Crain's Detroit Business, July 13, 2020 issue by Crain's Detroit Business

THE CONVERSATION

Wedding industry takes a plunge. PAGE 3

First Independence Bank chairman and CEO Kenneth Kelly leads the seventh-largest African Americancontrolled bank in the US. PAGE 19

CRAINSDETROIT.COM I JULY 13, 2020

CRAIN’S WOMEN IN LEADERSHIP | Q&A WITH DR. KHALDUN

MAKING THE MOST OF A SECOND CHANCE

QUICKEN LOANS IPO

NOT JUST ANY UNICORN

Company’s strong balance sheet differs from some recent offerings Investors may be happy to bet on founder Dan Gilbert Some experts worry that company may be branching out too far BY NICK MANES

In her first year of medical residency, three weeks after giving birth to her first child, Joneigh Khaldun, M.D., now the state’s chief medical officer, ended up in the ICU with a life-threatening head bleed. The recovery was difficult, but the experience inspired her life’s work. “I made a conscious decision afterwards that I was going to bounce back. I was going to finish my medical training and do something with the second chance at life that I had. My passion is not only being a good doctor, but changing systems and changing the trajectory of health for people in society.” READ THE INTERVIEW ON PAGES 8-9.

NEWSPAPER

This Rocket isn’t your typical unicorn. Once Quicken Loans LLC goes public as Rocket Cos. Inc., it will be a different kind of IPO than Wall Street is used to. Investors will find a mature, highly profitable company near the top of its industry, rather than a cash-bleeding startup with global ambitions. A company that continues to have room to grow, with a compelling digital business model. Moreover, the company is led by, and will continue to be controlled by, founder Dan Gilbert, whom investors will have little problem placing bets on, IPO experts say. While a specific valuation remains unclear, and the company has yet to announce a timeframe for when an offering could happen, initial press reports citing anonymous sources have said Quicken Loans could raise somewhere in the tens of billions of dollars. While many questions remain, there’s a simple truth, says Erik Gordon, a clinical assistant professor at the University of Michigan’s Stephen M. Ross School of Business: Quicken Loans is in the enviable position of not needing to go public. “They’re not one of those biotech companies that’s about to run out of money,” said Gordon. “They have real strong cash flow.” Indeed, the mortgage lending giant’s financials — laid bare for the first time last week in a federal S-1 securities filing — paint a picture of a company in extremely good fiscal health. In 2019, Quicken Loans and its portfolio companies reported $898 million in profits, or a 17 percent profit margin, on $5.1 billion in reported revenue. Those numbers made for a 46 percent jump from 2018 and 16 percent higher than the $771 million in pre-tax profits reported in 2017, as Crain’s reported. So why would a company that has largely operated away from the sunshine — aside from its ubiquitous marketing and highly visible presence in downtown Detroit — now choose to subject itself to the mandatory reporting requirements that come with being a public company? See QUICKEN IPO on Page 16

Quicken Loans Inc. founder Dan Gilbert speaks at Crain’s Newsmaker of the Year luncheon in February. | ANDREW JOWETT FOR CRAIN’S DETROIT BUSINESS

ANALYSIS

Gilbert isn’t giving up wealth, control — he’s amassing it Dan Gilbert can continue his real estate spending spree on Detroit if his mortgage behemoth goes public as planned — and continue it in a more robust fashion, if he so chooses. Rocket Cos. confirmed previous reports last Kirk week when it filed what’s known as a Form PINHO S-1 with the U.S. Securities and Exchange Commission, a document that declares a company’s intent to sell shares on the public stock exchange, in this case, the New York Stock Exchange with the ticker RKT. The value of the Rocket’s pending initial public offering, or IPO, is unknown but could be tens of billions of dollars, with billions flowing into the 58-year-old Franklin resident’s Rock Holdings Inc. holdings company as he retains 79 percent of the combined voting power of Rocket’s four proposed classes of common stock and stacks its board with his appointees — if it goes forward as currently envisioned. Jay Ritter, an economist at University of Florida and IPO expert, told Crain’s that the

MORE ON THE QUICKEN IPO  Who’s who in the inner circle of Rocket Companies. PAGE 16-17  How much will Quicken be worth? PAGE 17

Rocket valuation should be around $20 billion, possibly giving Gilbert a $4.2 billion haul, depending on the precise ownership structure of Rock Holdings. See PINHO on Page 15

NEED TO KNOW

LIQUOR AND FINES

THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT `WHITMER ORDERS BIAS TRAINING FOR HEALTH WORKERS THE NEWS: Michigan health workers must receive “implicit bias” training tied to their professional licensure under a directive issued Thursday by Gov. Gretchen Whitmer, who said the mandate will help address the coronavirus pandemic’s disproportionate and deadly impact on people of color. The Democratic governor also said she would soon announce steps to ensure compliance with Michigan’s mask-wearing requirement in indoor public spaces. WHY IT MATTERS: The COVID-19 crisis has highlighted racial disparities in health care, with Black people getting sick and dying at a disproportionate rate. Michigan has the nation’s 12th-lowest rate of COVID-19 infections over the past two weeks, but it has had an uptick of late.

` WHITMER VETOES BILLS THAT WOULD DELAY TAXES THE NEWS: Gov. Gretchen Whitmer on Wednesday vetoed bills that would have further delayed tax payments amid the coronavirus pandemic, citing harm to local budgets across Michigan and saying one measure related to property taxes was “blatantly” unconstitutional. The legislation had won overwhelming bipartisan approval in the Republican-led Legislature. The Democratic gover-

nor’s administration previously authorized tax deferrals, including extending the income tax filing date to July 15 from April 15.

WHY IT MATTERS: Whitmer said business-backed bills to delay sales, use and withholding payments an additional three months and to make larger businesses eligible for similar treatment were “commendable” but would “push many local budgets over the precipice into fiscal crisis.”

economic dislocation during the coronavirus pandemic.

` MICHIGAN UNEMPLOYMENT CASES REMAIN ELEVATED THE NEWS: COVID-19 refuses to relinquish its hold on Michigan’s economy. Last week, 34,470 people filed new claims in the state, a small decrease from the revised total of 38,309 the week prior, according to U.S. Department of Labor data released Thursday. Only six states saw larger claims last week. WHY IT MATTERS: Fears of structural long-term unemployment are now creeping in as many who were temporarily unemployed have been called back as the economy reopens across the state.

` STATE LAUNCHES $100M SMALL BIZ RELIEF FUND

` FOUR RACES TO CRAM INTO ONE WEEKEND AT MIS

THE NEWS: Michigan small businesses and agricultural companies have a new federally backed coronavirus relief program to tap into. The board of the Michigan Strategic Fund on Tuesday morning authorized a total of $15 million for agricultural businesses, and another $100 million for the Michigan Small Business Restart Program.

THE NEWS: NASCAR returns to Michigan International Speedway Aug. 7-9, cramming four nationally televised races into a single weekend. It’s the line-up of a Michigan race car fan’s dreams, but no spectators will be allowed at the Brooklyn venue.

WHY IT MATTERS: The grants offer a lifeline to small businesses that have been hammered by closures and

State fines largest distributor $3 million over snafus ` The Michigan Liquor Control Commission has slapped the state’s largest liquor distributor with a $3 million fine for its botched move to a new distribution warehouse in Livonia that led to rampant delays last fall in delivery of spirits to stores, bars and restaurants. NWS Michigan LLC — which does business as Republic National Distributing Co. — was cited for 88 violations by the liquor control commission and Attorney General Dana Nessel. “The state will not tolerate vendor mismanagement that results in financial hardship which impacts the livelihood of liquor retailers across Michigan,” Nessel said in a statement. Republic National’s move last year to a new, highly automated $90 million liquor distribution warehouse in Livonia was plagued with technology and logistical problems, resulting in weekslong delays for liquor shipments to retailers during the height of the holiday season. In some cases, bars and stores ran out of best-selling spirits such as Fireball Cinnamon Whiskey and Tito’s Handmade Vodka and had barren shelves for weeks on end because of the problems.

WHY IT MATTERS: The pandemic threw a monkey wrench into NASCAR’s season and postponed races at MIS indefinitely. The auto racing body laid out its schedule on Wednesday for the rest of the season.

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Workers in Republic National Distributing Co.’s liquor distribution warehouse in Livonia pick bottles of liquor on an assembly line. | LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS

WEDDING WOES

PANDEMIC PLUNGE

Bridal shops, venues, brides and grooms grapple with delays, cancellations, closures

Shawn Vilk and Juli Saad sort through wedding dresses at the Wedding Shoppe in Berkley.| LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS

BY KURT NAGL

Angela Munaco, 26, has every reason to be a bridezilla. She called off her 150-person bridal shower scheduled for March 15 at Cherry Creek Golf Club in Shelby Township when nearly all her guests bailed the day before, leaving to waste a few thousand dollars’ worth of flowers. It has been rescheduled four times so far due to continuously changing guidance on the COVID-19 pandemic. Her wedding reception, nearly two years in the making and originally scheduled for the Fillmore Detroit on May 30, has been pushed back twice. She and fiancé Calvin Snedeker, 25, are praying the 500-person wedding will happen Dec. 18, because the venue is booked solid for a year after that, and they have more than $50,000 in deposits on the line, Munaco said.

“I was getting a lot of hate from people saying that I should just get it over with, that I should just go to the courthouse and get it done with,” she said. “I thought that was completely unfair for them to say because they had all gotten their day, but why can’t I have mine?” Marriage already was complicated, but then along came COVID-19. Weddings were not spared when the coronavirus outbreak upended life earlier this year. Anybody planning to take the plunge this season has had to either postpone or dramatically lower expectations for the big day. That’s resulted in tempers flaring, tears flowing and dollars draining from brides and grooms and the various businesses that comprise the $1.4 billion wedding industry in Michigan. Factoring into couples’ decisions are deposits already placed on ev-

Top PPP lenders

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Lender

JPMorgan Chase Bank Bank of America Truist Bank PNC Bank Wells Fargo Bank TD Bank KeyBank U.S. Bank Zions Bank M&T Bank Huntington Bank Fifth Third Bank Cross River Bank Citizens Bank BMO Harris Bank

COURTESY OF SCOT ORSER

See WEDDINGS on Page 18

FINANCE

Here are the banks that made the highest number of Paycheck Protection Program loans since the program began through June 30. Rank

Calvin Snedeker and Angela Munaco have had to change their wedding plans because of the coronavirus pandemic. |

erything from venues, hotels and catering services to DJs and photographers whose refund policies range widely. Not to mention, of course, the possibility of another surge in the virus that could shut the state down again. In Southeast Michigan, indoor social gatherings, including weddings, may not exceed 10 people, according to Gov. Gretchen Whitmer’s most recent executive order. Outdoor events are capped at 100 people. In the northern parts of the state, the limit is 50 inside and 250 outside. Venues in metro Detroit interpreted the order differently. Banquet halls are bound by the 10-person rule, but restaurants can operate at 50 percent capacity. For many businesses, the distinction between the two categories isn’t so clear.

Loan count

269,424 334,761 78,669 72,908 185,598 82,773 41,487 101,377 46,707 34,680 37,122 38,197 134,472 49,670 21,362

Net dollars

$29 billion $25.2 billion $13.1 billion $13 billion $10.5 billion $8.5 billion $8.1 billion $7.5 billion $6.9 billion $6.8 billion $6.5 billion $5.4 billion $5.4 billion $5 billion $4.8 billion

NOTE: THE TOP FIVE BANKS ORIGINATED 17% OF TOTAL LOAN DOLLARS. SOURCE: U.S. SMALL BUSINESS ASSOCIATION

Average loan size

$107,882 $75,287 $166,215 $178,833 $56,414 $102,311 $196,177 $73,438 $148,623 $195,825 $175,854 $142,271 $39,871 $100,806 $225,425

% of total authority

4.4% 3.8% 2.0% 2.0% 1.6% 1.3% 1.2% 1.1% 1.1% 1.0% 1.0% 0.8% 0.8% 0.8% 0.7%

CRAIN’S DETROIT BUSINESS GRAPHIC

More than 121,000 businesses in Michigan borrowed under PPP BY CHAD LIVENGOOD

More than 121,000 Michigan businesses and not-for-profit organizations borrowed from the federal government’s Paycheck Protection Program loan fund this spring, underscoring the severity of the immediate economic crisis triggered by government-mandated shutdowns to mitigate spread of the coronavirus. The U.S. Treasury Department last week disclosed the names of every private company, nonprofit and reli-

IN MICHIGAN, THERE WERE 185 COMPANIES OR ORGANIZATIONS THAT BORROWED BETWEEN $5 MILLION AND $10 MILLION. gious organization that borrowed more than $150,000 in PPP loans, a portion or most of which may be forgivable for retaining jobs. In Michigan, there were 185 companies or organizations that bor-

rowed between $5 million and $10 million and 821 entities borrowed between $2 million and $5 million. More than 2,700 entities borrowed at least $1 million from the federal government’s small-business lifeline program, according to a state-bystate database. The U.S. Small Business Administration also disclosed that more than 101,000 PPP loans were made to businesses and entities that borrowed less than $150,000. See BORROW on Page 18 JULY 13, 2020 | CRAIN’S DETROIT BUSINESS | 3

REAL ESTATE INSIDER

This property is formerly part of the Packard Plant and is now one of three buildings listed for sale for $6.95 million. It is not part of Fernando Palazuelo’s redevelopment portfolio. | COSTAR GROUP INC.

Former Packard Plant property hits market for nearly $7 million

Melissa Wojnar-Raycraft has extensive experience with state government and regulatory law, and can help you successfully navigate the increasingly complex governmental environment.

