THE CONVERSATION Christman Co.’s Ron Staley on projects, planes and presidents.
Michigan Business: The Sunrise Side PAGE 16
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CRAINSDETROIT.COM I AUGUST 10, 2020
CRAIN’S DETROIT BUSINESS C-SUITE SURVEY
Work from home is here to stay, but it is still evolving Rocket Companies, the now publicly traded parent company of Detroit’s Quicken Loans, originated $72.3 billion in residential mortgages during the second quarter — a 40 percent increase from the first three months of this turbulent year. They also added 100,000 clients to their portfolio of 1.93 million mortgages they service each month.
Chad
LIVENGOOD
And the company’s 19,000 employees largely handled this growth from their home offices, basements, kitchen tables or wherever they’ve been encamped since mid-March to avoid contracting the coronavirus. “Working from home has been demonstrated — it works and it can be very, very efficient,” Rocket Companies CEO Jay Farner said Thursday on CNBC just before the company
Special Report What’s Next? At a time of uncertainty, we take a look at what we’ve learned and what to watch, across major industries. Pages 8-13
debuted on the New York Stock Exchange. (See story, below.) For a company that just reaped at least $1.8 billion in stock sales and is known for wringing out every bit of
productivity from its white-collar workforce, working from home has been a success. It’s also probably here to stay. A recent Crain’s survey of metro Detroit C-suite executives found 53 percent of companies either haven’t asked employees to return to the workplace or are making it voluntary. See LIVENGOOD on Page 25
Marijuana industry thrives in COVID-19 economic drought
MICHIGAN MARIJUANA
GROWING LIKE A WEED
BY DUSTIN WALSH
Sales were steady, if a little slow, last Wednesday during the lunchtime hour at High Profile cannabis dispensary in Ann Arbor. A single mask-wearing customer browsed the small shop’s selection of marijuana flower grown at the company’s Online operations 45 Michigan miles northwest regulators to in Webberville. rescind law tying A handful of medical, recreothers mean- ational pot. dered in the crainsdetroit.com front door of the turn-of-the-century multitenant college town home turned commercial building, showing IDs to the receptionist for a pickup order. Employees emerged moments later onto the sidewalk two blocks away from the University of Michigan’s Ross School of Business to deliver the goods. But Ankur Rungta, CEO of C3 Industries LLC and its four retail shops in Ann Arbor, Detroit, Grant and Buchanan, said despite a lack of college kids during the summer months in Ann Arbor and an seemingly neverending pandemic, the Packard Street store is exceeding sales expectations since opening in March.
Jay Logan of Ann Arbor, left, checks out some cannabis product while being helped by Halie Stewart of Ann Arbor at High Profile - Boutique Cannabis in Ann Arbor. “I like the selection. I know what’s going to be here on a regular basis,” Logan said. | NIC ANTAYA FOR CRAIN’S
See WEED on Page 24
CRAIN’S Q&A | RIGHT FROM THE SOURCE
Rocket stock jumps in stock-market return as it shares wealth A chat with Rocket COO Bob Walters on what’s ahead for the mortgage giant after the IPO VOL. 36, NO. 32 l COPYRIGHT 2020 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED
BY NICK MANES AND CHAD LIVENGOOD
first two days of trading, jumping 37 percent from the IPO price and closing at $24.67 on Friday. Founder and Chairman Dan Gilbert saw a nice bump, too: His net worth rose to about $34 billion, according to the Bloomberg Billionaires Index — more than four times previously estimated. And Gilbert is sharing the wealth, giving all employees shares in the now-public company, which includes Quicken Loans and Rocket Mortgage.
NEWSPAPER
R
ocket Companies Inc. had its long-anticipated initial public offering Thursday and netted $1.8 billion in doing so, giving the Detroit-based online mortgage giant a market capitalization of about $43 billion. That’s less than had been anticipated, but top executives said they’re more than happy with the outcome. The stock (NYSE: RKT) saw a nice bump in its
Walters
See WALTERS on Page 24
NEED TO KNOW
TO FAN OR NOT TO FAN
THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT WHITMER ORDERS MASKS AT DAY CARES, CAMPS THE NEWS: With just a few weeks left in the summer camping season, Gov. Gretchen Whitmer is ordering children attending day care and summer day and overnight camps to mask up. The Democratic governor issued an executive order on Thursday requiring all staff and children ages 4 and up to wear masks in hallways and common areas in day cares and facilities used for day and overnight camps.
WHY IT MATTERS: The order is aimed at stopping the spread of coronavirus, but child care professionals say it’s not necessarily realistic. It’s hard to stop children from playing with the masks, they say, undermining the reasons for wearing them.
TRUMP TO REINSTATE CANADA ALUMINUM TARIFFS THE NEWS: The Trump administration will reimpose tariffs on some Canadian aluminum imports, hitting a crucial trade partner just weeks after the president’s landmark North American trade agreement went into effect. President Donald Trump an-
nounced Thursday that he’s removing Canada’s exemption from 10 percent tariffs, effective Aug. 16. WHY IT MATTERS: The decision comes more than a month after U.S. Trade Representative Robert Lighthizer expressed concern about recent struggles by American aluminum producers, who have said they are hurting from a “surge” of metal from Canada.
FIRST VOLUNTEERS GET TEST DOSE OF COVID-19 VACCINE THE NEWS: Hundreds of brave volunteers are beginning to receive their first dose of a vaccine doctors at Henry Ford Health System in Detroit hope will lead to protection against the deadly coronavirus that has claimed more than 706,000 lives worldwide, including 6,221 in Michigan. Henry Ford is the only health system in Michigan that is participating in a third phase of human trials for Moderna’s vaccine. WHY IT MATTERS: Many experts think that the pandemic won’t be brought to heel without a safe and effective vaccine, widely distributed.
UNITED SHORE HQ TIED TO 50 COVID-19 CASES THE NEWS: Oakland County says that more than 50 cases of COVID-19 have been tied to the Pontiac headquarters of mortgage lender United Shore Fi-
nancial Services LLC. In an “emergency order” dated Aug. 4, county health director Leigh-Anne Stafford said the company with approximately 6,500 employees is in “direct violation” of an executive order by Gov. Gretchen Whitmer “that requires masks to be worn over the mouth and nose when in an indoor space.” WHY IT MATTERS: Companies have wrestled with the need to keep their businesses operating well and the need to keep employees safe. United Shore said it has kept the office at half-capacity and complied with all regulations set forth by the state, CDC and MIOSHA.
A new kind of Lions defense The Detroit Lions have outfitted Ford Field with clear plastic barriers, touchless faucets and 250 hand sanitizer stations in the event fans are allowed at games and assuming the NFL season moves forward amid the coronavirus pandemic. The team said late last week that it is hopeful fans would be allowed, but unsure how many. Season ticket holders were offered refunds and were told they would not have their seats this year. “The organization is preparing to host fans at all eight regular season home games, but there is still uncertainty surrounding how many fans, if any, will be allowed to attend games during the 2020 season or under what conditions,” the team said in a news release. The team is not planning an on-sale opportunity for single-game buyers. Ticket holders who choose to keep their accounts active will be given a 20 percent bonus credit on food, drinks and merchandise for every dollar rolled forward. The Detroit Lions organization is hopeful fans will be allowed at games this season at Ford Field.|
NEW GRANTS TO ADD MORE FAST EV CHARGERS THE NEWS: Drivers of electric vehicles will have more locations to recharge their vehicle’s batteries as they travel across Michigan through $1.7 million in grants provided this week by the Michigan Department of Environment, Great Lakes and Energy. Thousands of private and public EV chargers are expected to be installed in Michigan over the next several years. WHY IT MATTERS: The EGLE Charge Up Michigan Program grants will partially fund 36 EV direct current fast charging stations with a total of 76 plug-in points for automobiles and light-utility vehicles along well-traveled routes.
EDWARD MAUER FOR CRAIN’S DETROIT BUSINESS
CORRECTION Anthony Michaels of the Thanksgiving Parade Foundation/The Parade Co. and the Woodward Dream Cruise earned base compensation in 2018 of $380,985 and $200,000 in incentive/bonus compensation. A chart on Page 12 of the Aug. 3 issue listed an incorrect base pay amount that did not break out the bonus.
P R E M I U M O F F I C E S PAC E AVA I L A B L E • UP TO 13,194 SF • LOBBY EXPOSURE • UNDERGROUND PARKING •
PINEHURST
3 9 4 0 0 W O O D WA R D AV E N U E B L O O M F I E L D 248.644.7600 2 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
H I L L S ,
KOJAIAN.COM
M I
MANUFACTURING
CITY OF DETROIT
Dura’s new CEO talks expansion, reputation Supplier has plans to open 3 new plants BY DUSTIN WALSH
Kimberly Rodriguez plans to repair Dura Automotive’s tattered reputation. Rodriguez, 59, becomes the CEO of the Auburn Hills-based auto parts supplier on Sept. 1 and has used her 35 years of auto restructuring business to suss out a game plan. “We’ve mapped out a very detailed plan to provide all kinds of support for the company,” Rodriguez said in an interview with Crain’s. “This is a company that has great bones. The team has kind of been put on idle. So we’re taking them off idle and giving the team Rodriguez the resources to follow through on plans that have been developing over a much longer period of time. We need to deliver. Dura has some tarnished elements of its past. We just need to deliver.” Lexington, Ky.-based private equity firm MiddleGround Capital acquired a majority stake in the body systems supplier from Bardin Hill Investment Partners last week and hired Rodriguez away from Andra Rush’s trucking empire, Rush Trucking, where she served as its CEO for less than eight months. Rodriguez is leaving Rush Trucking after diversifying its customer base by 300 percent, she said. Rush, which was almost completely reliant on regional automotive deliveries, is now securing more over-the-road trucking contracts. “I really did what I came to do here,” she said. “We came in and put together a financial structure that provides the firm to go forward. The company now needs additional support in the over-the-road type of business. Someone that understands where the company is now and what’s needed. That’s not me.”
The city of Detroit’s census campaign hired community groups to go door-to-door to encourage participation in the decennial population count. A census canvasser is pictured July 1 near Griggs Street and Fenkell Avenue. | CITY OF DETROIT VIA FLICKR
‘REALLY CONCERNING’
Detroit pushes to raise low census response rate as count timeline cut BY ANNALISE FRANK
What businesses can do Detroit Regional Chamber CEO Sandy Baruah calls it the “civic duty” of a business to encourage participation in the U.S. Census count, but it’s “also in their self-interest,” he said. Some tips from the chamber and the U.S. Census Bureau include: ` Allow employees to fill out their census questionnaire during work hours, and provide equipment to do so. ` Create videos promoting the census, or use census branding to promote it alongside a compa-
ny’s own branding. ` Promote the census on communications to customers and employees. ` Help groups that are trying to reach hard-to-count populations. ` Add census links to company websites. How to respond: Those who have not yet responded to the 2020 Census can do so online, by phone or by mail. More details are at https://2020census.gov.
See DURA on Page 22
As the U.S. Census Bureau moves to cut its collection timeline by a month, Detroit is in a hasty final push to get people counted. The city’s 2020 Census Campaign, led by Victoria Kovari, had originally planned to end most of its door-knocking efforts in mid-August. “But now that they’ve cut it short, we’re concerned it’s not going to be as robust an operation as it has been in previous years. So we’re going to continue,” Kovari said. Community groups hired by Detroit to canvass areas of low response will now continue through the end of September, after news came Monday that the national count will
end, including door-knocking and online, phone and mail submissions. Legislation that would have extended it stalled in Congress. Experts say the move means less reliable data for research, and that harder-to-count communities like people of color and immigrants will be skimmed over. It will also have “a large downstream impact” on other Census Bureau surveys that are used to make a wide number of private-sector decisions, David Van Riper, director of spatial analysis at the University of Minnesota’s Institute for Social Research and Data Innovation, told the Associated Press. See CENSUS on Page 21
ENTERTAINMENT
Still-shuttered movie theaters have owners tired of hearing ‘crickets’ BY MALIQUE MORRIS
While Detroit’s three casinos were recently given the greenlight to reopen, movie theaters across the state are still in economic lockdown and theater owners are growing more aggravated. “Our business has a perception problem. It seems as if the governor’s office has the idea (that a movie theater) has many thousands of seats in them and people are sitting close together in them,” said Cory Jacobson, owner of Phoenix Theatres, which has locations in Livonia, Wayne and Monroe. “The reality today … (many) of us have converted to recliners,
“Our business has a perception problem,” said Cory Jacobson, owner of Phoenix Theatres, which has locations in Livonia, Wayne and Monroe. | JACK POWELL JOHNSON
which has 6 feet in the aisles alone, (and) the computer can assign specific seats and number of chairs that people can sit in.” “The only one who harbors that premise is our governor,” said Paul Glantz, co-founder and chairman of Troy-based Emagine Entertainment Inc., which operates nine theaters throughout Michigan. “It’s far less risky to go to movie theater today than going to a restaurant.” To help debunk the stigma, the Lansing-based National Association of Theatre Owners (NATO) of Michigan devised a reopening plan, using guidelines from the Centers for Disease Control and Prevention,
to ensure the safety of guests and employees when they are allowed to resume business. “Movie theatres across the State of Michigan have been working diligently to safely reopen. After all, the health and safety of moviegoers, theatre employees and our communities are currently and will remain a top priority,” it says in the Reopen MI Safely plan. The reopening plan includes provisions such as all theaters having a chief clean and safety monitor on duty to enforce high standards of sanitization. See THEATERS on Page 22 AUGUST 10, 2020 | CRAIN’S DETROIT BUSINESS | 3
REAL ESTATE INSIDER
The ownership group behind the Townsend Hotel in downtown Birmingham is behind on its debt. | COSTAR GROUP INC.
Townsend Hotel behind on debt as pandemic havoc continues
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A special servicer has been assigned for the posh Townsend Hotel in downtown Birmingham after falling behind on its debt, yet another Kirk sign of the unPINHO precedented economic havoc of the COVID-19 pandemic. Miami Beach, Fla.-based special servicer LNR Property Inc. is overseeing a resolution on the $35 million loan on the 150-room hotel at 100 Townsend St. owned by THC Partners LP. The loan was transferred to the special servicer because it was late in payment; THC Partners requested debt relief due to the pandemic, according to Trepp LLC, a New York City-based firm that tracks commercial mortgage-backed securities data. “The borrower is providing due diligence for the lender. Discussions are ongoing,� July commentary on the loan provided by Trepp says. Other commentary from June says the loan is a Kroll Bond Ratings Agency loan of concern. A Trepp report says the loan was
paid through March 1. The special servicer tries to come up with a debt resolution. The loan could be modified or extended, or some other work-out could be reached with existing owners. A source familiar with the matter says the ownership group headed up by David Sillman and Keith Pomeroy has been looking for equity investments in Detroit and New York City to shore up the hotel. I left a message with Sillman seeking comment. He told me in May that he doesn’t comment to the media
THE LOAN COULD BE MODIFIED OR EXTENDED, OR SOME OTHER WORKOUT COULD BE REACHED WITH EXISTING OWNERS. about business matters. If a resolution can’t be reached with THC Partners, the note could go up for sale, which could bring new ownership to the Townsend, long a go-to for athletes and other celebrities spending time in the region. But what sort of appetite would exist for a hotel that faces serious incoming competition for business
from the under-construction Daxton Hotel just a short walk away, not to mention concerns about travel and professional sports? That remains a question. Aparium Hotel Group will manage that new luxury 126-room, 17-residence property at Old Woodward Avenue and Brown Street under construction. The project is by Birmingham-based Mitchell Family Enterprises LLC, which is spending at least $55 million on it. The Townsend is just one hotel in choppy waters, though. Other bigname hotels — including the Westin Book Cadillac, Trumbull and Porter and Indigo Detroit — have all faced debt issues because of the spread of COVID-19, which crippled the hospitality industry as a result of stay-athome orders. A number of smaller, lower-profile suburban hotels have also been pinched as a result. There is $86 billion in hotel CMBS debt that is exposed because of the COVID-19 pandemic, according to a Trepp report which warns of “severe distress� across the hotel sector with low occupancies and decreasing debt service coverage ratios. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB
REAL ESTATE
7 resign at Bedrock, including some of team brought in with ex-CEO Cullen BY KIRK PINHO
800.456.3824 fishbeck.com
4 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
Seven Bedrock LLC employees, including the heads of four departments, left Dan Gilbert’s Detroit-based real estate company last week following the departure of former CEO Matt Cullen, who departed the firm last month. Alyse Martinelli, Bedrock’s chief people officer; Glen Tomaszewski, chief financial officer; Mark Miller, chief strategy officer; and Dan Reinhard, general counsel, came to Bedrock less than a year ago with Cullen and Mark Dunkeson from JACK Entertainment, the gaming company that Gilbert has been divesting from in the last two or so years. Some former JACK employees remain at Bedrock.
Martinelli
Tomaszewski
The resignations were announced companywide July 31 in an email from Bill Emerson, interim CEO. Bedrock said in a statement that a national CEO search continues. Cullen left Bedrock a month ago along with Dunkeson, the former Bedrock president and COO, to work primarily on a pair of Cleveland casinos, of which Gilbert is a minority
Miller
Reinhard
owner and Cullen is a lead investor. Steve Bentley resumes his previous role of CFO to replace Tomaszewski, Emerson said in his email, a copy of which was obtained by Crain’s. He had been the chief accounting officer. The leadership moves are the latest in a series of departures the last two years from Bedrock, the most dominant real estate company in the city.
MAKING EVERY DAY
BETTER 2020-21 AND BEYOND
» Ensure health and wellness resources are available to all, especially our most vulnerable populations navigating incredible health disparities
DURING COVID-19 IN 2019 » Awarded over $1.4 million in scholarships to 2,000 families to access health and wellness programs and services
» Sustain and expand YMCA Healthy Living Kitchen to serve 200,000+ meals annually » Expand virtual programs and services
» Provided child care for to essential workers and those returning to work. Over 1,000 children in Macomb, Oakland and Wayne Counties have been served in child care and Y Day Camp since May 27.
» Improve and expand early childhood educational services » Expand Achievers career and college prep program
» Held 7,500 member and 1,500 senior wellness conversations
» Served 200,000 meals to over 1,000 children » Provided over 8,000 youth with safe fun educational programs during summer and after school, including youth with special needs
» Served 150,000 meals to children and young adults with special needs from March 1-June 30 » Provided 200+ virtual exercise classes for all ages
» Taught free water safety and swim lessons to over 1,500 children » Employed over 600 youth in our summer programs » Engaged over 2,000 volunteers in more than 40,000 hours of community service » Launched YMCA Positive Play Intiative (YPPI) in Southeast Michigan to provide sports sampling to children in their neighbhorhoods at 14 sites throughout Metropolitan Detroit with SportPort » Piloted LIVESTRONG at the Y Cancer Surivivor Program at three YMCAs
» Grow volunteer intiatives to provide meaningful opportuntities for residents to give back to their communities » Expand neighborhood based mobile activities for kids
» Partnered to provide virtual improv classes to serve an unlimited number of youth and families
» Increase familiy programs and services
» Expanded the Detroit Can Film Festival– Encouraged 100 or more youth across Metropolitan Detroit to answer: What Matters Now. » Promoted Census Participation to 75,000 YMCA members and program participants » Sustained safe sanitary spaces for the community to enjoy post COVID-19 » Established virtual summer youth employment program to serve 200 youth ages 14 to 24
YMCA OF METROPOLITAN DETROIT ymcadetroit.org BIRMINGHAM FAMILY YMCA
FARMINGTON FAMILY YMCA
BOLL FAMILY YMCA
MACOMB FAMILY YMCA
CARLS FAMILY YMCA
NORTH OAKLAND FAMILY YMCA
DOWNRIVER FAMILY YMCA
SOUTH OAKLAND FAMILY YMCA
400 E. Lincoln Street, Birmingham, MI 48009 (248) 644-9036 1401 Broadway, Detroit, MI 48226 (313) 309-9622 300 Family Drive, Milford, MI 48381 (248) 685-3020 16777 Northline Road, Southgate, MI 48195 (734) 282-9622
28100 Farmington Road, Farmington Hills, MI 48334 (248) 553-4020 10 North River Road, Mount Clemens, MI 48043 (586) 468-1411 3378 E. Walton Boulevard, Auburn Hills, MI 48326 (248) 370-9622 1016 West 11 Mile Road, Royal Oak, MI 48067 (248) 547-0030
COMMENTARY
Technology should help, not hurt, access to government Kelley
ROOT
Executive Editor other words: The communication must be two-way. Some institutions have adapted better than others. Michigan’s courts, in particular, seem to have risen to the challenge of moving operations online, Luce Hermann pointed out. And they will likely stick with some of those practices post-pandemic, for efficiency’s sake. Local government and school boards, though, have work to do. Luce Hermann has fielded complaints that officials can’t be heard through their masks, don’t respond to questions, or require questions to be submitted in advance. Public comments get cut off or screened out (not always without reason — just Google “Zoombombing”). Some public bodies use limited versions of Zoom or Microsoft Teams that restrict the length of their meetings and the number of online observers. One local government met outside at a local park, with no virtual component to allow people to observe. “It’s been very hit-or-miss. … There have been issues from legislative committees all the way down the public body chain,” Luce Herrmann said. “I think there is, for many, a lack of commitment … (to) following both the spirit and letter of the executive orders.” Eventually, the state's Open Meetings Act and Freedom of Information Act will require updating to reflect COVID’s impact on public access to government. In the meantime, though, access to democracy shouldn’t be limited to the (literally) well-connected or tech-savvy. Local governments need to devote time, energy and creativity to establishing a consistent online presence that allows more citizens to participate, not fewer. “With the court system, it’s really a good example of what government can do,” Luce Herrmann said. “We just need to make that more even.”
