health crisis urged him to make a drastic change at one of his newer establishments, Pernoi, an upscale restaurant in Birmingham that opened last September. During the shutdown, ordered by Whitmer on March 16, DelSignore replaced Pernoi’s Italian-Japanese a la carte offerings with a pop-up takeout menu filled with Italian comfort food like ricotta ravioli. Due to the positive reception and high takeout volume — which still only accounted for less than 25 percent of normal sales — he decided to transform the high-end establishment into the more casual Casa Pernoi. “Just the fact that we went through this pandemic, I just feared that we were going to be thrown into a recession after that,” said DelSignore, who also owns Bacco Ristorante in Southfield and the pizza chain Bigalora Wood-Fired Cucina. “I wanted to build something more recession proof.” He said his initial attempt at highend carryout did not attract customers, but when he revamped the menu to feature more affordable dishes, his sales immediately doubled. “Fine dining has felt the fallout more acutely,” said Justin Winslow, president and CEO, Michigan Restaurant and Lodging Association. “Their entire premise is predicated on the culinary experience, coupled with ambience and presentation.” As restaurants of all genres enter an uncertain market, with most businesses now reopening across the state, Casa Pernoi’s rebranding is the sort of reconfiguring that many establishments are considering as they try to adapt.

BEAUMONT

From Page 1

Alex Calderone, managing director of Calderone Advisory Group in Birmingham, questioned the value of the merger for anyone but the health systems. “My gut reaction is: Is bigger really better? This (merger) is a playbook used extensively by a number of health systems around the country. Has it gotten them anywhere?” Calderone said. “I do not believe these mergers and acquisition transactions to create larger entities are the panacea for the problems affecting health care.” Allan Baumgarten, a Minneapolis-based health care consultant who publishes annual Illinois and Michigan market reports, said even though the two health systems operate in different states, combining them would increase their market power. “If the merger goes through, and many do not, it will result in higher prices for Michigan employers and consumers,” Baumgarten said. Rob Casalou, president of the Trinity Michigan, Florida and Georgia markets, congratulated the health systems on the merger announcement. He said creating an obligated group for bond financing would improve the credit rating of the two 16 | CRAIN’S DETROIT BUSINESS | JUNE 22, 2020

“Fine dining is extremely difficult with a perfect economy,” DelSignore said. And now that the economy has been destabilized by the pandemic, the restaurant landscape in Michigan looks hazier than ever. Michigan’s restaurants lost an estimated $3 billion in revenue from midMarch through May, against a nationwide decrease of $120 billion, with a projected loss of $240 billion for the full year, Winslow said. Almost 1,000 dining establishments in Michigan have permanently closed, he added. For an industry where the success of a business is contingent on consumers’ disposable income, a healthled economic slowdown, which has left more than 1 million people in Michigan unemployed, will only make things more cumbersome for local restaurants as they restart. “It’s going to be a slow growth (period),” Winslow said. Slowdown in activity in downtown Detroit concerns George Sboukis, owner of Caucus Club, a high-end steakhouse in the Penobscot building. He said the absence of a work crowd has eliminated the possibility of having a profitable lunch shift, so when he reopened June 12, it was only for dinner service. The dearth of entertainment events, like sports games, concerts, theater performances and symphonies, has made downtown less frequented even after business hours. “You’re really making the restaurant the sole destination of the evening; that makes it a tougher sell to suburban diners,” Sboukis said. Because most people chose to dine closer to home, Sboukis didn’t see takeout as a viable option. Sboukis said all of the projected revenue he anticipated from regularly scheduled events, such as conferences and the annual auto show, evaporated because of coronavirus. That prompted him to file for a feder-

al disaster loan, in order to procure additional funds, aside what he received from the Paycheck Protection Program, for the months ahead. “If I just relied on the payroll money, there was no way I was going to be able to make it to the holidays,” Sboukis said. Another stumbling block business owners are confronting is a lack of staffing. Corey Mcintosh, co-owner

health systems, reduce overall borrowing costs and increase access to capital. He said back office savings would also help reduce expenses. Casalou said operating in different markets wouldn’t help the systems contract with state payers such as Blue Cross Blue Shield of Michigan, but it could help negotiate more favorable contracts with national payers like Aetna Inc. and UnitedHealthcare. “They signed an LOI, so they’re go-

systems serve, said Rick Zall, a partner at Proskauer and chair of its health care industry practice. “Because they’re in different markets, it’s certainly a more viable proposal, I would think, than if they were competitors in similar markets,” Zall said.