A property that was once part of the Packard Plant in Detroit as well as two others hit the market last month for $6.95 million. The package of Kirk properties that inPINHO cludes the building at 1600 East Grand Blvd., owned by an entity called Tsanwood LLC, was listed last month by Troy-based brokerage house L. Mason Capitani Inc. Marketing materials say the buildings total about 179,000 square feet, with about 46,000 to 68,000 square feet available for possible marijuana growing operations. Tsanwood is registered to Rick Portwood, the owner of Detroit-based The Display Group Ltd., who said the listing is to test the market. He noted that the buildings are also for lease. “I would prefer not selling it because it’s a great property,” he told me. “If somebody is interested in paying that kind of money for it, we would take it, but if I would have my druthers, I would prefer a tenant coming in because I don’t want to sell it.” Portwood said the 1600 East Grand Blvd. building is the former Building No. 82, where the Packard Motor Car Co., the property’s namesake, pro-

duced marine engines. The buildings are not part of the development plan by Arte Express, the company owned by Peru-based developer Fernando Palazuelo. However, his firm does have a small office in the 1600 East Grand Blvd. building. It is working on the redevelopment of the former Packard Motor Car administration building, the first phase in an ambitious effort to redevelop the overall 3.5 million-square-foot plant that has been one of the emblems of the city’s rise and fall. Joseph Kopietz, a member of Detroit-based law firm Clark Hill’s real estate group representing Arte Express, said the COVID-19 pandemic stalled construction but work has been done on the project since a groundbreaking ceremony in May 2017. “Fernando is still committed to the project; he’s locked down in Peru. They were under basically martial law down there,” Kopietz said of Palazuelo, who bought the plant from Wayne County for a mere $405,000 in a 2013 auction of foreclosed property. “They’ve gone through and spent quite a bit of money on a complete abatement, structural reinforcement, getting roofing prepped and started,” Kopietz said. “We were hoping to be able to get all the core and shell completed by the end of summer, with potential first occupancy by the end of the

Livonia, MI | www.mikecoxlaw.com (734) 591-4002 | mraycraft@mikecoxlaw.com

4 | CRAIN’S DETROIT BUSINESS | JULY 13, 2020

Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

Total Wine & More plans locations in Sterling Heights, Novi, Ann Arbor area BY KIRK PINHO

STATE GOVERNMENT AND REGULATORY LAW

year, but we have been effectively halted for four months and had limited activity on construction.” At the time of a May 2017 administration building groundbreaking, the project was expected to cost $23 million, including soft costs. Actual construction is expected at $16 million to $18 million, Kopietz said at that time. It received a 12-year tax abatement valued at $3 million, according to a Detroit Economic Growth Corp. document. In January 2019, the iconic Packard Plant bridge over East Grand Boulevard collapsed and had to be torn down. There was a shake-up in the redevelopment project’s leadership in July 2018. Packard Plant development director Kari Smith resigned, saying that construction predevelopment on the 121,000-square-foot had finished and more than 1,400 yards of contaminated debris had been removed. Kopietz said at the time that Smith had been instrumental but Palazuelo wanted to take the company in a new direction. In June 2019, a Palazuelo-owned Grand Trunk Warehouse & Cold Storage facility at 1921 E. Ferry St. hit the market for $4.94 million to raise funds for the Packard Plant effort. It remains for sale, Kopietz said.

A company specializing in building expansive liquor stores in large junior-anchor retail spaces is planning at least three Metro Detroit locations, Crain’s has learned. Bethesda, Md.-based Total Wine & More is working on opening stores in Sterling Heights in the former Toys R Us, as well as in Novi in an existing OfficeMax location and Pittsfield Township near Ann Arbor in a Big Lots site, according to a property owner and applications submitted to the Michigan Liquor Control Commission for liquor licenses. A Cascade Township location near Grand Rapids in a former Babies R Us store on 28th Street was reported first by MiBiz in February. The company says its typical stores carry more than 8,000 different wines, 2,500 beers and 3,000 spirits. It also says they look for properties 20,000 to 25,000 square feet.

Total Wine & More seeks locations that range from 20,000 to 25,000 square feet, the company says on its website.

Christopher Brochert, cofounder and partner of Bloomfield Hillsbased Lormax Stern Development Co. developer, said that Total Wine & More plans to occupy 28,000 square feet of the 44,000-square-foot former Toys R Us at 13801 Lakeside Circle at Lakeside Mall. Lormax Stern paid $1.45 million for it in February 2019, according to CoStar Group Inc., a

Washington, D.C.-based real estate information service. The Novi location is at 21071 Haggerty Road in the High Point Shopping Center at Eight Mile Road and Haggerty in a current OfficeMax location. Messages were left with property owner Sobel Co., based in Boca Raton, Fla. CoStar says the OfficeMax is about 30,000 square feet. A message was left with OfficeMax local management seeking comment. The Pittsfield location is a 29,000-square-foot Big Lots at 3140 Lohr Road in property owned by Waters Place LLC, which is registered to Fred Goldberg in Bloomfield Hills, according to CoStar. Jeannie Vogel, MLCC spokesperson, said the liquor license applications were from an entity called Michigan Fine Wine and Spirits LLC, which was formed in September and lists its corporate business office on state incorporation documents at the Bethesda address of Total Wine & More.

NONPROFITS

Skillman funds access to national pool of skilled volunteers New York-based Catchafire helps nonprofits complete projects to further their mission BY SHERRI WELCH

Hundreds of Detroit nonprofits serving the city’s youth will have access to free expertise provided by a national pool of skilled volunteers with new support from the Skillman Foundation. A $200,000 grant from Skillman to New York-based Catchafire is funding annual memberships for 200 nonprofits, giving them unlimited, on-demand access to more than 100,000 skilled volunteers online and support to think through the operational areas they could strengthen with pro bono help. Projects could range from nonprofit board assessments to graphic design, website construction and leadership coaching to moving in-person events to virtual events and online fundraising. The platform gives nonprofits the chance to build operating capacity, as well as long-term relationships with skilled volunteers who could become long-term supporters. At the same time, the platform provides opportunities for volunteers looking to donate time and skills to engage with nonprofit causes that are important to them. “The nonprofit ecosystem itself is

Gant

Whitfield

fragile,” said Skillman program officer Terry Whitfield. There are no public dollars that are helping to support organizations primarily funded through philanthropy, he said. And many times, foundations don’t fund the operational side of nonprofits. “The strength of our ecosystem is only as strong as the operations that help to drive the programs, so this was a great opportunity to help our grant partners.” Skillman is the latest funder to join the One Michigan collaborative, a group that’s contributed about $1 million to give invited nonprofit grantees in Michigan access to the skilled volunteers on the Catchafire. org platform. The collaborative includes: the Michigan Health Endowment Fund, the Ann Arbor Area Community

Foundation, both separately and as part of the Washtenaw Coordinated Funders, which also consists of the Office of Community and Economic Development Manley representing the city of Ann Arbor, Washtenaw and Washtenaw Urban counties, United Way of Washtenaw County and St. Joseph Mercy Ann Arbor. As of early June, 1,043 Michigan nonprofits were on Catchafire, Manley said. Between March 1 and June 9, Michigan nonprofits completed 347 virtual pro bono projects on the platform. The projects focused on immediate needs in the wake of COVID-19, like transitioning to remote work, developing human resource policies to keep staff safe and healthy, planning and organizing virtual fundraisers, transitioning programs to a virtual environment and securing support from the CARES Act. Those projects and the nonprofits engaged in them leveraged nearly 5,700 hours of volunteers’ time, sav-

THOUGHT LEADERSHIP FORUM

ing more than $1.2 million, according to Catchafire. To tap a skilled volunteer through the Catchafire platform, nonprofit members choose from over 140 available projects. The site only shows projects for things volunteers have indicated they can provide, said Tyler Manley, senior manager of nonprofit engagement. Matches between nonprofits and volunteers typically happen quickly, he said: “The average time from when a nonprofit posts a need and chooses a professional to do it is five days.” Volunteers apply to complete work on projects, and nonprofits choose who they work with after reviewing resumes and conducting interviews. Skillman’s grantees have jumped right in. As of June 12, 83 of 170 nonprofits it had offered free Catchafire memberships were active on the site. Fifteen projects had been posted by interested nonprofits, and 10 of them had been matched with a volunteer, Whitfield said. Those nonprofits had benefited from 266 donated volunteer hours and saved $46,800 — the cost if they’d paid for those professional services. Skillman offered the 30 remaining memberships to support center Co.

act in Detroit for nonprofits it engages, Whitfield said. “Like any healthy sector, the nonprofit ecosystem needs a variety of options and opportunities to meet nonprofits where they are and this is one of them,” said Allandra Bulger, executive director of Co.act Detroit, in an email.

First-hand experience Big Brothers Big Sisters of Metropolitan Detroit is among nonprofits that have taken Skillman up on its offer and signed up for Catchafire. “When I first heard about this, I was almost in tears,” said President and CEO Jeannine Gant. Gant said BBBS, which was forced to lay off 40 percent of its staff due to the revenue impact of COVID-19, doesn’t have the capacity or expertise to take on new projects. As a result, she’s a “super user” of Catchafire, with five or six projects already completed so far. In one project, BBBS is seeking to overhaul its Quickbooks accounting system. Another volunteer from Colorado is helping BBBS develop an email fundraising campaign. “I’m loving Catchafire,” Gant said. “It’s a game changer for sure.

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As employees return following shutdowns, employers are modifying workplaces to prevent the spread of COVID-19. Some employers have been met with harsh criticism and even protests from employees regarding the adequacy of their safe workplace measures. Prudent employers should consider the labor law implications of workplace modifications and responding to employee criticism. FAILURE TO BARGAIN OVER COVID-19 WORKPLACE MODIFICATIONS Employers are required to make workplace modifications to ensure a safe environment for employees and

to prevent the spread of COVID-19 under applicable federal and state law. Workplace modifications include changes to schedules, shifts, job assignments, procedures and work rules. However, the National Labor Relations Act (NLRA) prohibits unionized employers from unilaterally modifying employee wages, hours, or terms and conditions of employment without first providing notice of and an opportunity for the union to bargain over the modifications prior to implementation. Employers may unilaterally modify working conditions if (1) the plain language of their union contract allows the employer to do so; (2) the proposed modification is in line with an established history of similar actions to working conditions the employer has taken; or (3) if extraordinary circumstances, akin to a hurricane or flood, are present. Absent one of these exceptions, employers are advised to provide advance notice and an opportunity for the union to bargain over workplace modifications that affect employee wages, hours or working conditions before implementing them. EMPLOYEE CRITICISM OF COVID-19 SAFETY MEASURES Across the country, employees have

initiated work stoppages, strikes, social media campaigns and other actions to protest unsafe working conditions resulting from employer’s responses to COVID-19. The NLRA protects both union and non-union employees who engage in “protected concerted activity” for the purpose of “mutual aid and protection.” Work stoppages regarding working conditions are generally considered “protected concerted activity” under the NLRA and employers who discipline employees for their involvement in such activity face potential claims. Although the NLRA was recently interpreted to not extend protections to individual employees who engage in “mere gripes” about their employer, protests on behalf of co-workers or those intended to influence others to take action are protected under the NLRA. Determining whether employees have made “mere gripes” or engaged in “protected concerted activity” is a highly fact-dependent and difficult inquiry. Employers are advised to carefully investigate each employee’s activities before taking disciplinary action against them, due to the potential NLRA claims that may arise.

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JULY 13, 2020 | CRAIN’S DETROIT BUSINESS | 5

COMMENTARY

PPP shaming? Uneven results are tradeoff for speed Dustin

WALSH

ing a vast number of companies without the opportunity to access the funds. And many of those that did receive PPP loans didn’t experience any revenue decline, according to data compiled by Hamilton from surveys form the U.S. Census Bureau. Of the respondents to the May survey, 75 percent received PPP, but only 60 percent experienced a revenue shortfall. The U.S. government simply did not make it a requirement that a business document it was hurt by the virus, as it would likely slow down implementation. Australian businesses had to document a projected loss and for that loss, employers receive AU$1,500 every two weeks for employees regardless of employee wages or their status as full or part time if they have been employed at the company for 12 months. The issue here is the system provided part-time workers with roughly the same wages as full-time workers. But payments didn’t start until May 1, despite Australia’s economic suffering beginning around the same time as the U.S. PPP payments left the U.S. treasury April 3. “The Australian subsidy was much more tightly targeted, but more generous to those that were eligible; the American subsidy went to many businesses that didn’t need it, but many that received it didn’t receive enough,” the working paper said. But the U.S. simply isn’t able to target its plan like Australia. The U.S. Internal Revenue Service generally relies on annual W-2 forms to assess payroll information, while the Australian treasury uses an electronic payroll transmitted via the business’ accounting software whenever a worker is paid. Australia could simply verify the number of employees on payroll on a given date, whether they are full or part time and whether they had been with the business for the past 12 months. The IRS doesn’t have that kind of robust technological footprint. Its budget has been cut by 20 percent along with a 20 percent staff reduction since 2010. That reduction, coupled with the fact that the agency was tasked with distributing $1,200 coronavirus stimulus checks to millions of households, would have made handling business relief nearly impossible. So for the thousands and thousands of businesses saved from ruin by PPP, you’re going to see others that maybe didn’t deserve it. That’s the cost of expediency in the age of COVID-19. The overruns are probably not a rounding error, but most likely inevitable.

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.

DANIEL SAAD

The U.S. Treasury Department’s release of Paycheck Protection Program recipients set off some sniping last week as people scrambled to find out who got what. More than 121,000 Michigan businesses and nonprofit organizations borrowed from the federal loan fund this spring to circumvent the economic toll of COVID-19. Almost immediately, “PPP shaming” erupted on social media following the Treasury’s data dump. Scorn raged over loan awards going to companies owned by billionaires to private jet operators to country clubs. Did the Florida Democratic Party deserve $780,000 in PPP funds or the Catholic Church $1.4 billion? These are all worthy discussions about the efficacy of the program. Crain Communications, the Detroit-based parent company of Crain’s Detroit Business, also received a PPP loan in the range of $5 million to $10 million. We’ll suspend the THE U.S. SIMPLY argument over whethISN’T ABLE TO er the most efficient TARGET ITS PLAN solution to the ecodamage of LIKE AUSTRALIA. nomic COVID-19 and subsequent lockdowns of the economy is to simply provide money. But it is important to understand why the U.S. loan program, effectively a federal wage subsidy, is inefficient in nature. Congress substituted pinpoint accuracy for expediency, and it likely had to. The best way to highlight this is by contrasting the U.S.’s federal wage subsidy with a similar program such as the one from Australia, as outlined in a working paper released last week by Steven Hamilton, economist at Georgetown University. The U.S. PPP relied on middle men (banks) for small businesses with 500 or fewer employees but without considerations of whether revenue would be affected by the COVID-19 crisis. The Australian government implemented its version of PPP, called JobKeeper, through its central tax authority, which allowed businesses of all sizes to access the program but only after the company documented a projected drop in revenue of at least 30 percent, (or 50 percent of large business), compared to a year earlier. By using the country’s extensive and existing banking system, the U.S. was able to roll out the loans quickly — though implementation was hamstrung by squabbles in Congress and the first tranche of funds running out too soon. PPP handed out over $520 billion loans in just three months, and Congress extended the program until Aug. 8. The system is also more flexible, as Congress can choose to continue funding the program or end it in short order. But while the U.S. Small Business Administration could move quickly because of the existing private banking infrastructure, that same infrastructure prevented many businesses from accessing the loans because, simply, they don’t have a business relationship with the bank. Only 44 percent of U.S. small businesses took out a loan in the past five years, according to the U.S. Federal Reserve. For expediency, many banks limited PPP processing to existing business customers, leav-