DANIEL SAAD
Hundreds of anxious parents wanted to hear from the Lakeview Board of Education on Tuesday during a virtual meeting on school restart plans. Fewer than 100 actually got the chance. That’s because the St. Clair Shores school district was using a limited version of Zoom, the ubiquitous online meeting platform that’s become the public’s only portal into public meetings. One parent blasted the district in a Facebook post, pointing out that a cheap upgrade could have prevented widespread frustration. “During a time of crisis, when countless parents have concerns, comments or simply want to hear information being disseminated first hand I find it shocking that the board would limit participation even inadvertently,” Bryan Shishakly wrote. Such is the state of access to public officials in a pandemic. Governing in the age of coronavirus, like everything else, has moved online-only. That makes sense for safety’s sake, but it’s bad news at a time when accountability matters more than ever. And it’s not an excuse to limit public access to debates about reopening schools, businesses and universities — some of the most consequential decisions governments will ever make. On Wednesday, Gov. Gretchen Whitmer — who had been holding socially distant in-person briefings with a small press pool — surprised reporters by returning to Zoom with a limited opportunity for questions. “The new format … with reporters having to provide questions in advance to get called on, gives complete control to the administration on questions that will be asked,” Zach Gorchow, editor and publisher of Gongwer Michigan, tweeted afterward. “There are many better options for the public.” The governor’s office told The Detroit News the move was intended to align with current COVID limits on in-person gatherings and that questions were taken in order, not screened. But it’s a reminder that the onus is still on elected officials to make themselves, their deliberations and their votes accessible to all. “We all have obstacles and challenges to doing our usual business, but we all have to figure that out,” Robin Luce Hermann, legal counsel to the Michigan Press Association, told me last week. “This is not a free-pass situation.” Early in the pandemic, Whitmer issued an executive order requiring public bodies to put materials online and find a way for both their members — and the public — to be heard. In
COMMENTARY
Protect small business from frivolous COVID-19 lawsuits BY CHARLES OWENS
Charles Owens is the state director for the National Federation of Independent Business in Michigan.
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.
BLOOMBERG
Some public bodies use limited versions of Zoom or Microsoft Teams that restrict the length of their meetings and the number of online observers.
It is apparent to anyone who has ventured out during the extended shutdown from the COVID-19 outbreak that Michigan’s small businesses are struggling to survive. Now, a new challenge will soon present itself that could be the final blow for many of them that are already hanging by a thread: the threat of unfounded lawsuits as they begin to reopen. For most small businesses, the safety of employees and customers is always of paramount im-
portance. As small business owners across Michigan begin the process of reopening, it is imperative that we establish protections from the threat of frivolous lawsuits that seek to exploit the already damaging effects of COVID-19. According to a recent National Federation of Independent Business survey, nearly 70 percent of small business owners are concerned about increases in liability claims when reopening their businesses. Enterprising trial attorneys seeking to take advantage of the current situation with questionable COVID-19 lawsuits would not be a new concept. An entire cottage industry of litigation harassing small business owners has sprung up from the federal Americans with Disabilities Act and the abuses by the trial bar have been well documented. Many shops and businesses nationwide have been hit by lawsuits demanding payment over alleged minor violations of the ADA. Fortunately, legislation has been intro-
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 | AUGUST 10, 2020
duced in the Michigan Senate and House that addresses these liability concerns so that our state’s small businesses who have fought to survive over the course of this pandemic can get back to work without fear of unnecessary and costly legal battles. NFIB, and many other organizations and institutions, support this commonsense legislation to assure that all employers in all sectors who take reasonable steps to follow public health guidelines, will be protected against needless lawsuits. The proposed legislation would shield a business or organization from liability from lawsuits brought by customers, or other third parties, unless the customer or third party proved that the business knowingly failed to take reasonable steps to reduce the risk of COVID-19 to customers and other third parties and that the failure caused the injury. The legislation would not protect any business or organization that intentionally or recklessly disregards a substantial risk that would increase the likelihood that an individual would be exposed to COVID-19, or intentionally exposes a person to the virus. The legislation also distinguishes actual injuries and legitimate claims from “phantom-injury” lawsuits claiming “emotional distress” or injuries that cannot be documented to have occurred on the premises of the defendant. Just one of these “no injury” lawsuits in a fragile economy can be the death knell for a small business or any organization that is attempting to reopen. The legislation we are seeking would be a win-win in that it will incentivize employers to protect and promote workplace and customer safety and protect organizations against the economic threat of groundless COVID-19 related lawsuits. We urge the Legislature to work quickly to pass this legislation and we urge the governor to sign it into law as soon as possible so Michigan can get back to work.
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
Restrictive immigration policy hurts Michigan’s economy BY MILAN GANDHI AND RAMI FAKHOURI
The spring and summer of 2020 have seen a dramatic acceleration of the Trump administration’s measures to restrict immigrants from coming into Milan Gandhi is the United States. After the onset the owner of of the coronavirus Med-Share Inc. pandemic, the of Southfield White House issued a series of p ro c l a m a t i o n s that effectively limited entry into the U.S. from many nations, including Brazil, Iran and the Schengen countries of Europe. Two of the most Rami Fakhoury damaging proclais the founder mations were and managing passed in April director of and June, respecFakhoury tively. April’s Global proclamation Immigration suspended entry USA PC of Troy into the U.S. for immigrants who were outside the U.S. or did not have a valid visa as of the proclamation’s effective date of April 24. Although this proclamation was supposed to last only two months, it has been extended until Dec. 31 and could be extended further by the president. A similar proclamation was issued June 22 that barred entry into the U.S. of foreign nationals who did not have a valid visa in certain specific guest worker categories like the H-1B and L-1. Like its predecessor, the June proclamation will not expire at least until Dec. 31, and may also be extended at the president’s discretion. Supporters and members of the administration have argued that these proclamations are necessary to protect American workers during a time of unprecedented economic contraction. Yet, the facts speak otherwise: Immigrants have made, and continue to make, significant contributions to our regional economy. Take one of the best-known guest worker visas — the H-1B, for specialty occupations such as engineers or computer scientists. Well before the pandemic struck, Michigan employers have relied upon H-1B workers to fill highly skilled positions. In FY 2019 alone, Michigan employers secured 4,350 H-1B visas to bring in talent to fill skill gaps. Ultimately, these H-1B guest workers help Michigan businesses to expand and hire more U.S. workers. A study conducted by the Partnership for a New American Economy concluded that over 21,800 jobs for U.S.-born workers in Michigan were created between 2010 and 2013 as a result of H-1B workers. Other guest worker visas, such as the L-1 visa for foreign executives, managers or workers with specialized knowledge, produce similar economic multipliers for our state. These workers often come over to help set up or run Michigan-based offices for overseas companies and, as such, play a major role in driving foreign direct investment in our state.
Indeed, a report issued by Oakland sectors that generally employ immiCounty’s Department of Economic grants. Unemployment figures from Development and Community Affairs the Bureau of Labor Statistics show shows that the county attracted $575 that job losses were highest in lowmillion in domestic and foreign inIMMIGRANTS HAVE MADE, AND CONTINUE vestment in 2019, with 41 percent TO MAKE, SIGNIFICANT CONTRIBUTIONS TO coming from companies head- OUR REGIONAL ECONOMY. quartered outside of the U.S. Indeed, immi- er-skilled service occupations, and grant-owned firms employed over that demand for higher-skilled work167,000 Michiganders in 2018, con- ers in computer science and health tributed $7.1 billion in taxes, and had care continues. Even with the high unemployment $18.4 million in spending power. In fact, many of the jobs lost due to numbers produced by COVID-19, U.S. the coronavirus pandemic were not in businesses still struggle to find quali-
fied skilled talent. The effects of the Trump administration’s proclamations will only aggravate this situation, leading businesses either to relocate to another country, or to become increasingly disadvantaged as their competitors in other countries attract these workers instead. The U.S. Chamber of Commerce and three other litigants have gone further and taken the unprecedented step of suing the Trump administration, contending that the proclamations exceed the president’s legitimate authority. Litigators from the American Immigration Lawyers Association, the Justice Action Center and the Innovation Law Lab have also sued to
challenge the entirety of President Donald Trump’s immigration bans. Business leaders, tech giants and social justice groups all agree — the president’s restrictive proclamations are both morally wrong and economically counterproductive. Hindering skilled immigrants from entering the U.S. will continue to hinder Michigan’s — and the nation’s — economic recovery. We encourage the Trump administration to reverse its short-sighted policy Ωso Michiganders, already suffering under the terrible burden of COVID-19, will not have to endure an unnecessarily protracted recession due to the unavailability of skilled talent.
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AUGUST 10, 2020 | CRAIN’S DETROIT BUSINESS | 7
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WHAT’S NEXT While uncertainty sown by the pandemic has taken root, here’s a look at what could be on the horizon
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his is not where we thought we’d be. Time has behaved strangely over the past five months. It’s stood still, while at the same time it’s been frantic as we’ve worked endlessly to keep businesses afloat, people safe and trains running — if not on time, at least running. It’s safe to assume that in May most people thought we had seen the downside of the coronavirus pandemic. It would hang around for quite a while, but we thought by now we’d be settling back to a “new normal” in our work and personal lives. It would be different, but it would be a little more stable. Here in mid-August, it doesn’t feel that way anymore. This Crain’s special report was conceived in those days and intended as a look at how the virus had changed things. Because we thought we would have a clearer picture. Since then, we’ve seen a national uprising for racial justice, an upswing in cases of the virus and a widening gulf in opinion on what should be done about it. The playbook gets rewritten every day. Right now, Michigan seems to be hitting a plateau, with cases of the virus no longer on the upswing. We’re in far better shape than much of the South. Vaccines are in testing, though there are no guarantees. That’s the good news. But still, the future remains cloudy. School districts and universities are wracked with uncertainty over their fall restart. All aspects of business and life are still undergoing profound changes, and anybody who tells you they know where things will settle out is selling something. So in this section, our reporters delved into what’s certain, what’s still unknown, and what could be coming next — to help you know what to watch and be as prepared as you can.
8 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
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W INSIDE Education: Schools’ future likely will be a game-time decision. PAGE 9
Health Care: Lessons learned as industry prepares for the next wave — or next virus. PAGE 9 Real Estate: Worst forecasts have not come to pass, at least not yet. PAGE 10
Nonprofits: Battling for survival — and not all organizations are going to make it. PAGE 11 Automotive: Motor City’s driving engine will depend on broader economy’s resilience. PAGE 12
Venture Capital: Startup investment keeps chugging; will deals keep getting done? PAGE 12 City of Detroit: Economic crisis, racial reckoning underscores disparities. PAGE 13
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FOCUS | WHAT’S NEXT? EDUCATION
Schools’ future, a critical workforce question, approaches game-time decision BY KURT NAGL
For millions of teachers and students in Michigan, the return to school this fall could be a massive, high-stakes science experiment. The coronavirus pandemic that cut in-person teaching short in March rages on with no vaccine as elected officials and health experts weigh the needs of the economy against health and safety. The question for educators, students and parents is whether the risk of spread is more serious than the risk of continuing to fall behind in learning. The education industry learned a lot over the past five months after a sudden transition to remote learning. Many of the state’s 540 school districts and dozens of colleges and universities were woefully unprepared for the shift. Predictably, low-income areas had the biggest problems. The pandemic brought to light chronic flaws in the education system, including disinvestment and lack of equity. What we've learned: Without a doubt, students are falling behind. The challenge now is figuring out how to catch up and make sure no more ground is lost. Strategies differ greatly among districts, which, under Gov. Gretchen Whitmer’s return-toschool plan, are given individual authority over how to proceed. Rochester, Ann Arbor, Lansing and Grand Rapids school districts are among those that plan to begin the school year remotely. Detroit Public Schools Community District, the
have curbed the spread of the virus more effectively than the U.S. China and Israel reopened schools just to shut them down again due to outbreaks, foreboding what might happen if the U.S. moves too quickly. Best-case scenario is that every household in Michigan has an option that best suits its needs — in-person learning for vulnerable children and working parents who rely on it; virtual learning for those who are concerned about safety and have the resources at home to support it; and a hybrid approach to accommodate students and families across the spectrum.
Decisions on whether classrooms will look like this after Labor Day could be happening at the last minute. | LARRY PEPLIN FOR CRAIN’S
largest in Michigan, said its 50,000 students will have a choice between in-person and online learning. Highland Park said it will start with remote learning before hopefully transitioning to the classroom. The University of Michigan, Michigan State University and Wayne State University are opening their campuses but conducting most classes online. The common theme: an emphasis on remote learning. The pandemic laid bare a reliance on technology. A generation of students pestered by parents and teachers for being too attached to their devices is now tethered to them by necessity. But smart-
phones and laptops are still no substitute for teachers. “What we’re finding and seeing is that as schools decide to go virtual and go remote, there are lots of wealthy parents who are deciding to hire teachers, hire tutors, to work with their children one on one,” said Tonya Allen, president of the Skillman Foundation and chair of Gov. Gretchen Whitmer’s Return to Learn Advisory Council. “There are so many people in our community who can’t make that choice at all, and I worry greatly that the inconsistency that we see across the state and even in local regions will be exacerbating inequity.”
Unanswered questions: This is what we don’t know: What will happen to teachers and students who return to the classroom? Cases of COVID-19 have already cropped up at schools around the region. Some point to them as warnings of the disaster that awaits in-person instruction this fall. But traditional learning proponents say there haven’t been large outbreaks because following strict protocols prevents the spread, and kids are less susceptible to the coronavirus. Many countries, such as Germany and Finland, have put kids back in classrooms without a flare-up in infections. Those countries, however,
What's next: Whitmer said early in the outbreak, when the number of cases was skyrocketing, that it was unlikely schools would reopen this year. When the curve was flattened in June, she spoke optimistically about resuming in-person learning this fall. An apparent resurgence of the coronavirus has created another question mark. “I’m not sending kids and our education workforce into our schools unless it’s safe. It’s that simple,” Whitmer said on CNN recently. Decisions made now about the first day of school will be made in the final hour, but the fate of the school year will be determined by what happens in the first few weeks. If the case count balloons, it will be a long winter for students, teachers and parents. Contact: knagl@crain.com; (313) 446-0337; @kurt_nagl
HEALTH CARE
Will industry, individuals act on the lessons learned? BY JAY GREENE
COVID-19 has challenged the U.S. health care industry like no other pandemic, disaster, regulatory or payment change in modern history. Hospitals have streamlined over the past 40 years to efficiently deliver care at the highest possible quality, but also to maximize profits or stretch limited resources. They have drilled on emergency preparedness plans. But the COVID-19 pandemic upended cost-saving approaches and exposed weaknesses in hospital staffing strategies designed to limit nurses and other health care workers to daily inpatient volumes. The failure of hospitals to be prepared for COVID-19 in March and April is a systemic problem that has been criticized for years by nurses and health care unions. The “short staffing” of critical departments often leads to employee dissatisfaction, burnout and resignations. COVID-19 exposed many hospitals’ lack of personnel and supplies to adequately treat the hundreds and thousands of patients requiring critical and intensive care. Of the nation’s nearly 1 million hospital beds, only 10 percent are reserved for intensive care. The federal government also was woefully unprepared, with insuffi-
cient reserves of ventilators, respirators and other personal protective equipment. A national emergency coordination plan for COVID-19 testing, use of face masks and stay-athome orders in regions of high viral spread also failed to materialize. Governments have underfunded public health systems for decades. As county hospitals have closed, public health clinics have been used to provide free or low-cost services for the under-insured or uninsured. Nursing homes, rehabilitation centers and behavioral health providers also were caught flat-footed. The pandemic sliced through many longterm care facilities predominated by seniors in their 70s, 80s and 90s, many with multiple chronic diseases and weakened immune systems. Nearly 25 percent of the deaths to COVID-19 in Michigan were at nursing homes. Long-term underfunding of postacute care facilities and of behavioral health care also has played a role in unpreparedness in Michigan for the influx in COVID-19 patients and
related to COVID-19. Still, some question whether the state response was quick or strong enough, given that Michigan ranked in top three states for positive cases and deaths into June. As of Aug. 3, the state ranks No. 8 in death rates by population at 65 per 100,000. Hospitals have been shoring up supply chains by investing in THE FAILURE OF HOSPITALS American comTO BE PREPARED FOR panies for personal protective COVID-19 IN MARCH AND equipment and APRIL IS A SYSTEMIC PROBLEM rethinking “justin-time” supply THAT HAS BEEN CRITICIZED and staffing stratFOR YEARS BY NURSES AND egies. They also have HEALTH CARE UNIONS. reorganized medical departand 8 percent Hispanic groups af- ments to quickly pivot to critical and fected, indicating to federal officials intensive care uses if COVID-19 volume increases. social and health inequities. Physicians, dentists and other outWhat we’ve learned: Within one patient health care providers are preweek of the first COVID-19 positive paring for a new normal that includes case on March 10, Gov. Gretchen social distancing patients and using Whitmer ordered the shutdown of a telemedicine and other technologies. Doctors of COVID-19 patients now number of businesses, including theaters, bars, casinos and indoor closely watch for blood clots, place restaurant dining, to limit communi- ventilated patients on stomachs and ty spread. She has issued more than monitor organs such as lungs, heart, 170 executive orders and directives liver, kidneys and brain. community impact. So far in Michigan, more than 84,000 people have tested positive for COVID-19 with more than 6,200 deaths. Probable cases and deaths are about 5 percent higher than those totals. The infection rates and deaths also are much higher in the minority population with 26 percent of Blacks
Unanswered questions: Big ones are when will vaccines be available; how effective will they be and how long will they last. In 2019, the influenza vaccine was 45 percent effective but only about 65 percent get inoculated. More will be needed to stifle COVID-19. What’s next: Experts say the world must be prepared to more quickly contain and then coordinate a response to the next pandemic. Doctors and hospitals are preparing for a possible second wave this fall. They say they are more prepared now than in March and April. They have stocked up on personal protective equipment, ventilators and oxygen support machines and medicines known to minimize the virus’ inflammatory effects. They also can quickly reopen intensive care units designed for COVID-19 patients and more appropriately triage and isolate patients. Rapid and widespread viral testing and vaccine development must be perfected as a first line of defense. But the bottom line, say experts, is that after public alerts are given and containment and protections are put in place, it is up to individuals to accept shared safety rules to reduce community spread and deaths. Contact: jgreene@crain.com; (313) 446-0325; @jaybgreene AUGUST 10, 2020 | CRAIN’S DETROIT BUSINESS | 9
FOCUS | WHAT’S NEXT? REAL ESTATE
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Worst fears haven’t come to pass — so far
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BY KIRK PINHO
Commercial and residential real estate have never experienced a seismic shift as large and pervasive as the one brought about by the COVID-19 pandemic. Construction, by and large, stopped. There were concerns of skilled trades workers going to other states that allowed construction for work, prompting concerns about a spike in building costs. Nonessential workers were told to stay home, leaving buildings large and small virtually empty. Evictions were halted in an effort to keep people in their homes. Malls shuttered. Businesses of all stripes, and residents, couldn’t (or wouldn’t) pay their landlords. Some sued those commercial tenants for unpaid rent. Building material supply chains were disrupted. With travel restrictions in place and business gatherings limited or canceled, hotels fell behind on their debts. And that was just the beginning. But some of the major concerns in the industry didn’t come to pass. For example, the fear that apartment owners would face a crush of non-paying renters was largely curtailed because of enhanced federal unemployment benefits that gave those out of work an additional $600 per week, affording them the ability
tancing and increased cleaning and sanitation. Some staggered their workforce to come in only certain days of the week. Landlords, in some instances, offered tenants rent forgiveness, while others held firm and took them to court.
