THE CONVERSATION
CRAIN’S MICHIGAN BUSINESS | Pack Elephant offers an alternative to corporate tchotchkes. PAGE 9
Maxwell Dunn PLC managing partner Ethan Dunn on practicing what you preach. PAGE 22
CRAINSDETROIT.COM I JANUARY 18, 2021
PHILANTHROPY
REAL ESTATE
Home value disparity hits local Black homeowners Gap between region’s average home values, Black-owned homes is nearly triple national rate
BRAKE DANCING
BY KIRK PINHO The Children’s Center raised millions of dollars over the years through its Auto Glow party (pictured) and the charity preview of the North American International Auto Show.
dustry veteran, teamed up with Connecticut-based private equity fund Stone Point Capital LLC to launch the platform that would grow into the company that exists today. Today Home Point is owned by a variety of Stone Point funds.
Jomo King was shocked a few years ago. As he was trying to refinance his 2,500-square-foot tri-level, an appraiser valued his home at just $70,000, less than half of what neighboring properties were selling for at the time in the Grandmont neighborhood on Detroit’s west side, where he put down his roots in 2008. But King’s experience should come as no surprise. Black homeowners in metro Detroit face the greatest disparity in the nation when comparing the value of their homes versus other homeowners in the region. Metro Detroit is among the most disparate in its home value gap for Hispanic homeowners, as well. Those findings by a recent Zillow Group Inc. study contribute to challenges ranging from generational wealth accumulation to economic development, experts said. The gap between the region’s average home values and Black-owned home values is nearly triple the national rate and more than double the national rate for the Hispanic community, according to data from the Seattle-based online real estate company. Zillow found that the average Black home value is $106,413, compared to $195,270 across the entire multiple-listing service area, which includes Wayne, Oakland, Macomb, Washtenaw, Livingston and St. Clair counties, a 45.5 percent difference. The majority of the region’s Black population lives in Detroit.
See HOME POINT on Page 21
See DISPARITY on Page 18
CHILDREN’S CENTER
With the Detroit auto show charity preview at a crossroads, nonprofits regroup BY SHERRI WELCH | For decades, the charity preview of
the North American International Auto Show has raised millions of dollars in unrestricted funding for a small group of children’s charities in Southeast Michigan. But the so-called “auto prom,” which drew thousands in black tie attire to Detroit’s Cobo Center every January and was one of the biggest, one-night fundraisers in the region for decades, may never come back in the same format or raise the amount it once did.
The annual infusions to the charities were never promised, but they came almost every year for more than 20 years. Charities began budgeting for the annual event. The 2019 show raised $4 million for the children’s charities. Following contractions in recent years, eight core charities are on the list of beneficiaries. They’ve now lost the revenue from the preview for the second year in a row, not including a $37,000 grant each received from the
DADA Charitable Fund at the Community Foundation for Southeast Michigan last year to help soften the hit. With the show’s planned move last year to June and an indoor-outdoor format as a result of shifts in the automotive world and the cancellation of the show in 2020 and again this year, the charities are now faced with the fact that they can no longer count on raising money through charity preview. See CHARITIES on Page 20
REAL ESTATE
As it eyes IPO, Home Point uses acquisitions to grow Metro Detroit’s third big mortgage company aims to take advantage of industry boom times BY NICK MANES
By later this year, metro Detroit is primed to have its third publicly traded mortgage origination firm. Home Point Capital Inc. based in Ann Arbor lacks the name recognition of Rocket Companies Inc. in Detroit or the Pontiac-based United Shore Fi-
nancial Services LLC/United Wholesale Mortgage, the No. 1 and No. 2 players in mortgage origination in the country. But Home Point, which filed earlier this month to go public on the NASDAQ, has had a banner year like its larger regional neighbors. No date has yet been set for the proposed public offering, which the
NEWSPAPER
VOL. 37, NO. 2 l COPYRIGHT 2021 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED
company says is dependent on market conditions. While Rocket — in various iterations — and United Shore date back decades, Home Point dates back to just 2015, but a string of acquisitions have made the company into a major player in the industry in just a few years. Willie Newman, a mortgage in-
FOCUS | HEALTH CARE Future of telemedicine: Telehealth may continue to grow, but only if payment, benefits and regulations remain favorable to patients, providers. PAGE 13 A new, critical tool: Teletherapy reaches people in need at home. PAGE 14
NEED TO KNOW
REAL ESTATE
THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT APPLE TO LAUNCH APP ACADEMY IN DETROIT
VACCINE SUPPLY EXPECTED TO DOUBLE IN STATE NEXT WEEK THE NEWS: Health systems and health departments next week will receive double the number of COVID-19 vaccine doses they expected after the federal government approved a request from Michigan to use 60,000 doses allocated to a long-term care program managed by CVS and Walgreens. The state also plans to reallocate hundreds of thousands of “banked” doses sitting idly in deep freezers to hospitals and local health departments. Health system executives say that with more doses they can quickly expand vaccinations of people over 65 and essential workers, including teachers, day care workers and first responders. WHY IT MATTERS: Michigan’s vaccine rollout — widely seen as the key to slowing the rate of infection and death from COVID-19 and the path to economic recovery — continues to ramp up after a slow start early in the year. Vaccine administration has ramped up over the last three weeks from 21,741 in week one to 125,687 in the past week, MDHHS said.
THE NEWS: Cupertino, Calif.-based Apple Inc. announced it will open its first North American Apple Developer Academy in Detroit. The program, launched in partnership with Michigan State University, aims “to empower young Black entrepreneurs, creators, and coders, helping them cultivate the skills necessary for jobs in the rapidly growing iOS app economy,” according to a release. WHY IT MATTERS: Apple said Detroit was selected due to the city’s “vibrant Black entrepreneur and developer community, with over 50,000 Black-owned businesses.” Landing such initiatives has been a stated goal of billionaire mortgage mogul Dan Gilbert, the co-founder of Rocket Companies Inc. Gilbert’s Rock Ventures has been working with MSU and Apple to select a space for the academy by the summer.
arate $3.5 million program will offer $40,000 grants for small live-music and entertainment venues. WHY IT MATTERS: The need for small business relief is acute, and the MEDC expects a strong response for this latest round of grant funds. MEDC President and CEO Mark Burton said the organization has learned through previous programs that the need for the funds is far greater than any amount of resources the MEDC is facilitating. A month ago, thousands of small business owners lined up virtually for a slice of a $10 million pot of relief grants from the state — a process that left many frustrated.