COMMENTARY

Infrastructure projects need funding now more than ever BY MARK WALLACE

I’ve heard the same refrain from both friends and strangers, over and over, ever since the pandemic hit: “COVID has upended life as I know it. But I’ve found peace along the Detroit Riverfront.” Some have started runMark Wallace is ning along the river or the Dequindre Cut. Some president and have taken up fishing on CEO of the the banks. Others have Detroit found refuge in the quiet Riverfront solitude under a shade tree Conservancy at Gabriel Richard Park. The system of parks and trails along the Detroit Riverfront has been an integral part of our community for more than a decade, and it has been a source of strength for Detroit as we go through this period of profound loss and uncertainty. The word “infrastructure” brings up images of bridges and highways, physical assets focused on transportation or commerce. But our experience in the COVID era has been a reminder that the most valuable part of any community is its people, and that public infrastructure — like the Detroit Riverfront — is essential to keeping our people healthy, safe and social. For decades, American leadership has failed to invest in and repair our nation’s crumbling infrastructure. Now, with a health crisis resulting in a battered economy, critical infrastructure funding is even more urgent. The passing earlier this month of a transportation bill by the House Transportation and Infrastructure Committee — the INVEST in America Act — makes outdated infrastructure smarter, safer and more resilient. It creates jobs, boosts the economy, addresses the impact of

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 | JULY 13, 2020

climate change and helps build a more equitable, connected and inclusive country. The bill will now move to the full House of Representatives for consideration. It’s important to recognize the importance of transportation infrastructure reuse projects, as well. Nationally, for over a decade, more than 150 projects have been turning abandoned railways or highways, polluted riverfronts or waterways, and underutilized areas into new hybrid forms of public space. These projects reconnect neighborhoods that often have been divided by interstates, railways and major roadways, by offering multi-modal options for residents to get moving and build community. Leading the way on this effort is the Alliance for Infrastructure Reuse and Redevelopment, a coalition including the Detroit Riverfront and many other organizations. Through public-private partnerships, these projects are generating over $40 billion in economic development by leveraging and contributing millions of dollars to communities through increased job creation, tax revenue and tourism. In addition, these projects increase access to clean and healthier environments for residents, mitigate pollution and increase disaster resilience. The INVEST Act supports infrastructure reuse projects that have helped revitalize so many cities by salvaging underutilized or abandoned infrastructure to create inclusive public spaces for multi-modal transportation. It is critical that these projects, which improve physical and mental well-being, while also creating jobs and boosting the economy, are included under the eligibility for federal grant opportunities and programs. The nonprofit Detroit Riverfront Conservancy encourages Congress to pass this legislation that is so critical to the maintenance of our nation’s infrastructure and that expands the definition of infrastructure reuse projects like the Detroit Riverwalk and the Dequindre Cut.

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

Mask up, Michigan, to keep our businesses open BY SANDY BARUAH

Sandy K. Baruah is president and CEO of the Detroit Regional Chamber.

We have been home for four months. It’s hot and we are all pretty bothered. We’ve been told, and told again, to do, and not do, a series of things — including wearing a mask. Who wants to wear a mask? They are uncomfortable, especially in the heat, and they make us

look funny. Some think wearing a mask is a political statement or indication of self-righteousness. Others think not wearing one is an expression of our American freedom or support for President Donald Trump. Here is a different thought: Wear a mask to keep your local businesses open. The primary goal of the Detroit Regional Chamber is to support businesses across the region. In this era of COVID-19, there is nothing more important to businesses large and small — and the employees who work for them — than to keep their doors open. Unless and until the virus is under control, businesses and their customers will struggle. Unless and until the virus is under control, governments will have little choice to impose restrictions and customers will continue to hesitate to venture into the economy. Unless and until the virus is under control, our economy and employment will suffer. Wear a mask as an act of econom-

CRAIN’S AWARDS

Nominations now open for Notable Veterans in Michigan Crain’s Detroit Business seeks accomplished leaders who have served their country and their businesses and continue to give back to their community. Nominations are now open for Notable Veterans in Michigan. The deadline to nominate a candidate is Aug. 18. After being nominated, candidates will receive an email and have until Aug. 25 to complete a separate application. Any veteran currently working in Michigan is eligible for recognition in Notable Veterans. We are looking for demonstrated leadership in military service and business. Honorees will be featured in a special section in Crain’s Detroit Business on Nov. 9. Visit crainsdetroit.com/nominate for more information or to start a nomination. For questions about the program, please contact Integrated Marketing Manager Kelsey Strachan at kstrachan@crain.com.

ic patriotism. Wear a mask to sup- tomatic carriers: You or I could feel port your favorite dress shop, gour- perfectly healthy and spread the virus just by walking around and met deli, barber or Ford dealer. The evidence is convincing; the spreading our respiratory droplets. Those COVID-19 most effective tainted droplets step society can WEAR A MASK AS AN ACT may not impact take to stem the tide of COVID-19 OF ECONOMIC PATRIOTISM. the asymptomatic carrier but can is to wear a face mask any time WEAR A MASK TO SUPPORT infect and harm others. With a and every time YOUR FAVORITE DRESS mask, the chancwe are in public es of you being — especially SHOP, GOURMET DELI, when indoors. BARBER OR FORD DEALER. that carrier diminishes greatly. One of the reaA recent study showed that requirsons COVID-19 is so scary, and why the world is challenged to get a han- ing people to wear face masks all of dle on it, is the prevalence of asymp- the time could be enough to contain

an outbreak — meaning no more shutdowns. Bolstering this research is the example of the two Missouri hairstylists who tested positive for the virus. Between them, they saw 140 customers immediately after their salon reopened. But instead of local public-health officials detecting a cluster of new cases, they arrived at a surprising finding that despite extensive testing, no tests of their customers came back positive. The hairdressers wore masks at work and their customers did too. The health crisis and the economic crisis go hand-in-hand. As long as the virus is spreading, or until science develops an effective

remedy, COVID-19 will slow our economy. You or I may not develop the vaccine the world is waiting for, but we can do the next best thing: Wear a mask. All of us wearing masks is so important, the Chamber calls upon our government leaders at all levels to help advance the ethos of “no shoes, no shirt, no mask, no service.” No exceptions. Businesses, especially our frontline essential workers, need help in getting more of their customers to understand that wearing a mask is a critical element to keep their doors open. Mask up, Michigan. Let’s keep our businesses open.

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JULY 13, 2020 | CRAIN’S DETROIT BUSINESS | 7

WOMEN IN LEADERSHIP

CHANGING THE TRAJECTORY

From teen pregnancy in Detroit to COVID-19, Dr. Joneigh Khaldun’s mission is a healthier Michigan The Khaldun File

BY RACHELLE DAMICO | SPECIAL TO CRAIN’S DETROIT BUSINESS

Education: Bachelor of Science in Biology from the University of Michigan. Doctor of Medicine, Perelman School of Medicine at the University of Pennsylvania. Master of Public Health with a concentration in health policy, the George Washington University School of Public Health and Health Services.

Joneigh Khaldun was on her way to becoming an emergency medicine physician when she ended up in the intensive care unit herself. She was just beginning her medical residency program at Kings County Hospital in Brooklyn, N.Y., when she suffered a life-threatening brain hemorrhage. Despite the fact that Khaldun almost lost her life, there was a silver lining to that experience. She decided that she wanted to do more. “That’s when I really committed myself to not only being the best doctor I could be, but to change the world with the time that I have on earth,” Khaldun said. “My passion is not only being a good doctor, but changing systems and changing the trajectory of health for people in society.” Today, Khaldun is the chief medical executive and chief deputy director for health for the Michigan Department of Health and Human Services. In her roles, Khaldun provides medical guidance for the state and oversees public health, Medicaid, public hospitals, behavioral health and mental health services. Khaldun has made strides in public health and public policy. As a fellow in the U.S. Department of Health and Human Services’ Office of Health Reform, Khaldun worked with senior Obama Administration officials in 2012 on implementation of the Affordable Care Act. She also led Detroit’s response to the largest hepatitis A outbreak in modern history during 2016-2019, coordinating screening and vaccination at major emergency departments and vaccinating more than 8,500 people. Now, Khaldun is chief public health adviser to Gov. Gretchen Whitmer for Michigan’s COVID-19 response. As of July 7, Michigan had reported over 66,000 total cases of the virus and nearly 6,000 deaths. Case figures are up since June — Michigan reported 610 new cases on July 8, the highest daily number of new cases in six weeks — but they’re nowhere as high as the thousands of cases seen daily in some southern states now and what Michigan saw in April. “The governor’s leadership and her attention to the data and the science has really made Michigan stand out as far as how quickly we were able to get the disease rates to come down in our state,” Khaldun said. “We are now seeing slight increases across the state in various regions and it’s important that we don’t take our foot off the pedal.”

8 | CRAIN’S DETROIT BUSINESS | JULY 13, 2020

` When drew you to medicine? As a young person, I was always interested in science and was always asking a lot of questions. When I was about 5 years old, I recognized that my grandmother had a lot of medical conditions. She smoked a lot of cigarettes, so I aggressively tried to hide them. I made the connection that smoking was associated with her health conditions. I thought I could make my grandmother healthy if I could just take her cigarettes away. She died young. Even early on, I had a real interest in prevention and I understood the connection between health, behaviors and the environment. By the time I finished high school, I clearly knew that I wanted to be a doctor. ` What were some early challenges in your career and how did you overcome them? When I was an emergency medicine resident at Kings County Hospital, I came into the residency program my intern year pregnant with my first child. About three weeks after the birth of my child, which was kind of a difficult delivery, I was having bad headaches. After multiple communications with my own doctors, I finally went into the hospital where I worked and was diagnosed by my own program director as having a bilateral subdural hematoma. Essentially, I had a brain full of blood. I was young, I had a 3-week-old baby at home, and yet there I was in an intensive care unit with a lifethreatening head bleed. I’m incredibly lucky because I have pronounced people dead who have had the same CAT scan that I had. I ended up having a pretty urgent surgery. I don’t remember much back then, but I do know that I ended up having holes drilled in my skull to get the blood out. Coming back from it was challenging. I remember being winded and dizzy when I walked. I felt out of it and like my brain was not functioning right. I made a conscious decision afterwards that I was going to bounce back. I was going to finish my medical training and do something with the second chance at life that I had. My

Joneigh Khaldun, M.D.

passion is not only being a good doctor, but changing systems and changing the trajectory of health for people in society. That’s what I’ve committed my career to. ` What’s it like to be a medical professional who’s also involved in the political realm? How do you balance a profession that’s fact-based vs. a profession that’s idea-based? At the end of my medical residency program, I decided I didn’t want to be a regular ER doctor. I wouldn’t say I wanted to be involved too much in politics, but policy — the policy developments, the policymaking and the policy implementation. I did a fellowship at George Washington University in health policy. I worked as

an ER doctor there but I also got my master’s degree in public health. As part of the experience, I was able to work full time as a fellow in the Office of Health Reform under the Obama administration in HHS. That’s where I started to understand that you can’t necessarily go to policymakers with your 30-page research article and expect that changes will be made. There’s a lot of context to how policies are made and implemented. That experience opened my eyes to the opportunity for physicians to be able to be involved in helping to craft and guide how policy is implemented. I’m not a politician but I do love thinking about and talking about implementing health policies. ` What’s an initiative that you’ve

Career ladder: Khaldun completed her emergency medicine residency at SUNY Downstate/Kings County Hospital Center in Brooklyn, N.Y. in 2010. Afterwards she served as both emergency medicine faculty and a health policy fellow at George Washington University in Washington, D.C., from 2010-2012. In 2012, Khaldun was a fellow in the U.S. Department of Health and Human Services’ Office of Health Reform, where she worked with senior Obama Administration officials on implementation of the Affordable Care Act. From 2013-2016, Khaldun was a clinical assistant professor at the University of Maryland School of Medicine in Baltimore, Maryland. During that time, she founded and directed the department’s Fellowship in Health Policy and Leadership, a program designed to give early career physicians policy experience and leadership training. From 2015-2016, Khaldun was chief medical officer and assistant commissioner for Clinical Services at the Baltimore City Health Department. In 2016, Khaldun was appointed by Mayor Mike Duggan as medical director for the Detroit Health Department. She became the department’s director and health officer in 2017. In her time leading the Detroit Health Department, she built a reproductive health network, led efforts to combat the largest hepatitis A outbreak in modern history and created the department’s opioid overdose response efforts. In 2019 she was appointed by Gov. Gretchen Whitmer to serve as chief medical executive for the state of Michigan and chief deputy director for Health for the Michigan Department of Health and Human Services. Since 2016, Khaldun has practiced emergency medicine part time at Henry Ford Hospital in Detroit. Fun fact: Khaldun was a long jumper, hurdler and sprinter at Pioneer High School in Ann Arbor. Khaldun credits her high school track coach, Bryan Westfield, as an important early mentor. “He instilled in me and everyone that he coached the importance of dedication, hard work and perseverance,” Khaldun said. “I credit him for a lot of my thick skin.”