Downtown Detroit’s commercial real estate market has been a bright spot for the past several years, but uncertainty about the future of office work will cast a pall. | LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS
to make their monthly payments. The housing market has shown signs that it’s rebounding after record-setting lows in sales as economic uncertainty and stay-at-home orders slowed the sales industry to a near halt.
What we’ve learned: As the virus spread, the industry adapted. When construction workers were allowed broadly to return to work starting in T:10" May, the industry — already used to wearing protective equipment —
added masks to their required gear and resumed building projects. Brokers and Realtors did virtual or contactless tours of buildings and homes. Businesses reconfigured their spaces to allow for more dis-
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Unanswered questions: The precise effect on office space remains unknown. Some tenants may continue allowing their employees to work from home, which would free them up to shrink their footprints. But precisely how deep that space contraction is is up for debate. Currently the region has about 81 million square feet of office space, according to a second-quarter report from the Detroit office of London-based brokerage firm Savills plc. The vacancy rate was 20.8 percent, down from 21.3 percent in the second quarter last year. “I think it’s going to shrink the potential office requirements long term because of the work from home aspect,” said Paul Choukourian, managing director in the Southfield office of brokerage firm Colliers International Inc. “Short of that, there are a lot of unanswered questions. I don’t think anyone expected it to go on as long as it’s gone.”
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NONPROFITS
Fragile safety net facing tests that threaten survival
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parities in the ability to access and leverage technology, Kuhn said. Racial disparities have taken on a new importance amid the pandemic, forcing nonprofits to view their work through a racial equity lens. How nonprofits are doing financially differs from one to the next, depending on their mix of public vs. private funding, their reliance on earned vs. contributed revenue and how much they can rely on their donors to support them right now, said Mariam Noland, president of the Community Foundation.
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When people find themselves without food, water or shelter, they turn to the nonprofit sector to help meet their basic needs. After-school providers keep children academically and socially engaged. Mental health agencies help people deal with issues that feel too hard to handle, and cultural and arts programs provide a break for those seeking respite from daily routines or struggles in life. Anything that might be a resource for people during the pandemic (and before it) likely touches a nonprofit, said Kelley Kuhn, vice president of the Mich- Unanswered questions: Leaders igan Nonprofit Associagree that demand for huation. But because of man services will continue COVID-19 HAS COVID-19, there are to rise, but no one knows no guarantees those FUNDAMENTALLY how much. It will depend organizations will alon how quickly the econoCHANGED HOW ways be around. my turns around, Noland NONPROFITS The sector is in unsaid. And several factors precedented territory, play into that, including OPERATE. facing significant the prospect of a recession change and contracand whether or not school tion as it grapples with is in session and parents revenue losses, balcan return to full-time emlooning demand for ployment. services, operational “What happens with shifts needed to keep kids is a huge determinant people safe and the of what happens with who possibility of recescan go back to jobs, where sion, according to in... people put their prioridustry leaders. ties,” she said, noting there COVID-19 has fundamentally is also a related impact on arts and changed how nonprofits operate, from cultural organizations, since people logistics like incorporating safety mea- are unlikely to go to a theater perforsures into in-person service and pro- mance if money and time are tight. gram delivery to shifting programs and fundraisers online and nonstop con- What’s next: Leaders are watching tingency planning to adapt to chang- what happens with the economy and ing revenue streams and human re- Michigan’s phased reopenings, since source capacities, Kuhn said. both factors have a ripple impact on All of those shifts have taken a toll earned and contributed revenue. not only on nonprofit finances but They are also monitoring the rise also on nonprofit leaders and em- in the demand for human services, ployees, many of whom have worked whether government will step up to nonstop during the pandemic. support the increased demand, and “If an economic downturn hap- the mental well-being, burnout and pens to an already fragile sector, what work-life balance for nonprofit emwill be the stress and burden when ployees. Whether there will be more nonprofits will be continually asked federal relief that nonprofits can acto fill gaps in services to communi- cess without the same issues they enty?” Kuhn said. countered in securing the initial PPP “The safety net is going to need at- loans is another question, Kuhn said. tention and support.” Based on their financial models and limited cash on hand, a “shockWhat we’ve learned: Nonprofits ing number” of nonprofits will not have collectively lost millions of dol- survive the pandemic, with closures lars in earned revenue with building most likely spread out over the next closures and contributed dollars two to three years, Jeff Williams, diwith canceled fundraising events. Yet rector of the community data and resome, like food banks and rescues search lab at Grand Valley State Uniand shelters, ramped up their efforts versity’s Dorothy A. Johnson Center with each new wave of demand, costs for Philanthropy, said in June. be damned. Leaders are seeing some indicators To conserve cash, employees were that nonprofits are beginning to look at furloughed. To help recoup lost reve- consolidations, and partnerships are nue, some shifted to virtual fundraisers taking shape as those organizations and innovative events like drive-in the- navigate the pandemic and post-panater gatherings. Some secured federal demic environment, Kuhn said. Paycheck Protection Program loans. “If you are looking to continue to Mental health agencies began tele- do the work in a resource-stressed health visits with clients to handle environment, then you’re creatively increased demand for counseling, looking towards consolidations and and hospitals restarted elective med- partnerships” to best meet commuical procedures. Educational and nity needs, Kuhn said. cultural groups launched new programs online. But it’s become clear Contact: swelch@crain.com; that among nonprofits there are dis- (313) 446-1694; @SherriWelch
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FOCUS | WHAT’S NEXT? VENTURE CAPITAL
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Betting on the future: Startup investment remains healthy as deals keep getting done
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BY NICK MANES
Indeed, the second-quarter report from Pitchbook and the NVCA shows that nationally, the overall number of deals in the first half of 2020 has fallen compared to last year, but deal value remains strong.
Southeast Michigan’s technology startup community has spent several years on the come up as companies woo more investment and some achieve “unicorn” status with valuations of $1 billion or more. The onset of the coronavirus pandemic, and the still-present economic uncertainty that has resulted, has slowed some of that investment, but by and large, most experts remain confident that the growth of startups in the region will continue. What we’ve learned: For starters, many startup founders have found ways to pivot their business models to remain relevant and operational during the pandemic and ensuing lockdowns. Delivery services for food and other various staples remains a popular trend, and companies like Detroit-based ToDoolie Inc. and Ann Arbor-based Refraction AI have found ways to get by by tapping into those markets. All told, the pandemic and resulting economic crisis have been disruptive to the startup community in the United States, as well as the venture capital investors so many count on. But it’s been “hardly apocalyptic,” as put in a recent report by Pitchbook and the National Venture Capital Association. “Much of the slowdown occurred during the early part of the (second) quarter, when uncertainty over COVID-19’s impact on the economy was at its height. After the initial month and a half of exercising caution, triaging, and focusing primarily on stabilizing their own portfolio
Censys Inc. recently closed on a $15.5 million Series A investment round from out-of-state venture capital investors. | CONTRIBUTED
companies, VC investing began to pick up in May,” according to the report. “While some sectors have been heavily affected by the pandemic, many startups, especially in the software and biotech sectors, have fared relatively well during the COVID-19 crisis, offering solutions to the healthcare, digital enterprise, and consumer services needs of the country.” Venture capital investment — a key indicator of startup success — has been steadily on the rise in Michigan for years. In 2019 Michigan companies attracted just more than $2 billion in VC dollars, with $1.3 billion of that going toward Plymouth-based
report earlier this year from the Michigan Venture Capital Association.
Rizik
Heintz
electric truck maker Rivian. Excluding Rivian’s large haul, 70 startups brought in more than $514 million last year, a 152 percent increase in VC investment in the state spread over the last five years, according to a
Unanswered questions: So now the question becomes, how much will that growth be stunted by a pandemic that shows no sign of subsiding in the short term, and an economy that remains in free fall while the coronavirus rages? Local experts are mostly confident that the good times can and will continue. Chris Rizik, the CEO and fund manager of Ann Arbor-based Renaissance Venture Capital, noted that overall investment remains on par with pre-pandemic times.
What’s next: Emily Heintz, founder and managing director of EntryPoint, an Ann Arbor-based nonprofit that researches entrepreneurial and startup economies, said she has few worries when it comes to the general technology sector and most company’s ability to weather the storm. Many have long operated with remote workforces, she noted, and those who may not make it through likely had deeper problems pre-pandemic, Heintz said. As proof, Heintz pointed toward the news last week that Censys Inc. had closed on a $15.5 million Series A investment round from out-of-state venture capital investors. The Ann Arbor-based cybersecurity firm, which makes software that monitors a company’s connected devices for security vulnerabilities, has deep connections to other local technology startups, with founders that have worked for other companies in the area. To Heintz, that’s emblematic of how a local startup economy grows and becomes more sustainable. “And I think that the connections and experience level has kind of gone from company to company, and that’s exactly the kind of thing that you want to see,” Heintz said. “And that we’ll continue to see more and more in the Midwest.” Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes
AUTOMOTIVE
Motor City’s driving engine weighs hit to economy BY DUSTIN WALSH
The Great Suppression, the response to the COVID-19 pandemic from government and business leaders, may have saved lives but not balance sheets. After experiencing the severity of the coronavirus outbreak in China early in the year, the Detroit Three shuttered all North American plants in mid-March. Roughly 93 percent of all automotive manufacturing went offline in March and didn’t reopen until May 18. Nearly two months of production losses and, thus, revenue left the Southeast Michigan supply base running to its bankers. All the major tier-one suppliers maxed out their available debt. Plymouth-based Adient plc, for example, took an additional $600 million in debt during its second fiscal quarter that ended on March 31. It also initiated a $600 million private offering, using its assets as collateral via a secured note, and slashed salaries. The smaller-tier suppliers turned to wartime-like production efforts of producing personal protective equipment for their own use upon reopening as well as for health systems and public heath workers as a
means to squeak out some sales. Roseville-based RCO Engineering, an interior components supplier for General Motors, Lear and other automotive suppliers, turned to the production of face shields, as many as 30,000 per day to supplement losses. What we’ve learned: The COVID-19 economy has been a bloodbath. More than 190,000 manufacturing sector workers lost their jobs in Michigan in April alone. Nearly 100,000 of them were in the auto sector. Contextually, more than 1 million lost their jobs in Michigan during the month of April before recovering in May. Financials for the sector were still in ruin in May. Julie Fream, CEO and president of Troy-based trade group Original Equipment Supplier Association, told CNBC the industry needed a bailout of $20 billion to $25 billion to avoid widespread supply problems including bankruptcies. But things began turning around by
12 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
than originally anticipated and is running at 80 percent to 90 percent of preCOVID-19 volumes. Additionally, receivables from this ramp-up are beginning to be paid to suppliers. This has eliminated some immediate funding needs of suppliers.” Production volumes are expected to continue to accelerate through the third quarter of 2020 as everyone MORE THAN 190,000 plays catch up MANUFACTURING SECTOR from roughly two WORKERS LOST THEIR JOBS months of shutdowns, particuIN MICHIGAN IN APRIL larly for trucks and SUVs, Fream ALONE. NEARLY 100,000 said.
on the virus. As of Aug. 5 there were more than 4.83 million COVID-19 cases and spikes across several U.S. states, including Texas, California and Alabama. But even if the virus is contained, will office workers resume their commute to the office? According to a recent National Association for Business Economists survey, 36 percent believe more than a third of all workers who switched to remote working will remain remote forever. The future appears, as of now, to see fewer people driving and that’s ultimately a drag on auto sales, the U.S. economy and particularly Southeast Michigan jobs.
Unanswered questions: The industry can’t outrun the inevitable. The U.S. economy contracted at a nearly 33 percent annualized rate during the second quarter, the largest drop since World War II. Germany witnessed its largest economic decline since 1970. There is no country or market immune to the recession brought on by the COVID-19 outbreak. More important, the health of the industry is almost wholly dependent
What’s next: The outcome of a second stimulus, currently debated in Congress, could impact auto sales and parts production. If a consumer bailout doesn’t come, or is reduced, how long can sales hold? Even if it does come, the economy could take years to recover. Car sales are not expected to return to pre-COVID levels until 2023 at the earliest, according to a Bank of America forecast.
the end of the month and into June. While automakers recorded a 30 percent drop in sales during the second quarter, the greatest sales plunge since the Great Recession, those figures exceeded expectations. Automakers and suppliers are running at high capacity and balance sheets recovered from the cost savings mea-
OF THEM WERE IN THE AUTO SECTOR. sures. Robust unemployment insurance and federal stimulus dollars helped float the economy and kept consumers spending, at least a little. “In May, based on the results of the supplier surveys we had conducted, there was a concern the industry would see a number of financially distressed suppliers in the August time frame,” Fream told Crain’s. “Since then the industry has ramped up much quicker
Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh
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CITY OF DETROIT
Economic crisis underscores business disparities in Detroit BY ANNALISE FRANK
The coronavirus led to the deaths of 220 out of every 100,000 Detroiters (so far). While it spread, the city’s thousands of businesses had decisions to make without a road map, and in many cases without assurance they’d make it through. “The goal is just to survive this year,” said Amina Daniels, founder of boutique fitness studio Live Cycle Delight, which has two locations in Detroit’s West Village. “...We can’t go into debt because of a pandemic. That’s not fair.” In the country’s biggest majority-Black city, existing racial health and economic disparities are in full view. They’re linked, with many communities of color hard-hit by the pandemic also facing high job loss, like Detroit. These businesses were also statistically more likely to go into the pandemic-caused recession in a less advantageous financial position than white-owned businesses. Two-thirds of counties with a lot of Black business activity before the pandemic are now in top coronavirus-hit areas, and Black-owned companies are more likely to be located in such “hot spots,” according to a Federal Reserve Bank of New York study released this month. Plus the federal Paycheck Protection Program meant to help small enterprises stay afloat reached fewer than 20 percent of businesses in counties with dense Black-owned business operations, the study found. What we’ve learned: Nationally, three-quarters of small businesses had enough cash on hand to last two months or less during the first few months of the pandemic, a July survey in the National Academy of Sciences’ journal found. Service sectors were hit especially hard, with the New York nonprofit James Beard Foundation estimating this spring that up to 80 percent of independent restaurants said they didn’t believe they would survive the crisis. Business owners scrabbled for grant funding, like Daniels, who said she applies for “everything”
REAL ESTATE
From Page 10
Likewise, retail landlords may end up in the same boat. COVID-19 crippled many retailers, both small family-owned businesses as well as national and international stores. The impact on those building owners will play out in the weeks and months to come, and opportunistic buyers of real estate in both the retail and office sectors will swoop in to buy up distressed assets. What’s next: Some are anticipating a wave of tenants downsizing their office footprints when leases come up for renewal. Peter McGrath, associate director in the local Savills office, said all companies are going to review their footprints and evaluate their space needs moving forward.
“THE GOAL IS JUST TO SURVIVE THIS YEAR. WE CAN’T GO INTO DEBT BECAUSE OF A PANDEMIC. THAT’S NOT FAIR.” — Amina Daniels, founder of Live Cycle Delight
and spent many late nights and early mornings doing so. Locally, the Detroit Economic Growth Corp. saw overwhelming demand for its COVID-19 business relief grants in April. More than 1,700 applied and around 730 were selected. Without a vaccine and with positive coronavirus testing rates in Detroit hovering around 3 percent-4 percent, the downturn isn’t reversing itself any time soon. So Daniels and other Detroit businesses have been changing their business models to fit a new reality. She spent thousands on outdoor equipment to move her fitness classes outside, while restaurants focus on takeout or expand outdoor dining. Unanswered questions: Months into the pandemic, protests began in late May over the death of George Floyd while in Minneapolis police custody. They mounted renewed
SOME RETAIL LANDLORDS ARE ANTICIPATING A WAVE OF TENANTS DOWNSIZING THEIR OFFICE FOOTPRINTS WHEN LEASES COME UP FOR RENEWAL.
“There is some consensus that many users simply won’t need as much space due to more employees
calls to address systemic racism and injustices across the country against Black Americans. In Detroit, calls by protesters and others have targeted Police Chief James Craig, Mayor Mike Duggan and even museum institutions. Some high-profile Detroit businesses, mostly white-led, have spoken of “commitments” to change, and it’s clear from social media that organizations are having tough conversations. We’re rehashing old problems, said Hodari Brown, president of the Detroit chapter of the Black-business advocacy organization National Business League. What he wants to see is an adjustment in the perception of Black business assistance versus reality — touting examples of Black-owned businesses that won contracts with a company or government, for example, versus really increasing the percentage of inclusion. The question isn’t whether we’ll see companies speak out, but whether the data will really bear out improvements for the standing of Black-owned businesses through this crisis. What’s next: Kofi Kenyatta, Detroit-based partnership director for the nonprofit Family Independence Initiative, wrote recently in a commentary for Crain’s that his organization, which gave out cash to Detroiters impacted by the COVID-19 crisis, already has the data to show what helps address systemic racism. Now it’s just about getting “the philanthropic, business and government communities to join us in trusting and investing in people.” Brown said he wants to see data that “moves the needle.” “And the problem is we don’t just want to move the needle by 1 percent,” he added. “That’s not how things change. Change is having substantial conversations with actions put into place that really boost our members to get access to capital dollars that municipalities and larger corporations have.” Contact: afrank@crain.com; (313) 446-0416; @annalise_frank working remotely, and doing so more often,” he said. “The other side of the coin is office users with dense office environments — say one employee per 100 square feet — could actually need a larger footprint to create a safe and inviting workplace for their employees.” “The problem is going to come as these leases start to roll and almost every company is going to go through a diagnostic of their space, and I think long term it’s about how do we downsize because we learned that 25 to 30 percent of our employees can work from home,” said Brian Piergentili, executive director in the Southfield office of Cushman & Wakefield, a Chicago-based brokerage house. “I think there will be significant downsizing. I hope I’m wrong.” Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB
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AUGUST 10, 2020 | CRAIN’S DETROIT BUSINESS | 13
HOSPITALITY
Shinola Hotel operators ride hospitality industry’s ups, downs Mac & Lo weathers pandemic, focuses on diverse workforce as first year exceeds expectations BY MALIQUE MORRIS
Audrey Laurent-Maclean and Sergio Maclean brought a New York state of mind to Detroit’s hospitality industry. Now, in the middle of a pandemic and a racial awakening nationwide, the hotel connoisseurs say they are putting people over profit. “There always has to be a human component,” Laurent-Maclean said. “If you take that out of hotels, what is the point?” The couple, who co-own Mac & Lo, a restaurant and hospitality management and consulting firm, moved from New York City to Detroit in 2016, after traveling back and forth for a year, in pursuit of an emerging market for their business. Maclean said after looking into multiple cities, including Austin and Pittsburgh, they believed Detroit would become an epicenter of hospitality. About six months after relocating and parsing the city’s restaurant and hotel offerings to gauge the demographics both industries attracted, Mac & Lo partnered with development firm Bedrock LLC and luxury watchmaker Shinola to operate Shinola Hotel, a luxury boutique outfit that opened Jan. 2, 2019. While the Macleans are responsible for the lodging experience, New York City-based NoHo Hospitality Group, owned by restaurant proprietors Andrew Carmellini, Luke Ostram and Josh Pickard, oversees the hotel’s food and beverage offerings: Evening Bar, San Morello, The Brakeman and Penny Red’s. In the first year of operation, the Shinola Hotel surpassed Mac & Lo’s expectations. “Coming into the opening, it was difficult to exactly know where we were going to land,” Maclean said. “We blew the market out of the water.” “Prior to the pandemic, we were hitting all (the metrics),” said Mark O’Brien, the hotel’s general manager. “We were doing some amazing occupancy.” O’Brien had worked in New York City’s hotel industry for 25 years at places like the Waldorf Astoria before becoming general manager at the Maritime Hotel and Dream Hotel, before he was approached by the Macleans to manage Shinola. He said he immediately connected with the couple, based on their common history in building luxury boutique experiences from the ground up. “To come to Detroit and create something that didn’t exist here,” said O’Brien, who studied food system economics and management at Michigan State University. “That’s what sold me.” Prior to the pandemic shutdown, Shinola Hotel was averaging 76 to 85 percent occupancy based on 129 rooms, with rates starting at $195, Mac & Lo said in an email. They added that in its premiere year, Shinola was leading Detroit’s leisure and hospitality market on occupancy rate by 6 percent, on average daily rate, which denotes revenue by rooms sold, by 67 percent and revenue per available room, the industry’s standard for hotel performance, by 75 percent. A key ingredient to the hotel’s rapid success, aside from the couple’s collective 40-plus years of experience in
Audrey Laurent-Maclean and Sergio Maclean own Shinola Hotel operating firm Mac & Lo. | COURTESY OF MAC & LO
working with ADP Total Source, a Miami-based professional employer organization, to handle all disciplinary actions and terminations. Creating a diverse atmosphere was etched into Mac & Lo’s strategy for managing Shinola. Laurent-Maclean, 52, said the couple wanted to ensure that the hotel would attract and serve a mixed demographic, which for them meant balancing their bookings to include all types of travelers: business professionals, bridal parties and creative types alike. “Traditionally, Detroit has focused on business and group travel; we focus on transient travel,” said Maclean, 49. “We don’t want one type of (traveler) taking over.” It’s a deliberate method that tracks back to Mac & Lo’s origins in New York City. Established in 2014, the company worked with luxury hotel brands such as the Mercer, Bowery and Ace Hotels in the Big Apple before moving operations to Detroit. “We root ourselves in a very organic, very universal, very old-fashioned sense of hospitality,” said Maclean, who is originally from Spain and worked as an operations manager at the Soho Grand Hotel in Manhattan. “Our style of service is, we don’t serve from above or below, everyone is equal. We want our employees to be individual and not washed out by the brand.” Maclean said the only obstacle Mac & Lo confronted while transforming the Shinola watch brand into a hospitality entity was convincing their partners and the market at large to trust their vision and unique approach, i.e. not offering discount packages and having a less scripted staff. “We do not want to compete on price; we want to compete on service,” Maclean said. “We try to make sure that we have the best service, the best marketing, the best culture.”