Bay Pointe Golf Club in west Oakland County seeks buyer The Bay Pointe Golf Club has been listed for sale for $8.95 million. Spread across 140 acres, the property that sits in both West Bloomfield and Commerce townships includes about 2,300 feet of Middle Straits Lake frontage and a 20,000-square-foot clubhouse, restaurant and banquet facility that can accommodate up to about 350 people, according to marketing materials from Farmington Hillsbased Friedman Real Estate, which has the listing. A spokesman for Friedman said the property would be ideally sold to either another golf course/banquet hall owner or operator; a developer looking to create a small residential enclave with a handful of private lakefront estates; or a corporate user for use as a corporate retreat.
DETROIT LIONS HIRE NEW GENERAL MANAGER
MEDC TO GIVE $55 MILLION LIFT TO SMALL BUSINESSES
THE NEWS: The Detroit Lions have hired Brad Holmes away from Los Angeles to be the team’s new general manager. Holmes, director of college scouting for the Rams the past eight seasons, had been interviewed for several front office vacancies around the NFL.
THE NEWS: The Michigan Strategic Fund has approved $55 million in grants for small businesses impacted by the state health department’s coronavirus restrictions. Eligible small businesses that have been closed could receive up to $20,000. Eligible small businesses that have been partially closed or otherwise open but impacted during the order may receive up to $15,000. A sep-
WHY IT MATTERS: The hire brings a close to half of the Lions’ high profile search for new leadership. The team has yet to name a head coach after head coach Matt Patricia and general manager Bob Quinn were fired after chronic under-performance and mounting pressure from a disenchanted fanbase. Holmes will join Detroit’s search for a new coach.
An aerial visual of Bay Pointe Golf Club in West Bloomfield and Commerce townships. | SCREENSHOT/FRIEDMAN REAL ESTATE
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FINANCE
SPORTS BUSINESS
Companies are pausing political spending. Will it last? BY NICK MANES
commercial casinos in Detroit can offer online gaming, in addition to the 12 Native American tribes in the state. Most operators have already announced mobile rollout plans. Online betting could also hurt the nonwagering side of business, such as hotel, entertainment, and food and drink. In Greektown, the streets are pretty quiet, and the casino still slow compared to normal times, said Marvin Beatty, chief community officer for Greektown. Beatty believes that will change once the vaccine is distributed widely. He’s not worried about mobile betting taking over completely.
In the days following the Jan. 6 insurrection at the U.S. Capitol as Congress voted to certify Joe Biden as president, American corporations drew a line in the sand. Wall Street banks, major automotive manufacturers and various other noteworthy Michigan companies including Rocket Companies Inc. and Dow Inc. have released statements announcing, to various degrees, changes to political donations as they’ve expressed dismay with the attempts to disturb a free and fair election and the violence that ensued. The statements generally have fallen into two distinct buckets: companies like Rocket based in Detroit have announced a blanket halt to political donations as the mortgage company contemplates “the role corporations play in the political process,” CEO Jay Farner said in a statement to Crain’s. Midland-based Dow, meanwhile, took a more targeted approach, announcing it would suspend all corporate and employee political action committee contributions to “any member of Congress who voted to object to the certification of the presidential election.” The two views of how to proceed lead to the question of whether the violence at the Capitol and attempts by nearly 150 Republican lawmakers to overturn the presidential election in favor of Donald Trump make for a watershed moment that could alter the decades-long trend of corporate money in American politics. Or is this likely just a blip and American elections will continue getting more expensive? Simon Schuster, the executive director of the Michigan Campaign Finance Network, a Lansing-based organization that tracks money in Michigan politics, said it will largely depend upon how the Republican Party does or does not reinvent itself post-Trump.
See BETTING on Page 21
See POLITICAL on Page 20
GETTY IMAGES/ISTOCKPHOTO
GETTING IN THE GAME Online betting in Michigan brings opportunity, challenges BY KURT NAGL
As Michigan casinos prepare to go live with online gambling as soon as this week, the state is in position to become one of the country’s top mobile betting markets, experts say. Since sports betting and online gaming became legal in December 2019, gaming giants from Las Vegas to Australia have descended on the state, signing platform supplier deals with casino operators and sponsor deals with Detroit’s sports teams. That means gamblers will have a wealth of options for wagering their money, and they won’t have to leave their couch to do it.
“WE THINK THERE IS CLIENTELE FOR INTERNET GAMBLING AND THERE WILL CONTINUE TO BE CLIENTELE FOR BRICKAND-MORTAR.” — Marvin Beatty, chief community officer for Greektown Casino-Hotel
On one hand, that presents big opportunity for MotorCity Casino Hotel, Greektown Casino-Hotel and MGM Grand Detroit, which saw sales plummet 57 percent to $639 million in 2020 due to pandemic-related closures and capacity restraints. Online betting will lessen the blow of potential future restrictions and allow casi-
nos to reach customers who wouldn’t otherwise go through the doors. But with old-fashioned brickand-mortar betting ramping back up, it remains to be seen what impact online betting will have on the business model. Customers will soon be flooded with options. Each of the three
NONPROFITS
Companies expect corporate giving to hold, increase for some in 2021 BY SHERRI WELCH
Despite the toll COVID-19 has taken on businesses, many maintained charitable giving levels in 2020 and plan to give at least as much — if not more — this year. That was among the findings in a corporate giving survey done by Crain’s Detroit Business from mid-December through early January, in partnership with the Association of Fundraising Professionals, Greater Detroit Chapter and the Council of Michigan Foundations. About half of the 69 companies who shared their giving projections for this year said they expect to do-
nate about the same amount as last year. Another 43 percent projected they’ll give more this year. Corporate optimism is mirrored in nonprofits’ outlook for Ragan the future, according to the early results of a separate survey conducted by the Michigan Nonprofit Association, where 86 percent of nonprofits said they are confident their operations will continue in spite of disruptions from the pandemic.