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worked on that youâ&#x20AC;&#x2122;re particularly proud of? One thing thatâ&#x20AC;&#x2122;s important to me in public health is that when youâ&#x20AC;&#x2122;re developing initiatives, you work with the communities. You donâ&#x20AC;&#x2122;t swoop in and start doing things without asking the community what the challenges and solutions are. When I was Detroitâ&#x20AC;&#x2122;s Health Director, we worked on the teen pregnancy rate and the number of people who didnâ&#x20AC;&#x2122;t have access to contraceptives, but also perhaps didnâ&#x20AC;&#x2122;t have the resources or the knowledge to make the right choices when it came to when they wanted to become a parent. Over the span of about two years, we worked closely with youth groups in the city of Detroit, as well as medical providers, hospitals and federally qualified health centers. We brought over 23 reproductive health clinics (to Detroit) and partnered with Lyft to give people free rides to clinical appointments. We opened our own Detroit health department clinic and a recreation center where we provided contraceptives and intense counseling for people with no out-of-pocket costs. Itâ&#x20AC;&#x2122;s something that was (in partnership) with the community, and we developed interventions based on what the community was telling us it needed. Thatâ&#x20AC;&#x2122;s how you do public health well and itâ&#x20AC;&#x2122;s something Iâ&#x20AC;&#x2122;m proud of. ` When the first coronavirus cases were identified in Michigan, were you surprised it escalated as quickly as it did? Honestly, I was not surprised at all. By the time we, on March 10, identified our first two cases of COVID-19, I assumed that it was already present in this state. My amazing team at MDHHS and I have been looking at this and following it since early January or December. I knew that as a country we already had people traveling back who potentially had been in areas where there are high rates of disease and infection. I also knew that we had such a strict criteria for testing in the country. In the early days, only people who were very sick and who were hospitalized could get access to a test. Early on, I didnâ&#x20AC;&#x2122;t even have the ability to run those tests in the state. We had to send them to the Centers for Disease Control to be run and then the CDC was prioritizing tests across the entire country. Thatâ&#x20AC;&#x2122;s why we started talking about social distancing and washing hands before we even identified our first cases. It was just a matter of time before we identified those cases. ` Michigan was a hard-hit state that saw a huge improvement, but now thereâ&#x20AC;&#x2122;s been an uptick in cases. What should people remember in order to keep cases low? It only takes one person. If you get exposed and get the disease it could spread like wildfire. Itâ&#x20AC;&#x2122;s important we continue to be incredibly vigilant when it comes to basic things like social distancing, hand washing and wearing a mask. Try to avoid large gatherings. What weâ&#x20AC;&#x2122;ve been seeing with people gathering in various places, like the bar in East Lansing, is very concerning. (More than 150 known COVID-19 cases have been associated with visits to Harperâ&#x20AC;&#x2122;s Restaurant and Brew Pub in

Joneigh Khaldun, M.D., and Gov. Gretchen Whitmer at a pandemic press briefing in May. | MICHIGAN GOVERNORâ&#x20AC;&#x2122;S OFFICE

East Lansing between June 12-20.) I think everyoneâ&#x20AC;&#x2122;s concerned about that type of behavior. Itâ&#x20AC;&#x2122;s on all of us as Michiganders to do our part. Weâ&#x20AC;&#x2122;re going to have to continue to focus on that if weâ&#x20AC;&#x2122;re going to (contain) this disease in the state and across the country. ` What are some of your frustrations when it comes to the pandemic? What do you wish we were doing differently, both at the federal level and as a community? Something that keeps me up at night is how very basic things like mask wearing have become political. Mask wearing is not political; itâ&#x20AC;&#x2122;s something that can prevent infection and save lives. Iâ&#x20AC;&#x2122;ve been concerned about things coming out of the White House that are not factual and how thatâ&#x20AC;&#x2122;s encouraging people to not make the right choices and decisions. At the federal level, especially from the White House, we should have had and still need to have consistent, accurate, scientifically sound guidance for the public around public health best practices. We should be encouraging people if theyâ&#x20AC;&#x2122;ve been exposed to get a test. We should be encouraging people to wear a mask. We should not be saying that COVID19 is over and under control because it is not. This country has a long way to go when it comes to being able to contain the disease. That messaging is critically important. As a country, we should have been able to quickly identify cases so that we could box the disease in and stop the spread. We did not do that, and I think weâ&#x20AC;&#x2122;re still seeing the fallout of that. Not only did we not make tests available early, (we didnâ&#x20AC;&#x2122;t have) supplies such as personal protective equipment, and lab supplies like reagents and swabs. There is still no real infrastructure coordinated from a federal level or a strategy for states to get these supplies. Weâ&#x20AC;&#x2122;re partnering with our other state leaders, but weâ&#x20AC;&#x2122;re essentially competing with other states for supplies. I think thatâ&#x20AC;&#x2122;s something that the federal government could have done a better job with. ` Whatâ&#x20AC;&#x2122;s the most common misconception you hear about the coronavirus? One thing Iâ&#x20AC;&#x2122;m concerned about is

young people. Adolescents and some of the younger folks may think the disease canâ&#x20AC;&#x2122;t infect them, or they donâ&#x20AC;&#x2122;t need to wear masks, or that they can go out in crowds, but thatâ&#x20AC;&#x2122;s not true. The disease as weâ&#x20AC;&#x2122;re seeing across the country can affect people who are younger. Even though weâ&#x20AC;&#x2122;ve had higher numbers of cases and deaths in older individuals, it doesnâ&#x20AC;&#x2122;t mean that people who are younger cannot still have severe consequences and even death. Itâ&#x20AC;&#x2122;s really important that people still understand how dangerous this disease is and they take it seriously.

` How long do you think it will take for a vaccine to be administered to the majority of the population? We are working very hard and working very closely with our national colleagues to be prepared when a vaccine becomes available. We donâ&#x20AC;&#x2122;t expect it until late fall at the earliest. Unfortunately, just like with H1N1, we believe when the vaccine first becomes available itâ&#x20AC;&#x2122;s going to be in very limited quantities. Whatâ&#x20AC;&#x2122;s likely going to happen is that the CDC is only going to give each state a certain amount of vaccines and then letting us know which priority group should get the vaccine. We donâ&#x20AC;&#x2122;t know at this point, but groups like health care workers and the elderly is certainly something that weâ&#x20AC;&#x2122;ll be focusing on here in this state. Also, racial and ethnic minority populations who weâ&#x20AC;&#x2122;ve seen have been disproportionately impacted by the disease. Right now, we believe it will be a while before the entire general population will have access to the vaccine. We remain hopeful and are planning for when the vaccine becomes available. ` Why do you choose to still practice emergency medicine at Henry Ford? I really enjoy practicing emergency medicine. I joke and sometimes say itâ&#x20AC;&#x2122;s the easiest job that I have. When you are working in an emergency department and you see someone come with a sky-high blood pressure

` Should employers be requiring employees to test negative for the virus before going to work as opposed to just not having a fever or other symptoms? Testing is incredibly important. As a state, we went from being able to test a few hundred people a day to now testing between 13,000-14,000 people per day, which is great. Itâ&#x20AC;&#x2122;s important to remember that once someone is exposed to the virus it can take several days for them to come down with symptoms or to even test positive. Once you get that test result, it doesnâ&#x20AC;&#x2122;t mean the day after your test you havenâ&#x20AC;&#x2122;t been exposed. We have to identify cases as quickly as possible. We have to make sure that people who are exposed are quarantining and isolating. Weâ&#x20AC;&#x2122;re especially encouraging frontline workers, people who work in nursing homes, and others who work in high-risk industries to get tested. Those individuals get tested frequently to make sure weâ&#x20AC;&#x2122;re identifying cases as quickly as possible.

because they ran out of their medication, or youâ&#x20AC;&#x2122;re trying to send someone to outpatient follow-up and canâ&#x20AC;&#x2122;t because of insurance issues or because they donâ&#x20AC;&#x2122;t have a place to live, you see firsthand the impact of how our health care system sometimes fails people. It keeps me grounded. I love providing high-quality care to my patients and teaching residents and medical students. I bring a different perspective because of my public health and policy experience and that helps them think complicatedly about the patients theyâ&#x20AC;&#x2122;re taking care of. ` What advice would you give someone who is considering a career in the medical field? I believe physicians should treat every patient as if they were a family member, meaning it is imperative to listen, not judge, and provide the highest quality care with every interaction. I would tell anyone going into the medical field that there is no greater honor than being able to help people be as healthy as possible. As an emergency physician, I find it humbling to take care of people when they are facing a health crisis. I often donâ&#x20AC;&#x2122;t get to spend much time with a patient or their family, but that time can mean the difference between life and death and it often presents a real opportunity to provide solace and comfort.

We are here to make your project easier. With engineering, architectural, infrastructure, and environmental services in-house and 14 RIĹ´ FHV IRU ORFDO DWWHQWLRQ )LVKEHFN LV \RXU all-in-one solutions provider.

` What about pool testing, where a large group of people are tested at once before going into the workplace â&#x20AC;&#x201D; is that something Michigan is considering? Pooling refers to putting a whole set of samples into one batch and running them all at the same time, so if the whole batch is negative you assume everyone is negative. Weâ&#x20AC;&#x2122;re currently looking at the data and the science around that. Weâ&#x20AC;&#x2122;re working very closely with our federal scientists as well to understand how we could potentially bring that to Michigan. 800.456.3824 fishbeck.com

JULY 13, 2020 | CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS | 9

HEALTH CARE

McLaren Macomb to begin negotiations with newly formed union Hospital ends appeals process following overwhelming vote by 330 service employees to organize BY JAY GREENE

Officials at McLaren Macomb Hospital in Mount Clemens have agreed to begin contract negotiations soon with a new service employee group with OPEIU Local 40 after dropping further appeals that challenged election results from last August. Earlier this month, the National Labor Relations Board unanimously dismissed the 288-bed hospital’s request for a review of the union election held last year in which about 330 service employees voted overwhelmingly to organize. McLaren Macomb, which is part of 14-hospital McLaren Health Care Corp., a Grand Blanc-based integrated health system, challenged the election results four times before NLRB officers and regional boards. “Many will never understand the amount of strength and tenacity it took for us health care heroes to come in everyday with our backs against the wall, not just battling McLaren but battling a pandemic as well to serve our community and stand up for what is right for everyone,” said Raynette Gaines, OPEIU Local 40 member, in a statement. Tom Brisse, president and CEO of McLaren Macomb, said the hospital will honor the NLRB’s final decision and work with OPEIU to negotiate a contract. “We will respect the NLRB’s decision once made and forgo any further appeal in the interest of moving forward for our employees,” Brisse said in a statement. Jeff Morawski, R.N., president of OPEIU Local 40, said he expects McLaren to soon work with the union on a contract. “McLaren Macomb management has already publicly committed to honor the labor board’s decision and so we expect them to come to the table and bargain,” Morawski said in an email.

McLaren Macomb, part of McLaren Health Care. | MCCLAREN MACOMB

However, Sharyl Smith, McLaren’s regional vice president of marketing and business development for the Southeast Michigan region, said McLaren must address some preliminary issues involving a group of employees who were not included in the NLRB certified bargaining unit before contract talks begin. “(We are) hoping to work with the union to resolve those issues prior to any bargaining commitment,” Smith said. Scott Brooks, a labor attorney representing Local 40 with Gregory, Moore, Brooks & Clark PC in Detroit, said the union hopes to meet with hospital officials in the next two weeks to discuss how to include about 30 employees in the bargaining group in a variety of job classifications. “(The NLRB) said they could vote but they would be subject to challenge, so their votes were kept separate, in the event the votes were determinative” in the election, said Brooks, adding that because the overall vote to approve was so over-

whelming a hearing wasn’t necessary to include them. “There was no reason to open those ballots.” Brooks said the union and the hospital will meet to discuss and agree what classes to include in the new bargaining unit. He said if the parties can’t agree, the issue goes back to the NLRB. “We can be resolving that (issue) as contracts talks progress,” said Brooks.

McLaren’s challenge After the August 2019 union vote, Brisse said McLaren Macomb disputed several issues at a pre-election hearing and at a post-election objection hearing. McLaren appealed the NLRB’s decisions based on “the interest of our impacted employees” and concerns that the rights of some employees were not protected in how the election process was conducted, he said. “The (NLRB) recognized in its determination that this election process was flawed,” Brisse said. “The

NLRB has changed its election process prospectively to prevent this exact conduct in the future. However, the board rarely applies process changes retrospectively, so the hospital’s request for review was denied.” Brooks said nothing in the NLRB ruling indicated that the election process was flawed. Unrelated to the McLaren case, he said the NLRB simply changed the steps in how elections can be challenged. “The hospital filed four separate reviews that acted to delay final determination,” he said. “Nevertheless, the union was certified to represent the employees last year in December.” Under the new rule, if a request for review of a regional director’s election order is filed and not decided on the election date, the NLRB may stay the election or allow it to take place and then impound the ballots. Then, if an employer requests review of that order, the NLRB’s final decision will direct the election take place if it had been stayed or it will trigger opening impounded ballots if it had taken place, Brooks said. Workers certified in the union include bed control specialists, administrative and imaging assistants, clerical associate-1s, clerical associate-2s, gift shop clerks, clinical care systems coordinators, office coordinators, dispatchers, couriers, EEG techs, operators, patient liaison meta bariatric, schedulers, surgical boarders, surgical supply specialists, cardiographic techs, critical care techs, lab assistants and perioperative techs, the NLRB said. Other employees that must be negotiated include the following classifications: anesthesia techs, endoscopy techs, academic program administator-1s, academic program administrator-2s, graduate medical education specialists, medical staff services coordinators, audit analysts, billing clerks, inventory assistants, inventory coordinators and medical

Brisse

Brooks

“WE WILL RESPECT THE NLRB’S DECISION ONCE MADE AND FORGO ANY FURTHER APPEAL IN THE INTEREST OF MOVING FORWARD FOR OUR EMPLOYEES.” — Tom Brisse, president and CEO of McLaren Macomb

coders, the NLRB said. Now that the union certification has been upheld, Brooks said NLRB Region 7 will continue processing the unfair labor practices filed against McLaren for refusing to bargain. Morawski said the unfair labor practice charge was filed because the hospital refused to bargain after the NLRB certified the union in mid-December. He said McLaren also refused to provide information and initiated “unilateral changes ... since the original certification in some instances may need to be reversed.” OPEIU Local 40 represents registered nurses and service employees at McLaren Macomb and also the nurses, radiology technologists and laboratory technologists at Ascension Providence Rochester Hospital. Several McLaren hospitals already have similar nonprofessional service units, including McLaren Flint, McLaren Greater Lansing and McLaren Bay. Contact: jgreene@crain.com; (313) 446-0325; @jaybgreene

INFRASTRUCTURE

Last of Rocket Fiber internet business sold to Cleveland ISP Everstream Solutions sells residential side of business to Snip Internet, also of Cleveland BY NICK MANES

Downtown area residents with internet service through Rocket Fiber LLC will soon see a different company name on their bill. The Dan Gilbert-backed internet service provider earlier this year sold to Cleveland-based Everstream Solutions LLC. Now the latter company, which focuses primarily on enterprise and commercial internet service, has completed a sale of the Rocket Fiber residential business to Snip Internet LLC, also of Cleveland. The 4-year-old ISP was founded by Everstream President and CEO Brett Lindsey to focus on residential service and has been expanding into markets such as Columbus, Milwaukee and now Detroit via the acquisition, terms of which were not disclosed. Snip earlier this year closed on a $7.75 million fundraising round, according to a federal securities filing. 10 | CRAIN’S DETROIT BUSINESS | JULY 13, 2020

The existing Rocket Fiber residential internet business has been sold to Snip Internet from Cleveland. | ROCKET FIBER VIA FACEBOOK

“In the four years since launching, Snip has been building the back-office support and network infrastructure to expand into new markets,” said Lindsey. Pricing and service will remain the same for Rocket Fiber customers, according to Lindsey. There’s presently more than 100 multi-unit buildings in the downtown Detroit and surrounding neighborhoods that have Rocket Fiber internet service As Snip enters the Detroit market, the goal for the remainder of 2020 will be investing in the area and building out customer service teams, said Lindsey. Historically, Rocket Fiber has largely only been available within the 7.2 square miles that make up the core parts of downtown Detroit. While expansions to other neighborhoods and out to the suburbs are possible in the coming years, Lindsey said, overall the company sees its fit

“PEOPLE MOVING DOWNTOWN EXPECT THEIR INTERNET SERVICE TO BE RELIABLE AND FAST, WHICH ISN’T THE CASE IN MANY PROPERTIES TODAY.” — Robin Doerschuk, vice president and general manager, Snip

in urban downtowns. “Throughout the Midwest, the urban revitalization occurring is bringing new residents into downtown areas, driving demand for quality high-speed internet service,” Robin Doerschuk, vice president and general manager of Snip, said in a statement announcing the sale of the Rocket Fiber residential business. “People moving downtown expect their internet service to be reliable and fast, which isn’t the case in many properties today.”