“FINE DINING IS EXTREMELY DIFFICULT WITH A PERFECT ECONOMY.” — Luciano DelSignore

and COO of Peso Bar, a Mexican eatery in Southwest Detroit, said that only one out of his 10 servers has agreed to come back immediately, which has put him in a tough position as a business owner because he said he wants to be sympathetic but he also has to be business minded. “It’s a fine balance between the human element and numbers. That’s been our struggle, balancing those two,” Mcintosh said. “You can’t put a dollar sign on life, it’s invaluable.” As a result, Peso Bar is opening up in stages. They are currently open for togo service only, but in the coming weeks patrons will be allowed to eat on the patio and then eventually there will be dining service to the patio, if more servers are willing to return to work. Mcintosh’s staffing struggle is emblematic of an industrywide phenomenon. Three-fourths of the leisure and hospitality sector, about 350,000 people, has become unemployed because of COVID-19, Winslow said. Aside from health concerns, some restaurant employees are hesitant to return to work because unemployment benefits likely

Cash flow boost CEO John Fox of Beaumont said the deal with Advocate Aurora would

“WE’RE GOING TO MAINTAIN A STRONG, GROWING PRESENCE IN MICHIGAN AND CONTINUE TO BE A MAJOR EMPLOYER HERE IN EVERY RESPECT.” — John Fox, CEO of Beaumont

ing to be figuring out what’s the benefit to our organizations to the communities we serve. What’s the value besides just being big?” Casalou said. “They will go right down the list and find how to create value. I think it’s going to be a powerful merger for both organizations.” The reaction to the potential deal from health insurers, especially the Blues plans that operate in the three states, will be important, as they’re key players in the markets the health

allow the Southfield-based system, which has nearly $5 billion in annual revenue, to make investments in its clinical programs, facilities and technology that it couldn’t do alone. Fox cited increased investment in its research institute, beefing up its information technology platform, expanding into other Michigan markets and potentially relocating its medical school campus as specific examples. Beaumont has no plans to close any of its eight hospitals, reduce ser-

surpass their earning potential working primarily for tips at a restaurant. With or without adequate staffing, some business owners, like Larry Mongo, owner of the speakeasy Café D’Mongo in Capitol Park, are not willing to take the risk of reopening. Mongo, 70, said he can’t physically be at the club because of his wife’s underlying health problems. And other members of his team, which he said operates like a small family, have also expressed similar reservations, as some of them care for elderly relatives. “I have a responsibility to my staff and my customers,” Mongo said. “I won’t be an absentee owner.” And the issue of space has also given him pause. At a recent employee meeting, where he discussed possible reopening plans, he said he saw that social distancing would likely not work in his 1,700-square-foot bar. As business owners brace for an unpredictable future, Winslow said MRLA is working on a “Mission to Save Hospitality,” which consists of a set of public policy solutions, such as allowing bars and restaurants to continue serving “cocktails-to-go,” that will help the state’s leisure and hospitality industry survive the pandemic. But the rate of recovery for restaurants in the city is heavily dependent on how the public responds to reopened establishments. “I’m really just curious to see how much the public understands that if they don’t support restaurants in the next few months” then their favorite eating places are not going to survive, Sboukis said. “I hope that people come with a more sympathetic approach.” And customers’ purchasing power is also a determinant for a rebound. “The desire to consume will surge as much as disposable income will allow,” Winslow said. Contact: malique.morris@crain.com; @luxeoflique vices or cut jobs in Michigan as a result of the deal, Fox said. “We’re going to maintain a strong, growing presence in Michigan and continue to be a major employer here in every respect,” he said. Advocate Aurora CEO Jim Skogsbergh said in a statement that Beaumont “has built a strong reputation for clinical excellence, education and research.” Fox said Beaumont would retain its own CEO, leadership team and headquarters. Advocate Aurora has a single executive leadership team with Skogsbergh as CEO and operations leaders in both states, spokesman Adam Mesirow wrote in an email. The board of the parent company would be composed of 15 people split equally among the three institutions. Calderone said there are benefits to the merging health systems. However, there are dangers if corporate cultures clash. “It is hard to see any reason for merger other than to stabilize the organizations’ cash flows, generate economies of scale,” he said. “Advocate Aurora would get larger and it would be good for them to access other markets. It would be a continuation of their acquisition strategy,” Calderone said. “Pursuing a merger could work out great for

Restaurateur Luciano DelSignore displays some of Casa Pernoi’s breads. | CASA PERNOI

them, but those that don’t work out, it can be quite damaging.”