“A lot of ... nonprofit leaders, fundraisers, board members and beneficiaries were worried about the impact on philanthropy, in general, but specifically on the corporate sector,” said Steve Ragan, immediate past president of the Association of Fundraising Professionals, Greater Detroit Chapter and executive vice president of Hope Network. But unlike other markets such as New Orleans, where hotels and casinos provide the bulk of corporate support to nonprofits, Southeast Michigan is benefiting from a more diversified giving market, he said. About 77 companies in the state, the majority from Southeast Michigan, re-
Learn the secrets of the Best-Managed Nonprofits Join us Thursday, Jan. 21, for a webcast exploring the “Secrets of the Best-Managed Nonprofits.” Hear from the winners of the annual Crain’s award program about their best practices and looking forward to 2021. Go to crainsdetroit.com/events to sign up.
sponded to the corporate giving survey. Half operate in manufacturing and professional/business services areas; others are in the banking and finance, construction and transportation and utilities sectors. Respondents included
privately held, publicly traded and family-owned companies and reflected a mix of budget sizes, with 56 percent reporting $100 million or more in annual sales. The mix of the types and sizes of companies giving to charities in the region marks a stark shift from 15 years ago when much of corporate philanthropy came from the Big 3 and their suppliers, prompting Detroit Renaissance — the regional CEO council predecessor to Business Leaders for Michigan — to call for other companies to step up in supporting nonprofits. See GIVING on Page 19 JANUARY 18, 2021 | CRAIN’S DETROIT BUSINESS | 3
REAL ESTATE INSIDER
The former Russell Street Deli space in Eastern Market has been listed for lease at a rate more than double what its former tenant, a longtime staple of the city’s food district, had paid. | KIRK PINHO/CRAIN’S DETROIT BUSINESS
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Rent more than doubles at former Russell Street Deli space A key retail slot in Detroit’s Eastern Market food district has finally hit the market for lease. It’s been more than a year and a half since a very Kirk public falling out PINHO between landlord Sanford Nelson and his Firm Real Estate LLC company and Russell Street Deli owner Ben Hall prompted the restaurant to abandon its longtime home and shutter at the end of August 2019. Detroit-based brokerage firm Uncommon Space has the listing for the nearly 1,700-square-foot space and the roughly 1,500-square-foot basement at 2465 Russell St. Now, the space has hit the market at $30 per square foot per year, not including the cost of utilities. That’s well north of the $1,700 per month Russell Street Deli was paying. At the new rate, rent would be approximately $4,250 per month, not including utilities. Obviously, the $30 a square foot is subject to lease negotiations and could end up being lower. I reached out to Nelson’s spokesperson and received the following comment: “2465 Russell Street’s rate is consistent with current 2021 market rates.” Nelson told Crain’s in April 2019 that he negotiated a new market-rate lease extension for five years with Supino Pizzeria, the former deli’s neighbor to the south, in September 2018. He didn’t disclose the rate, but previously said the market rate was around $25 per square foot. So there is some precedent to the rate bump. The spokesperson said Russell Street Deli ownership informed Firm Real Estate on Dec. 31 that they would be moving from the property and vacated the space Jan. 4. It had been used for storage. “It’s an awesome location and will be great to get it activated again soon,” said Kyle Erin Darcy, broker and founder of Uncommon Space, in an email.
The former Motorama Motel in Ferndale has undergone a $3.7 million redevelopment as apartments and has now hit the market for sale. The 35-unit apartment property is 34 percent occupied. | KIRK PINHO/CRAIN’S DETROIT BUSINESS
Darcy said Russell Street Deli was paying “way below market rate” and “the new asking rent is consistent with other leases we’ve done in the neighborhood over the last two years.” There have been concerns about the new corps of Eastern Market landlords jacking up rents in the historically cheap food district. Nelson has entered the fray the last couple of years, as have other Detroit developers and economic development professionals who are also looking to invest in the neighborhood just northeast of the downtown core. Others include Roger Basmajian and George Jackson and New York City-based developer ASH NYC, replacing the street-level business operators in Eastern Market that traditionally owned their own properties (and sometimes others). The millions planned in investment and renovations have rustled up fears about rent increases, identity changes in the historic district and inclusivity in development.
Former motel, now apartments, hits market A Detroit-based developer is marketing a former Ferndale motel for sale after spending millions turning it into apartments. Mike Ferlito converted the former Motorama Motel at the northwest corner of Eight Mile Road and Woodward
Avenue into the 35-unit Urbane Ferndale apartments after buying it in 2019 and completing $3.7 million in renovations last year. “Every asset we do, we always leave the options to buy or sell, and this asset, we decided to sell,” Ferlito, head of Detroit-based development firm Ferlito Group which worked on the project with Royal Oak-based Urbane Apartments, said last week. “We have so many more projects we are doing, at least seven that are in predevelopment right now.” The property is 34 percent occupied, and the one-bedroom units are renting for $925 per month. The apartments replaced what was known as a problematic property. The Detroit Free Press reported in June 2019 that police made more than 50 trips to the 60-room motel in the first nine months of 2018. “When we saw the project, we felt that corner really needed a boost, and redeveloping the property with market rate apartment buildings is best suited for that site,” Ferlito said. Dividing walls were removed to convert the 60 rooms into 35 apartments. Bloomfield Hills-based multifamily brokerage house Income Property Organization has the listing on the sale. The price is undisclosed. Urbane Apartments is the property manager. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB
“
THANK YOU, GOV. WHITMER
Safe drinking water is essential to Michigan’s economy and businesses like mine.” —LYDIA GUTIERREZ, PRESIDENT AND CEO OF DETROIT-BASED HACIENDA MEXICAN FOODS
Thanks to Gov. Whitmer’s leadership, Michigan recently enacted a landmark standard to protect our drinking water from toxic PFAS chemicals. Now, businesspeople like Lydia Gutierrez—and all of us—can trust their products are made with safe and reliable Michigan water.
Learn more at e2.org
COMMENTARY
COMMENTARY
As we prepare for brighter 2021, an introduction
A
s we turn the page on a year that many of us would like to forget, we here at Crain’s Detroit Business are focused and ready for a brighter 2021. We hope you are too. We continue to strive to be your most important news and information resource — keeping you up to date on the best and most relevant information on what drives this great economy here, while also giving you the tools you need to succeed. It is with this mandate that I introduce myself to you as the new Group Publisher of Crain Communications’ “city-book” publications in Chicago, New York, Cleveland and, of course, Detroit. I’m assuming the position held for the last two-plus years by Mary Kramer, one of Michigan’s top journalists, whose award-winning career included many years helming Crain’s Detroit Business before paving a new, successful path for the Crain city books as they aggressively navigate the digital age. Let’s make no mistake. I’m attempting to fill some big shoes. Under Mary’s steady hand, the Crain city books, including Crain’s Detroit Business, are stronger and reaching more readers and serving more business partners than ever before. She is leaving the publications in spectacular shape. We are more ready than ever to capitalize on the changes in the media landscape, and I’m honored to take the baton. The good news is Mary is not leaving Crain. She is moving into a new role working on exciting, big projects for Crain Communications, continuing to report to Crain Communications CEO and Crain’s Detroit Business Publisher KC Crain. Look for more big news from Mary in the coming weeks and months. As part of the changes in leadership, I’d also like to announce that Lisa Rudy, associate publisher of Crain’s Detroit Business, will expand her duties to manage the day-to-day operations of Crain’s Detroit. Lisa has spent
Jim
KIRK
Group Publisher the last 18 months working not only with Crain’s partners in Detroit, but also Cleveland and New York, helping set all three publications on stronger footing. Her attention now will be focused on working with KC Crain and me on expanding the audience of Crain’s Detroit and building and delivering new products to readers and business partners alike. She is focused on the commitment to deliver the best fact-based reporting and editing that Executive Editor Kelley Root and our team of outstanding journalists produce on a daily basis. This is an extraordinary time to be in the media business. We understand that change is constant in our industry. And we also understand the tremendous trust our readers and business partners put into us every day. That’s why we continue to get smarter about how we deliver our content to readers and are working hard to refine our platforms so that we successfully meet the challenge of the changing needs of our readers as technology evolves. Additionally, we are listening to our business partners as they continue to look for ways to solve their unique problems. We are committed to be the right resource to help them navigate this more competitive landscape. We know the last year has been tough. But we also know that from difficult times in the past, new opportunities arise. We know that 2021 will be better and stronger. And that great things lie ahead for Detroit. We thank you, always, for taking us with you on your journey.