HOSPITALITY

Pre-pandemic, tourism, hospitality industry was hitting new highs Metro Detroit reached record employment in sector, saw 19 million visitors annually BY SHERRI WELCH

The number of people employed in Metro Detroit’s tourism and hospitality industry reached record levels in 2020 before COVID-19 spawned mass event cancellations, restaurant and hotel shutdowns and slowdowns. Employment numbers reached that peak as the region saw a record 19 million visitors annually to the city and region, the Detroit Metro Convention & Visitors Bureau said. According to a study commissioned by the DMCVB in February, employment in the region’s tourism and hospitality industry had grown to a combined 486,840 jobs. That figure included 23,000 indirect jobs tied to hospitality, according to the study conducted by the Workforce Intelligence Network. The industry made up about 25 percent of all metro Detroit employment in a typical year, the DMCVB and WIN said, ranking the combined sectors among the largest industry in the region and state. Spending by those workers contributes approximately $79 million to state sales tax collections each year, $121 million in state income taxes and $6.5 million in fuel taxes, according to the study. Additionally, hospitality workers pay $30.3 million in income taxes to

Metro Detrtoit attractions, such as the Motown Museum, bring 19 million visitors annually to the city and region, according to a recent report. | GETTY IMAGES

WHAT’S YOUR COMPANY’S NEXT MOVE?

the city of Detroit. Those employees work in segments including arts and culture, conferences and events, entertainment, gaming, hotels, air travel, recreation, dining, event planning and casinos. “Prior to the pandemic, hospitality was a major force in southeast Michigan and its restoration will be instrumental to the region’s comeback,” said Larry Alexander, president and CEO of the Detroit Metro Convention & Visitors Bureau, in a release. “For Metro Detroit’s economy to recover, this industry has to recover.” The DMCVB said it is monitoring several indicators to determine if tourism is rebounding in the region. Among those are the reopenings of attractions like local arts and cultural institutions, many slated for this month. Meeting and convention planners are reaching out to discuss event bookings and rebookings in Detroit, generally for 2021 and beyond, the DMCVB said. Campus Party TechFest, an event that’s taken place around the world for over 20 years, had scheduled its first U.S. event in Detroit in August but rescheduled it first to November and then to July 2021. The U.S. event was originally projected to attract 3,000-5,000 attendees, a spokeswoman said.

Hotel occupancy in the region is another indicator of the strength of the hospitality and tourism sector that the DMCVB said it’s watching. As Crain’s reported, a total of 43.7 percent of the 44,880 hotel rooms in the Detroit region were occupied the week of June 7-13, with an average daily room rate of $75.57, according to data collected by Tennessee-based hotel-industry analytics firm STR. That’s up from an occupancy rate of 22.3 percent the week of April 5-11 and an ADR of $64.93. At the beginning of March, occupancy rates were 62.2 percent and the average daily room rate was $99.18. Melissa Sheldon, director of data and workforce projects for WIN, said employers seeking workers for occupations related to tourism and hospitality posted 4.5 percent more online job advertisements in May than in April. “Due to restrictions and stay-athome orders, employer demand was low across most sectors in Michigan, especially in April, but the uptick in demand during the month of May is promising as we move toward economic recovery,” Sheldon said in the release. Contact: swelch@crain.com; (313) 446-1694; @SherriWelch

Let the business community know with a featured listing in Company’s on the Move Showcase your latest milestones, awards, community outreach and more in Crain’s print and online edition

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JULY 13, 2020 | CRAIN’S DETROIT BUSINESS | 11

CRAIN'S LIST: PHY PHYSICIAN SICIAN OR ORG GANIZ ANIZA ATIONS Ranked by number of physicians Company Address Phone; website

1 2 3 4

Top executive(s)

Physicians Jan. 2020/ 2019

Full-time employed physicians Jan. 2020/ 2019

Part-time employed physicians Jan. 2020/ 2019

Type of organization

Hospital Affiliation

Beaumont Care Partners LLC

Ryan Catignani executive director

4,095

1,165 0

2,930 0

CIN

Beaumont Dearborn, Beaumont Farmington Hills, Beaumont Grosse Pointe, Beaumont Royal Oak, Beaumont Taylor, Beaumont Trenton, Beaumont Troy, Beaumont Wayne

McLaren Physician Partners

Gary Wentzloff president and CEO

2,552

913 850

NA 0

PHO

McLaren Health Care Corp., Karmanos Cancer Center

The Physician Alliance LLC

Michael Madden president and CEO Karen Swanson chief medical officer

2,317

616 563

NA 0

IPA

Ascension Southeast Michigan, Children's Hospital of Michigan, Detroit Receiving Hospital, Beaumont Health, Henry Ford Health System, McLaren-Macomb, Harper Hospital, Karmanos Cancer Institute

University of Michigan Faculty Group Practice

Timothy Johnson senior associate dean for clinical affairs

2,203

2,203 0

NA 0

Group practice

26901 Beaumont Blvd., Southfield 48033 947-522-0039; www.beaumontcarepartners.org

2701 Cambridge Court, Suite 200, Auburn Hills 48326 248-484-4928; www.McLarenpp.org 20952 12 Mile Road, Suite 130, St. Clair Shores 48081 586-498-3555; www.thephysicianalliance.org

4101 Medical Science Building I, Ann Arbor 48109-0624 800-211-8181; medicine.umich.edu/medschool/patient-care/

3,921

2,351

2,279

2,102

Michigan Medicine (formerly University of Michigan Health System)

Henry Ford Physician Network

1 Ford Place, Detroit 48202 313-874-1466; www.henryford.com/hfpn

Bruce Muma president and CEO

2,145

1,495 1,302

0 0

CIN

Henry Ford Health System; others. Includes 1,495 employed physicians in the Henry Ford Medical Group and another 650 independent/community physicians in Southeast Michigan.

Beaumont Accountable Care Organization

Walter Lorang executive director and COO

1,873

0 0

ACO

Beaumont hospitals in Royal Oak, Dearborn, Farmington Hills, Grosse Pointe, Taylor, Trenton, Troy and Wayne

United Physicians Inc.

Michael Williams president and CEO Diane Slon EVP, COO

1,700

NA NA

IPA

Beaumont Health, Beaumont Health Farmington Hills, Children's Hospital of Michigan, Crittenton Hospital and affiliates, Detroit Medical Center hospitals, Pontiac General Hospital, Garden City Hospital, Henry Ford Health System, Karmanos Cancer Center, McLaren Health Care Corp., Oakland Regional Hospitals, Select Specialty Hospitals, St. John Providence Health System, St. Joseph Mercy Health System, St. Mary Mercy Hospital of Livonia, Triumph Hospital of Detroit, UM Hospital, others

McAuley Health Partners ACO LLC

Martha Walsh regional director ACO/CIN Melissa Bolt executive director

1,125

593 462

NA NA

ACO

St. Joseph Mercy Ann Arbor, St. Joseph Mercy Chelsea, St. Joseph Mercy Livingston

MedNetOne Health Solutions

Ewa Matuszewski CEO

980

980 985

NA 0

IPA

Ascension Providence Rochester, Henry Ford Health System, Beaumont Health, McLaren Health System, ProMedica, Ascension St. John, Detroit Medical Center

United Outstanding Physicians LLC

Yasser Hammoud CEO & medical director

935

0 0

ACO

Henry Ford Hospital-Main, Henry Ford HospitalWyandotte, Garden City Hospital, and hospitals designated by health plans with which UOP physicians are contracted.

Beaumont Medical Group

Daniel Frattarelli president

925

0 NA

NA NA

Group practice

Beaumont Dearborn, Beaumont Farmington Hills, Beaumont Grosse Pointe, Beaumont Royal Oak, Beaumont Taylor, Beaumont Trenton, Beaumont Troy, Beaumont Wayne

Consortium of Independent Physician Associations (CIPA)

Paul MacLellan president

700

75 100

0 0

IPA

Statewide hospital affiliations

Oakland Southfield Physicians PC

Jerome Frankel medical director

646

646 658

NA NA

IPA

Beaumont Dearborn, Beaumont Farmington Hills, Beaumont Trenton, Children's Hospital of Michigan, Henry Ford Health System, Huron Valley-Sinai Hospital, McLaren Oakland, Sinai-Grace Hospital, St. John Providence Health System, St. Joseph Mercy Health System, St. Mary Mercy Hospital Livonia

GMP Network

Jacqueline Rosenblatt executive director

632

268 254

NA 0

IPA

Henry Ford Macomb Hospital-Clinton Township

Northern Physicians Organization

Dr. Nathan March medical director Marie Hooper executive director

510

0 NA

NA NA

CIN

IHA Health Services Corp.

Mark LePage CEO

509

475 467

34 36

Group practice

Saint Joseph Mercy Health System, Michigan Medicine

Michigan Healthcare Professionals PC

Jeffrey Margolis president

474

459 446

15 2

Group practice

Beaumont Health, Beaumont Hospital Farmington Hills, Crittenton Hospital, Detroit Medical Center hospitals, Garden City Hospital, Henry Ford Hospital West Bloomfield, Huron Valley-Sinai Hospital, McLaren Macomb, McLaren Oakland, McLaren Lapeer, Pontiac General Hospital, Port Huron Hospital, St. John Providence Health System, St. Joseph Mercy Oakland, St. Mary Mercy Hospital

Professional Medical Corp.

Asif Ishaque president Mike Grodus director, Healthcare Transformation

468

58 64

NA 0

IPA

Hurley Medical Center, McLaren, Genesys

Oakland Physicians Network Services

Rodger Prong CEO Satish Sundar president

447

3 0

3 3

IPA

St. Joseph Mercy Hospital Oakland, Huron Valley-Sinai DMC, Beaumont Royal Oak, Ascension, McLaren, Henry Ford, Providence, Pontiac General

Huron Valley Physicians Association PC

Jeffrey Sanfield president

395

53 62

18 18

IPA

St. Joseph Mercy Health System, Ann Arbor, SJMHChelsea and Livingston

26901 Beaumont Blvd., Southfield 48033 947-522-0037; www.beaumont-aco.org

30600 Telegraph Road, Suite 4000, Bingham Farms 48025 248-593-0100; www.updoctors.com

8 9 10 11 12 13 14 15 16 17 18 19 20

24 Frank Lloyd Wright Drive Lobby J, Ann Arbor 48105

4986 N. Adams Road, Suite D, Rochester 48306-1416 248-475-4701; www.mednetone.com 18800 Hubbard Drive, Suite 200, Dearborn 48126 313-240-9867; www.uopdocs.com

26901 Beaumont Blvd., Southfield 48033

101 North Main Street, Ann Arbor 48104 800-594-6115; www.medicaladvantagegroup.com

29200 Northwestern Highway, Suite 325, Southfield 48034 248-357-4048; www.ospdocs.com

43411 Garfield Road, Suite A, Clinton Township 48038 586-842-0870; www.gmpnetwork.org 125 Park Street, Ste. 300, Traverse City 49684 844-242-2473; npoinc.org

24 Frank Lloyd Wright Drive, Lobby J2000, Ann Arbor 48105 734-747-6766; www.ihacares.com 30000 Northwestern Highway, Farmington Hills 48334-3292 248-851-3300; www.mhpdoctor.com

2425 S. Linden Road, Suite B, Flint 48532 517-336-1400; www.pmcpo.com

2360 Orchard Lake Road, Sylvan Lake 48320 248-682-0088; www.opns.org

2002 Hogback Road, Suite 3, Ann Arbor 48105 734-973-0137; www.hvpa.com

1,901

1,216

2,629

893

985

921

925

800

658

659

503

448

447

437

468

Want the full Excel version of this list â&#x20AC;&#x201D; and every list? Become a Data Member: CrainsDetroit.com/data

This list of physician organizations encompasses physician hospital organizations and independent practice associations and is an approximate compilation of the largest such groups in Wayne, Oakland, Macomb, Washtenaw and Livingston counties. IPA = Independent practice association. PHO = Physician hospital organization. ACO = Accountable care organization. CIN = Clinically integrated network. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the organizations. Trinity Health ACO, SE Clinical Network LLC, Affinia Health Network CIN and Trinity Health Medical Groups and Provider Services were not able to respond before publication. NA = not available. LIST RESEARCHED BY SONYA D. HILL

12 | CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS | JULY 13, 2020

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FINANCE

What the Rocket Companies IPO reveals about Gilbert’s profits, taxes, growth plans and inner circle BY CHAD LIVENGOOD

and Edison Financial, two Canadian mortgage business startups,” the company said in its IPO filing.

Billionaire businessman Dan Gilbert’s Quicken Loans family of companies posted $898 million profits in 2019, a 17 percent profit margin on $5.1 billion in revenue. Profits last year for the nation’s top retail mortgage originator were up 46 percent from 2018 — 16 percent above the $771 million in pre-tax profits the Detroit company reaped in 2017. Those are just a few of many revelations the newly renamed Rocket Companies Inc. spelled out in 387 pages of detail Tuesday to the U.S. Securities and Exchange Commission as part of Gilbert’s bid to take his company public — and still retain a controlling interest in his financial tech empire at One Campus Martius. The document, known as a Form S-1, lifts the veil on Gilbert’s interconnected private business holdings, their growth in recent years and how Gilbert and his top lieutenants plan to sell a share of the company on the New York Stock Exchange. Here’s what we’ve learned:

Quicken Loans’ headquarters in the One Campus Martius building in downtown Detroit.

The name change

The inner circle narrows

The renaming of Quicken Loans to Rock Companies is the culmination of a yearslong rebranding campaign that CEO Jay Farner has led to adopt Rocket Mortgage as a brand that stands out from housing mortgages issued by traditional commercial banking lenders. Over the past five years, the company has shaped its advertising strategy around precision and speed in buying a house. Its first Super Bowl ad in 2016 pitched buying a home from a mobile phone as simple as “Push Button, Get Mortgage.” Within the Quicken family of companies — or FOC, as the insiders call it — there’s been an intentional move away from the Q-word in recent years (minus a certain streetcar on Woodward Avenue). In-House Realty, which started as a real estate services arm of Quicken Loans, became Rocket Homes, a multiple listing service designed to pair pre-approved Rocket Mortgage customers with houses in their price range. The mortgage company’s in-house title insurance services once known as Title Source was renamed Amrock. Under the Rocket brand, a new consumer lending company called Rocket Loans was born, growing from $8.8 million revenue in 2017 to $24.7 million last year. Rocket Loans “relies on a business relationship with” Cross River Bank Inc., a federally insured bank based in Fort Lee, N.J., according to the SEC disclosure. A call center spinoff business called Rock Connections was formed (and topped $114 million in revenue last year, according the IPO filing). From Rock Connections, an auto sales service called Rocket Auto was spun out in late 2018. Its revenue doubled to $20 million in 2019, according to the IPO disclosure. A professional services company called Rock Central also has sprung up from the FOC. Its CEO is Angelo Vitale, a 23-year veteran of Quicken who is general counsel and secretary of the new company’s board.