Familiar challenges
Detroit’s iconic Shinola Hotel opened Jan. 2, 2019. | KIRK PINHO/CRAIN’S DETROIT BUSINESS
the industry, is a diverse workforce where individuality is championed and equity is paramount, they said. “Thankfully this is something that (being in New York) we are so used to being in a very diverse pool,” Laurent-Maclean said. “We brought it here not thinking that we brought it here.” She added that in a city that has a large black population, coupled with her own biracial background, the task of ensuring an inclusive environment was second nature. “We didn’t have to seek (diverse candidates) out, we didn’t have to make a calculated chart,” Laurent-Maclean said. “It was very organic for us.” Not requiring prior experience in a luxury hotel environment has helped Mac & Lo keep Shinola’s staff from becoming too homogeneous. “You can always train people to learn the ABCs, but who have the right qualifications for a hotel,” Laurent-Maclean said. “Watching those people grow is so gratifying (and) not
14 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
something that we premeditated.” “There are times when I prefer if somebody did not work in a hotel before coming here,” O’Brien added. “If that hospitality gene is there, we can teach them everything else.” Shinola’s employee statistics speak for themselves. Before the mandated closure, 78 percent of the staff, all of whom work directly for Mac & Lo, were African American, Middle Eastern, Latinx or mixed race identified, with white Americans accounting for 22 percent of the team, and 74 percent of supervisors and managers were people of color, according to inhouse data Mac & Lo provided Crain’s. In 2019, 96 percent of promotions in all departments were given to employees of color, the company added. The company offers paid cross-training across all departments and conducts most promotions from within. Leaders also organize inhouse management leadership and sensitivity training, in addition to
But after an opening year exceeding benchmarks, Shinola Hotel’s second year in business was accompanied by a viral pandemic that decimated the global leisure and hospitality industry. Having worked in New York City for more than 20 years, Laurent-Maclean and Maclean were no strangers to navigating precarious business terrain after national devastation. Laurent-Maclean said in the wake of the 9/11 terrorist attacks, the Mercer Hotel in Soho, where she worked for 10 years as operations manager, saw a lot of return guests, which she attributes to a need for reassurance and connectivity. “This is what we strive to give to people here (at Shinola),” she said. “People are in a weird place.” The events of 9/11 taught her not to react too fast and make brash business decisions in the face of erratic circumstances, she added. “It was a daily, almost hourly process of rethinking,” Laurent-Maclean said. “That was similar to 9/11 … every day was a different day and a different way to manage that day.” When the initial shutdown occurred in March, O’Brien said nearly all of the 102 employees at Shinola Hotel were laid off, with the exception of 14 staffers who stayed on as a task
force to keep operations up to pace with COVID-related improvements. And although the company said it does not disclose numbers, Mac & Lo confirmed that 100 percent of revenue was lost during this time because the hotel was completely closed. “We could have stayed open, but we chose not to, to protect our team,” O’Brien said. Instead he and the task force used the time to examine the hotel’s standard operating procedures to prepare for a safe reopen, he added. Before reopening on June 22, Mac & Lo consulted with medical personnel to advise staff on best practices, as well as a third-party cleaning service that trained the team on enhanced sanitizing techniques. Now, they conduct daily temperature checks and wellness questionnaires for staff, and schedules are staggered to help limit hotel capacity. “We were able to bring back roughly 50 percent of (employees), because of our business levels,” O’Brien said. “We had 102 employees (part time and full time), and right now we’re at 48.” Since reopening, Mac & Lo said Shinola Hotel’s occupancy rate has fluctuated between 20 and 60 percent, averaging around 40 percent for most of July, after peaking at 70 percent during the Rocket Mortgage Classic’s annual PGA tournament from July 2-5. Shinola still remains ahead of the market, with an occupancy around 38.7 percent last week while the market averaged 21 percent, the company added.
“WE ROOT OURSELVES IN A VERY ORGANIC, VERY UNIVERSAL, VERY OLDFASHIONED SENSE OF HOSPITALITY.” — Sergio Maclean
Looking ahead “For the rest of the 2020 year, we are going to bring it to 2021 as safely as possible,” Laurent-Maclean said. “Keeping it in a place where it can take off next year.” Maclean said that Mac & Lo’s plans for Shinola and beyond supersedes revenue stream. “Our end goal is not so much cash-driven,” he said. “We want to try and engage as many operations such as Shinola that will be defined by us as much as they define us … passion is what drives those emotions and what drives that success.” “In hospitality, it has to be more than a paycheck,” O’Brien said. “We’re here to make great memories for people.” Laurent-Maclean added that one of Mac & Lo’s principal thoughts in building the Shinola Hotel brand was to curate a leisure environment that guests would want to keep coming back to, with details like their living room, a hub for guests to convene and meet new people, which they have coined “Detroit’s living room” and is currently closed to the public. “We want to concentrate on our return rate,” Laurent-Maclean said. “We want people to make this a destination when they come to Detroit.”
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ALPENA’S ALLURE Family moves from California to launch craft brewery
CRAIN’S MICHIGAN BUSINESS: THE SUNRISE SIDE
PAGE 18
CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS
FROM AN EYESORE TO A JEWEL IN EAST TAWAS
The Branhams took a warehouse building and converted into a jewelry showcase. The pine beams throughout the interior came from 160-year-old white pines. The interior includes a fireplace and waterfall.
Family converts former department store into jewelry showcase Family converts former department store to jewelry showcase.
BY TOM HENDERSON
For more than 20 years, the most prominent building to greet visitors to downtown East Tawas was a big hulking steel box devoid of features except for a shade of green so bright and disagreeable you almost had to avert your eyes. It looked more like a warehouse you’d see in an industrial zone far from downtown. It stood at the corner of Newman Street, downtown East Tawas’ main street, and M-23, the state highway that takes tourists along Lake Huron on the “Sunrise Side” of the state. What made the building particularly irritating to local residents and regular visitors was that it replaced a lovely and iconic 100-year-old three-story hotel called the Holland Hotel. See BRANHAM’S on Page 20
16 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
THIS PAGE
New Augie’s owner leans into the winds of uncertainty. PAGE 17
Company’s system heats, cools using power of well water. PAGE 18
“THIS HAS BEEN SUCH A WONDERFUL TRANSITION. IT WAS A WELCOME CHANGE FOR EVERYONE IN TOWN.” Kurtis Branham (left), and dad Ken Branham took an ugly green warehouse and converted it into a jewelry showcase in East Tawas. | TOM HENDERSON/CRAIN’S DETROIT BUSINESS
— Christina Aller, managing director of the Tawas Area Chamber of Commerce
FOCUS | CRAIN’S MICHIGAN BUSINESS and to increase the number of cars he could fit in. The big hit on the menu? Noticing how long the lines were at the franchise fast-food restaurants up and down M-23 in Tawas City and East Tawas, he put a sign out front offering quarter-pound hamburger meals for $5, which included fries and a soft drink, with patrons able to supersize that to half-pounders for $2 more. “You couldn’t work on your normal margins,” he said. “If I wanted to sell a $10 burger meal, I was going to sit here with an empty parking lot.” The sign out front and advertising
REVAMPING AN ICON
New Augie’s owner leans into the winds of uncertainty “Everyone in Chicago said, ‘Why would you leave Chicago for northern Michigan?’ I’d laugh and say, ‘Why would you ever leave northern Michigan for Chicago?’” Zachary Sigulinsky says with a laugh. He did, indeed, leave Chicago for northern Michigan. Sigulinsky is the new owner of Augie’s On the Bay, an iconic restaurant on the Lake Huron side of M-23 in Tawas City. He has pedigree perhaps a bit more refined than the average owner of an up-north eatery. He attended Bemidji State University in Minnesota on a football scholarship, got hurt his freshman year and decided he wanted to turn a food hobby into a food career. He enrolled in the Le Cordon Bleu College of Culinary Arts in Chicago, then got his degree in hospitality from the Kendall College at National Louis University in Chicago. After college, from 2008-13, Sigulinsky worked for Chicago-based Levy Restaurants, which runs food operations at a wide variety of venues. Sigulinsky was a manager at U.S. Cellular Field, home of the White Sox, and at the United Center, home of the Black Hawks of the National Hockey League and the Bulls of the National Basketball Association. Burned out by long hours, he decided to take a break from the food business and moved to Petoskey, where his parents had retired. There, he met his wife, Mandy, who was from Tawas, and after a brief stint out of the business, he became a regional manager for Sysco Systems, a distributor of food to restaurants, covering the Standish-Sterling-Mio area. “Going in and out of restaurants, I got the itch to get back into the food industry,” he says. Mandy got a job teaching Spanish in the Roscommon school system and they bought a home there. Her parents still lived in Tawas and one day, four years ago, the Sigulinskys and her parents went to Augie’s, which had a series of owners and names since being built in the 1940s. Over the years, it had been the Mid-way, Sportsmen’s Roost, Sonny’s On The Bay and, beginning in
“I STOOD IN THE FRONT DOORWAY AND ANNOUNCED, ‘SOMEDAY, I AM GOING TO BUY THIS PLACE.’ ” — Zachary Sigulinsky, owner of Augie’s On the Bay
2007, Augie’s On The Bay. “I stood in the front doorway and announced, ‘Someday, I am going to buy this place,’” he said, sitting at a table inside just after the 6 p.m. closing. The day was sunny and windy, and as he talked, waves crashed against the breakwall a few yards outside the windows. His senior year at Kendall, his capstone project had been to design two restaurants, drawing up business plans and doing feasibility studies. One was called The Admiral’s House, a higher-end steak and chop place. The other was The Shipyard, featuring comfort food. Augie’s seemed like a natural fit to bring his comfort-food idea to life. He didn’t know it then, but Augie’s was named for the nickname of the mother of the owner, Deana McKenzie. Sigulinsky revisited Augie’s many times in the subsequent years, letting McKenzie know he was serious and to make sure she let him know if it got to be the right time for her to sell. “At first she thought I was joking,” he said. Last summer, she told him she was ready, but wanted one last busy tourist season and fall before letting go. They ended up closing on the deal in January. “Out of respect for Deana dedicating the name of the restaurant to her mother, I felt it was the right thing to do to keep the name and continue to honor her mother,” said Sigulinsky. He did an extensive remodeling on the interior, putting in new wood floors and a stainless steel lunch counter, and revamped the menu. Just as the new Augie’s was hitting its stride in March, the coronavirus hit, and his and everyone else’s world changed. Sigulinsky said he didn’t spend any time feeling sorry for himself over the
See AUGIE’S on Page 21
YOU MADE NEWS IN CRAIN’S
Zachary Sigulinsky, owner of Augie’s on the Bay in Tawas City. | TOM HENDERSON/CRAIN’S DETROIT BUSINESS
BY TOM HENDERSON
on social media kept the place hopping. “We were selling between 140 and 200 quarter-pounder meals a day. We wanted to offer good food and get it to customers faster than they could get it through the drive-thru. “We pushed the to-go menu, but we never steered customers away from the traditional menu, if that’s what they wanted,” he said. If you had your heart set on the beef tenderloin ($22), a filet with either shrimp or crab ($25), steelhead ($16) or perch ($20), you could have those, too.
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timing; he just did a quick pivot. Overnight, he created a fast-food to-go menu and bought point-of-service equipment for his waitstaff, allowing them to take orders in the parking lot, dispatch them electronically to the kitchen and take credit- or debit-card payments at car windows. All items were in whole-dollar amounts, so change wasn’t needed. He even had a company reblacktop his parking lot and paint new yellow stripes to make parking more orderly
Contact Laura Picariello at lpicariello@crain.com
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Argent Tape and Label, Plymouth, Michigan
CAPITALISM
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greatgame.com/conference AUGUST 10, 2020 | CRAIN’S DETROIT BUSINESS | 17
FOCUS | CRAIN’S MICHIGAN BUSINESS
Brothers Brant ( left), and Blake Austin in front of their brewery and dining patio in Alpena. | TOM HENDERSON/CRAIN’S DETROIT BUSINESS
THE ALLURE OF ALPENA
Drawn by the city’s beauty, family moves from California to launch successful craft brewery BY TOM HENDERSON
That was one vacation with unintended consequences. It was 2002 and the Austin family drove from their home in California to Florida to pick up a new mobile home. The father, Dana, was a captain in the San Bernardino fire department and long hours meant building up time off, which allowed for long family vacations, often in the form of car trips around the country. The plan was to get the mobile home, then to drive to Idaho to visit some relatives. But, hey, thought Dana’s wife, Julie: We ought to take a detour to Michigan, see one of the Great Lakes we’ve heard so much about. So they were heading up I-75 and son Blake was doing the navigating. He
suggested getting off on M-23 and running that north, along Lake Huron, or, as locals call it, the Sunrise Side. “We didn’t plan it. We just stopped at Alpena because it got dark and we got a campground,” said Blake. “The next day we saw a drawbridge going up and a boat going by. We were captivated and stayed a couple of days.” The next summer, they decided to drive back to Michigan, this time to head up the Lake Michigan side of the state and check out real estate. Blake said they were getting tired of California and rocketing real estate prices, and had been so taken with Michigan they thought they all might want to move there when Dana retired. They made it up to Traverse City, got sticker shock at housing prices, “and we said, ‘Let’s shoot back to Alpena,’” said
Blake. He said it was as beautiful as they’d remembered, and real estate prices were far cheaper. They had no way of knowing, yet, but those trips would eventually radically change the family’s lives. In 2014, they would all move to Alpena, and now the sons, Blake and Brant, own and run a thriving, growing brewery and restaurant there, Austin Brothers Brewing Co. But that’s getting ahead of the tale. From 2003-2013, Blake was a golf pro at the Oak Valley Golf Club in Beaumont, Calif. In 2010, Blake and his wife bought a home in Alpena. It was during the recession and prices were cheap. They bought it as an investment and summer house. The same year, Brant, who had been going to nursing school, decided he
wanted to become a brewer instead. Their dad got into home brewing in the 1990s and part of their vacation planning over the years was finding and visiting craft breweries. Brant had taken up home brewing, too, and on weekends, he and Blake and their friends would hang out in the driveway enjoying a beer, or three. “My dad was like, ‘If you’re going to do it, you’re going to do it right. You’re going to brew school,’” said Blake. He also said: “‘Go back to your memory bank. What’s the favorite town you’ve seen? We all said Alpena,’” recounted Blake. Brant enrolled at Seibel Institute of Technology in Chicago, a vocational school focused on brewing education. Part of the program included several months at Doemens Academy in Mu-
‘You’ve figured this out’ Company’s system heats, cools using power of well water BY TOM HENDERSON
There are estimated to be one million houses in Michigan on well water. Many of them also heat their homes with propane. Well-Connect, a company in Alpena, has a patent on systems that aim to change that. The company’s patent covers systems that use geothermal energy, the natural heat found deep underground, and well water to heat homes in the winter, air condition them in summer and drastically reduce the use, and cost, of propane. The patent is for the hybrid nature of the technology. It doesn’t replace forced-air furnaces running on propane. Its heat-pump-based system ties into existing ductwork in a home and takes over most of the heating. On really cold days, the propane system kicks in. According to Well-Connect data, in January, generally the coldest month of the year, its system provides about 85
percent of the needed heat. That rises to 95 percent in March. According to Tim Schultz, the company president and son of founder Dennis Schultz, the average temperature of well water is 50 degrees. The Well-Connect system draws two gallons a minute. In the winter, the heat pump cools that water to 40 degrees, pumping that drawn-off heat into the house. In the summer, the process reverses; the water is heated to 60 degrees as heat is drawn from the house. The advantage in addition to cost savings is environmental. Instead of burning a fossil fuel, the system borrows ground water, takes heat from it or adds heat to it, then returns the water to the ground without any contamination. It has an Energy Star rating of 5.4, meaning it provides 5.4 units of heat for each unit of electricity it consumes. Well-Connect, a DBA for Terra Caloric LLC, was founded in 2011. Terra Caloric is one of several companies under the Timm Construction Co. LLC umbrella. Timm was founded as a builder of homes in 1948 by Emery Timm, Dennis Schultz’s stepfather. Dennis Schultz, an aeronautical engineer who graduated from the Univer-
18 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
Jim Klarich (left), director of business development; Tim Schultz, president; Dennis Schultz, founder, Well Connect, geothermal company in Alpena, which makes geothermal units for homes on wells.
nich, Germany, where he earned his master of brewing certificate. That was followed by a three-year stint at Ballast Point Brewing Co. in San Diego, a legendary craft brewer that was sold for $1 billion to Constellation Brands in 2015. Before Ballast Point was sold, Brant had moved on to The Mother Earth Brewing Co., a small brewery in Vista, Calif., where he wanted to work on the lower-volume equipment they would have in the brewery they were planning for Alpena. In 2014, the entire family made the move to Alpena. Blake and Brant found a large industrial building on the outskirts of town, the vacant former home of an excavating company, and the day after Christmas that year they began ripping things apart. “We did a lot of the work ourselves,” sity of Michigan in 1964, joined the family business in 1970 and has been prominent in growing it. He remains president of Timm today. In 1978, Dennis founded another company, Fiber Char Corp., a maker of wood trim products for a wide variety of architectural and consumer products. He remains president. Other companies now under the Timm umbrella are TRC Roofing, ABC Siding and Bay View Insulation. Schultz said the companies employ more than 50, with 15 employed at Well-Connect, which manufactures its units in Alpena. In 2005, Timm built the Great Lakes Maritime Heritage Center in Alpena, part of the National Marine Sanctuaries of the National Oceanic & Atmospheric Association. It was built to LEED Gold certification standards, an environmental rating system that was Schultz’s introduction to geothermal heating. Timm took a well that hadn’t been used in 100 years and used its water as the heat source for the building. A geothermal system for a building that large is expensive, but Dennis Schultz said the project got him thinking about how a scaled-back geothermal system could be used to help homeowners in rural settings, who typically have high energy costs. In 2011, he built his first Well-Connect system. Installations were slow to
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FOCUS | CRAIN’S MICHIGAN BUSINESS “WHAT THEY ARE PRODUCING IS VERY EXCELLENT AND THE MARKET HAS RESPONDED. THEY HAVE A DIVERSITY OF PRODUCT AND STYLES FOR EVERYONE’S PALATE.” — Scott Bays, sales director, Huron Distributors Inc.