LETTER TO THE EDITOR
State helps keep surprise medical bills in check TO THE EDITOR: Last year, Michigan’s lawmakers and Gov. Gretchen Whitmer joined together to end surprise medical billing, the unpleasant invoices many patients were receiving after a procedure when one or more of the physicians involved was not covered by the patient’s insurance. Congress in the waning days of December also addressed the issue, including a ban on surprise medical billing in the federal pandemic legislation. But the federal solution is far less valuable to consumers than the Michigan approach. Michigan Association of Health Plans was an early advocate of a strong policy to stop surprise billing. We represent most of the major health insurers in the state and many of the state’s Medicaid managed care insurers. Our top priority was getting patients out of the middle of these payment fights. Health plans often receive complaints from
enrollees regarding surprise bills from providers who had strategically decided they could make more money by refusing to negotiate with insurers over bills. Instead, they billed individuals after an operation or medical appointment, and then used bill collectors to pressure patients into paying bills far higher than other providers were charging for the same procedures. Our solution was the one ultimately adopted in Michigan. In the vast majority of cases, a provider who is not covered will be submitting his or her bills to the insurer, not the patient. Providers will submit payment based on a fee schedule if an agreement on payment cannot be reached. Congress went another direction. The federal law, which will not be used for most Michigan procedures, calls for the provider and the insurer to go into arbitration. See SURPRISE on Page 7
Former Michigan Gov. Rick Snyder testifies March 17, 2016, before the U.S. House Oversight and Government Reform Committee hearing in about Flint’s lead-tainted water crisis. | PETE MAROVICH/BLOOMBERG
Charges put executive decision-making on trial
A
Genesee County grand jury indictment of Richard Dale Snyder alleges the former two-term governor of Michigan committed the misdemeanor of willful neglect of duty for failing to supervise his underlings during Flint’s disastrous water switch in 2014 and 2015. The first count of the two-count indictment says Snyder shirked his responsibilities as the state’s chief executive by “failing to inquire into the performance, condition and administration of the public offices and officers that he appointed and was required to supervise.” The second count says the two-term Republican governor neglected to declare a state of emergency in Flint sooner. The charges leveled by Attorney General Dana Nessel’s office against Snyder and others during the Flint water crisis contain a common thread: The everyday decisions of government officials are fair game for criminal prosecution. “This is just wrong. I mean, it’s absolutely, fundamentally wrong,” said Rich Baird, Snyder’s right-hand man who was among the eight other former government officials indictedv last week. Prosecutors allege Baird committed perjury during a March 1, 2017, deposition under oath, committed a common law felony of misconduct in office and obstructed justice by “attempting to influence and/or interfere with ongoing legal proceedings.” The most serious charge against Baird is a 20year felony for extortion for allegedly attempting to coerce a group of Wayne State University researchers the state paid $4 million to determine whether Flint’s water led to a Legionnaires’ outbreak that killed at least a dozen. Managing the research group was part of Baird’s long list of duties as Snyder’s on-theground liaison in Flint after the discovery of toxic lead in the city’s drinking water. Baird said in an interview that he reined in researchers to stay “within the scope” of the project. “When they started wandering ... off the reservation and doing things outside of the scope, we pulled them back in,” Baird told me.
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 | JANUARY 18, 2021
Chad
LIVENGOOD
Does this rise to the level of extortion? The indictments offer no revelations of corrupt intent on the part of Snyder, Baird and company. Snyder’s second count of willful neglect of duty doesn’t say when the governor should have declared an emergency in Flint. But a full year before Snyder moved to switch Flint back to Detroit’s water system, weeks before his 2014 re-election, General Motors Co. found the city’s drinking water was so corrosive that it wasn’t suitable for engine parts, much less stomachs. Wayne County Prosecutor Kym Worthy, who teamed up with state Solicitor General Fadwa Hammoud in the investigation, said the indictment against Snyder “goes far beyond failing to supervise.” “This goes far beyond leading a large organization and someone in an organization makes a mistake or a failure to supervise,” she said. “As the evidence comes out, it will be plain for everybody to see why, in fact, charges were necessary in this case.” What’s plain to see is who didn’t get indicted. Officials at the Genesee County health department spent at least 18 months investigating the deadly legionella outbreak and never informed the Flint-area public of a communicable disease passing through the population, leading to deaths of patients at McLaren Flint hospital. But like the previous Flint water probe, no one from either the county, nor McLaren or federal agencies like the Centers for Disease Control and Prevention and Environmental See CHARGES on Page 7
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.
CHARGES
From Page 6
Protection Agency has been charged criminally for failing to alert the public about the threat. The county health department didn’t even inform all physicians in Genesee County, at a time when there was a major spike in pneumonia deaths that may very well have been undiagnosed Legionnaires’ disease — so the doctors didn’t even know to be on the lookout for it. Imagine if a public health agency had covered up a COVID-19 outbreak in 2020. That’s what the Genesee health department did in 2014 and 2015. But Nessel’s team isn’t charging anyone criminally at that level. Instead, they’re following the same path former Attorney General Bill Schuette’s team traversed, going after the bigger names in Lansing. Hammoud and Worthy leveled nine counts of involuntary manslaughter against former state health department Director Nick Lyon and Dr. Eden Wells, the state’s former chief medical executive. Lyon and Wells both endured lengthy preliminary exams and were ordered to stand trial before Nessel dismissed the charges in June 2019 and ordered a redo of a 3-year-old probe launched by Schuette. Thursday’s indictments added more counts of involuntary manslaughter to Wells’ and Lyon’s charging documents, but the underlying case looks the same as the one Schuette’s special prosecutor, Todd Flood, toiled away at. “We conducted a full and thorough investigation and followed the evidence in this case,” Hammoud said Thursday after I asked about the lack of accountability at the local or federal levels. The Snyder indictments give the impression that he’s criminally liable for the alleged inaction of Wells and Lyon, his appointees. The charging document cites Article V, Section 8 of the state Constitution that says a “duty to inquire into the condition and administration of any public office and the acts of any public officer, elective or appointive.”