As Gilbert has built a business empire and amassed political influence in the mayor’s office and the state Capitol, his inner circle has evolved. The change has been more pronounced in the year since the 58-yearold Gilbert suffered a debilitating stroke in May 2019. His Bedrock LLC real estate company, charged with the construction and rehab of multiple downtown office buildings, has seen major changes in leadership in the past year following the August 2019 departure of longtime Gilbert friend Jim Ketai, who co-founded Bedrock in 2011. Bill Emerson, vice chairman of the parent company Rock Holdings Inc. and the former longtime CEO of Quicken Loans, is not on the board of the new company. Emerson recently slid back into the CEO post at Bedrock LLC on an interim basis — his second tour of duty at Bedrock in the past year — after longtime Gilbert lieutenant Matt Cullen departed to work on a pair of Cleveland casinos he bought with his gaming business partner, Mark Dunkeson, who was Bedrock’s president and chief operating officer. Farner, 47, who succeeded Emerson in the CEO’s office at Quicken Loans where he’s worked for 24 years, is listed in the prospectus as CEO of Rock Holdings Inc. (referred to as RHI in the document) and a director on the board. Farner earned $11.7 million last year with a base salary of $650,000, according to the SEC filing. The public offering calls for Gilbert and RHI to retain 79 percent of the stockholder voting power. Jennifer Gilbert will be a director on the board alongside her husband, the chairman. Matthew Rizik, chief tax officer for Rock Holdings since 2012, has director’s seats on both the boards of Rocket Companies and Rock Holdings. He was previously a partner at PricewaterhouseCoopers LLP in Detroit. The board is rounded out with Quicken’s president and COO Robert Walters, CFO Julie Booth and Vitale

14 | CRAIN’S DETROIT BUSINESS | JULY 13, 2020

Lease arrangements

as well as Siebert Williams Shank CEO Suzanne Shank and Hollywood power broker Nancy Tellem. Walters has been with the company for 23 years and Booth is a 16-year veteran.

Tax strategy Rock Holdings’ pretax income in 2019, 2018 and 2017 was $898 million, $615.2 million and $771.9 million, respectively, according to the SEC disclosure. The company said its total expenses in 2019 exceeded $4.2 billion, including nearly $2.1 billion for employee payroll and benefits and a $905 million marketing and advertising budget. The SEC filing reveals the structure of Gilbert’s numerous LLCs within the Family of Companies has lowered his tax exposure. “The effective tax rates for these periods were lower than the U.S. statutory corporate income tax rate of 21% as the company is comprised of qualified Subchapter S subsidiaries and single member LLC’s, which are not subject to federal income taxes,” the company said in the SEC disclosure. State corporation records show Quicken Loans Inc. was converted to a limited liability company on April 15, which also may lower Gilbert’s tax bill with the Michigan Department of Treasury. Under the state tax code, LLC income is subject to the 4.25 percent individual income tax, lower than the 6 percent Corporate Income Tax rate for corporations. “The combined businesses include C corporations that have elected to be treated as Subchapter S subsidiary corporations or single member LLCs, both of which are disregarded for federal income tax purposes,” the company said in the SEC disclosure. “The (Rock Holdings Inc.) shareholders are responsible for the federal income tax liabilities of RHI and the combined businesses. Therefore, no provision for federal income taxes is necessary.”

Plan for growth Rock Companies’ plan to sell public shares lays out a broad strategy for continuing to grow Rocket Mortgage’s market share in the U.S. retail mortgage business, which it says is 9.2 percent this calendar year. The company originated $51.7 billion in mortgages in the first quarter this year — a nearly 132 percent increase from Q1 2019 — and is on pace to top last year’s $145 billion in mortgage originations. “We have demonstrated a track record of creating value through profitable growth with a capital-light business model,” the company said in its IPO filing. The company also says its mortgage brand can be used to “cross-sell” other financial services such as personal and auto loans to some 1.83 million customers. Rocket Loans reported closing 25,000 personal loans in 2019, a 30 percent year-over-year increase. In its second year of operation, Rocket Auto “facilitated” the sale of 20,000 used vehicles in 2019, according to the disclosure document. Those numbers may be minuscule in the multi-billion-dollar personal and auto financing sectors, but the company’s leaders see room for growth. The IPO document also reveals Gilbert’s company has invested in Vancouver-based mortgage tech company Lendesk and Edison Financial, a digital mortgage company with an office just across the Detroit River in Windsor. Gilbert has shown an interest in the past in taking advantage of Detroit’s close proximity to Ontario to attract international talent for his companies. Last year, Quicken Loans opened a recruitment office in the same downtown Windsor building where Edison is based. “We believe our success in the United States can be leveraged in the Canadian mortgage market, a market of approximately $761 billion (Canadian dollars) of annual mortgage originations, and have invested in Lendesk

On the surface, Gilbert’s family of companies are mixed together, even as some subsidiaries such as the Rock Connections call center business have sprung from the mothership. But on paper, the accountants have drawn clear lines of demarcation within Gilbert’s web of companies — a strategy that may help position it to be traded on Wall Street. While Gilbert owns the multiple buildings Quicken Loans operates out of downtown, the mortgage company still has leases with Gilbert’s real estate company, Bedrock Management Services LLC. For the past three years, Quicken Loans’ lease payments to Bedrock have totaled $69.5 million in 2019, $66.2 million in 2018 and $60.5 million, according to the SEC filing. During those three years, Quicken Loans subleased office space to two other Gilbert-owned companies — Rock Ventures LLC and StockX LLC — for $4 million (the document says Gilbert is the “controlling shareholder” of StockX, a venture capital-fueled e-commerce website with its own ambitions to go public). Over the past three years, Quicken paid Bedrock an additional $61 million for parking spaces, according to the disclosure.

Gilbert’s philanthropy The Quicken Loans Community Fund LLC, the philanthropic arm of the mortgage firm, has received $40.6 million from the company since 2017, according to the IPO disclosure. Approximately $27.8 million was disbursed to the community fund in 2017, followed by payments of $7.5 million in 2018 and $5.3 million in 2019. The IPO filing does not disclose how the community fund spent the money. But it has been the philanthropic vehicle behind several community initiatives in Detroit in recent years, including efforts to stave off residential foreclosures for unpaid property taxes in the city. The Quicken Loans Community is run separate from the Gilbert Family Foundation.

Naming rights deal Over the past three years, Quicken Loans has spent $25.3 million on marketing and advertising costs for the naming rights of the downtown Cleveland basketball arena where Gilbert’s Cavaliers play. Last April, Quicken Loans Arena — known as the Q in Cleveland — was renamed Rocket Mortgage FieldHouse. Rocket Companies has bought the naming rights of the Cleveland arena through 2034. The company paid $2.1 million in 2019, $8.3 million in 2018 and $14.1 million in 2017 for the naming rights, according to the IPO filing. Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood

PINHO

From Page 1

While he is just one economist with one valuation, the point remains: That’s not handing over control or July 13, 2020 spending power. That’s amassing it. “So it’s cash going to the piggy bank of Dan’s holding company, which gives them a lot of flexibility,” said Erik Gordon, clinical assistant professor in the Stephen M. Ross School of Business at the University of Michigan in Ann Arbor. “He can use that cash to make acquisitions. It’s going to be at the holding company level controlled by Dan. He could buy some other companies, Dan Gilbert’s fingerprints are all over downtown Detroit, and taking Quicken Loans he could start some projects.” public is unlikely to change that any time soon. | LARRY A PEPLIN FOR CRAIN’S DETROIT BUSINESS

Power and influence That cash infusion, along with cash reaped from the year-plus divestment from what was his Jack Entertainment LLC gaming operations (including Greektown Casino-Hotel for $1 billion) that generated even more billions for him, will continue to make him the single-most powerful and influential person in the city. “Clearly, he gets from this IPO greater than every dollar he has put into Detroit today,” said Richard Hosey, a former senior vice president for Bank of America NA who now owns Detroit-based Hosey Development LLC. “He could do just with the liquidity, everything he has done — although there are not another 100 buildings to buy.” Roderick Hardamon, CEO of Detroit-based developer URGE Development Group, who is also a former North American head of Citi Alternative Investment Services, said another benefit of the IPO is the attraction of institutional investors to Detroit. “Just think of what’s going to happen when an institutional investor starts thinking about investing in Quicken, then you understand how much that sparks interest in other tangential assets and other opportunities when someone dips a toe in,” he said. “While he risks losing some autonomy, it could attract other individuals and investors whose interest perhaps wasn’t here before.” And outside of institutional investors, the IPO could have ripple effects on the local economy as Rocket employees own stock, creating a lot more local wealth, said Nicholas Colas, co-founder of DataTrek Research LLC, based in New York City. “It can create a very nice flywheel effect for a local economy where real estate values go up because people’s private stock becomes public, and they can sell some and reinvest that in the community with homebuilding, home buying, neighborhood renovations and improvements,” Colas said. But the effect of public companies doing well can cut both ways: In Seattle, the housing boom caused by the success of companies like Amazon. com Inc. and Microsoft Corp. has led to skyrocketing apartment rents and home values, making the cost of living too high for far too many. “If it explodes the way Microsoft or Amazon did, it can create an inflationary cycle for real estate prices, which isn’t necessarily good,” Colas said.

Bedrock infusion In addition to Gilbert’s newfound billions in liquidity alone, his Bedrock LLC real estate development, ownership and leasing company will continue to pump hundreds of millions in revenue into his and his investors’ pockets every year. Precisely how much is not known,

but Quicken alone paid $69.5 million to Bedrock in 2019, $66.2 million in 2018 and $60.5 million, according to the SEC filing. That’s only for Quicken office leases and doesn’t include the $61 million in parking Quicken paid to the company over that time period, not to mention the hundreds of millions in other lease revenue Bedrock receives every year. While Gilbert, Quicken and Bedrock’s fortunes are undoubtedly intertwined, the real estate company (which declined comment for this December 2,on 2019 story) stands its own and is not a not-for-profit organization solely reliant on the fluctuations of Gilbert’s pocketbook and largess. According to data from DBRS Morningstar Inc., the valuations of just six Gilbert-owned trophy assets in his 100-plus property portfolio have more than doubled in value, from purchase prices totaling $306 million to $608.5 million during their most recent appraisals after renovations and stocking them with new tenants. For example, Ally Detroit Center was bought for $100 million in 2015 and is now worth $185 million less than five years later. According to Trepp LLC, a New York City-based firm that tracks commercial mortgage-backed securities debt, the skyscraper had a net cash flow of $14.8 million last year, up from $12.6 million in 2018. That’s just one building.

Opportunity Zone tax shift? He could defer what would be an eye-popping capital gains tax liability in Opportunity Zone investments, which allow him to park his gains and pay no taxes on them, said Joseph Kopietz, member of the Real Estate Group for Detroit-based law firm Clark Hill PLC. “The other benefit where a lot of the people look at is if you hold in that Opportunity Zone investment for 10 years, you get to sell with no gain on that investment,” he said. Those zones, which have been criticized for their deployment into areas in Detroit and elsewhere that were already teeming with economic development activity prior to their enactment, allows for reduction and deferment of capital gains taxes. In short, some argue, the capital gains tax benefit folded into the 2017 Tax Cuts and Jobs Act tax code overhaul could have been more acutely targeted at U.S. Census tracts where investors may need more of a two-handed shove than a gentle nudge to put cash into things like real estate developments and business investments. In addition, others say more oversight is needed of how the funds are used. Gilbert’s team came under scrutiny last year over an investigation suggesting that the billionaire’s team exerted its considerable political and economic muscle to net federal Op-

portunity Zone tax breaks when they weren’t warranted. An October story in the nonprofit news outlet ProPublica says that a census tract laden with Gilbert-owned real estate in and around downtown did not meet certain requirements of the new break on capital gains taxes, yet it became a Qualified Opportunity Zone anyway. Gilbert is one of the founding members of the organization that pushed to have the Opportunity Zones enacted into law.

Not sitting still Gilbert has been mum on the IPO and how he plans to deploy the capital he generates for himself, presuming it goes forward. He suffered a stroke in May 2019 and has rarely been seen in public since, minus an appearance and speech at the Crain’s Newsmakers of the Year luncheon in February, just before the pandemic struck. But his development activities have

continued, and will in the future. Most recently, he brought on board Chicago-based Magellan Development Group LLC as a development consultant on the skyscraper underway at the former J.L. Hudson’s department store site, which is exRAIN ’S 680 DETROIT pectedCto rise feet. B AUSINESS pair of large cranes are arriving at the site starting Monday to work on the tower and socalled block, a 232-foot building immediately to the north of the skyscraper. The price tag officially has been $909 million, but the budget has fluctuated and a precise cost has not been disclosed in recent years. He and fellow billionaire Stephen Ross are working on a graduate school initiative with the University of Michigan on the site of the former Wayne County Consolidated Jail project downtown, with an estimated tentative price tag of $750 million for it, currently called the Detroit Center for Innovation. The Monroe Blocks project immediately east of Gilbert’s headquarters in the One Campus Martius building downtown has faced design challenges but most recently had an estimated cost of $830 million for its high-rises including office, residential and retail space. He and development partners are also planning more than 900 resiRAIN ’Ssite DETROIT USINESSBrewdencesCon the of theBformer ster-Douglass housing projects just outside of downtown Detroit in an effort that would easily cost more than $300 million. Those four verified projects, totaling no less than $2.79 billion, don’t include others like the $311 million redevelopment of the Book Tower/ Book Building on Washington Boulevard and a smattering of others in buildings he has amassed over the last 10 or so years.