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Austin Brothers Beer Co. canning line in Alpena. | TOM HENDERSON/CRAIN’S DETROIT BUSINESS
said Blake. In September 2015, they began brewing, and in November, they opened the restaurant. As they were working on the building to get it ready, word got out in the Alpena community that a brewery was coming to town, and Scott Bays, the sales director for Huron Distributors Inc., which has warehouses in Alpena and Indian River and distributes beer in 10 counties in the northern Lower Peninsula, looked the Austins up. “I heard rumors someone was moving here to open a brewery. I was immediately interested because we had no breweries in that area,” he said. “We had a number of discussions with pick up, but the company got a boost when it was named innovator of the year in 2016 by Gov. Rick Snyder at his Energy Excellence Awards event. Soon after, the company got a big commercial break when Home Depot executives, after meeting with the Schultzes at their showroom in downtown Alpena, decided to launch a pilot program, having Well-Connect systems available for view in some state stores. That meeting was set up by Scott Gormley, the president of SGI Heating and Cooling, a Flint Township-based company that is a contractor for Home Depot, installing heating and cooling equipment sold by the big-box store. Gormley said he got a call from the manager of the Home Depot store telling him about a local company with an interesting geothermal system and asking if he would mind vetting it. “I have a reasonable amount of experience in geothermal,” said Gormley. “I met them, they showed me their product and I told them, ‘You’ve figured this out.’ I was impressed immediately. They’d built a great product. I told them, ‘You figured out how to get the low-hanging fruit.’” Gormley said what he meant by that was that their hybrid system was so much cheaper than a pure geothermal system. They didn’t need as much heat-pumping power if propane was
them. It’s kind of like a marriage. You want to make sure you are compatible.” Huron became the brothers’ first distributor, delivering draft beer to its customers when brewing began. About a year later, the brothers began selling bottled beer, too. The brewery got a big boost in the spring of 2017. Bays arranged for the beer buyer for the Meijer stores to meet with the brothers and sample their beer. “He immediately green-lit it for all the Meijers in Michigan,” said Bays. “What they are producing is very excellent and the market has responded.” The Austins make six year-round beers, including top sellers Woody Wheat and 45er IPA, named for the 45th parallel that runs around the glove and goes just south of Alpena. They also regularly make the same four seasonal beers, but much of the fun comes from being creative. Over the years, they’ve made more than 150 different beers, including an India pale ale called Key Lime Smoothie. At the light end of the scale is Northern Lights, an ale with just 95 calories; at the opposite end of the scale is the Murkman IPA, billed as a triple New England beer, which tops out at 10.3 percent alcohol by volume. “We try to make a beer for everyone,” said Blake. When COVID-19 hit in March, the bottom temporarily fell out of the business. Bars and restaurants closed on March 16, stopping sales of the kegs Huron was distributing. Luckily, last July the Austins installed a canning line. “Canning saved our business,” said Blake.
“SAVINGS OF 65-70 PERCENT OVER THE WINTER ARE COMMON. AND IN SUMMER, AIR CONDITIONING IS AS CLOSE TO FREE AS YOU CAN GET.” — Scott Gormley, president, SGI Heating and Cooling
going to augment their system; they could piggy-back on existing ductwork; their system had a small footprint, which is crucial to many of the smaller homes on well systems and using propane; and it could be installed relatively cheaply, in less than a day. “The financial dynamics are incredible,” said Gormley. “Savings of 65-70 percent over the winter are common. And in summer, air conditioning is as close to free as you can get.” Gormley said he has installed as many as 120 of the systems. Well-Connect is in eight Home Depot stores today but is scheduled to be in 28 over the next year. A total of about 700 Well-Connect systems have been installed, mostly in Michigan but a few in Canada and Montana, and the Schultzes say they are averaging one installation a day. The cost of the equipment and in-
“The sales of cans exceeded all our expectations,” said Bays. COVID-19 had other impacts. They had to shut down their dining room, and they have yet to reopen it. Luckily, they have a large outside space that accommodates plenty of distancing. Employee head count was reduced from 36 to 16 and will remain reduced for the foreseeable future. They went to a paperless menu, with a QR code on each table that brings up the menu on your smart phone. Hours have been reduced to noon-8 p.m., and often there is a line for outside seating when they open. The curbside to-go business remains strong. “It has brought us new customers, people who don’t want to wait half an hour for a table,” Blake said. Last year, the brothers set a production record with 3,233 barrels brewed, a barrel equal to 31 gallons. This year, they were up 30 percent year over year before COVID hit and hope to at least match last year’s total by year’s end. In 2018 they brewed 2,724 barrels, good for 28th of the state’s 400 breweries. The rankings and barrels brewed by state breweries for 2019 aren’t posted yet on the Michigan Liquor Control Commission website. Mike Mahler is economic development director of the Alpena Area Chamber of Commerce. He had been CEO of Alpena-based First Federal of Northern Michigan Bancorp Inc. but retired in June 2019. In January he joined the chamber. When he was at the bank, Austin Brothers had become a customer, and he said that one Saturday morning, before the brewery officially opened, he pulled a little rank and stopped in to get a growler filled. “Brant was telling me that the pilsner wave hadn’t hit Michigan, yet, but would. He had just brewed a pilsner and filled a glass and held it up the light. “Just look at that yellow!’ he said. ... That’s when I told him: ‘That’s why you are going to be successful. You’re so proud of your beer.’” Contact: thenderson@crain.com (231) 499-2817; @TomHenderson2 stallation is typically in the $12,000 to $13,000 range, but rebates from state electric companies and a 26 percent federal tax credit green-energy tax incentives bring the cost down to $8,000 to $9,000. In addition, Michigan Saves, a Lansing-based nonprofit that helps fund energy improvements, offers loans through participating credit unions at 4.25 percent for up to 15 years to finance the Well-Connect system. Well-Connect pays customers $500 if they make a successful referral to a friend. Lynne Watson of Boardman Township in Kalkaska County has been paid three times. “I’ve recommended it to so many people. It’s just so fantastic,” she said. She said she and her husband installed geothermal heating in 1987 in a house they owned in the Leelanau Peninsula, and after they moved to South Boardman, saw an ad for Well-Connect. She had a Well-Connect system installed in 2018. “I did it more for environmental reasons than to save money, but I’ve saved $700 a year on my propane bill. I’m very, very happy,” she said. “And the nice thing in summer is that we can cool the whole house for $50, which you can’t do with propane.”
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FOCUS | CRAIN’S MICHIGAN BUSINESS
BRANHAM’S
From Page 16
It was bought for back taxes in the late 1980s by Stan Norman, who eventually tore it down and put up his green box to become one of a chain of Norman’s department stores in northern Michigan, which sold sporting goods and clothing it advertised as having the “lowest every day prices in the U.S.” “It was such an eyesore,” said Christina Aller, managing director of the Tawas Area Chamber of Commerce. “People here just hated that that was the first thing you’d see if you were coming into town.” In 2013, after 80 years in business, Norman Corp. shut all its stores, which
The green facade of Norman’s, a former retailer that went out of business. Branham’s moved into the location. | FOURCSQUARE.COM
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PEOPLE ON THE MOVE
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Clark Construction Company
Oakland Community Health Network
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Laurelyn Hewitt, SPHR, SHRM-SCP, is promoted to the role of Vice President of Human Resources. Hewitt holds a Master Hewitt of Business Administration from Walsh College and a Bachelor of Science in Construction Management from Lawrence Technological University. She has over 15 years of experience in Commercial Suchan Construction and field operations, and over 12 years of experience in Human Resources Leadership. Janice Suchan, AIA, NCARB, LEED AP, is promoted to Vice President of Marketing and Business Development. Suchan holds a Bachelor of Architecture from the University of Detroit Mercy, and continues to serve on their Advisory Board. She received industry recognition as an “AIA Detroit Young Architect” of the year and Crain’s “40 Under 40.”
NEW HIRE? PROMOTION? BOARD APPOINTMENT?
Oakland Community Health Network’s (OCHN), Board of Directors approved a three-year employment contract with Southfield resident, Dana Lasenby, as the agency’s next Chief Executive Officer (CEO). Lasenby’s extensive background and experience reflects her commitment to put people first and lead OCHN in ensuring the delivery of quality public mental health services to Oakland County residents. She begins this important community service role on Wednesday, August 12, 2020. INSURANCE / BROKERAGE
Lighthouse Group
PROFESSIONAL SERVICES
Alan J. Woznicki has been named Associate Vice President at Lighthouse Group. With this position, Alan will expand his responsibilities to lead Lighthouse Group’s growth in metro Detroit. He brings a wealth of risk management knowledge to this role and will work proactively to develop sound insurance programs to help his clients reduce exposures and manage their costs. Alan has 35 years of industry experience, is a Licensed Insurance Counselor, and holds a BS from Western Michigan University..
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October 30, 2017 | crainsdetroit.com PHOTOGRAPH BY JACOB LEWKOW FOR CRAIN’S
UBS to open downtown Detroit office By Annalise Frank
October 30, 2017 | crainsdetroit.com
• UBS plans to open wealth management office in Detroit in mid-2018 • Office to include 6,000-squarefoot space30,nonprofits and civic October 2017 | crainsdetroit.com groups • UBS plans to open wealthcan use free of charge • Bedrock-owned buildings office in Detroit “I’m impacting lives now. management I know undergoing renovations in mid-2018
UBS to open downtown Detroit office
By Annalise Frank
UBS to open downtown Detroit office
Bedrock LLC
Bedrock LLC
6,000-squarethe effect food insecurity• Office had onto includeUBS plans to open an office in downfoot space nonprofits and civic Detroit in mid-2018, the company Annalise Frank growing groups meByand my peers up, andcan usetown free of charge announced Monday. • Bedrock-ownedUBS buildings Group AG’s U.S. and Canadian UBSan plans to open wealth this•was opportunity toundergoing make a renovations wealth management business, New Jermanagement office in Detroit sey-based Wealth Management change I wish an adult UBScould plans to open an office UBS in downin that mid-2018 Americas, to lease 13,000 square UBS will lease 13,000 feet from Bedrock LLC starting around mid-2018 in two buildings: the Grintown Detroit in mid-2018, theplans company • Office to include 6,000-squarefeet on the connected sixth floors of nell Building (center left) at 1515 Woodward Ave. and the Sanders Building (center right) at 1529 have made for me.” announced Monday. foot space nonprofits and civic buildings at 1515 Wood- Woodward Ave. Group AG’sneighboring U.S. and Canadian groups can use free UBS of charge ward Ave. and Fourteen metro Detroit employees don’t really have adequate resources wealth management business, New 1529 Jer- Woodward Ave. • Bedrock-owned buildings The twoManagement buildings built around 1900 are will move to the downtown office to or adequate office space to host dosey-based UBS Wealth undergoing renovations by Detroit-based will lease LLC 13,000 feet from Bedrock LLC starting around mid-2018 buildings: Grin- meetings or things nor events the or board start, but the office has the capacity toin two Americas, plans toowned lease 13,000 square UBSBedrock nell Building (center at 1515 Woodward andnew the Sanders Buildingalong (centerthose right) at 1529 Bush said. and are undergoing said left) lines,” hold another six toAve. eight staff memon inthe connected sixth floors of renovations, Reprinted with permission from Crain’s Detroit Business. © 2019 Crain Communications Inc. All RightsUBS reserved. plans to open anfeet office downAve. for bers, Bush said. It will act as an extension John Bush, 60, WoodMichiganWoodward market head UBS’s investment in the new ofneighboring buildings at 1515 Further duplication without permission is prohibited. Visit www.crainsdetroit.com. #CD1134 town Detroit in mid-2018, the company UBS Wealth ManagementFourteen Americas.metro of fice will resources be “significant,” he said, as its the other wealth management offices. don’t really have adequate Detroit employees announced Monday. ward Ave. and 1529 Woodward Ave. “The real impetus open atonew The twoCanadian buildings built around 1900 arefor us “uniqueness Bush is based Birmingham office space to hostcomes do- at a price.” He said willto move the downtown office out to ofortheadequate UBS Group AG’s U.S. and office inBedrock Detroit is to support what’s owned by Detroit-based LLC he could or not yet provide an estimate but travels to to the will meetings norothers eventsand or board things start, but the goofficeoffice, has the capacity wealth management business, New Jering renovations, on in the city, ” saidhold Bush, a Detroit and are undergoing said on the be spending in thealong Detroit branch. those lines,” Bush said.cost of the build-out, as some another six to eight new stafftime memsey-based UBS Wealth Management nativemarket who grew City. “We John Bush, 60, Michigan headup forin Garden have yet The location have a less UBS’s investment in the new of- to be finalized. said. will act asDetroit an extension fromBush Bedrock LLCItstarting around mid-2018 in twowill buildings: the Grin- contracts Americas, plans to lease 13,000 square UBS will lease 13,000 feetbers, UBS Wealth Management Americas. really felt like we wantedofto have a physfice will be “significant,” hecompany said, as its the other wealth management offices. The plans to start its buildtraditional, more “urban” feelright) than 1515 Woodward Ave. and the Sanders Building (center atthe 1529 feet on the connected sixth floors of nell Building (center left) at “The real impetus for us to open new ical presence downtown to reinforce “uniqueness comes at saidnext year, depending Bush is based outothers, of the he Birmingham outa price.” processHe early said. New York-based architecAve. a neighboring buildings office at 1515 Wood- toWoodward in Detroit is our support go-particular vision what’s for this areatravels and toture he will could not yet an estimate office, but the firm others and will Cale on when renovations on the buildings Verderame design the provide ward Ave. and 1529 ing Woodward don’t really have adequate resources Fourteen metro Detroit employees on in theAve. city,”tosaid Bush, a Detroit reinforce our on Barton the cost of the build-out, as some be spending time inspace; the Detroit branch. are complete. Southfield-based Malow The two buildings builtnative around 1900 areup in adequate office space to have host dowill moveCity. to tothe officelocation to or will who grew Garden “Wedowntown commitment contracts finalized. The Detroit have aon less based in Switzerland, employs Co. has signed as general contractor.yet to beUBS, owned by Detroit-based Bedrock nor events or board or things start, thea physoffice has the capacity really felt likeLLC we wanted tobut The company plans to startacross its buildtraditional, moreto“urban” than the outmeetings the city. ” have 60,000 54 countries. About 34 UBS feel plans to rent about half of the and are undergoing renovations, along those lines,” Bush said. early next year, depending hold six to eight new he staff memical presencesaid downtown toWealth reinforce others, said. New office York-based architecUBS another — 6,000 square out feetprocess — at no cost percent of them work in the AmeriJohn Bush, 60, Michiganour market head UBS’s investment the renovations new of- on the buildings bers, said. It will act an extension vision for for thisMparticular oninorganizations, when tureasfirm VerderametoCale will design theother a n aBush g e marea e n tand cas, according to a news release. UBS nonprofits and UBS Wealth Management will beMalow “significant,” he said, as its of the other also wealth management offices. ficeBarton to Americas. reinforce our Americas are be complete. space; Southfield-based Bush said. The space will called UBS Wealth Management Americas em“The real impetus for commitment us to open a new “uniqueness comes at a price.” He said is based thehas Birmingham to has Bush based signed on as Woodward general contractor. metro De- out ofCo. ploys 280employs in Michigan, 225 of whom Gallery. Its UBS, design and in artSwitzerland, office in Detroit is to support what’s go- office, but travels to theUBS an estimate heabout couldhalf not others and the city. ” 60,000 across 54 countries. 34 Detroit. plans towill rent will out of yet the provide troit offices in are basedAbout in metro aim to showcase Detroit’s history ing on in the city,” said Bush, on the cost the build-out, asthem somework in the Amerispending Detroit branch. UBS a Detroit Wealth B be percent office — 6,000 square at noofcost irm i n g h a time m , in the The wealth management business andfeet a— hub-and-spoke layout ofwill renative who grew up in Garden contracts have yet tocas, be finalized. M a n a gCity. e m“We e n t Troy, The Detroit locationtowill have a and less other according to a news release. UBS nonprofits organizations, Farmington recorded operating income of $2.13 flect the city’s road system. really felt like we wanted to have a physAmericas also Hills, The plans to startManagement its buildtraditional, more “urban” Wealth Americas em- quarter of 2017 — a Bushfeel said.than The the space will becompany called Plymouth in the third “Some of theUBS organizations that op- billion ical presence downtown reinforce has tometro De- others, he said. New York-based outdesign process early year,280 depending architecploys in Michigan, 225 of whom Woodward Gallery. Its and art next John Bush erate and Dearborn. and provide services in the city 7 percent increase over last year. our vision for this particular area and troit offices in ture firm Verderame Cale when renovations the buildings the onDetroit’s in metro Detroit. willwill aimdesign to showcase history areonbased to reinforce our B i r m i n g h a m , space; Southfield-based complete. Malow arelayout The wealth management business andBarton a hub-and-spoke will reReprinted with permission from Crain’s Detroit Business. © 2019 Crain Communications Inc. All Rights reserved. commitment to Troy, Farmington Co. has signed on as general UBS, basedis prohibited. in Switzerland, employs income recorded operating contractor. flectFurther the city’s road without system. duplication permission Visit www.crainsdetroit.com. #CD936of $2.13 Hills, Plymouth the city.” billion in About the third “Somehalf of the organizations that op60,000 across 54 countries. 34quarter of 2017 — a UBS plans to rent out about of the John Bush and Dearborn. UBS Wealth 7 percent and provide city work percentinofthe them in theincrease Ameri-over last year. office — 6,000 squareerate feet — at no cost services Management to nonprofits and other organizations, cas, according to a news release. UBS Reprinted with permission from Crain’s Crain Communications Inc. All Rights reserved. Americas also Wealth Management Americas emBush said. The space will be Detroit calledBusiness. UBS © 2019 Further duplication without permission is prohibited. Visit www.crainsdetroit.com. #CD936 has metro DeWoodward Gallery. Its design and art ploys 280 in Michigan, 225 of whom troit offices in will aim to showcase Detroit’s history are based in metro Detroit. Birmingham, The wealth management business and a hub-and-spoke layout will reCRAINSDETROIT.COM I MARCH 9, 2020 I Troy, Farmington recorded operating income of $2.13 flect the city’s road system. Hills, Plymouth THE CONVERSATION “Some of the organizations that op- billion in the third quarter of 2017 — a John Bush erate and provide services in the city 7 percent increase over last year. and Dearborn.
Albert Berriz talks workforce housing, Ann Arbor and Cuba
Reprinted with permission from Crain’s Detroit Business. © 2019 Crain Communications Inc. All Rights reserved. | BY KIRK PINHO Further duplication without permission is prohibited. Visit www.crainsdetroit.com. #CD936
MCKINLEY INC.: Ann Arbor-based real estate company McKinley Inc. saw the writing on the wall for its retail portfolio a few years ago and cut bait, turning its focus primarily to its large crop of tens of thousands of workforce housing units across the country. One of the people at the helm of that decision was Albert Berriz, CEO and managing member, who came to America as a young boy fleeing Cuba and now steers a large company with a portfolio valued at more than $4 billion. `I don’t think it’s overblown to use the word “crisis” for Ann Arbor’s affordable housing situation. Give us your perspective on how the city should go about addressing it. I think it’s a supply issue. The reality is that Ann Arbor has not really welcomed solutions from the private sector and has only sought solutions from the public housing side or the community nonprofit side. And both of those groups, while I think they’re very well intentioned, don’t have the capital and the expertise to resolve the problem at the scale it’s needed. To put it in perspective, you know, the Washtenaw County study that came out had a need of about 3,000 units. And if you look at the cost per unit today, and let’s say $250,000 or $300,000 per unit to build a brand new unit today, you know, it’s an $800 million to a $1 billion problem, so I don’t think that’s a problem that gets resolved on the public side or on the community nonprofit side. You know, they have to go to places to seek capital and there just isn’t enough capital, nor do they have enough resources or expertise to resolve the problems. So the city I think, by and large, has attempted to do this in those ways because they really haven’t welcomed the private side. And there is a lot of expertise and there’s a lot of capital that could do this, from the private side perspective. It just hasn’t been the way that Ann Arbor operates, so you see what has happened in Ann Arbor year over year, decade over decade is there’s a lot of conversations about affordable housing, but there’s no solutions. `You were talking a little bit earlier about how McKinley got out of retail and office. What led to that decision and how has that reflected or shaped your business strategy? It was a risk profile that we were just not comfortable with. We are a generational business and so we look at our assets in
a way that we never expect to sell them. We expect to invest in them so they last for long term, and we just couldn’t see that on retail. We saw a significant degradation of our rent rolls. We had buildings that were, let’s say, 70 percent to 80 percent investment-grade credit tenant composition and then we saw that we saw that quickly degrade. We just didn’t see a place where we could really have an asset class retail that would last for the long run. And then office in many ways, the same way. The way people are shopping and the way people are occupying offices today, the risk profile is very different than it was, let’s say, when we were making those investments 20 and 30 years ago, so for us, it was the right move. It’s paid off because, had we held many of the assets today, they would be significantly compromised. I think they would be worth a lot less. We started those sales about six years ago, and we sold a lot of that early on, so we sold them still at a time they were being valued significantly more than they would be worth today, in our opinion. And we sold some big buildings. I mean, these weren’t small buildings. We sold a 1 millionsquare-foot shopping center, for example, in Norfolk, Va., which is one of the largest power centers in the state of Virginia. So these weren’t small assets. So they were important for us to move them out at the right time, and for people that thought that was there was a good upside for them, so we actually sold them at good prices, and certainly we couldn’t have sold them at those prices today.
trajectory was to where you are today in terms of the head of McKinley. I left (Cuba) compliments of Fidel Castro in early 1959 because of the Cuban Revolution. We had to flee. It was survival to leave the country at the time and my parents relocated to Miami. We were fortunate for that. We’re fortunate to have left alive, fortunate to have resettled in what is without question the greatest country on the planet. I was not born here. I was born in Havana and I emigrated as a Cuban refugee just before I was 4 years old with my parents. `What consumes your day outside of the office? My wife and I walk. We like to boat, so those are the two things. In our summers we live at Saugatuck, and it’s a great place to live. We’d live there year-round, but it’s a little too cold in the winter.