Future growth? Advocate Aurora, which has dual headquarters in Milwaukee and Downers Grove, Ill., was formed through a 2018 merger that created a holding company parent. Besides Beaumont, so far this year the system has signed a letter of intent to develop a partnership with Madison, Wis.-based Quartz Health Solutions Inc., a health insurance company, to develop a Medicare Advantage HMO plan. It also has signed a definitive agreement to sell two of its central Illinois hospitals to Carsle Foundation in Urbana, Ill. Beaumont Health was formed in the 2014 merger that added Dearborn-based Oakwood Healthcare Inc. and Farmington Hills-based Botsford Hospital. It has since formed joint ventures to build 30 urgent care centers in Southeast Michigan and a 200-bed mental health hospital in Dearborn. But only in the past 18 months has Beaumont been working to reduce costs and streamline operations by selling non-acute care assets and flattening management layers. Beaumont, which is one of the largest health systems in Michigan, last month announced that it had

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And that’s upending the business model of the restaurateurs whose success relies heavily on weekday office worker foot traffic and business travel, weekend visitors from the suburbs and beyond, as well as nightlife, conventions, sports and special events — all of which have mostly disappeared during the pandemic. The absence of workers from Quicken Loans, Ally Financial, General Motors Co., Blue Cross Blue Shield of Michigan, DTE Energy Co., multiple law firms, city and county government filling Detroit’s office towers is being felt hard at the ground level. “There’s not enough traffic downtown to justify reopening yet,” said Dennis Archer Jr., owner of Central Kitchen, a popular lunchtime spot for Quicken Loans employees who work upstairs in the Dan Gilbert-owned First National Building. At this point, Archer said, Central Kitchen is planning to reopen around Aug. 10, what would be the restaurant’s sixth anniversary. “No one wants to open and then close,” Archer said. “We want to get it right the first time.” A block south on Woodward, one of Central Kitchen’s competitors, Townhouse Detroit, is preparing for a July 1 reopening. Its owner, Jeremy Sasson, also is planning a July 8 reopening for Prime + Proper, his higher-end steakhouse at Griswold and State in the Capitol Park Building. “It will be some time before things can be seen more clearly in Detroit,” Sasson said. Sasson said he’s trying to be not be “too late or be too early” in reopening his two restaurants. Townhouse Detroit is located at the base of the Gilbert-owned skyscraper Ally Detroit Center, where the main tenant, Ally Financial, has not set a date for returning to the office. “We want to do right by our team, we want to do right by our guests and we want to do right by our business,” Sasson said. “And aligning those (objectives) is not easy.” It’s also not easy to predict the future

or whether there will be enough patrons who are comfortable filling tables to keep these businesses afloat. That’s evidenced by the number of restaurants downtown that are still only doing takeout service at this point, limiting operations and staffing. Gov. Gretchen Whitmer’s administration is mulling a mandatory 6-foot radius rule to enforce social distancing in office settings. Such a rule would likely reduce the number of workers allowed to occupy office spaces with the kind of open floor plans that are prolific at Quicken Loans, StockX and co-working spaces such as WeWork and Bamboo Detroit. “If there is a mandatory workplace distancing, I think all that will do is reinforce less people coming back downtown,” said Archer. Quicken Loans and its family of companies, the linchpin of downtown Detroit’s resurgence in recent years, is taking a very cautious approach to bringing its 19,000 employees back downtown. But company leaders also are mindful that their workforce created the demand for ground-level retail stores and restaurants in the buildings that company founder Dan Gilbert invested billions of dollars into in the years between Detroit’s bankruptcy and the deadly pandemic that has claimed the lives of 1,425 Detroiters. “Our mission is to get everybody back down to Detroit because that’s our headquarters, and we’ve got a lot of important things going on in downtown Detroit, outside of our mortgage business,” Quicken CEO Jay Farner said in an interview. “But the primary driver for us is the safety of our team members.” Quicken Loans plans to begin bringing back employees to its downtown offices the week of July 6 and gradually build up to 5,000 or 6,000 workers by mid-August, working in the office on staggered daily schedules, Farner said. At Quicken Loans’ One Campus Martius headquarters, the mortgage giant has, like all companies, been rethinking everything from floor plans to entry points and elevator use. Farner said Quicken’s goal of having up to 6,000 workers downtown on