SURPRISE
Rich Baird, a retired PricewaterhouseCoopers LLP executive, served eight years as former Gov. Rick Snyder’s transformation manager. | JAKE MAY/MLIVE VIA AP
The indictments imply Snyder should have inquired into how Lyon and Wells were handling the problems with Flint’s foul-smelling water. By this logic, all governors of Michigan will have to micromanage anything that may plausibly lead to death. The current governor, Democrat Gretchen Whitmer, has had two policies during the coronavirus pandemic that may give her pause after Snyder’s indictment. At the beginning of the pandemic, Whitmer ordered nursing homes to accept COVID-positive individuals discharged from hospitals. That policy was followed by an untold number of infections, hospitalizations and deaths. Nursing homes are ground zero of the pandemic, claiming 37 percent of Michigan’s COVID-19 deaths yet only accounting for 7.5 percent of cases. At Saginaw Correctional Facility state
prison, about 1,000 of the 1,400 inmates have tested positive for COVID-19 since mid-November, with two-in-five inmates currently experiencing active cases, according to the Michigan Department of Corrections. Five inmates are currently in Saginaw area hospitals. Three have succumbed to the virus since New Year’s Eve, according to the MDOC. In total, 132 state inmates have died from COVID-19, according to state data. Whitmer has repeatedly sidestepped questions about why she hasn’t commuted sentences of ill or elderly inmates or done something different to stop COVID-19 from ravaging the state’s prison population. There are empty prisons in this state that, with funding from the Legislature, could have arguably been reopened to socially distance inmates. But no such action has been taken.
Is this willful neglect of duty? On the surface, these are executive decisions made by the person voters empowered to manage the state. But someday there might be a prosecutor who thinks otherwise. This is the ever-so-slippery slope Nessel is taking the state down with these prosecutions. Baird worries that second-guessing by prosecutors of the decisions of career public servants could turn people off from working in state government, especially the executive ranks. “When (public servants) see that this is the kind of thing that can happen, I think you’re going to dry up the pipeline of people who wish to be in public service because the personal liability will simply be too great,” Baird said. Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood
Take Heart, Michigan.
From Page 6
Arbitrators will consider a variety of matters and then render a financial decision. As the Washington Post noted in an article, the federal solution was supported by providers and private equity firms, some of which have purchased physicians’ practices, removed them from insurance networks, and then started charging individuals sky-high prices. MAHP believes the arbitration solution will add costs and uncertainty to what should be a transparent transaction that should be handled with minimal bureaucracy and a high level of certainty. That certainty will protect insurance rates from increases that make it harder for companies and individuals to afford to purchase insurance coverage. We’ll continue to address surprise medical billing costs beyond providers including transport to medical care such ambulances and special air flights. Those issues will require additional work at the state and federal level. Dominick Pallone Executive Director Michigan Association of Health Plans
When “Financial security from generation to generation” is your wealth management firm’s tagline, you tend to take a long-term view of market performance. You also tend to be optimistic, given that historical market data overwhelmingly favors that mindset—even in the midst of a pandemic. A profound sense of gratitude helps. Gratitude to the pharmaceutical firms that are producing vaccines in record time; to the many who are visibly fighting the virus day and night at risk to their health; and to the equal number of good people who, beyond the spotlight, are providing products, services and aid to so many. As author Mary Anne Radmacher once said, “Courage doesn’t always roar. Sometimes it’s the quiet voice at the end of the day saying, ‘I will try again tomorrow.’” With you, and in good measure thanks to you, we, the people, are prevailing.
Kalamazoo Grand Rapids Birmingham Traverse City Bay Harbor | 800.416.4555 greenleaftrust.com
JANUARY 18, 2021 | CRAIN’S DETROIT BUSINESS | 7
Gr ra fu bi
CRAIN’S MICHIGAN BUSINESS: GRAND RAPIDS
MED-TECH METROPOLIS MSU brings research, innovation muscle to Grand Rapids’ Medical Mile Doug Meijer Medical Innovation Building under construction (at left) next to the MSU Grand Rapids Research Center. In the foreground is a parking deck, where the Perrigo Building will be built.
BY TOM HENDERSON
Development has accelerated at Michigan State University’s Grand Rapids Innovation Park, at the northwest corner of the city’s Medical Mile, so called for its array of health care facilities and institutions. The school’s Grand Rapids Research Center opened on the 2.5-acre site in 2017. The entire Medical Mile has about 15 acres. The building has 162,000 square feet and was built at a cost of $88 million. It currently houses 180 employees and 33 teams working with principal investigators on a variety of projects, including women’s health, cancer, pediatrics, neurosciences, autism and bioinformatics. Going up next door, the outside sheathed in orange vapor-barrier material, is the $85 million, six-story, 200,000-square-foot Doug Meijer Medical Innovation Building, scheduled for completion this fall.