`Can you give thumbnail sketch of coming here and what your
September 2, 2019 | crainsdetroit.com
Albert Berriz, CEO and managing member, McKinley Inc.
Reprinted with permission from Crain’s Detroit Business. © 2020 Crain Communications Inc. All rights reserved. Further duplication without permission is prohibited. #CD1156
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hroughout Dandridge Floyd’s careers — whether as a social worker, attorney or assistant superintendent of Oakland Schools — making change has always been a center point. When United Way pitched a framework to Oakland Schools for a countywide breakfast program to address poor nutrition as a way to improve academic achievement, Floyd — who experienced food insecurity growing up — knew firsthand the powerful impact it could have. To secure the needed funds, Floyd led a team that earned support from all 28 local districts to finance the program — despite the fact that a majority of them would see no benefit. “The local districts were phenomenal,” Floyd said. “The biggest surprise was how quickly it happened. Education is a democratic system and democracy can be very slow, but this happened in six to seven months. That showed how committed people were to making sure the students of Oakland County have everything they need to be successful.” In a county where over 7,000 children suffer from hunger, and only two in five eligible students access a school breakfast, Floyd said a common misperception is that “Oakland County is rich.” “That makes this program all the more important, because if that is the bias or the thought process people have about Oakland County, then these kids would have never gotten help.” In a groundbreaking public/nonprofit partnership between the Oakland County Board of Commissioners, Oakland Schools and United Way, Oakland County is Better with Breakfast was born. “I’m impacting lives now,” Floyd said. “I know the effect food insecurity had on me and my peers growing up, and this was an opportunity to make a change that I wish an adult could have made for me.” — Laura Cassar
40 40 UNDER
October 30, 2017 | crainsdetroit.com
UBS to open downtown Detroit office By Annalise Frank
October 30, 2017 | crainsdetroit.com
• UBS plans to open wealth management office in Detroit in mid-2018 • Office to include 6,000-squarefoot space30,nonprofits and civic October 2017 | crainsdetroit.com
UBS to open downtown Detroit office By Annalise Frank
groups • UBS plans to open wealthcan use free of charge • Bedrock-owned buildings
office in Detroit “I’m impacting lives now. management I know undergoing renovations in mid-2018 6,000-squarethe effect food insecurity• Office had onto includeUBS plans to open an office in downfoot space nonprofits and civic town Detroit in mid-2018, the company Annalise Frank growing groups meByand my peers up, andcan useannounced free of charge Monday. • Bedrock-ownedUBS buildings Group AG’s U.S. and Canadian UBSan plans to open wealth this•was opportunity toundergoing make a renovations wealth management business, New Jermanagement office in Detroit sey-based Wealth Management change I wish an adult UBScould plans to open an office UBS in downin that mid-2018 Americas, to lease 13,000 square town Detroit in mid-2018, theplans company • Office to include 6,000-squarefeet on the connected sixth floors of have made for me.” announced Monday. foot space nonprofits and civic
UBS to open downtown Detroit office Bedrock LLC
` Explain workforce housing versus affordable housing. We’re not in luxury housing. Our residents are working. They’re going to wake up tomorrow morning and go to work. Our average rents are, for example, in Washtenaw County, about $1,100 to $1,200 or in Orange County, or Seminole County, Florida, $1,400 or $1,500. So these are affordable rents. And the difference between us and affordable housing is our buildings are not subsidized. They’re all market rate, and they’re all privately owned. The owners are not receiving any form of subsidy, nor are the residents. However, if you wanted to sort of assess residents and low-income housing tax credit deals compared to ours, they’re probably not too dissimilar, the median incomes. The McKinley residents in, let’s say, Washtenaw County, when you look at the numbers are probably not going to be too much different than what you would see in a traditional LIHTC deal. But again, our buildings, the primary differences, our buildings are market rate and they’re not subsidized any way.
UBS will lease 13,000 feet from Bedrock LLC starting around mid-2018 in two buildings: the Grinnell Building (center left) at 1515 Woodward Ave. and the Sanders Building (center right) at 1529 Woodward Ave.
buildings at 1515 WoodGroup AG’sneighboring U.S. and Canadian groups can use free UBS of charge ward Ave. and Fourteen metro Detroit employees don’t really have adequate resources wealth management business, New 1529 Jer- Woodward Ave. • Bedrock-owned buildings The twoManagement buildings built around 1900 are will move to the downtown office to or adequate office space to host dosey-based UBS Wealth undergoing renovations by Detroit-based will lease LLC 13,000 feet from Bedrock LLC starting around mid-2018 buildings: Grin- meetings or things nor events the or board start, but the office has the capacity toin two Americas, plans toowned lease 13,000 square UBSBedrock nell Building (center at 1515 Woodward andnew the Sanders Buildingalong (centerthose right) at 1529 Bush said. and are undergoing said left) lines,” hold another six toAve. eight staff memon inthe connected sixth floors of renovations, Reprinted with permission from Crain’s Detroit Business. © 2019 Crain Communications Inc. All RightsUBS reserved. plans to open anfeet office downAve. for bers, Bush said. It will act as an extension John Bush, 60, WoodMichiganWoodward market head UBS’s investment in the new ofneighboring buildings at 1515 Further duplication without permission is prohibited. Visit www.crainsdetroit.com. #CD1134 town Detroit in mid-2018, the company UBS Wealth ManagementFourteen Americas.metro of fice will resources be “significant,” he said, as its the other wealth management offices. don’t really have adequate Detroit employees announced Monday. ward Ave. and 1529 Woodward Ave. “The real impetus open atonew The twoCanadian buildings built around 1900 arefor us “uniqueness Bush is based theadequate Birmingham office space to hostcomes do- at a price.” He said willto move the downtown office out to ofor UBS Group AG’s U.S. and office inBedrock Detroit is to support what’s owned by Detroit-based LLC he could or not yet provide an estimate but travels to to the will meetings norothers eventsand or board things start, but the goofficeoffice, has the capacity wealth management business, New Jering renovations, on in the city, ” saidhold Bush, a Detroit and are undergoing said on the be spending in thealong Detroit branch. those lines,” Bush said.cost of the build-out, as some another six to eight new stafftime memsey-based UBS Wealth Management nativemarket who grew City. “We John Bush, 60, Michigan headup forin Garden have yet The location have atheless UBS’s investment in the new of- to be finalized. said. will act asDetroit an extension fromBush Bedrock LLCItstarting around mid-2018 in twowill buildings: Grin- contracts Americas, plans to lease 13,000 square UBS will lease 13,000 feetbers, UBS Wealth Management Americas. really felt like we wantedofto have a physfice will be “significant,” hecompany said, as its the other wealth management offices. The plans to start its buildtraditional, more “urban” feelright) than 1515 Woodward Ave. and the Sanders Building (center atthe 1529 feet on the connected sixth floors of nell Building (center left) at “The real impetus for us to open adowntown new ical presence to reinforce “uniqueness comes at saidnext year, depending Bush is based outothers, of the he Birmingham outa price.” processHe early said. New York-based architecneighboring buildings at 1515 Wood- Woodward Ave. office in Detroit is our to support go-particular vision what’s for this areatravels and toture he will could not yet an estimate office, but the firm others and will Cale on when renovations on the buildings Verderame design the provide ward Ave. and 1529 ing Woodward don’t really have adequate resources Fourteen metro Detroit employees on in theAve. city,”tosaid Bush, a Detroit reinforce our on Barton the cost of the build-out, as some be spending time inspace; the Detroit branch. are complete. Southfield-based Malow The two buildings builtnative around 1900 areup in adequate office space to have host dowill moveCity. to tothe officelocation to or will who grew Garden “Wedowntown commitment contracts finalized. The Detroit have aon less based in Switzerland, employs Co. has signed as general contractor.yet to beUBS, owned by Detroit-based Bedrock nor events or board or things start, thea physoffice has the capacity really felt likeLLC we wanted tobut The company plans to startacross its buildtraditional, moreto“urban” than the outmeetings the city. ” have 60,000 54 countries. About 34 UBS feel plans to rent about half of the and are undergoing renovations, along those lines,” Bush said. early next year, depending hold six to eight new he staff memical presencesaid downtown toWealth reinforce others, said. New office York-based architecUBS another — 6,000 square out feetprocess — at no cost percent of them work in the AmeriJohn Bush, 60, Michiganour market head UBS’s investment the renovations new of- on the buildings bers, said. It will act an extension vision for for thisMparticular oninorganizations, when tureasfirm VerderametoCale will design theother a n aBush g e marea e n tand cas, according to a news release. UBS nonprofits and UBS Wealth Management will beMalow “significant,” he said, as its of the other also wealth management offices. ficeBarton to Americas. reinforce our Americas are be complete. space; Southfield-based Bush said. The space will called UBS Wealth Management Americas em“The real impetus for commitment us to open a new “uniqueness comes at a price.” He said is based thehas Birmingham to has Bush based signed on as Woodward general contractor. metro De- out ofCo. ploys 280employs in Michigan, 225 of whom Gallery. Its UBS, design and in artSwitzerland, office in Detroit is to support what’s go- office, but travels to theUBS heabout couldhalf not an estimate others and the city. ” 60,000 across 54 countries. 34 Detroit. plans towill rent will out of yet the provide troit offices in are basedAbout in metro aim to showcase Detroit’s history ing on in the city,” said Bush, on the cost the build-out, asthem somework in the Amerispending Detroit branch. UBS a Detroit Wealth B be percent office — 6,000 square at noofcost irm i n g h a time m , in the The wealth management business andfeet a— hub-and-spoke layout ofwill renative who grew up in Garden contracts have yet tocas, be finalized. M a n a gCity. e m“We e n t Troy, The Detroit locationtowill have a and less other according to a news release. UBS nonprofits organizations, Farmington recorded operating income of $2.13 flect the city’s road system. really felt like we wanted to have a physAmericas also Hills, The plans to startManagement its buildtraditional, more “urban” Wealth Americas em- quarter of 2017 — a Bushfeel said.than The the space will becompany called Plymouth in the third “Some of theUBS organizations that op- billion ical presence downtown reinforce has tometro De- others, he said. New York-based outdesign process early year,280 depending architecploys in Michigan, 225 of whom Woodward Gallery. Its and art next John Bush erate and Dearborn. and provide services in the city 7 percent increase over last year. our vision for this particular area and troit offices in ture firm Verderame Cale when renovations the buildings the onDetroit’s in metro Detroit. willwill aimdesign to showcase history areonbased to reinforce our B i r m i n g h a m , space; Southfield-based complete. Malow arelayout The wealth management business andBarton a hub-and-spoke will reReprinted with permission from Crain’s Detroit Business. © 2019 Crain Communications Inc. All Rights reserved. commitment to Troy, Farmington Co. has signed on as general UBS, basedis prohibited. in Switzerland, employs income recorded operating contractor. flectFurther the city’s road without system. duplication permission Visit www.crainsdetroit.com. #CD936of $2.13 Hills, Plymouth the city.” billion in About the third “Somehalf of the organizations that op60,000 across 54 countries. 34quarter of 2017 — a UBS plans to rent out about of the John Bush and Dearborn. UBS Wealth 7 percent and provide city work percentinofthe them in theincrease Ameri-over last year. office — 6,000 squareerate feet — at no cost services Management to nonprofits and other organizations, cas, according to a news release. UBS Reprinted with permission from Crain’s Crain Communications Inc. All Rights reserved. Americas also Wealth Management Americas emBush said. The space will be Detroit calledBusiness. UBS © 2019 Further duplication without permission is prohibited. Visit www.crainsdetroit.com. #CD936 has metro DeWoodward Gallery. Its design and art ploys 280 in Michigan, 225 of whom troit offices in will aim to showcase Detroit’s history are based in metro Detroit. Bedrock LLC
`Crain’s Detroit Business: Can you talk a little bit about how the McKinley portfolio began and where it’s at today? Berriz: McKinley started in 1968 in Ann Arbor, and it was founded by (former U.S.) Ambassador Ron Weiser. It started in the student housing business and eventually transitioned into more traditional multifamily housing, and in addition to that, office and retail, as well. Today, we’re primarily a workforce housing multifamily operator. We have essentially disposed of our retail and office assets in an effort to really focus on multifamily and also focus on an asset class that I think is more in line with our current goal, which is to have a generational multifamily real estate enterprise and a pool of assets that really are long term in nature.
Bedrock LLC
Contact: Debora Stein at dstein@crain.com
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Bedrock LLC
hroughout Dandridge Floyd’s careers — whether as a social worker, attorney or assistant superintendent of Oakland Schools — making change has always been a center point. When United Way pitched a framework to Oakland Schools for a countywide breakfast program to address poor nutrition as a way to improve academic achievement, Floyd — who experienced food insecurity growing up — knew firsthand the powerful impact it could have. To secure the needed funds, Floyd led a team that earned support from all 28 local districts to finance the program — despite the fact that a majority of them would see no benefit. “The local districts were phenomenal,” Floyd said. “The biggest surprise was how quickly it happened. Education is a democratic system and democracy can be very slow, but this happened in six to seven months. That showed how committed people were to making sure the students of Oakland County have everything they need to be successful.” In a county where over 7,000 children suffer from hunger, and only two in five eligible students access a school breakfast, Floyd said a common misperception is that “Oakland County is rich.” “That makes this program all the more important, because if that is the bias or the thought process people have about Oakland County, then these kids would have never gotten help.” In a groundbreaking public/nonprofit partnership between the Oakland County Board of Commissioners, Oakland Schools and United Way, Oakland County is Better with Breakfast was born. “I’m impacting lives now,” Floyd said. “I know the effect food insecurity had on me and my peers growing up, and this was an opportunity to make a change that I wish an adult could have made for me.” — Laura Cassar
20 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
Susan Murphy has been named GreenPath’s Chief People Officer. In this role, Susan will build on the national nonprofit’s strong culture of empathy, compassion, meaning, and impact, fostering an inclusive environment that helps people be their whole selves at work. Having recently served as VP of HR, Organizational Development, and Governance at United Way for Southeastern Michigan, Susan brings extensive experience in community impact, fund development, operations, and human-centered design.
Administrative Controls Management, Inc. Senior Vice President/ Co-Owner of Administrative Controls Management, Inc., James E. Krebs, PE, CCP, PMP, FAACE, is now President-Elect for AACE International; a nonprofit association for the cost management community. He has over 34 years of project management, project controls, and construction experience including planning, scheduling, estimating, cost controls, and claims analysis and testimony services within the utility, manufacturing, petrochemical, nuclear, and automotive industries.
Branham’s jeweler Rick Bagnasco works on widening a ring. He’s been a jeweler with the family-owned jewelry business for 25 years. |CHAD LIVENGOOD/ CRAIN’S DETROIT BUSINESS
also included outlets in Gaylord, Standish, Bay City and Bad Axe. Norman was elderly and in ill health, had no relatives to carry on and could find no buyers for the business. For many years, the building was more of an eyesore than it had to be. Norman had started some work on a front facade and awning in 1996, but left them unfinished for 12 years during a long and angry dispute with the city over a massive sign he wanted to attach to the building that was much larger than permitted by ordinance. After Norman’s closed, the building was for sale but had no takers at the asking price. In 2015, it was put up for auction and was bought for $345,000 by Ken Branham and his sister, Joyce Hill. Their father, Joseph, had founded a jewelry store a block down on Newman in 1959 and a Branham’s was opened in West Branch in 1974. A oneblock move in East Tawas would mean a lot more space and a lot more visibility. “We wanted to change the face of East Tawas,” said Ken. “When we announced we had bought Norman’s, 100 people showed up to watch the Norman sign come down.” The building opened as a Branham’s Jewelry store in 2016, and it is an eyesore no more. A complete renovation that cost upward of $700,000 resulted in 2017 in the store being given honorable mention as the coolest new jewelry store in the U.S. by Instore Magazine. “We made a silk purse out of a cow’s ear,” said Branham. The interior has to be seen to be believed. There is a large main showroom, with long cases filled with jewelry. The ceiling, made of gleaming knotty pine, is 21.5 feet overhead. In one corner, a floor-to-ceiling brick wall includes both a waterfall and a fireplace. There are four huge white pine beams spaced throughout the room, running from floor to ceiling, 28 inches in diameter, their bark stripped to reveal the gleaming yellow of the pine. Those four giant beams and four shorter beams came from three white pines on Ken’s property, cut in January 2016 from a slope leading to the east arm of the Au Gres River, about 10 miles west of East Tawas. Because of the steep slope, they evaded being cut down late in the 19th century or early in the 20th when hundreds of thousands of acres of white pine in northern Michigan were cut down and shipped by railroad to lumber mills in Flint. The Branhams counted the rings and the trees were 150 years old, give or take a ring or two, about as old as East Tawas, which traces its roots to 1862, The Branhams wanted to strip off the bark to reveal the pine, but because the trees were frozen, they were told
the bark would have to be milled off, which would strip the exterior of the pine of much of its character. Instead, they cut out part of the back wall of the heated building and brought the beams inside. After the wood thawed, they were able to powerwash the bark off, and then the beams had to be taken to a kiln to be properly dried for six weeks. Other decorative wooden touches in the showroom are made from old barnwood and milled from dead ash trees harvested from Ken’s land. “The building is absolutely gorgeous. Unbelievable,” said Aller. “This has been such a wonderful transition. It was a welcome change for everyone in town.” Branham, who runs the business with his son, Kurtis, quoted one state economic development official, who was visiting East Tawas several years ago, when the building was still in all its eyesore glory, as saying: “‘That building is so offensive, it qualifies as a blight on the retail community.’” “We drove by this building for 25 years and listened to my dad complain for 25 years about what Norman had done,” said Ken, referring to the historic hotel that had been town down and replaced. Branham’s is more than just a typical jewelry store. Both Ken and Kurtis design jewelry and make pieces on site. They added a second floor to the building, and upstairs is a large space called the “Treasured Memory Room.” In the summer season, there are a lot of weddings on the beach or at various scenic spots nearby, and bridal parties can come there to get dressed, put on makeup or wait out showers. With the second-floor addition, the building now has 13,400 square feet. The jewelry store uses abut 6,000. The Autism Center of Michigan is a tenant, and a buildout is underway for the last 4,500 square feet, which will be leased by a salt-water spa. Ken’s father is still alive at 87 and no longer complaining about what Norman had the audacity to do. “He and my mom are proud of what me and my sister have done,” said Ken. The Branhams employ 15, seven of them in East Tawas. Business was severely impacted by COVID-19. They had to shut their doors, but continued to make jewelry and sold it online or through curbside service by appointment. They even got the word out through social media that they would do live internet shows of them doing CAD designs of jewelry and making pieces. “We wanted to entertain people who were tired of being at home watching reruns of ‘I Love Lucy,’” said Kurtis. Contact: thenderson@crain.com (231) 499-2817; @TomHenderson2
CENSUS
From Page 3
While the U.S. Census Bureau does the counting, Detroit is there to boost outreach, Kovari said. After all, the population count is momentous for the city — it impacts state and national political representation, as well as $1.5 trillion in federal funding levels for states and localities including Medicare, Medicaid, infrastructure, housing and other social services programs. An often-cited rule of thumb is that each person counted in the census is worth $1,800 per year. CRAIN’S DETROIT BUSINESS “We’re really concerned, the peo- August 10, 2020 ple who have not responded ... in Detroit, they’re people of color, people in poor communities, lots of renters, the people that benefit most by the federal money that the Census Bureau helps to count,” Kovari said. Detroit’s census team has raised nearly $3 million to fund its staff, outreach and materials such as lawn signs, buttons, shirts, information cards and billboards. It mostly comes from corporations and foundations, but the city put in $700,000 from its general fund to pay staff starting in January 2019. The national self-response rate for the census was 63.1 percent as of Friday, with Michigan beating it by 5.8 percentage points. Detroit’s, by comparison, was at 48.7 percent. 2010’s rate, which Mayor Mike Duggan has said the city vehemently wants to eclipse, was 53.6 percent. This year, Detroit has the Canvassers hit the neighborhood around Griggs Street and Fenkell Avenue in Detroit on July 1 in an attempt to get more people to fill out the census. | CITY OF DETROIT VIA FLICKR fifth-lowest census response rate out of Caesars Arena twice a week. cities with more than 200,000 residents, “WE’RE REALLY Detroit’s census operation plans to per Census Bureau data. target Midtown and downtown over “We probably have few issues more CONCERNED, THE PEOPLE Advertising Section the next six weeks, because response urgent than filling out the census, and WHO HAVE NOT rates there have been low. Kovari says right now our status is really concerning,” Duggan said in a late June news RESPONDED ... IN DETROIT, that’s due partly to apartment residents waiting out the pandemic in the subconference. Anika Goss, executive director of THEY’RE PEOPLE OF COLOR, urbs and Wayne State University cutting classes due to the health crisis. think-tank Detroit Future City, said PEOPLE IN POOR To place your listing, contact Suzanne Janik at 313-446-0455 There’s also a neighbormuch of the demographic data the oror email sjanik@crian.com COMMUNITIES, LOTS OF hood-by-neighborhood challenge, ganization uses to study how to grow where the top 20 community groups Detroit, how many kids live there, who’s RENTERS ...” www.crainsdetroit.com/classifieds to get the highest increase in census working and who is living in poverty — Victoria Kovari, executive director, response over 2010 will get $1,000. stem from the census count. Detroit 2020 Census Campaign Kovari said she expects to announce “For a city like Detroit, especially winners next week. with our level of high poverty, we need The COVID-19 crisis took old-fash“That was our focus,” Kovari said. to be able to watch that number … and if we don’t have accurate data to do “We knew responding online or by ioned canvassing out of the equation. that, I’m not sure how we can consis- phone would only capture so many But starting June 29, 11 community 2,280 ACRES AUCTIONS tently make the policy changes neces- Detroiters. So we had all this in-per- groups the city hired with more than son stuff planned, and that obviously 100 canvassers started combing sary to alleviate it,” Goss said. streets in neighborhoods with low reShe mentioned one study Detroit all went away.” In April, Kovari’s team pivoted to a sponse rates. Future City is hoping to fund in the fuWashtenaw County Land Door-knockers visited 150,000 ture, on how to move African Ameri- virtual phone bank staffed with 100 Lima Township, Section 25 cans and Latinos and Latinas into high- volunteers that have made approxi- homes in the fall and 200,000 so far in SEV: $93,500 (2019) growth job sectors, that would need mately 60,000 calls. They also sent vol- this second phase. Kovari expects Taxable Value: $48,359 (2019) up-to-date census figures to be most unteers armed with smart tablets to that to rise to 300,000 by the end of Taxes: $1,809.77 (2019) Detroit food distribution sites. Those September. effective. ONLINE AUCTION: AUGUST 25 “They’ve probably signed up close to On top of the timeline being short- census-takers approached cars, askened, the deadly coronavirus pandem- ing them if they would fill out the form 2,000 people on the doors,” Kovari said. VISIT OUR WEBSITE: “People are a little reluctant to open the on the spot. ic has crippled efforts. They’ve signed up nearly 500 Detroi- door, with all the stuff going around. As Detroit confirmed its first www.crainsdetroit.com/ COVID-19 cases in March, the city’s ters going to grocery stores on Satur- They worry about whether it’s (legiti(517) 676-9800 census campaign had more than 90 days. Kovari also plans to staff upcom- mate). But we’ve had good response.” classifieds SheridanAuctionService.com —The Associated Press contributed to events scheduled between March ing outdoor movie nights in Campus Martius Park and the plaza next to Little this report. and May.