a daily basis is being driven by the assumption that office buildings will need to limit capacity in much the same way restaurants and bars are limited to half their normal capacity. The Quicken Loans CEO says he would support Whitmer imposing office space capacity restrictions. “We have to keep Michigan’s economy going,” Farner said. “So if it needs to be more cautious now to avoid a more drastic shutdown in the future, I’m all for that.” After the “success” of working from home — Quicken closed on a record $20 billion in mortgages in March and $22 billion more in April — the company is planning to let employees split their time between home and the office for the foreseeable future, Farner said. But the paring back of the number of workers downtown probably was not in the business plans for most of the retail shops and restaurants that have opened in recent years. Sasson’s Prime + Proper opened in 2017 as Capitol Park’s surrounding apartment buildings were being renovated and filled up with downtown workers with disposable income. But restaurants offering dry-aged steaks and raw bars aren’t supported by just the neighbors. “Downtown Detroit needs metro Detroit to survive,” Sasson said. “It can’t survive just on the five-block radius.” Quicken Loans executives are “very focused on” maintaining the vibrant downtown that Gilbert’s Bedrock LLC real estate company has spent a decade building, Farner said. They’re actively encouraging employees who are volunteering to come back to the office next month to spend time outside of their buildings during the workday — a subtle hint to get out and patronize Bedrock’s struggling tenants. “We’re in no rush to reopen internal cafeterias and those sort of things,” Farner said. “We want to set up a structure where people have the time and take it to go do shopping and eat at the restaurants and really have an enjoyable time downtown.”

market like Chicago, said Ken Marlow, a partner and health care industry chair with the law firm Waller. “It really does have a lot of the elements we’ve seen in these megamergers where they’re looking for a more fully integrated system that can provide health care across the continuum of care,” Marlow said. The deal with Beaumont would bring Advocate Aurora significantly closer to its goal of doubling its reve-

ending March 31 on operating revenue of $1.07 billion, down from an operating income of $37.6 million on operating revenue of $1.15 billion relative to the prior year. In March, Fox said Beaumont projected losing $1 billion to $2 billion of its approximately $5 billion in annual revenue as it delayed approximately 80 percent of non-urgent procedures during the COVID-19 pandemic. However, the projected financial

take a chunk of the $4 trillion health care industry in the U.S., Fox said. “We’re facing extraordinary, if you will, challenges from new players in the market that are much more disruptive,” Fox said. “Hospitals and physicians are the most diffuse, disaggregated part of the health care economy,” he said. “The pharmaceutical, device, insurance (sides) have all consolidated way more than the provider side has. And in addition, we have new players coming into the market — Amazon, Walmart, CVS and others — who all want to take a piece of the $4-trillion health care economy, and either find a profit opportunity in that or become a new gatekeeper in terms of patient flow.” Fox said Beaumont faces many financial challenges ahead. “(We are) really not big enough to play with those kinds of players. And we think that the three of us … given our concentration (as) the leaders in our respective states, (the merger) gives us an extraordinary opportunity to be more successful.”

From Page 1

scrapped an affiliation deal with four-hospital Summa Health in Akron, Ohio. Fox said conversations with Summa and Advocate Aurora began around the same time last year but were unrelated. If the Summa merger had gone through, the combined system with Advocate Aurora could have included 40 hospitals, $18.5 billion in annual revenue and exceeded Trinity in total revenue. Casalou said he believes the biggest initial benefit to the merger could be greater access to capital for expansion plans. “Never underestimate the power of a strong financial foundation that gives you access to capital,” said Casalou, adding: “Then the next question will be: ‘What are they going to do with that capital? (Fox) said they want to invest in their facilities and their research and they want to invest in Michigan. I will wait to see what those investments look like and whether they affect us or not.” Mesirow said the COVID-19 pandemic has increased Advocate Aurora’s strategic aim that being larger is critical to implement safety and clinical best practices. Advocate Aurora is in a good financial position but is restricted in its ability to make acquisitions of this size, particularly in a competitive

“NEVER UNDERESTIMATE THE POWER OF A STRONG FINANCIAL FOUNDATION THAT GIVES YOU ACCESS TO CAPITAL. THEN THE NEXT QUESTION WILL BE: ‘WHAT ARE THEY GOING TO DO WITH THAT CAPITAL?’ ” — Rob Casalou, president of the Trinity Michigan, Florida and Georgia markets

nue to $27 billion by 2025. But both Advocate Aurora and Beaumont have been hit hard by COVID-19 financial losses. Advocate Aurora reported a $85.7 million operating loss in the quarter ended March 31 — a 2.7 percent loss margin — compared with $112.8 million in operating income in the prior-year period, a 3.7 percent operating margin.. Beaumont recorded a $54.1 million operating loss in the first quarter

losses do not include more than $506 million in grant money from the CARES Act, which Beaumont and dozens of other health systems in the U.S. received as part of COVID-19 federal relief aid packages.