8 | CRAIN’S DETROIT BUSINESS | JANUARY 18, 2021
“IT’S MIRACULOUS THE PACE AT WHICH WE’VE BEEN ABLE TO MOVE. I ALWAYS SAY, ‘EVERYTHING IS POSSIBLE IF YOU DON’T CARE WHO GETS THE CREDIT.’” — Norm Beauchamp Jr., M.D., MSU executive vice president for health sciences
Immediately to the west of those buildings will be the North American headquarters for Perrigo Co. plc, a maker of health care products, with groundbreaking this spring. Perrigo is now headquartered in Ireland but was founded in 1887 in Allegan, which currently is home to its North American headquarters. Perrigo has committed a capital investment of $44.7 million over its lease of 15 years and will bring 170 jobs to Grand Rapids. It will occupy 63,000 square feet of the $50 million, 10-story, 125,000-square-foot building, which is adjacent to a new
six-story, 600-car parking deck. On the north side of the park is a surface parking lot that will be the site of another building in the future. The Meijer and Perrigo projects were kickstarted in June 2019 when MSU entered a public-private partnership with Health Innovation Partners LLC, a joint real-estate development between MB Real Estate of Chicago, Walsh Construction/ Walsh Investors of Chicago and Rockford Construction Co. of Grand Rapids. See INNOVATION on Page 10
Conquer Accelerator finds early success PAGES 10-11 MSU brings research, innovation muscle to Grand Rapids’ Medical Mile. THIS PAGE Grand Angels raising $25M fund, its biggest ever. PAGE 9 Pack Elephant offers an alterna-
tive to corporate tchotchkes, opens a new storefront. PAGE 9
Entrepreneur wants to change how we shop using facial recognition technology. PAGE 12
ROCKFORD CONSTRUCTION/HEALTH INNOVATION PARTNERS
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FOCUS | GRAND RAPIDS
Grand Angels raising $25M fund, its biggest ever
GIFT-GIVING GETS A LIFT
ROCKFORD CONSTRUCTION/HEALTH INNOVATION PARTNERS
BY TOM HENDERSON
The Grand Rapids-based Grand Angels are planning on a grand year for 2021. The most active angel investor group in the state — and, founded in 2005, the oldest — is raising a new limited-partner investment fund of $25 million, its biggest ever. It will coinvest in deals with individual angel investors around the state. Previously, the Grand Angels had raised investment funds of $1.5 million, $7.25 million and $11.8 million. According to Angels chairman Carl Erickson, the group is planning to add four more angel groups around the state this year to its affiliated angel network. In 2017, the Grand Angels helped launch the Kazoo Angels of Kalamazoo, and last year it helped launch the Flint Angels and the Detroit-based Woodward Angels. Erickson said he has a memorandum of understanding for an affiliation with an angel group in Jackson and had meetings in January with angel investors in two other cities around the state. He said there are about 100 members in the four affiliated angel groups, with about 50 in the Grand Angels, and he’d like to increase the total to 250 with the addition of more affiliates. The Grand Angels help with back-office support and due diligence and in return get better deal flow from a wider geographical base of networking. Erickson said a new structure has been put in place to better manage the growing affiliate network following the departure last year of Grand Angels president Tim Parker, who was recruited to be president and CEO of the Community Foundation of North Central Wisconsin in Wausau. A nonprofit trade organization has been formed called the Michigan Capital Network Association. Under that umbrella, the Michigan Capital Network Angels will coordinate the member angel groups and support, and the limited-partner funds will be managed as Michigan Capital Network Ventures. Paul D’Amato is managing director of MCN Ventures. Dale Grogan was recruited in November to help him manage the funds. For the previous 10 years, he was managing director of the Grand Rapids-based Michigan Accelerator Fund I. Erickson said he is looking to hire someone to be director of the MCN Angels. The new fund will invest in early stage Michigan companies and companies in the Great Lakes region. Erickson said that individual angel members generally match fund investments on a dollar-by-dollar basis, giving the fund in effect the impact of a fund twice that size. See ANGELS on Page 12
Winsome Kirton | CRAIN’S DETROIT BUSINESS
Pack Elephant offers an alternative to corporate tchotchkes, opens a new storefront BY TOM HENDERSON
Winsome Kirton thought there was a market need she could fill after she moved to Grand Rapids in 2017 with her husband, Thomas Hordt, who took a position at the Mary Free Bed Rehabilitation Hospital. Instead of the chintzy gifts that companies often give to their employees or customers over the holidays, she wanted to organize thoughtfully curated gifts that recipients would much more appreciate. It was an idea that had begun percolating several years earlier when she worked in advertising in New York City and noticed that companies liked to give out gifts at Christmas but seemed to pay little attention to their quality. They were just checking off a box. Kirton also thought she could solve another market need, too, by helping artisans who were people of color, women or members of the LGBTQ community get more of their art to the marketplace. “Corporate giving is a $125 billion business in the U.S., but it’s tchotchkes, water bottles, key chains. It’s boring. It’s not sourced with intention,” said Kirton. “We’re not selling key chains. I want employees and clients to get gifts of value.” She founded Pack Elephant Inc. in her home in 2018, doing strictly online sales, then expanded her presence to downtown Grand Rapids in December when she became
“CORPORATE GIVING IS A $125 BILLION BUSINESS IN THE U.S., BUT IT’S TCHOTCHKES, WATER BOTTLES, KEY CHAINS. IT’S BORING. IT’S NOT SOURCED WITH INTENTION.” — Winsome Kirton, founder, Pack Elephant
the ground-floor anchor tenant in a 3,000-square-foot space in Studio Park, a new $160 million development that was a partnership between Downtown Grand Rapids Inc. and the developer, Jackson Entertainment Inc. The store will also host events and programs to support budding entrepreneurs. The timing of the store’s opening in the year of COVID-19 was fortuitous. So many artisans had been deprived of the fairs and craft events where they normally show and sell their goods. Kirton said that the pandemic sharply hurt her business when it hit in March, ending large weddings and other events where gift bags are common. But she said what seemed to be a pent-up demand to have fun and do good led to a banner holiday season. Customers can build gift packs for
employees or clients at the store, but they can also buy individual retail items. Her core business is still online gift packages. She employs five full-time employees on the core business and four part-time at the store. The core business has commercial customers in 10 states and has shipped to 42 states and four countries, as far away as Australia. Her journey from virtual to brickand-mortar is an example of how the Grand Rapids community supports entrepreneurship. In June 2018, Kirton won $5,000 at a monthly pitch event put on by Start Garden, the DeVos family incubator for startups in downtown Grand Rapids. The next year she won $1,000 at another Start Garden pitch night. “Winsome has grown her product offerings and expanded the list of locally sourced products that make up her thoughtfully curated gift boxes. With the opening of the Marketplace at Studio Park, a onestop shop for supporting local creators, the message of ‘shop local’ has never resonated more strongly. She is smart to be embracing both the online and in-person shopping experience,” said Laurie Supinski, program director at Start Garden. Kirton has been sharing her entrepreneurial skills since December 2019 as an entrepreneur-in-residence at Gateway Grand Rapids at the Michigan State University Innovation Center. Gateway helps would-be entrepreneurs with men-