CLASSIFIEDS
REAL ESTATE
40± ACRES
AUGIE’S
From Page 17
He worked out a new volume pricing deal with his former employer, Sysco, and in anticipation of the busy tourist season, had four small patios built outside, between the restaurant and seawall, allowing for easy social distancing. Four more small patios are planned, and next year he said he will put in a 30-foot-by-60-foot raised deck to take more advantage of his 300 feet of lake frontage. On May 4, Augie’s resumed indoor dining, with capacity reduced from 140 to 57. There are three booths along one wall in the first room you enter
from the parking lot. The middle one has a sign on the table proclaiming: “Please do not use this booth. This is in compliance with six feet of social distancing. Thank you for your consideration.” Some smaller tables in the middle of the rooms were taken out. “When we first opened the dining room, it was a whole new order of crazy. We had lines out the door,” said Sigulinsky. Pre-COVID, Augie’s employed 30. It has 16 now, and hiring more at the height of what is still a busy tourist season has been difficult. As a result, he has reduced hours and closes at 6 p.m. Despite getting hit with the pandemic soon after committing to a large mortgage on a new business, Sigulin-
sky said cash flow was never an issue and has been strong throughout. Christina Aller, the managing director of the Tawas Chamber of Commerce, said she has been impressed by the new Augie’s, particularly the outside patio area, which features large umbrellas to shield patrons from the sun. “That building has been here as long as I can remember, and I’ve been here all my life,” she said. “I love what they have done with their outdoor seating, and that they’ve managed to have kept that small-town feeling of everyone knows your name when you go in.” Contact: thenderson@crain.com (231) 499-2817; @TomHenderson2
JOB FRONT
Crains Detroit Business Monday, August 10
POSITIONS AVAILABLE
Electrical Controls Engineer for Thielenhaus Microfinish Corp. in Novi, MI. Duties: in-
config, &x standardize controls sys & software arch throughout prod’n machinery 1stall, column 2 incheselect’l = $488 for microfinish & superfinish equip; adjust & adapt controls sys to specific machines & functions; & lead in install’g, commission’g, launch’g, troubleshooting, & repair’g prox’s 1 train run(s) =teams $488
d’n equip, inc’l elect’l controls sys; modify & repair elect’l & mech’l equip & dev & impl customized PLC controls; install & repair elect’l & mech’l systems; impl & supp maint activities, & review & update process flow & error proofing plans, schematics, & instr; 30% travel, both dom & int’l. Req’s: Bach Deg in Electrical, Electronics, or Computer Eng’g, or foreign equiv. 2 yrs exp in elect’l controls eng’g pos’n in microfinish & superfinish equip ind. 2 yrs exp w/ each of: develop’g, install’g, configur’g, & support’g NC Programs, PLC programs, & HMIs of elect’l software control sys for microfinish & superfinish equip based on Siemens Sinumeric 840D, Simatic S7-300, & S7-1500 controls utiliz’g Siemens Step 7, TIA Portal, & WinCC; configur’g, tuning, & optimiz’g Siemens drives utiliz’g STARTER/Simotion Scout & Bosch drives utiliz’g IndraWorks, inc’l IndraMotion MLD; controlling superfinish machining processes utiliz’g in-line, pre-process, & post-process gauging prod’d by Marposs, Meitec, or Control Gauge; commission’g & provid’g troubleshooting support for mech’l, elect’l, robotic, pneumatic, & hydraulic prod’n machinery for microfinish & superfinish equip. 1 yr exp develop’g WinCC Scripts using VBS & dev’g MS Excel macros using VBA. Exp can be acq’d concurrently. Resumes: resume@thielenhaus.US w/ job title in subj. EOE. AUGUST 10, 2020 | CRAIN’S DETROIT BUSINESS | 21
THEATERS
From Page 3
In addition, maximum occupancy will be reduced, seats adjacent to booked tickets will be blocked off for social distancing and customers will be encouraged to purchase tickets and select their seats online to reduce encounters. The plan also says that Michigan is currently one of seven states in the U.S. where theaters are still closed. And moviegoers are itching to watch new releases and cinema classics on the big screen again. Jacobson, who served as president of NATO of Michigan from 2006 to 2009, said the informational account on Phoenix Theaters’ website has received an influx of inquiries from customers about a reopening date. “A lot of customers have the expectation that we’re open already,” he said. As movie studios continue to delay releases amid prolonged theater closures, the lack of new films is another problem. When Phoenix Theatres’ three Michigan locations reopen, they plan to show the first runs of new titles like “Unhinged” starring Russell Crowe, Marvel Entertainment’s “New Mutants” and Christopher Nolan’s “Tenet,” all set to be released in late August and early September, Jacobson said in an email.
A family watches a drive-in move at Canterbury Village in Lake Orion. Each vehicle gets a 14-by-20-foot space; capacity is limited. | CANTERBURY VILLAGE VIA FACEBOOK
“We have the infrastructure to restart business today,” said Glantz, who has kept general managers and senior leaders on payroll. “In about a week’s notice we can be ready to reopen.” The roadblock is an executive order allowing them to do so. “We submitted our (reopening) plan to the governor on May 21,” said Glantz, who is also a part of NATO of Michigan. “And the feedback we’ve received is crickets.” In an emailed statement to Crain’s, the governor’s office said that Whitmer
WHATEVER IS
NEXT For Grand Valley students, next is opportunity and innovation. Next is global, connecting and uniting us. It’s local, shaping the spaces in which we work and live. It’s a commitment to progress. Next is where minds are free to imagine what could be. At GVSU, next is now. And whatever’s next for you, we will help you get there.
gvsu.edu/next
22 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
is taking theater owners’ anxieties and frustrations seriously. “Our office has received correspondences and like many similar situations, our office is taking all inquiries very seriously. Guidelines for activities are detailed in accordance with which phase of the MI Safe Start Plan that area is in. Per Executive Order 2020-160 Section 4(e) Indoor theaters, cinemas, and performance venues are closed to entry, use, and occupancy by members of the public. Governor Whitmer is continuing
to monitor cases and make decisions based on the best data and science. As she has said all along, she will adjust as necessary when it comes to reengaging Michigan’s economy safely,” the statement read. But remaining in an indefinite standstill can have harsh economic ramifications on otherwise healthy businesses. Jacobson, whose theaters have had a 100 percent revenue loss during the shutdown, said current government assistance, which includes PPP and disaster loans, will not provide sufficient aid to help theaters withstand continued shutdown. “Prior to the pandemic, my company was a very profitable company and has been for many years,” Jacobson said. “We’re not talking about governmental relief for failed businesses.” Glantz echoed the financial concerns. “It’s depleting our financial health,” said Glantz, who did not disclose Emagine’s revenue loss. “We have the cost to go on, while we’re deprived of revenue. I don’t know any business that can sustain that indefinitely.” Amid ongoing uncertainty, some theaters have found creative ways to entertain their customers. Historic Redford Theatre, which exclusively shows classic films in its 1,600-seat auditorium in Old Redford, has been streaming old Hollywood titles, like 1941’s “Penny Serenade” with Cary
Grant, on their Facebook page. Viewers can donate an amount they choose, and the funds will go toward the theater’s expenses, said Steve Overstreet, vice president of Redford’s board of directors. Emagine has partnered with Lake Orion’s Canterbury Village to offer weekly drive-in movies Wednesdays through Sundays. Each vehicle gets a 14-foot-by-20-foot space. Emagine’s location at Twelve Mile Crossing at Foundation Walk in Novi also offers a drive-in theater featuring moves and concert events. Several theaters, including the Michigan Theater in Ann Arbor and metro Detroit’s MJR Digital Cinemas, offer curbside concessions; MJR also offers delivery orders through the DoorDash mobile app. The Michigan Theater also has virtual movie screenings available for home viewing; the Farmington Civic Theater does as well and offers free popcorn with a virtual movie receipt. Aside from the prospect of economic calamity, Glantz laments not being able to provide an escape for moviegoers. “What saddens me the most, our role in society is to bring joy and pleasure to our guests,” he said. “We’ve been deprived of the opportunity to do that.” Contact: malique.morris@crain.com
DURA
From Page 3
Terms of the Dura deal were not disclosed, but according to MiddleGround’s website the firm’s investments range from $75 million to $250 million. St. Clair Shores-based equity firm The Charlton Group Inc. is a minority owner of Dura in the deal. Dura’s reputation suffered under former owners Patriarch Partners, led by bombastic Wall Street investor Lynn Tilton. Patriarch Partners entered the U.S. assets of Dura under Chapter 11 bankruptcy protection in October 2019. The MiddleGround deal was for the entire global company with 6,700 employees in 13 countries and revenue of $870 million last year. Patriarch Partners, which owned 73 percent of Dura, had sought to sell the maker of driver control systems, lightweight metal vehicle frames and battery trays for a few years, with Bloomberg reporting a potential $1 billion price tag in 2018. But potential buyers walked away from a deal, according to a report in the Wall Street Journal, after Dura said its revenue projections for 2019 were half as much as it originally claimed. During the failed negotiations to sell Dura last year, Tilton collected $485,000 in management fees and charged Dura more than $1.4 million for legal fees, WSJ reported. Tilton’s legal troubles also plagued her attempts to sell off the supplier. She had been, and continues to be, embroiled in litigation over how she operates her holdings. In 2017, the self-described turnaround queen beat a fraud charge brought by the U.S. Securities and Exchange Commission. But a settlement with a bond insurer maintained a black cloud over any deal to sell Dura. As part of the settlement, Dura owed the funds tied to to the bond insurer $105 million and scared off prospective suitors. During the bankruptcy filing, Til-
Lexington, Ky.-based private equity firm MiddleGround Capital acquired a majority stake in Auburn Hills-based auto parts supplier Dura Automotive. | DURA AUTOMOTIVE SYSTEMS
ton committed $77 million to pay down debt and buy Dura out of bankruptcy. But her plan to place a seemingly profitable Dura into bankruptcy to rid debt and sell the company back to her equity firm backfired when a Delaware bankruptcy judge replaced Tilton’s offer with one from New York’s Bardin Hill. A bankruptcy trustee is now weighing the legal decision whether to sue Tilton and her Patriarch Partners over the handling of Dura as part of the agreement Bardin Hill reached with creditors, WSJ reported. “Capital expenditures and focusing on operations wasn’t happening under the former owners,” Rodriguez said. “They lost a substantial amount of business and had fundamental operating issues.” MiddleGround was founded by former Toyota Motor Co. employees, including hourly line workers. Rodriguez said having new nontraditional financial owners with a background in the auto industry provides a competitive advantage. “MiddleGround is just a different kind of equity fund,” Rodriguez said.
“They are automotive focused all the way down to the line because that’s where they came from. That’s how they make decisions.” Rodriguez has worked with partners at MiddleGround for more than a decade, she said, when they worked at a firm called Monomy Capital Partners. While the COVID-19 pandemic is crippling the new company’s ability to assess all aspects of its global plants — U.S. citizens can’t travel overseas to nearly every country in the world because of the outbreak in America — Dura plans to expand by opening two new plants in Macedonia and another new plant in the U.S. Rodriguez wouldn’t discuss the location or investment of the planned U.S. plant. “Where other people are scared away by COVID and uncertainty, we see opportunity,” Rodriguez said. “We see a substantial opportunity going forward. We’re not only not battening down the hatches, we have a substantial growth plan.” Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh
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WALTERS
WEED
From Page 1
From Page 1
In a wide-ranging interview on Thursday afternoon with Crain’s Senior Editor Chad Livengood and Crain’s reporter Nick Manes, Rocket Companies President and COO Bob Walters touched on the months of work that went into the offering, why the executives decided to do so, and how it’s looking at acquisitions going forward. The following transcript has been lightly edited for length and clarity. To hear the entire conversation, the Detroit Rising podcast version is available at crainsdetroit.com/podcast-subscribe.
Sales are exceeding everyone’s expectations in the middle of a recession worse than any in history. Adultuse recreational sales and medical marijuana sales hit new records in Michigan the week ending Aug. 1, totaling $14.24 million and $12.35 million, respectively. In fact, recreational marijuana sales have more than tripled since the Gov. Gretchen Whitmer’s Stay Home, Stay Safe order went into effect in late March. Medical marijuana sales more than doubled. Marijuana businesses were allowed to continue operations, first only through curbside pickup, then as the state relaxed restrictions, inside sales have returned. Experts believe marijuana sales reached new highs for a multitude of factors. There simply are more retail outlets open — 90 retail outlet licenses have been issued in 2020 through Aug. 7. The pandemic has allowed the legal market to cannibalize the illicit market as consumers are reticent to trust not-regulated sellers who could spread the virus. The recession tied to COVID-19 has also left cannabis consumers with more time to partake and a federal stimulus package that has buoyed the economy. “It’s all of these factors coming together at once that’s moving the needle,” said Andrew Brisbo, executive director of the Michigan Marijuana Regulatory Agency. “I think it’s absolutely true that COVID-19 increased these numbers. For people who have been able to continue to work, there’s more access to discretionary income as maybe they aren’t commuting. For medicinal consumers, because these are trying times, they may be using more. A lot of cannabis consumers are utilizing products more during the pandemic. The availability of the retail operations is increasing. It all adds up to more sales.”
` Crain’s: Company executives got to ring the bell at the New York Stock Exchange this morning, and the stock is up a little bit since trading began. How’s the first day going? Walters: It’s exciting. I’ve been at the company 24 years. (CEO) Jay (Farner) for 24, 25 years. Dan (Gilbert) started the company 35 years ago, so it’s a really exciting day. The first time you see the stock begin to trade, it’s been a lot of fun and it’s exciting for our team members. I think it’s exciting for the city of Detroit, to have such a vibrant company. Jay often said on the roadshow that to see these kinds of things in Silicon Valley is pretty commonplace, but it’s great to see such a thriving company in the city of Detroit. ` Can you tell us a little about how the roadshow went and what went into pitching the stock to investors? How long did it go on for? I’m laughing because it seems like years, but you know practically, it was a couple months. There was what they call a “testing the waters phase.” We met with over 100 different institutions, 61 individuals, 300 different investors. It was really interesting to talk to so many different constituencies and then have them ask questions about our company. `There appeared to be some contention among investors leading up to Thursday’s IPO and whether the company should have been priced more like a high-growth tech company or a consumer finance company. Can you speak as to what transpired on Wednesday leading toward a bit more muted offering than had been anticipated? The IPO process is far from an exact science, and so we (were) at the lower end of the range, but still in the range. What we were heartened by, and what was exciting, is to see the quality of the investors that came into the deal. And then of course as you mentioned earlier ... to see the stock trade up I think is indicative of that market demand. And ultimately ... being public is a long-term reality for us. It’s relatively rare that a company with a 35-year track history, a company of our size — and I’m talking about from a market capitalization perspective — and a company that is as wildly profitable as we are goes public. Most companies that go public are usually at the beginning of their journey, and they sometimes (have) yet to make profits and they need capital. We don’t need capital to build the business. And so we’re unique in that perspective, but we couldn’t be more thrilled with the way that the stock is trading today. ` So why go public now? What’s changed in this industry that makes this a good move for this company? Even though we only sold a relatively small portion of the company to the public, what it gives us is a currency, and we can do a number of things with that currency. One of the important things that’s really important to Dan is to give all of our team members shares in the company. It also
Left to right, Rocket CFO Julie Booth, CEO Jay Farner, Chairman Dan Gilbert and President and COO Bob Walters ring the bell on the New York Stock Exchange. | NYSE
allows (Gilbert) to monetize a small amount and, obviously, in the city of Detroit and the other cities that Dan is interested in, to be able to continue to reinvest. And there may be the opportunity down the road for us to acquire companies or institutions with some of that capital.
Rocket IPO by the numbers
37%
`Increase in Rocket Companies’ stock price over the $18 IPO price, as of close Friday.
governor’s orders change, as the virus and as the infections change, we watch that very, very closely. So really right now, we’re pushing that off a bit and we’re really watching again the governor’s orders, we’re watching how the virus is behaving. And, you know ... we’ve seen some stories about some other folks, in fact some other folks in our business, that have struggled with a high increase in infections. And that just can’t happen.