Challenging ‘disrupters’ Joining forces with Advocate Aurora would help Beaumont compete with large companies such as Amazon, CVS and Walmart looking to

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

Contact: jgreene@crain.com; (313) 446-0325; @jaybgreene Tara Bannow at Modern Healthcare, a Crain’s sister publication, contributed to this story.

NEW CEO

From Page 3

The remainder of its revenue, about 7 percent, comes from memberships paid by area hotels, restaurants, attractions, catering and transportation companies and from advertisements in the bureau’s Visit Detroit magazine. That revenue has grown as more hotel rooms have been added in the region. In 1998, when Alexander became CEO of the DMCVB, there were just over 25,000 rooms Lovio-George in the market, he said. There are now about 43,000 in the tricounty area and 68.8 percent of those rooms were occupied at the end of last year. About 40.8 percent of the hotel rooms in the tricounty area were occupied in early June, Alexander said. “It was really going to be a great year based on all the groups we had on the books, including Alcoholics Anonymous, one of the biggest groups ever booked, which was scheduled for July 4 weekend,” Alexander said. “We got off to a great start in the first quarter, and then all of a sudden it’s like somebody turned the faucet off and closed the door.” The DMCVB still has about 36 meetings on the books through the end of the year. It’s following up with each to determine If they still plan to hold it and working with groups who want to rebook an event to find a different date.

CEO search “This industry has taken a huge hit with the pandemic,” said Christina Lovio-George, CEO and founder of Lovio George Communications + Design, who was chair of the DMCVB when Alexander was hired and is chairing the DMCVB’s current search committee for a new CEO. “These are unusual times with the industry on its back and the revenue stream half what it was at the beginning of the year.” The DMCVB’s new top executive will need expertise in both destination marketing and in turnaround, she said, to deal with the new budget realities at the DMCVB and an industry that has been significantly hard hit by diminished demand. Despite the work ahead for the DMCVB, Lovio-George is optimistic about the search prospects. “This is a better time to look with Detroit being the city it is than it would have been even three years ago,” she said. There are no internal candidates. But there is lot of available talent and several people in the region have stepped up to inquire about the position, she said. “It’s been informal, but we’re always, I guess, biased to have local people who have the skill set and enthusiasm to take this job.” The goal is to make an offer out to a new CEO candidate by fall, she said. Contact: swelch@crain.com; (313) 446-1694; @SherriWelch JUNE 22, 2020 | CRAIN’S DETROIT BUSINESS | 17

CRAIN’S RECONNECTS | SMALL BUSINESS OWNERS

Working to survive — and thrive — in a turbulent time

t’s been a rough few months for all businesses, and there has probably never been a tougher time to be a small business in Detroit. The wave of business shutdowns and tanking economy were joined by a wave of angry protests and anguish over yet another killing of an unarmed Black person. It’s been a time of turbulence, to say the least. We caught up with several Black business owners Crain’s has profiled previously to see how they’re reacting, adjusting, or just trying to survive a period like no other.

SYLVIA JARRUS/CRAIN’S DETROIT BUSINESS

BRIAN MCKINNEY, FOUNDER, GAYANGA CO.

SYLVIA JARRUS/CRAIN’S DETROIT BUSINESS

KEN PORTER, FOUNDER AND CEO, PMG AGENCY

BUILD INSTITUTE

JEVONA WATSON, ATTORNEY AND OWNER, DETROIT SIP

‘I just didn’t see it as being worth the risk’