Neighborhood investment Whatever Gilbert continues to do in real estate and for the city, a stable of developers has been working in neighborhoods across the city on real estate investment and other efforts. And will continue to do so, as well. Whether it’s in the West Village neighborhood or Virginia Park or the Livernois/McNichols area or Jefferson Chalmers, said Hardamon, who is now working on a development on Grand River near Trumbull called the The Osi, that work will continue. Focusing too much on Gilbert’s efforts “devalues all the other work and effort of the myriad number of developers who are rebuilding Detroit. That army of individuals isn’t doing the Hudson’s tower but are doing the West Village and Liv6,” he said. “... There is a very diverse group of individuals who have been pushing forward.” Hardamon said. He continued: “We have all benefited from the headlines and attention that Gilbert, Quicken and Bedrock have attracted, but there are folks that were doing deals before then. He shined a bright light on it and encouraged others to invest and commit, but there is a significant effort and a cadre of active developers who are not Gilbert who are in total doing massive amounts of development with individuality and creativity who will drive this latest wave of development so it’s not reliant on one individual.” Dustin Walsh and Nick Manes contributed to this report. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

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CRAIN’S

FROM PAGE 1 | OUICKEN LOANS IPO

The inner circle: A look at th BY NICK MANES

As billionaire Dan Gilbert prepares to take the mortgage company he started in 1985 to the public markets, he’ll have multiple confidantes by his side. Set to join Rocket Companies Inc.’s board of directors are several longtime executives of Quicken Loans, as well as his wife Jennifer and several well-known Detroit business people.

QUICKEN IPO

From Page 1

Executives at Quicken Loans and incoming board members declined interview requests, citing a federally mandated quiet period. But equities analysts and other experts point to a host of reasons that generally include some version of estate planning for Gilbert, 58, who had a stroke last year

Dan Gilbert, Chairman of the Board of Directors

Jay Farner, Quicken Loans CEO

Robert Walters, Quicken Loans President and COO

Julie Booth, Quicken Loans CFO

An CEO

Gilbert, 58, founded Quicken Loans in 1985 and has chaired the company’s board of directors since that time. A key architect of the revival of downtown Detroit, Gilbert’s Bedrock Real Estate LLC owns more than 100 properties around the central business district.

Has been Quicken Loans’ CEO since 2017 and worked for the company since 1996. Serves as a board member of Detroit Lab, LLC, Community Solutions, StockX, Bedrock Manufacturing, the Metropolitan Detroit YMCA, Bizdom Fund and Rocket Giving Fund. Earned just over $11.7 million in 2019 with a base salary of $650,000.

Joined Rock Financial, Quicken Loans’ previous iteration, in 1997 and has served in current role since 2017. Previously served as chief economist and executive vice president of Quicken Loans overseeing the Capital Markets and Servicing operations. In 2019, made $258,100 from Quicken Loans, with a base salary of $255,000.

Joined Quicken Loans in 2003, becoming the mortgage lender’s CFO in 2005. Previously worked as a senior manager in the Detroit office of accounting firm Ernst & Young LLP. Serves as a board member for Make-A-Wish Michigan and previously served as chair for the Mortgage Bankers Association financial management committee. Made $453,100 in 2019, with a $350,000 base salary.

L sion serv cou Qui com team Was base

that left him with partial paralysis. But there’s an even simpler reason, according to Nick Colas, co-founder of New York City-based DataTrek Research LLC: Investors and consumers are sure to buy what Quicken Loans is selling. And that’s not just mortgages or the stock the company is selling, he said, but the fact that with Quicken Loans’ digital offerings, mortgage buyers don’t have to leave their

couch to buy that product. “(Companies) do best when their particular offering or product hits a big investment theme,” said Colas. “So that’s why this is a big event. There’s probably no bigger investment theme than the power of online (commerce) to transform consumer behaviors and consumer experiences. And (mortgage) is an industry that historically, has been very conservative and not really one where

there’s been a lot of change.” Rocket Mortgage, Quicken Loans’ digital mortgage-buying application, which helps position the company as a “FinTech” player, was highlighted as a game changer for the mortgage industry in a 2018 report by the New York branch of the U.S. Federal Reserve Bank. “In areas with more FinTech lending, borrowers refinance more, especially when it is in their interest to do so,” reads the Fed report. “We find no evidence that FinTech lenders target marginal borrowers. Our results suggest that technological innovation has improved the efficiency of financial intermediation in the U.S. mortgage market.” The current environment of rock-bottom interest rates for home mortgages and refinancing, as well as an abyss of uncertainty, means that a company like Quicken Loans in solid financial shape would have little upside in waiting long for an IPO, sources said. Colas estimated that an offering could happen as soon as September. Hot-ticket companies like ride-hailing giants Uber and Lyft have had a rough go of it since their IPOs in 2019, particularly as they’ve continued to rack up losses. Those companies, notes Colas, have struggled to resonate with investors even pre-pandemic. And now that the current environment has consumers staying closer to home, a model employed by a company like Quicken Loans is likely to be rewarded, he said. “So the markets are being good about discriminating between money-making and money-losing based on what the current environment shows,” said Colas. But at the margin, a money-making business in this environment is really good.”

Gilbert in control Since the unveiling of Quicken Loans’ S-1 filing last week, much has been made about the relatively unique structure of the proposed deal. For starters, the proposed deal carries four different tiers of stock, two of which are controlled by Gilbert alone. Colas, a longtime IPO observer, said he’s seen little precedent for 16 | CRAIN’S DETROIT BUSINESS | JULY 13, 2020

The deal as outlined leaves Dan Gilbert firmly in control of the company. | LARRY A PEPLIN/CRAIN’S DETROIT BUSINESS

that and declined to speculate as to the reasons. Two classes of stock, he said, is common. Jay Ritter, an economist and IPO expert at the University of Florida, said only 20 percent of IPOs in 2020 had multi-class stocks and almost all of those were exclusively two classes. “Four classes is highly unusual,” Ritter said. “Investors prefer one share, one vote rather than buying shares with inferior voting power.” Additionally, the deal as proposed leaves Gilbert firmly in control of the newly created company, which creates both challenges and opportunities for investors. Under the deal as outlined in the filing, Rock Holdings and Gilbert would control 79 percent of the combined voting power of the company’s common stock, with multiple classes of stock with different voting and economic rights. “As a result, RHI will be able to control any action requiring the general approval of our stockholders, in-

clud dire men cert ame the sub cord Th que ing Bloo cora “I vest — a the erby B be f mai foun Th hold been G that Gilb com “( who

at the Rocket board

CFO nior

C Angelo Vitale, CEO of Rock Central

Jennifer Gilbert, Director

Matthew Rizik, Director

Suzanne Shank, Director

Nancy Tellem, Director

Leads the organization’s professional services subsidiary and will serve as the public company’s general counsel and secretary. Joined Quicken Loans in 1997 and led the company’s legal, auditing and risk teams in a variety of executive roles. Was paid $403,100 in 2019, with a base salary of $300,000.

Dan Gilbert’s wife will serve on the public company’s board of directors. Jennifer founded Amber Engine in 2015, a Detroit-based home furnishings services and solutions technology company. Previously founded Doodle Home, a digital platform for residential interior designers, sold to Dering Hall in 2015. President of NF Forward and serves as chair of the board of governors of the Cranbrook Academy of Art and Art Museum, and as a board member for the Detroit Institute of Arts.

Has been the chief tax officer of Dan Gilbert’s portfolio of companies since 2012. Previously spent three decades as a tax partner at PricewaterhouseCoopers LLP in Detroit.

President, CEO and co-founder of investment banking firm Siebert Williams Shank & Co. LLC, and will serve as a director on Rocket’s board. Previously was chairperson and CEO of Siebert Cisneros Shank & Co. LLC, a firm which she co-founded in 1996. Currently serves as a director of American Virtual Cloud Technologies, CMS Energy and Consumers Energy’s boards.

Media executive who will serve as a director on the Rocket board. Is executive chair of Los Angeles-based Eko, a media startup focused on interactive music videos. Longtime Hollywood executive for Metro-Goldwyn-Mayer and CBS Entertainment, among others. Married to Arn Tellem, vice chairman of the Detroit Pistons NBA basketball team.

How much will Quicken be worth? BY DUSTIN WALSH

s to

d, is

IPO ida, 2020 t all ses. ual,” one ying .” osed the creuni-

the bert omny’s sses and

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cluding the election of our board of directors, the adoption of amendments to our amended and restated certificate of incorporation ... and amended and restated bylaws ... and the approval of any merger or sale of substantially all of our assets,” according to the filing. The proposed structure raised questions to David Sowerby, managing director and portfolio manager at Bloomfield Hills investment firm Ancora Advisors. “It potentially clouds the newer investor and future investor’s ability to — as any shareholder — influence the direction of the company,” Sowerby told Crain’s last week. But a public Quicken Loans would be far from the only company to remain under the firm control of its founder following a public offering. The control that Mark Zuckerberg holds over Facebook, for example, has been compared to a “dictatorship.” Gordon, the UM professor, expects that investors will have no problem with Gilbert at the helm, especially when compared with some young CEOs. “(Gilbert) is not a 28-year-old guy who spouts silliness. (Gilbert) is a

guy who built this business over 30 to 35 years,” he said, particularly noting high-profile and now ousted founders like Travis Kalanick of Uber and Adam Neumann of WeWork. “I think the control feature, given that it’s a guy who has over 30 years, built this company, I think people will be very happy about that aspect of it,” Gordon continued. “Prior to the IPO ... most of us didn’t have much of an opportunity to invest with (Gilbert). Now we do.”

Doing too much? Some, however, question whether Quicken Loans has started trying to do too much and gotten away from its core business of mortgage loan origination. Guy Cecala, CEO and publisher of Bethesda, Md.-based Inside Mortgage Finance, said the rise of Quicken Loans and its public offering mirrors the rise of Countrywide Financial, which was the largest nonbank mortgage originator in the country until its demise during the 2008 housing crisis. “… You don’t see a lot of nonbanks

The initial public offering of Dan Gilbert’s Rocket Companies Inc. will likely be the largest of 2020. Jay Ritter, economist and initial public offering expert at the University of Florida, estimates the valuation of the holding company at approximately $20 billion. Only 21 percent, or about $4.2 billion worth of shares, will be sold at the offering. Rocket Companies estimated $4.2 billion offering would be nearly twice the size of the second-largest IPO of the year. New York Royalty Pharma plc, which funds clinical trials for future drug royalties, had the largest biotech IPO in history on June 15, raising $2.2 billion. Warner Music Group Corp. raised $1.9 billion and New Jersey business analytics firm Dun & Bradstreet Holdings Inc. raised $1.72 billion, both in June. There have been a total of 67 IPOs in 2020, most raising well under $1 billion. The reason Rocket Companies’ valuation is so high is because of its profitability, Ritter said. Most of the year’s IPOs are from nascent startups, looking to raise capital to bring a product more widely to market and turn a profit for the very first time. “They are profitable and that puts in them in the minority of IPOs,” Ritter said. “Only 22 percent of operating company IPOs have been profitable (this year).” Rock Companies is also closely related to the fintech sector as a heavily technology-backed mortgage firm, which is also viewed favorably by investors, Ritter said. “It is fintech and is consistently profitable,” Ritter said. “While the revenue varies from year to year, it is an asset-light company using technology rather than having armies of employees soliciting mortgages. Tech companies disproportionately get most of the attention. Especially a company like that that has a lot of name recognition because a lot of home owners have used them.” Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh that look to be everything in the mortgage space,” Cecala said. “Quicken is moving in the same direction.” Countrywide grew at an impressive clip in the 1980s through early 2000s, largely by moving into the subprime loan business. Between 1982 and 2003, Countrywide delivered 23,000 percent return on investment to its investors. In 2006, Countrywide financed 20 percent of all mortgages in the U.S. and 45 percent of its loans couldn’t be sold to the government-backed loan agency Fannie Mae.

But when housing prices began to deteriorate that same year, borrowers began to default on their mortgages. The overnight lending between banks that floated these mortgages dried up and led to a liquidity crisis and caused the failure of Lehman Bros. in the fall of 2008 and Countrywide. Bank of America acquired the assets of Countrywide for $4.1 billion in the fall of 2008. Staying away from the subprime category that led to the Great Recession has benefited Quicken Loans, because it cleared away some com-

petitors and caused big banks to pull back from the mortgage business to one extent or another. But Countrywide’s failure also coincided with its desire to grow as it expanded services by adding home equity loans to its portfolio in 1994, expanding to international servicing in 1999 and acquiring Treasury Bank N.A. to add liquidity to its lending capabilities in 2001. Last year, Rock Holdings, the parent company of Quicken Loans, acquired a majority stake in Lendesk to get a strong foothold in Canada, One Reverse Mortgage in 2008 and title insurance company Title Source, now known as Amrock, in 2002. “Countrywide is a cautionary tale to a nonbank that wants to be everything,” Cecala said. “You can look at Quicken get into Canada and picking up a title insurance business and just wonder whether they are going to pick up a depository institution to fuel their growth.” However, it’s unlikely Quicken Loans will have the same fate as Countrywide as it’s not extended in dangerous loan categories. Only about 10 percent of its business is non-government backed loans. But much of Quicken’s recent growth has been in brokered mortgages, where a broker brings the borrower to the lender. Mortgage origination through its partner network, or via a broker, rose to $52.7 billion in 2019 from $19 billion in 2018. “They are more reliant on third-party loan originators for their growth,” Cecala said. “That’s what primarily contributed to their growth last year. That makes sense from a growth standpoint because it’s easier to get loans if you don’t have to originate them. You effectively buy them. But there’s a lot of risk in that space as it costs much more to do as they tend to go to whomever pays the most. They are managing it well but the more they grow services, the more risk they are undertaking historically.” Crain’s Detroit Business Senior Reporter Dustin Walsh contributed to this report Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes JULY 13, 2020 | CRAIN’S DETROIT BUSINESS | 17

C s p q t

C s d a b

WEDDINGS

From Page 3

For example, Oakland County thought it had the green light last month to host wedding parties indoors at its Addison Oaks Buhl Estate and Glen Oaks Country Club venues, said Dan Shaw, partner of Fuller Oak Management LLC, which manages the venues. Before he could get an event off, the governor clarified the order, effectively closing the lavish banquet halls. So, he put tents up outside to try to save any bookings he could by offering outdoor weddings. “We’re trying to stay within reason and trying to accommodate our clients,” Shaw said. Most bookings through June have been postponed until later in the year or next year. The Fourth of July weekend was his first event since shutdown. Shaw said the venue had been running seven days a week before that. He estimates he has returned more than $100,000 in deposits at the venues he manages. “Everyone had the option of postponing or getting a refund,” he said.