toring, finding service providers and connecting with possible investors. “Winsome is really a great person, a very good entrepreneur,” said J. Kevin McCurren, commercialization program director for Gateway Grand Rapids. McCurren helped her get a business-accelerator grant of $8,000 from the Michigan Economic Development Corp. Helping her move into her space, formally called the Marketplace Powered by Pack Elephant, was a $67,500 retail-renovation grant from the Downtown Development Authority to cover 18 months of rent as the store builds business and recoups its $50,000 investment in the space. Currently, the store features 150 creations from 35 local artisans, with plans to soon add another 20 artisans. Items include unique snacks, bath and body products, candles, paintings, coasters made from cut and polished concrete and handcrafted and extremely heavy corkscrews. The large floor space has socially distanced racks of products, each displaying the artisan’s name, city and background, with a QR code that shares more information. Items range from $5 to several hundred for the paintings that line one wall, which are on loan from a local gallery. See GIFTS on Page 12
JANUARY 18, 2021 | CRAIN’S DETROIT BUSINESS | 9
FOCUS | GRAND RAPIDS
FERTILE GROUND Conquer Accelerator kicks off in Grand Rapids, finding early success with lawn care startup BY TOM HENDERSON
Last fall, Spartan Innovations, the entrepreneurial arm of the Michigan State University Foundation, launched a Conquer Accelerator startup incubator program in Grand Rapids. Five companies took part in the 10-week program, which had to be done virtually because of the pandemic. The Conquer program bills itself as an accelerator. One of the five companies in that first cohort, Lawnbot.biz, made good on the program’s name and intention. It accelerated like a rocket: from stop to full speed in a second. The Conquer program provides convertible note funding, with $10,000 up front and $10,000 upon completion. By the time the 10-week program was over, Lawnbot’s CEO, Kendall Hines, was in negotiations to be bought and didn’t need the second payment. On Jan. 11, it was announced that Lawnbot has been bought by Real Green Systems of Walled Lake. Hines says that under terms of his contract, he will pay Conquer back $20,000, giving it a nice return on its brief investment. The second Grand Rapids cohort, pending progress with COVID-19 vaccinations, is scheduled to be held in the new $85 million, 205,000-squarefoot Doug Meijer Medical Innovation Building, which is set to be completed this fall in the school’s Grand Rapids Innovation park on the north side of downtown. The first Conquer Accelerator was launched in East Lansing in 2016. The program provides $20,000 in funding, as well as mentorship and networking, to each of a cohort of five companies each year. Thus far, 20 companies have received a total of $500,000 from the program and have gone on to raise an additional $3 million in funding. Bringing the Conquer Accelerator to Grand Rapids was the request of the Grand Rapid SmartZone’s Local Development Finance Authority. “The LDFA heard what we’d been doing and approached Spartan Innovations about bringing our program to Grand Rapids. It made a lot of sense
INNOVATION
From Page 8
MSU’s first investment in the Medical Mile was in 2010 when it built the $90 million, 180,000-square-foot Secchia Center to be the headquarters of the College of Human Medicine and house laboratories and classrooms for 350 medical students. Norm Beauchamp Jr., M.D., is MSU’s executive vice president for health sciences and has been overseeing the build-out of the innovation park, which he envisions as a holistic approach to health care innovation, with research leading to better treatment of disease and the creation of for-profit companies and jobs — or, as he puts it, creating synergistic partnerships between academic research, clinical practice and industry. He said the plan for the new build-
“THE LDFA HEARD WHAT WE’D BEEN DOING AND APPROACHED SPARTAN INNOVATIONS ABOUT BRINGING OUR PROGRAM TO GRAND RAPIDS. IT MADE A LOT OF SENSE BECAUSE WE HAVE A BIG PRESENCE IN GRAND RAPIDS.” — Thomas Stewart, program director, Conquer Accelerator
because we have a big presence in Grand Rapids,” said Thomas Stewart, the accelerator’s program director since it was created. Stewart is also portfolio manager for Quantum Medical Concepts, a funding organization founded by the East Lansing-based Michigan State Medical Society. Quantum invests up to $250,000 in companies, and has co-invested in Conquer Accelerator companies. The Grand Rapids program kicked off on Sept. 14 and culminated with a virtual investor event on Dec. 9 for participants to pitch potential investors. Real Green was founded as a lawn care company in 1984 and has morphed over the years into a company that provides software to large lawn care companies across the U.S. to help them manage scheduling, invoicing, payments, global positioning and cost estimating. Lawnbot.biz was a perfect fit. Hines describes the company as Spotify for the landscape business, which has largely continued to do customer acquisition the old-fashioned way, with would-be customers leaving phone messages and waiting for a call back (which in the busy summer season tends to be delayed). Lawnbot does online lead generation and ordering for large lawn service operations. For example, if a would-be customer with a factory in an industrial park Googles lawn care companies, up will pop a link to ings includes labs for clinical trials, incubator facilities for startups, space to be rented out to service providers such as patent attorneys, and offices for venture-capital firms that may be based elsewhere in the state but want to have ready access to entrepreneurs there. Tenants who have signed up include Spectrum Health; the MSU College of Biomedical Engineering; and BAMF Health, a startup that will use cyclotrons being installed on the ground level of the Meijer building to produce what it calls radiotracers for non-invasive diagnosis and treatment of cancer, Alzheimer’s, Parkinson’s, cardiac disease, endometriosis, PTSD and depression. BAMF is an acronym for Bold Advanced Medical Future. The cyclotrons and radiopharmacy will be built out and owned by MSU as part of the $19.5 million gift from Doug Meijer and the Meijer Family Foundation.
10 | CRAIN’S DETROIT BUSINESS | JANUARY 18, 2021
Lawnbot’s local customers. There, the prospective customer can enter what kind of services he or she wants — mosquito control, lawn-mowing, fertilization or a combination, along with frequency of service — and get a quote. The quotes are facilitated by a tool Hines and his co-founder, chief technology officer Erik Alburg, have created called measur.it. Upon entering an address, a Google map of the location appears. The would-be customer can then, using a fingertip, scratch in the area to be attended to — a front lawn and not a back, for example. Measur.it determines the square footage, which results in a quote depending on the service wanted. By the beginning of January, the company had 167 large lawn care companies as customers, in 32 states and Canada. It had five employees, three software developers and two in sales and marketing. Terms of the sale weren’t disclosed, but Hines, who is 29, said, “It was life-changing money for us. My family is taken care of.” As part of the sale agreement, he and Alburg agreed to run the business unit for at least two years. They get to keep ownership of the measur.it app, for which they have been granted a provisional patent. “It’s a great story,” said Stewart. “We’re proud to have played a small part. Kendall was fantastic to work with. What I like about the technology is it is simple, intuitive, and there’s a clear market need.”
Seeds of an idea Lawnbot traces its roots to 2013. That’s when Hines became a co-owner of his father’s business, the Grand Rapids franchise of Lawn Doctor, a national lawn care company. “I grew up in the truck with my dad,” said Hines. The franchise had about 100 customers, some residential, some commercial. Using aggressive marketing tools that evolved into Lawnbot, Hines grew the customer base to about 2,000 by 2018, which is when he brought on a partner, Mike Christie, to buy his father out. MSU will then lease those spaces to BAMF and have access to the equipment for its own research. Doug Meijer was particularly motivated to help fund the building and, especially, the cyclotron because when he had prostate cancer, he could afford to fly to Germany for the same focused radiation treatment that will soon be available in Grand Rapids. Plans also call for having a medical-device company focused on the internet of things. Two new efforts at entrepreneurial outreach and support by MSU — the Grand Rapids Conquer Accelerator and Gateway Grand Rapids — will be housed in the Meijer building when it is completed. Gateway is currently in the research center. The Grand Rapids Conquer Accelerator is the second location of an accelerator first launched by the MSU Foundation in East Lansing in 2016.