Successfully battling COVID-19 on two fronts

Demolition firm Gayanga pivots as pandemic hits

BY KURT NAGL

BY CHAD LIVENGOOD

evona Watson said most small businesses have no excuse not to come back stronger after COVID-19. Watson’s coffee shop, Detroit Sip on McNichols Road, has been closed for more than three months due to the coronavirus pandemic, but owner Jevona Watson vows to reopen, hopefully by early July. Opened in 2017, it has been one of the staples of a struggling Northwest Detroit corridor that officials have tried for years to revitalize. Staying open for carryout didn’t make sense without support from nearby anchor institutions — University of Detroit Mercy halted in-person classes in March, and the Marygrove campus has been even quieter. It also didn’t make sense for safety reasons. “It was really scary, to be honest,” Watson said. “The numbers and area that we are located in was one of the hardest-hit. As much as I love to think Detroit Sip is essential, I just didn’t see it being worth the risk.” Watson lives nearby but practices law in Macomb County. Running a small business is a labor of love for Watson, who’s determined to help revive the neighborhood after decades of disinvestment. The pandemic has had an outsized impact on Detroit residents and the small business community, but for better or worse, it’s also put a spotlight on it. “It’s been more encouraging, ironically, than before COVID-19,” Watson said. “We’ve been given more attention, more resources than ever before. We were kind of overlooked. It forced people to really see how important it is to support local businesses.” Detroit Sip received a $5,000 grant from the Detroit Economic Growth Corp. and a $5,000 grant from Sara Blakely, the billionaire founder of women’s underwear brand Spanx who donated $5 million to women entrepreneurs around the country. Watson used some of the funds to provide her handful of employees a stipend before unemployment assistance kicked in and put the rest toward offsetting rent payments and bills. While the store was closed, she participated in several entrepreneur development programs, including one on web development hosted by the city of Detroit and another through the University of Michigan’s Detroit Neighborhood Entrepreneurs Project. In addition, Watson said the city helped connect her with a human resources and financial services firm to guide her through liability and unemployment questions. “Without COVID-19, I’m not sure we would have gotten all that attention,” she said. “Even in closing, if someone doesn’t come out of this with a little bit more than what they had going in, then I don’t really know what to say.” 18 | CRAIN’S DETROIT BUSINESS | JUNE 22, 2020

en Porter survived a two-front COVID-19 scare — in his body and his business. The founder and CEO of a small Detroit-based communications, printing and events marketing firm was diagnosed with a positive case of COVID-19 in late March, just when he was working to keep PMG Agency in business. Porter’s bout with coronavirus was mild. He only got tested after learning about the death of Detroit business development leader Marlowe Stoudamire, who was just 43 years old. Porter said he didn’t know Stoudamire personally, but admired Stoudamire’s work in Detroit business and nonprofit worlds and saw him as a role model in his own career trajectory. “When Marlowe died, it shook me to my core,” Porter said. “I told my wife, ‘I’m going to go get tested.’” While he was recovering from the virus, Porter said his small business of six employees sustained a $100,000 loss in convention-related communications and marketing work at TCF Center. PMG Agency (formerly called Porter Media Group) had contracts for supplying printed materials for a First Robotics competition, the Michigan Minority Supplier Development Council’s convention and the United Way Summer Career Connections Fair. What kept the company going was a move toward working on nonprofit and philanthropic initiatives, making the company less reliant on the special events and corporate meetings business that ground to a halt in March, Porter said. Prior to the pandemic, PMG Agency began doing communications work for the Kresge and W. K. Kellogg foundations’ Hope Starts Here early childhood initiative in the city, Porter said. “As we were pivoting in that direction, never in a million years we didn’t think we’d find ourselves in such a racial and social unrest that we find ourselves in now,” Porter said. “It was a blessing we were going through this growth plan change before the pandemic happened.”

“WHEN [DETROIT BUSINESS DEVELOPMENT LEADER MARLOWE STOUDAMIRE] DIED, IT SHOOK ME TO MY CORE. I TOLD MY WIFE, ‘I’M GOING TO GO GET TESTED.’”

rian McKinney spent the coronavirus lockdown buying more gravel-hauling trucks for his company’s fleet while the housing demolition work that launched him into the excavating business three years ago vanished. McKinney’s pivot away from being just a demolition company before the COVID-19 pandemic hit Detroit has positioned Gayanga Co. to get into other lines of work, particularly trucking to haul sand, gravel and aggregate — and no longer have to subcontract that work. “As we looked at our business model to do demolition, it became very clear that in order to be successful and competitive, we were going to have to grow our trucking fleeting,” McKinney said. Gayanga now has a fleet of 10 heavy trucks less than five years old, he said. Those trucks helped the company get work on Michigan Department of Transportation freeway projects this spring, keeping some of the company’s 45 workers employed while the rest were laid off because of the halt in demolition work, McKinney said. With city tax revenues plunging, housing demolitions were one of the first programs to get cut by Mayor Mike Duggan in an effort to save cash for a multi-million-dollar deficit. “We anticipated pivoting, we just didn’t anticipate so much the demo being gone,” McKinney said. McKinney started the company from scratch in September 2017 by winning demolition contracts from the city of Detroit to raze blighted homes and buildings. Those contracts allowed McKinney to buy the heavy equipment and aggregate-hauling dump trucks needed to branch out into other areas of the demolition and excavation business. Gayanga has since completed demolition work for the Gordie Howe International Bridge project, lead service pipeline removal for the city in Delray and demolished the old Edison boat house at DTE Energy Co.’s Conner Creek complex along the Detroit River. The company also has formed a joint venture with Detroit-based Major Cement Co. and landed nearly $10 million in streetscape contracts with the city of Detroit to modernize three corridors on West McNichols, Conant Street and Grand River Avenue. “We worked hard to position ourselves as a qualified, Detroit-headquartered MBE (Minority Business Enterprise) and in doing so we’ve had some great conversations with some larger companies,” McKinney said. “It’s already born some good fruit with these three streetscapes. We’re going after more underground utility, water main and site work contracts.”