Flocking outdoors Operating within the governor’s guidelines, outdoor weddings are basically the only option in metro Detroit. Northern Michigan, already a prime wedding destination in warmer months, is even hotter now given the relaxed rules on social gatherings. However, finding an available vineyard last-minute, on top of getting friends and family on board, isn’t practical for many couples. Beatrice Wolnerman, who opened an event space in Eastern Market in February, saw an opportunity to save her business by offering couples a chance to save their weddings. At the beginning of June, she introduced “tiny

Codi Arnone sizes up a wedding dress at the Wedding Shoppe in Berkley. | LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS

weddings” at Bea’s Detroit, which offers 4,000 square feet of event space, including a 1,000-square-foot rooftop. The packages include a floral arch, the bridal bouquet and groom’s boutonnière, an officiant, a champagne toast and wedding cake. The cost starts at $2,500 for up to 15 people and $10,000 for up to 50 people — the max

allowed at the venue. Wolnerman has already hosted five weddings and proposal parties, with 10 others on the books. “We are just shocked at the response,” she said. “We are so grateful, we are so thankful, and we’re just going to run with it.” Jessica Sorich, 28, is scheduled to

BORROW

From Page 3

The names of those companies were not publicly disclosed. The SBA estimated that PPP borrowings helped support 84 percent of the 59.9 million small-business jobs in the country as defined by the Census Bureau. The participants ran the gamut of industries: automotive suppliers, car dealerships, logistics firms, road and building construction companies, engineering firms, physicians groups, farms, prep schools and higher education institutions such as Aquinas College, Albion College, Alma College, Olivet College, Cleary University, Siena Heights University and Alpena Community College. Borrowers in the $5 million to $10 million range included Galesburg-based Bell’s Brewery; Hopcat bar and restaurant owner BarFly Ventures Inc.; Gardner-White Furniture Co.; the Kewadin tribal casino in Sault Ste. Marie; and major law firms including Miller Canfield PLC, Plunkett Cooney PC and Warner Norcross & Judd LLP. Other law firms such as Bodman PLC, Butzel Long, Foster Swift Collins & Smith P.C. and Hewson & Van Hellemont P.C. borrowed in the $2 million-$5 million range. Honigman LLP initially received a loan in the range of $5 million to $10 million, but the Detroit-based law firm returned the money before the Small Business Administration’s safe harbor deadline in mid-May. The Sam Bernstein Law Firm PLLC and the Southfield law firm of personal 18 | CRAIN’S DETROIT BUSINESS | JULY 13, 2020

BarFly Ventures LLC filed for bankruptcy last month after permanently closing its HopCat bar in Royal Oak. The company cited $28 million in secured debt, including a $6.6 million loan through the federal government’s Paycheck Protection Program. | KURT NAGL/CRAIN’S DETROIT BUSINESS

injury attorney Geoffrey Fieger each received PPP loans in the range of $1 million to $2 million, according to the federal database. Fieger’s TV advertising rival, Mike Morse, initially borrowed $2 million for his Southfield-based Mike Morse Law Firm PLLC, but said he returned the money in May before the safe harbor deadline. BarFly Ventures filed for bankruptcy protection last month, citing a $6.6 million PPP loan through Jeffersonville, Ind.-based First Savings Bank among its $28 million in secured debt. Two of Bell’s Brewery’s competitors in the craft beer business also sought loans. Holland-based New Holland Brewing Co. and Dexter-based Northern United Brewing Co. — the maker of North Peak beers — each borrowed between $2 million and $5 million, ac-

cording to the Treasury Department’s database. Crain Communications, the Detroit-based parent company of Crain’s Detroit Business, also received a PPP loan in the range of $5 million to $10 million. Cultural institutions such as the Detroit Symphony Orchestra, the Detroit Institute of Arts and the Detroit Zoo each got PPP loans ranging from $2 million to $5 million. The Interlochen Center for the Arts near Traverse City borrowed between $5 million and $10 million from the PPP loan fund. University Pediatricians borrowed between $5 million and $10 million for its Detroit-based operations during the pandemic. The loans of up to $10 million also went to rural hospitals across the state,

have a reception there Aug. 1. She had planned to rent out Shed 5 in Eastern Market for a 200-person event April 17. Instead, she had to call it off and plan a new one entirely. Luckily, the vendors were flexible on the venue change. She hopes to have 50 guests. “The more we thought about it, the more we just didn’t feel right having a big wedding anymore,” Sorich said. “We just felt like there were too many risks involved.” Wolnerman and her husband Eli initially envisioned the business as primarily a coworking space but are quickly adapting to demands. “If we become more of an event venue, so be it. That’s great,” she said. “We want to make our business work. So, we’ll just kind of let the world dictate which direction we go in.” Niche wedding businesses, such as bridal dress shops, don’t have the same flexibility. Fortunately, the pandemic hasn’t stopped people from planning for the big day, said Michelle McFarland, owner of the Wedding Shoppe in Berkley. McFarland said the shop lost around $500,000 in sales from being closed nearly three months, but a $700,000 federal loan allowed her to keep many of the shop’s 25 employees on payroll during most of that period. July sales are up from the same time last year. “I think people are getting more comfortable with the way things are,” she said. “We are getting people who are still planning to get married this year.” Things are different at the bridal shop, though. Trying on dresses is no longer the social endeavor it was before the pandemic, with champagne and crowded dressing rooms. Now, only three guests are allowed per bride, and no more spirits. Customers are required to make an appointment, wait in the parking lot until their party arrives and call the store to get inside. Masks are required to be worn by emincluding the Three Rivers Health System, the Kalkaska County Health Authority, the North Ottawa Community Hospital in Grand Haven and the Dickinson County Healthcare System and Schoolcraft Memorial Hospital in the Upper Peninsula. McKinley Cos., the Ann Arbor-based multifamily apartment management firm, borrowed between $5 million and $10 million. CEO Albert Berriz credits the loan program with keeping McKinley’s 430-employee workforce on the job at its housing complexes in Ann Arbor, Ypsilanti and the Orlando and Tampa Bay markets. “It was a very positive thing for us because we’re proud to say we’ve kept our workforce fully employed and fully deployed,” Berriz said Monday. “It’s sort of a lightning rod topic. But, for us, it’s something we feel good about.” Renaissance Global Logistics LLC, a division of Detroit-based James Group International, borrowed between $1 million and $2 million from the PPP fund. The company’s CEO, John James, is the Republican candidate for the U.S. Senate. James recently told Crain’s that his company has not laid off any of it 100 workers, but some employees took a paid leave of absence during the height of the coronavirus outbreaks. Orbitform Group LLC, a Jackson-based engineering and manufacturing company, borrowed between $1 million and $2 million. The company is owned by Senate Majority Leader Mike Shirkey, R-Clarklake. Shirkey said late Monday his management team at Orbitform applied for the PPP loan “without my involvement, by design.”

ployees and patrons at all times. “We’ve added video conferencing to each of our bridal suites so that, if grandma can’t come, you know, she can join in via Facetime or Skype,” McFarland said.

Wedding boom The good news for a bleeding wedding industry is that, if there is a vaccine, next year will likely be booming with all the parties pushed back this year. The pandemic threw Sarah and Zack Velasco for a loop, but they tied the knot as scheduled on May 16 anyway. However, it was in front of a few people at a cottage in Durand rather than the 120-person wedding planned at Oakhurst Golf & Country Club in Independence Township. The couple postponed the big party until the same time next year and will use it as a chance to renew vows. “Both of our parents just constantly told us, ‘You’re gonna have such a great story one day for your kids,’ and we just didn’t even want to hear it at all,” Sarah Velasco said. “It was so stressful. I would have much rather this just been done and over with.” Rescheduling again just isn’t an option for Munaco. The determined bride-to-be recently overcame yet another obstacle when her band told her it was double-booked Dec. 18. “It ended up working out that they called the other event and told them it was a ‘COVID bride’ that needed them there, and they agreed it would be fine to let the band come back to our ceremony,” Munaco said. Her soon-to-be husband certainly has his hands full. “I pray for the poor guy because my birthday is now two days before the wedding and a week before Christmas,” Munaco said. Contact: knagl@crain.com; (313) 446-0337; @kurt_nagl Several not-for-profit entities also sought loans from the government to sustain their operations during the shutdown, including the Easter Seals-Michigan in Auburn Hills, which borrowed between $5 million and $10 million, and the United Way of Southeastern Michigan, which received a loan between $2 million to $5 million. The Michigan Education Association, the state’s largest teachers union, borrowed $6.4 million to sustain its East Lansing-based operation, spokesman Doug Pratt said. “With 285 employees across Michigan, we’re proud that we’ve been able to do the right thing and continue to pay employees during the pandemic, despite uncertainty on the horizon,” Pratt said in an email. “The PPP program has helped us do that.” Several private and parochial K-12 schools got loans from the federal government. Detroit Country Day School in Franklin; University Liggett, a secular private school in Grosse Pointe Woods; Grand Rapids Christian Schools and Notre Dame Preparatory School and Marist Academy, a Catholic K-12 school in Pontiac, each borrowed between $2 million and $5 million. The Archdiocese of Detroit borrowed between $2 million and $5 million for operations of the Catholic church in Southeast Michigan. The loans are forgivable if used to pay payroll and partially forgivable if used to pay mortgage interest, rent and utilities over a specified period. Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood

THE CONVERSATION

Kenneth Kelly: Today’s community conversations ‘a little bit more deja vu’ FIRST INDEPENDENCE BANK: Now celebrating its 50th anniversary, First Independence Bank was born out of the Detroit riots of 1967. Chairman and CEO Kenneth Kelly now leads the seventh-largest African American-controlled bank in the country. During this time when conversations around racial and economic injustice are widespread — as are corporate statements about diversity and inclusion — Kelly says there’s ample opportunity to address those issues, and not just in “episodic” ways. There’s not a ton of banks like Kelly’s. A June report from the Federal Deposit Insurance Corp. found 144 FDIC-insured Minority Depository | BY NICK MANES Institutions (MDIs) in the U.S. The total assets of those banks, as of Dec. 31, 2019, stood at $249 billion. ` Crain’s Detroit Business: Given that it’s the 50-year anniversary of the founding of the bank and with the spotlight placed on racial inequality, do you feel we’re heading in the right direction? Kenneth Kelly: Well, I am very grateful for our forefathers who had the vision to start this institution. They did it out of economic necessity. They saw that there was a need, because of redlining and other issues that were going on in the 1950s and 1960s. And so, it is ironic right now that in 2020, we’re still dealing with some of those same injustices: one being economic and the other being the issue of police brutality. So we’re seeing that kind of be a little bit more deja vu. I’m hopeful that we get beyond trying to solve this through episodic solutions and try to figure out how we can do some things that systemically shift the way we think about these problems going forward. And that’s the commitment that I am bringing to the table, is to try to figure out how we can solve these problems in a systemic way and not make them short-term episodic solutions. ` So what do you see as the role that an institution like First Independence Bank can play, both in the immediate term and in the longer term? Well, what has made America great has been one of the (most) well-known banking systems in the world. Whether you look at when we started the Federal Reserve in 1913 to today, you can see how banks have played a part in economic growth and economic vitality. So, banks play a vital role in communities being redeveloped, they play a vital role in job creation, which basically translates into social justice. ` With Detroit being the largest majority African American city in the country and one Black-owned bank,

what does that say about the economic injustices you mentioned? Well, it tells you it’s systemic. And you know, there’s only approximately 20 African American-controlled banks in the country. And in many ways we find ourselves competing with banks of scale and size that just make it not economical to compete on a dollar-for-dollar basis. But it also shows the lack of distribution, the economic injustice in ways that kind of permeate across America, just as we saw with health care during COVID-19. African American homeownership is the lowest it’s been since they started measuring it in 1970, as of last year, the 2018 year, which came out in 2019. So those are all items that I think are symptomatic or diagnostic of the underlying economic inequality in the country.

Kenneth Kelly, chairman and CEO, First Independence Bank.

` Do you feel that Black-owned banks like First Independence have any specific obligation to help with some of these issues? Or does it need to be dealt with on a more systemic basis? It absolutely should be part of a broader banking system. The way I would describe it though, we have a higher affinity for that segment of the population. And so to the point of economic inclusion and economic justice, one of the things that we need is to demonstrate inclusion economically, whether that’s with large companies or small companies.

` How would you say that plays out in a practical business sense? From a supplier diversity perspective, whether that’s working directly with GM or Ford or any of the other large corporations in our community, those corporations working with us through lending and through deposit support and through the potential of equity, strengthen us and allow us to, in a way, help (us) to change the economic and social injustices. Many of our banks have been identified more as mission-driven, meaning that we’ve been identified through the U.S. Treasury that we typically lend a higher percentage of our dollars in low and moderate income areas. The intent is not just to be a bank for only African Americans, but to be a bank that really recognizes that we need all segments of society to support a bank like ours, so that we can demonstrate our effectiveness for communities that we have an affinity for, like African Americans. ` Diversity and inclusion have clearly been corporate buzzwords for some time and are back at the forefront again. What to you would look like real change this time around? I’ve made reference to doing things that are episodic. We have seen some episodic announcements thus far, and they don’t change the game long term. So what we’re advocating for are things that will be systemic. And what I’m saying is, I would love to work directly with any of the corporations inside of Detroit where they rely on us for banking needs that make sense for them as a corporation. We have typically found ourselves on the outside looking in as it relates to larger institutions. But we need demonstrated inclusion as we move forward, and I think it will help us alleviate some of the issues that have been mentioned.

REPORTERS

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

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RUMBLINGS

Harbaugh was close to a new deal at Michigan before pandemic University of Michigan head football coach Jim Harbaugh said Wednesday that he was closing in on a contract extension before coping with the COVID-19 pandemic became a top priority for all involved in the discussions. “There’s bigger fish to fry for our athletic director, or our administration, me as a coach,” Harbaugh said during an interview on Zoom, the Associated Press reported. “It hasn’t been on the top of the priority list. I would expect something, that there would be an announcement at some time.” Michigan Athletic Director Warde

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Michigan head coach Jim Harbaugh. | AP PHOTO/JOHN RAOUX

Manuel has said more than once that he wants Harbaugh to lead the Wolverines until he chooses to retire from coaching. Harbaugh has two years left on a

deal that pays him about $7 million per year. Manuel, who like Harbaugh is a former Michigan football player, has been happy enough with the results on and off the field to engage in talks to retain him beyond the 2021 season. “It was kind of right there last February, where it was being discussed, and then the pandemic hit,” Harbaugh recalled. In a wide-ranging interview with reporters, Harbaugh also said the late Dr. Robert Anderson was his family’s physician when he was growing up in Ann Arbor, Michigan,

and gave him annual physicals each season before he played for the Wolverines in the 1980s. “Never anything inappropriate,” Harbaugh said. “Nor did I hear of anything that was inappropriate about Dr. Anderson.” The university, which is facing many lawsuits relating to alleged sexual abuse by Anderson, has acknowledged some campus employees were aware of accusations against the doctor prior to a complaint two years ago that led to a police investigation. Anderson worked at the university from the mid-1960s through 2003. He died in 2008.

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.

JULY 13, 2020 | CRAIN’S DETROIT BUSINESS | 19

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