`Can you spell out some of the tangible impacts of giving stock options to all the employees? Does that mean `Forbes magazine’s there’s a bunch of new milestimate of Dan ` You and other execulionaires in Detroit? Just put Gilbert’s net worth tives at the company have that in perspective a little. before the IPO mentioned that you could You know, it’s certainly not soon be on the hunt for going to be a whole slew acquisitions in the financial of millionaires. But for a technology sector. Do you lot of people, I mean we ` Forbes’ estimate also see a possibility that have almost 20,000 team of the value of banks or insurance compamembers, a lot of those Gilbert’s stake team members that might nies could be part of your after the IPO be the only equity they future portfolio? own from a publicly traded There’s no specific plans, right stock perspective. And now, to move in that direction. to give people a piece of As we think about acquisitions, ` Share of the that is really meaningful. we think about it along the company that And one of the things that lines (of) investment. We have Gilbert still owns really makes me proud to this digital-first platform, we be with the company and have the centralized platform proud to be associated with Dan is, you that is remaking the way that Americans certainly see in a lot of publicly traded handle certain transactions: mortgage, companies, you see the senior managers personal loans buying an automobile. Our compensated. And we’ll certainly have focus is how can we make it easier? How that, too, but I think it’s relatively rare can we allow and help people use the where everyone, no matter what the computer and use their mobile devices role, is going to get some shares, and I that they demand to make that happen? just think that’s really meaningful. ` Jay Farner mentioned on CNBC that ` The Rocket brand has been the conon the mortgage origination side of sumer-facing brand for quite some the business, the goal is to go from time and now Rocket Companies 9 percent of market share now to 25 makes for the publicly traded entity. percent over the next decade. What’s What does all this say about the the elevator pitch for how that will future of the Quicken Loans brand? happen? That’s still a really powerful brand as well, Well, so the elevator pitch is we’ll pull it and today we use them both despite off the way that we went from 1 percent the fact that we really are transitioning to 9 percent, which sounds a little trite. to Rocket. So, I think that there are a But you look at the demographics, number of different avenues where you know, millennials are now the that is still being used. It still has a real predominant buyers of homes, they are relevance in the marketplace, but I think the first digital natives. And then all the we’ll continue to refine it over time. other generations that come behind them, it isn’t an expectation necessarily ` So you’re not going to rename the anymore, they literally demand that QLine anytime soon? they transact online. ... The other thing (Laughs). I’m not aware of that if that’s in is on the mortgage side, you’re really the works. seeing a transformation. You’re seeing a consolidation. Historically, there ` What are the current plans right have been thousands and thousands now for bringing employees back of mortgage companies, because it’s a downtown to the various offices the highly complex transaction. But as more company has? Jay Farner had said in of these digital solutions come to bear, June that the plan was to have about you’re seeing consolidation take place. one-third working downtown by And really that’s going to be just like mid-August. How is that shaping up? you’ve seen in other industries, those Yeah, well, first and foremost, our primary who are able to consolidate and take north star as it pertains to that is keeping complicated processes and make them our team members safe. No plan that we easier and more fluid, are the ones that put in place will trump that. So as the the share accrue to.
24 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
$7.5B
$36.4B
95%
Cannabis product is on display at High Profile - Boutique Cannabis in Ann Arbor | NIC ANTAYA, SPECIAL TO CRAIN’S DETROIT
million the week prior. But the sales never came back down. By May 17, recreational sales hit $8.9 million and medical sales reached nearly $10 million. By July, both markets had exceeded $12 million weekly before surpassing a new record earlier this month. Alcohol has followed a similar path during the pandemic. Spirits sales were up 18 percent between March 1 and May 31, led by a major 48 percent spike in April over the year prior, according to monthly sales data released by the Michigan Liquor Control Commission. In fact, alcohol is recession proof. U.S. beer, wine and liquor sales actually increased from the start of the Great Recession in December 2007 until its end in June 2009. “A lot of these sin businesses — like alcohol, tobacco and cannabis — they hold up better in periods of recession than other traditional businesses,” Beau Whitney, an Oregon-based economist who has worked for multiple cannabis firms, told Marijuana Business Daily in
Recession-proof Consumer spending began to tank in mid-March as the coronavirus made its way to the shores of the U.S. and then to Michigan. Consumer spending in the state fell by more than 30 percent between January and March 30, six days after nonessential businesses were ordered to close, according to Harvard University’s Opportunity Insights economic tracker. However, sales figures appear to indicate cannabis consumers value rolling paper as much as toilet paper during the pandemic. Recreational cannabis sales rose to $5.8 million the week before Whitmer’s shutdown order from $1.8 million during the first full week in January. Sales dropped $1.2 million the following week as it’s likely consumers stocked up on product fearing their stores would close as the pandemic surged in the state. But federal stimulus checks, $1,200 payments to Americans to buoy the economy during pandemic closures, began to hit bank accounts the week ending on April 19, one day before the cannabis culture’s biggest holiday, 4/20. Brisbo believes the holiday is responsible for a huge uptick in sales that week. Recreational sales surged to $7.2 million during that week from $4.8 million a week prior. Coincidently, many medicinal marijuana patients must have faced a sciatica flareup as medical sales increased to more than $8.6 million for the week ending April 19, compared to less than $6
“WE’RE CONTINUING TO SEE CHANGES IN CUSTOMER BEHAVIOR, PULLING PEOPLE IN FROM THE ILLEGAL MARKET...” — Ankur Rungta, CEO of C3 Industries LLC
March. “Consumers budget for cannabis. And they will budget and spend consistently, even when they pare back payments on other things, like that latte or going to the movies.” Andrew Livingston, director of economics and research for law firm Vicente Sederberg LLP in Denver, said sales are being suppressed, not by the pandemic but by product availability.
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“If you want to talk about supply constraints, it’s inventory,” Livingston said. “There wasn’t enough hours in the day to sell to everyone when adult-use opened up in Michigan. It’s gotten better, but more supply still needs to come online before sales can truly reach their market potential.” Brisbo and the MRA projects the state’s recreational marijuana market to grow to a $3 billion annual market. Since Dec. 1, 2019, recreational sales are $210.7 million and growing exponentially. Those growing sales figures are reflective of pulling more users into the market. Rungta said as the retail network continues to flesh out in Michigan — C3 opened its Grant High Profile shop in May and is starting the licensing process in Grand Rapids — the legal market is becoming more appetizing for consumers who have remained on the black market. “We’re continuing to see changes in customer behavior, pulling people in from the illegal market, as more stores come online and we’re still nowhere near capacity, so I expect sales to keep rising,” Rungta said.
Flaming out? But the COVID-19 recession, or the Great Suppression, is more complicated than a regular recession. The U.S. government’s Pandemic Unemployment Assistance program, which provided $600 a week in extra jobless benefits to tens of millions of unemployed workers, certainly boosted overall consumer spending and likely cannabis sales as well. That program ended on July 31 and U.S. Congress continues to debate a second round of the package, which may see a reduction of the benefit to as little as $200 per week. “It’s pretty stark for younger people,” Livingston said. “It’s not just cannabis. Consumer spending writ large will take a hit if the House and Senate don’t come to an agreement.” But the pandemic has ramifications for the industry beyond unemployment benefits. For Rungta and C3, the return of more than 30,000 students to UM’s campus and Ann Arbor is the difference between a boon or a bust. High Profile’s Ann Arbor store is mere blocks from the university and a 10-minute walk to Michigan Stadium. “We expected this store to have heavy seasonality,” Rungta said. “This close to campus and the stadiums. We thought fall would be a boon for us. But how many come back now?” Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh
“It’s panned out well,” said Vince Mattina Jr., president and founding partner of the accounting firm Mattina, Kent & Gibbons, P.C., which has offices in Rochester and Lapeer. “I would anticipate this is going to be a more permanent situation with the ability to do less time in the office — virus or not.” The big tech giants like Microsoft, Google and Facebook have announced plans to extend work-fromhome into mid-2021. Twitter has told its employees they can work outside of the office “forever.” When the coronavirus pandemic hit Michigan five months ago, most assumed that working from home would be a temporary phase until the public health threat subsided. The virus would pass, we wrongly assumed. We’ll get back to the office by summer. Wrong again. In late March, I went into the Crain Communications office and packed up a monitor, keyboard, mouse and computer docking station for my home office, assuming I’d be working there until Memorial Day or Fourth of July at the latest. Now I think it’s safe to assume we’ll be mostly working from home — or wherever there’s strong WiFi and strong coffee — until next Memorial Day. The virus isn’t going away, in part because as a society we still haven’t come to grips with the necessary social distancing and human isolation needed to wrestle it under control. With all of the rancor over mask-wearing in public, business travel looks highly unappealing and downright scary for some workers. In the Crain’s C-suite survey, nearly 73 percent of executives surveyed said they were not comfortable attending a business conference. The survey found 46 percent of executives said they’re not asking employees to travel and just 12 percent said they would reinstitute travel in 2021. Fewer than one in every 15 of the executives surveyed said they’ve taken a business trip outside of Michigan since mid-March, while less than 10 percent said they planned to reinstate company travel this calendar year. The nearly nonexistent business travel also may be a result of cost-cutting measures to survive. About 82 percent of CEOs surveyed said their businesses had sustained a revenue loss of 10 percent of higher, while 58 percent said they’ve laid off workers. Another 23 percent said they’ve imposed across-the-board pay cuts to weather the pandemic recession. While many jobs in the service industry, construction and manufacturing simply can’t be done from the comfort of home, office-based work can and probably should stay outside of the office. The more than 50 cases of coronavirus linked last week to the Pontiac headquarters of United Shore Financial Services put a spotlight on how office spaces are not immune to outbreaks, no matter how many precautions companies take. The open office layout that cut down cubicle walls and displaced middle managers from individual offices has been very trendy in recent years. It’s also the exact opposite of what’s needed for preventing the spread of a highly contagious virus. Just 11 percent of CEOs surveyed by Crain’s said they’re requiring employees to wear masks at their desks,
Crain’s Survey: How C-suite is thinking In a Crain’s survey of metro Detroit CEOs, 82 percent of the executives surveyed said their businesses have sustained a revenue loss of 10 percent or higher this year because of the coronavirus pandemic and economic fallout. About 53 percent of the C-suite executives said their companies either haven’t asked employees to return to the workplace or are making it voluntary. The survey was conducted July 20-27. Revenue (90 responses): COVID-19 and Michigan’s lockdown has affected many companies. What do you project for your company’s budgeted revenue for the year?
Malace
No impact 10.00%/9 Loss of 10% of budgeted revenue. 25.56%/23 Loss of 11-20% 23.33%/21 Loss of 21-35% 18.89%/17 Loss of more than 35% 14.44%/13 An increase budgeted revenue 7.78%/7 20%
10%
30%
40%
50%
60%
Employee return to the workplace (109 responses): Many employers are facing mixed reactions from employees about returning to the workplace. What is your experience? All employees have been required to return to our safe workplace environment by a specific date. 22.02%/24 Employees are returning on a voluntary basis, with the signoff from their manager to continue to work from home or remotely. 33.94%/37 We haven’t asked employees to return to the workplace. 19.27%/21 We have required essential workers to return. 24.77%/27 20%
10%
30%
40%
50%
60%
Operating budget adjustments (64 responses): As companies adjust operating budgets, some have furloughed employees and/or enacted across-the-board pay cuts. What best describes your experience? We have laid off some employees 57.81%/37 We have a temporary across the board pay cut. 23.44%/15 We have enacted a pay cut for top managers only. 18.75%/12 20%
10%
30%
40%
50%
60%
Business travel (137 responses): Which of the following best describes your company’s business travel experience? We are not asking employees to travel. 45.99%/63 We plan to reinstitute business travel before the end of 2020. 9.49%/13 We plan to reinstitute business travel in 2021. 12.41%/17 I have taken a business trip outside of Michigan since mid-March. 6.57%/9 I have no plans to travel for business outside of Michigan in 2020. 25.55%/35 10%
20%
30%
SOURCE: CRAIN’S DETROIT BUSINESS C-SUITE SURVEY
while 40 percent said masks are required in meeting rooms and 49 percent require mask-wearing in common areas such as hallways. In other words, a majority of businesses surveyed aren’t requiring masks in common areas or meeting rooms where space for social distancing is constricted. Bob Walters, president and COO of Rocket Companies, told Crain’s on Thursday the Detroit mortgage giant is “pushing off” its plans from midJune to have one-third of its workforce back downtown by mid-August. “We’re watching how the virus is behaving,” Walters said. “And, you
40%
50%
60%
CRAIN’S DETROIT BUSINESS GRAPHIC
know ... we’ve seen some stories about some other folks, in fact some other folks in our business, that have struggled with a high increase in infections. And that just can’t happen.” The longer-term encampment of white-collar employees at home brings a host of complicating factors that business owners and managers need to stay attuned to. The first is infrastructure. Employees with children or spouses at home are competing for internet bandwidth — the lynchpin of working from home — throughout the business day and sometimes well into the night.
Mattina
Any company that hasn’t yet boosted payments to workers for subsidizing their cell phone bill, internet connections and other home office expenses, including electricity, is getting a free ride while the vacant office space remains dormant. Mattina said his 30-employee accounting firm is investing in phone systems for his employees at home so that clients are not calling them on their personal cell phones at all hours of the day and night. “That’s probably one of the biggest challenges is with working remote and having 24-hour access to cell phones and emails that here’s no structure to the beginning and end of the day,” he said. “I want to keep some privacy for the staff.” The second big issue is employee productivity. Surveys of hiring managers offer a mixed review of whether employee output is meeting expectations. “People that are younger and constantly looking for reinforcement and mentoring and coaching are not doing as well on productivity,” said Larry Malace II, owner of Malace HR, a Troy-based recruiting and staffing business that does about $40 million a year in sales. “That’s kind of the downfall of it.” Veteran employees of the company are “working very effectively” from home because they need less support, Malace said. Mattina and his partners also have been spending more time reaching out to employees at home to check on how they’re juggling the new work-life balance, especially those with children or elderly parents. “It’s a tough situation for them and we’re trying to do whatever we can,” Mattina said. “We’ve got a great staff and we’re trying to keep them. Employee turnover is not good for anybody.” With summer nearing an end, the uncertain restart of K-12 schools is going test work-from-home setups. In the spring, during the governor’s mandatory lockdown, parents working from home juggled running home schools. Some schools are returning to fulltime in-person instruction. Some are opting for starting the school year entirely virtual, while others are adopting hybrid schedules to split the school week and lower the density of students in school buildings. The latter two options will create a new slew of workload-juggling for parents working remotely. Let’s not sugar coat how difficult this can be for the offspring of these tired masses of homebound office workers. As Skillman Foundation CEO Tonya Allen often asks, “And how are the children?” Every C-suite executive, department manager and supervisor in a metro Detroit business, nonprofit and governmental entity should be asking their employees this very question — sincerely. Because the chances of burnout from home are just as high as burning out in a cubicle. Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood
AUGUST 10, 2020 | CRAIN’S DETROIT BUSINESS | 25
THE CONVERSATION
Christman Co.’s Ron Staley on projects, planes and presidents
crainsdetroit.com
THE CHRISTMAN CO.: Ron Staley has his hands full with a pair of historic redevelopment projects: Michigan Central Station for Ford Motor Co. and the Book Tower and Book Building for Dan Gilbert’s Bedrock LLC. Staley, who is senior vice president of Southeast Michigan operations for Lansing-based contractor The Christman Co., likes to unwind on the weekends by flying a 1981 L-39 Albatross, a Cold War-era Ukrainian jet that he bought in 2010 after picking up flying about two decades ago. In addition to his work on the train station and other projects, his company has been tapped by the Architect of the Capitol for the fourth time in a row to build the presidential inaugural podium, which his firm has done for Barack Obama’s two swearing-in ceremonies as well as Donald Trump’s first. A floorboard from the podium from Obama’s historic 2009 inauguration is in the Fisher Building in Detroit’s New Center area where Christman has its Detroit operations based. | BY KIRK PINHO `Can you talk a little bit about building supply chain issues and what you foresee happening? Back in 2008, we saw that a lot of factories were laying people off just because there was no demand. The short-term demand is going to go down or they’ve got COVID issues and so people are not coming into work. And when demand does kick back up, there’s gonna be capacity within the factories to supply materials that are going to be needed. That will drive prices up, at that point. One of the issues we are seeing right now is, even apprentices coming into certain trades, where you’re constantly feeding young people in, they are not showing up because of COVID. That could potentially have an impact down the road, with having workers. We saw that in 2008 and that was a very big issue on the union for bringing apprentices in. We’re still battling that issue right now. `It sounds like what you’re saying is the pandemic is almost detonating a host of the programs that have been implemented in the last few years to bring more people into the trades. Am I getting that right? You’re right. There are factors at different levels. People are literally afraid of coming to work for fear of catching COVID, so they decide to stay home. There is definitely a portion of the workforce right now that, with this increased unemployment we are seeing, are saying, “Why should I bother going to work if I can make almost $1,000 a week sitting at home?” In Southeast Michigan, with executive orders, that makes the challenge even more difficult for the construction trades to find good people. `How do contractors respond if there is a substantial increase in the number of cases in Michigan? The construction industry is very hopeful that the governor will look at those hot spots and what’s causing them and where they are. Based on our numbers, it hasn’t been caused at construction
job sites. The construction industry has a very good safety record. We’ve been very strong in making sure that the personal protective measures have been taken. We have dedicated people going around and making sure the job sites are clean and everything’s sprayed down and the protocols for ensuring that workers are coming to the sites healthy. `What sort of update can you give on the train station and the other construction projects you’re involved in? We have about probably 140 workers on that project site, which is right about where we were when it was closed down. All the interior masonry work is well underway. Certainly we lost a little bit of spring weather and we are going to be double-shifting some work over there to try to pick up our schedule, which is in pretty good shape to turn that building over at the end of 2022. Book Tower, the exterior’s pretty well done, so that work’s out right now. Demolition is pretty well wrapped up and abatement’s pretty well wrapped up over there. Again, pretty much interior structural modifications to allow the work to happen, getting ready to pull out such things as the ornamental stained-glass dome inside there for restoration. `What do you do when you’re not on the job? I’m a firm believer that you should work hard and play hard. We all find something. About 20 years ago, I picked up flying airplanes and that led to flying vintage military aircraft. About 10 years ago, I decided that should lead to flying a vintage military jet. I just love the personal challenge of trying to find new aircraft to fly. It’s not necessarily an adrenaline rush; it’s a personal skill set. When there were air shows to fly, we used to get a group together and go fly four or six airplanes together in a formation, and just travel primarily around Michigan on weekends and enjoy ourselves. That gives me an opportunity to clear my head and relax
a little bit. It’s been a great challenge. (My plane is) a 1981 Aero L-39C Albatros, which came out of the Ukrainian air force back in 2003, I think. After the Cold War, Russia was selling a lot of these advanced trainer jets relatively inexpensively. So mine was brought into the United States in 2003 and I bought it in 2010.
Ron Staley, senior VP, Southeast Michigan operations, The Christman Co.
`How often did you get out and do an air show? We would do about six of them a year. Most of those are through the summer. This is probably the saddest week I’m having because this is the week they have the big air show over in Oshkosh, Wis., and that show was canceled. There would typically be anywhere from a dozen to 20 of these same jets from around the country and Canada, and we would get together and fly together for a week. Half a million people come to that air show, and it’s not happening this year.
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`It’s really hard to believe that a presidential election is less than four months away. Are you bidding again to do the inaugural podium? We have already been awarded that contract for the next dance. We will start building those here later this summer for the next president, whoever it may be. That process starts pretty early. This will be the fourth time that we’ll have constructed it.
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RUMBLINGS
Metro Detroit chef Loving his gig feeding NBA ‘bubble’ THE STRING OF NBA PLAYERS taking to Instagram to share pictures of their (bad) food is circling no more. The basketball league brought in another player to boost its team: metro Detroit chef Shawn Loving, to help feed “the bubble” near Orlando, Fla. Loving, a certified master chef and the department chair of Schoolcraft College’s culinary arts program, previously was a chef for the USA Olympic basketball team and did in-flight catering for the Detroit Pistons.
He has been working on the Walt Disney World campus as the executive chef in the Executive Chef Kitchen since mid-July. Loving is helping take Loving care of teams that are playing at the ESPN Wide World of Sports Complex near Orlando in an effort to shelter them from COVID-19 while they play.
26 | CRAIN’S DETROIT BUSINESS | AUGUST 10, 2020
The ECK hosts eight chefs from different teams and three sous chefs. The Detroit native oversees the operation, including ordering supplies, butchering and inspecting products all while cooking different items upon request. Loving is up at 4:30 a.m. prepping for his day. At 6 a.m. he gets his daily COVID-19 test before the vans show up at 6:20 a.m. to take him and his team to the kitchen where he spends his day, until about 9 p.m. “I don’t get tired because I like the end result,” Loving said. “It’s part of
that journey, so I gain a lot of energy from that.” Movement within the NBA bubble is tight. Loving is restricted to his own area, separate from the one the NBA players are in. Loving works closely with the team members’ chefs who are wellversed in their preferences. “There’s traditions they are used to and there are traditions I am used to as a chef. When we collaborate on those things and they let their wall down they realize you can be a support for them,” Loving said.
Crain’s Detroit Business is published by Crain Communications Inc. Chairman Keith E. Crain Vice Chairman Mary Kay Crain President KC Crain Senior Executive Vice President Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly, except the third week in December, by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Contents copyright 2020 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is prohibited.
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