THE CONVERSATION

Veteran events producer Jon Witz says industry isn’t doomed JONATHAN WITZ AND ASSOCIATES: The scene in downtown Detroit for Super Bowl XL in 2006 would probably induce panic attacks in the wake of the coronavirus pandemic. Nearly a million people packed the streets downtown. The city, accustomed to negative national media attention at the time, garnered rave reviews. It was a career high point for Jon Witz, who organized the corresponding Winter Blast festival that’s taken place in the city each year since. The 58-year-old events producer is behind some of the region’s longest-running, most popular events, including Arts, Beats & Eats and River Days in Detroit. There have been low points, to be sure. When Chrysler went bankrupt in 2009 and pulled its sponsorship money from Arts, Beats & Eats, it put the music festival on life support. That same year, organizers had a falling out with the city of Pontiac that left the event without a home. It later moved to Royal Oak. If keeping the festival afloat then was a long shot, doing so this season would be miraculous. The events industry has been virtually wiped out because of COVID-19, and the business of assembling crowds has likely changed forever. | BY KURT NAGL ` Crain’s Detroit Business: How did you start in the events business in Detroit? Jon Witz: Right after college I jumped into the general manager job of a nightclub spot in Chicago. It was a ’50s and ’60s venue. I did that for a few years and then transitioned to the Vic Theatre that was restored in Chicago that became kind of a theatrical nightclub kind of thing, and there were a lot of skits and live guest bands. That really kind of set the stage. When I first came to Detroit at 28 years old, I was the general manager of the State Theatre, which is now the Fillmore. People from the Forbes family actually came down to look at the Vic Theatre to potentially turn the State Theatre into that kind of concept. They had just restored the State Theatre and Fox Theatre. So, we were kind of courted … and, you know, I ended up building my life here. ` How was Arts, Beats & Eats born? I started my own business in 1993. What first got me noticed is I worked with some folks in Pontiac putting on an event for the World Cup in 1994 called “Taste of the World.” It caught the eye of someone who worked in (Oakland County Executive) L. Brooks Patterson’s office … So, I got a call from Brooks’ office in ’97. … Brooks announced in the state of the county address in early ’98 before we even had all of our funding together that he was doing a Labor Day weekend festival that was Arts, Beats & Eats. So, that’s when my career really, really took off. My wife Lori and I, we had a very small business at the time. We opened the festival with about $200,000 of debt to get the first one off the ground. If there would have been four days of rain that weekend, Arts, Beats & Eats would have been a one and done, and we would

have been working for three years just to pay off the bills. But fortunately, we got four days of sunshine and the event probably had as many people as the Jazz Fest and the State Fair. We probably had over 100,000 that first year. ` Why was it moved to Royal Oak? In 2009, we had just signed a five-year deal with Chrysler and were just so pumped up, and we were ready for a big show and then the economy really went south quickly. We were told the check was coming, but Chrysler went bankrupt in 2009 and that check never came. We were in our worst financial shape ever since the first year, and (the city of Pontiac) wanted to charge us $100,000 to rent the streets of Pontiac. It was insane. So, a restaurateur in Royal Oak by the name of Luigi Cutraro — he would always call me every year, you know, in this Italian accent, “Jonny, Jonny, you gotta move the festival to Royal Oak.” And I called him and said, “You’re not gonna believe this. I need to look into Royal Oak.” Currently, I work with (Pontiac) Mayor (Deirdre) Waterman on festivities there. If Mayor Waterman was running the city back in 2009, we never would have left. ` How did you land the Super Bowl event? In 2004, the Detroit Super Bowl host committee put out an RFP for the planning of a major event in Detroit for the Super Bowl. We came up with the Winter Blast concept, and we ended up being the company selected. … We were an underdog. We were competing against a lot of concert promoters and national companies… You know, there were a lot of doubters at the time. Detroit and downtown had not made the comeback, and

resurgence was just beginning. And we really turned the media’s view of Detroit around as it came to Detroit. We ended up hosting nearly a million people with our festivities downtown. … Winter Blast) is the one remaining legacy of hosting the Super Bowl. ` Will Winter Blast happen this winter? I’m not thinking about winter right now. … ` How about Arts, Beats & Eats on Labor Day weekend? We can’t win this year. So, from a sponsorship perspective, even though we still have our title sponsorship standing with us, we basically have lost probably $450,000 to $500,000 of sponsorship money. One of the things we’ll have to do to make it safe for people (is) cut our attendance by 50 to 60 percent. We’re gonna have to get rid of our national music stage where people are in close quarters. We’re gonna have to get rid of half the vendors that pay fees to get into the event and only have artists and restaurants on one side of the street. We think we would lose a quarter million dollars.

my son, Trevor, in Madison, Wis., and enjoying the biking trails out there. I am also on the board of the Autism Alliance of Michigan and honored to be the co-chair of the Autism Hero Walk this year, which is virtual, as people supporting those with autism will be walking in their own neighborhoods raising funds and awareness for the autism community. ` Will festivals make a comeback? I think the approach for anybody in the entertainment industry is one step at a time. I do think the general public would like to get out, celebrate and be social. If we could do something safely, I think there’s an appetite for entertainment right now. Jon Witz

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` How are you spending your down time? I enjoy hot yoga and spin classes, and taking my son, Tucker, who has autism, swimming at Lifetime Fitness. Over the last few months, though, it’s been riding the mountain bike at Kensington Park, practicing yoga outdoors with Thrive Hot Yoga, watching Netflix with my wife and daughter and visiting

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RUMBLINGS

Duggan sends message: Not done on auto insurance DETROIT MAYOR MIKE DUGGAN last Thursday telegraphed the next big political fight he wants to have over lowering auto insurance premiums for low-income Detroiters. The second-term mayor said in a televised town hall that he wants the Legislature to let adults on Medicaid use that coverage for auto accident injuries so they can opt out of personal injury protection coverage, often the most expensive portion of car insurance in Detroit — the city with America’s highest auto insurance rates.

Detroit Mayor Mike Duggan

“If you’re on Medicaid, you can’t opt out of paying for health with your car insurance,” said Duggan, who is up for re-election next year.

“It was the fight that we lost in Lansing. We’re going to go back again.” Duggan, on the town hall, also castigated the auto insurance companies he was aligned with just a year ago, arguing that carriers and agents aren’t doing enough to educate motorists about the no-fault reform law that goes into effect in two weeks. “Insurance companies make more money if you stay with the higher rates” for unlimited medical coverage, Duggan said during a televised town hall presentation

on no-fault reform. “That’s why they’re not all over you to switch on July 2.” The new law allows Medicaid recipients to downgrade to as low as $50,000 in PIP coverage for the medical costs associated with an auto injury if they live in a household with someone who has employer-provided health care that covers auto injuries. “The Detroit legislators and I are going to go back at this hard in the next year to get more protection for Medicaid recipients,” Duggan said.

Crain’s Detroit Business is published by Crain Communications Inc. Chairman Keith E. Crain Vice Chairman Mary Kay Crain President KC Crain Senior Executive Vice President Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly, except the third week in December, by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Contents copyright 2020 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is prohibited.

JUNE 22, 2020 | CRAIN’S DETROIT BUSINESS | 19

Sometimes we have to do more. This time, a lot more. Sometimes the urgency of a better future compels you to act. We are in such a moment, when a global pandemic, a cry for racial justice and a feeling of hopelessness challenge each community. In the face of this, Bank of America has committed to investing $1 billion over the next four years to build on our long-standing work to drive economic opportunity and equality in communities of color. It will power small businesses, help connect workers to new skills and job opportunities, improve medical response capacity and access to health care, and support affordable housing. This bolsters our recent commitment of an additional $100 million to support nonprofit partners and $250 million to support Community Development Financial and Minority Depository Institutions, addressing impacts from the coronavirus that disproportionately affect black and brown communities. My teammates and I here in Detroit commit to the important work that lies before all of us. We share the sense of urgency gripping the nation, and we welcome the promise of achieving great things together.

Matt Elliott Detroit Market President

To learn more, please visit bankofamerica.com/community.