Erik Alburg, CTO, left, with Kendall Hines, CEO | LAWNBOT
By then, Hines was intent on spinning out Lawnbot as a separate company. “I’d work for Lawn Doctor all day and then come home and work till 2 a.m. on Lawnbot,” said Hines. Soon, Hines sold his share of Lawn Doctor to his younger brother, Jordan, to concentrate on Lawnbot. In May 2019, Lawnbot was part of the annual pitch event for 100 promising entrepreneurs put on by Start Gar-
A rendering of the Doug Meijer Medical Innovation Building. | SMITHGROUP
den, the DeVos family startup incubator in Grand Rapids. About 800 had applied, and Lawnbot was one of those selected to pitch. It was one of 10 winners of $20,000. He incorporated in October and began selling product. In January 2020, Lawnbot caught the eye of Real Green executives at the big annual national convention the lawn care company hosts, this one at the Opryland Resort and Convention Center in Nashville, which kickstarted negotiations
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FOCUS | GRAND RAPIDS
BREATHING EASIER Ventilator usage during COVID-19 brought need for innovation to the forefront BY TOM HENDERSON
about selling the company. “Bill said, ‘Before you sign any term sheets, talk to me,’” said Hines, referring to Bill Nunan, Real Green’s CEO. “I know Kendall. I love his enthusiasm,” said Carl Erickson, chairman of the Grand Angels investment group, just before the company was sold. “He has energy and grit and the practicality to get things done. Lawnbot was all bootstrapped. Kendall didn’t have to take investment capital, which may sound silly coming from someone who makes investments. But not ev-
eryone needs to raise capital. If he ever does need to raise capital in the future, I’d take it to the Michigan Capital Network in a heartbeat.” The Michigan Capital Network is an affiliation of the Grand Angels of Grand Rapids, the Flint Angels, the Kazoo Angels of Kalamazoo and the Woodward Angels of Detroit. Now, though, there won’t be a need. Contact: thenderson@crain.com (231) 499-2817; @TomHenderson2 Conquer provides $20,000 in funding, mentorship and networking to a cohort of early stage companies each year. The program was expanded to Grand Rapids last fall. Five companies took part in the 10-week program, which had to be done virtually because of the pandemic. The plan is to have a second cohort of companies this fall in the Meijer building. The Gateway Grand Rapids, funded by the Michigan Economic Development Corp., helps entrepreneurs with networking, finding service providers and mentors and pursuing possible funding from early stage investors such as East Lansing-based Red Cedar Ventures and Michigan Rise and Detroit-based InvestMichigan and InvestDetroit. “We were trying to have a bigger presence in Grand Rapids,” said J. Kevin McCurren, Gateway’s commer-
The first cohort of five companies in the initial Conquer Accelerator program in Grand Rapids finished the 10-week program in December. One of those companies, Lawnbot.biz, has already been sold (see related story, Page 10). Grand Rapids-based Airway Innovations LLC, another participant in the program, has landed its first paying customer, according to company founder and CEO Eric VanMiddendorp. Airway is a creation of his work as a lead biomedical engineer at Grand Rapids-based S p e c t r u m Health Innovations, the invention and entreVanMiddendorp preneurial arm of the Spectrum Health System. He continues to work full time for Spectrum while seeking funding and customers for his device, which has the trademarked name of TubeTrac. The device grew out of a medical need that became acute amid all of the ventilator usage during the COVID-19 pandemic. Intubated patients, even though they are sedated, can sometimes pull the breathing tube out of their throats — with dire consequences, an event known as an unplanned extubation. The tube is often also held in place with adhesive devices, which when removed can cause severe tissue tears. The TubeTrac is a strap system that goes around the patient’s head and is connected to the breathing tube with both the strap and a plastic clip. Much more force is needed to remove the tube, according to tests done during development, and the risk of tissue tears is eliminated. Filter Studio, a design studio in Grand Rapids, helped design the system. The devices are manufactured by Kalamazoo-based Keystone Solutions Group. cialization program director. He said the program has provided assistance of one sort or another to 65 companies since October 2019, and last year helped 14 companies get a total of $179,000 in funding. Beauchamp joined MSU as dean of the College of Human Medicine in 2016 and was promoted to his current title in October 2019. Before coming to MSU, he held leadership research positions at Johns Hopkins University, where he specialized in developing advanced magnetic resonance imaging techniques to help in the treatment of stroke victims and to identify risk predictors for stroke and dementia, and at the University of Washington, where he served as president of the university’s clinical practice of 1,600 physicians. “Collaboration is one of the keys to transforming health care. Industry partnership is everything you see
Grand Rapids-based Airway Innovations LLC developed a device to meet a medical need that became acute amid all of the ventilator usage during the COVID-19 pandemic. | AIRWAY INNOVATIONS LLC
VanMiddendorp landed his first customer, Valley Presbyterian Hospital of Los Angeles, by happenstance. A physician there who was unhappy with the breathing tubes his intensive care unit was buying did a Google search to see what else might be out there, came across Airway’s website and placed an order. That initial trial order has led to followup orders and Airway has replaced its original supplier. VanMiddendorp said Spectrum Health was going to start a large study of TubeTrac’s effectiveness late last year, but because of the surge in its COVID cases and an overburdened staff, the study has been postponed. VanMiddendorp said once the study has been rescheduled, assuming the results are as he expects, a purchase order would follow. A surprising thing for those who might have seen itemized hospital bills lately is the low cost of the TubeTrac — $14. As part of its participation, Airway got $20,000 in funding from the Conquer Accelerator. Thomas Stewart is program
manager both for the Grand Rapids Conquer Accelerator and the Conquer Accelerator in East Lansing, which was started in 2016. He also manages the portfolio at Quantum Medical Concepts, a seed fund for medical startups that was founded by the East Lansing-based Michigan State Medical Society. Quantum can invest up to $250,000 in companies, and Stewart said he was impressed enough with Airway to begin negotiations for an investment. He said he expects to have a decision in mid-February. “Eric has done an excellent job at translating a clinical challenge into a user-friendly device. He’s a hard worker who has shown a lot of grit and adaptability and he knows how to bring good advisers on board to fill gaps in knowledge or expertise,” said Stewart. “I’ve been impressed with his willingness to learn and be coached.” Gateway Grand Rapids, another MSU program that started in Grand Rapids in 2019, has been helping Airway with advice, networking and landing service providers and possible funding through such statewide early stage investment sources as Red Cedar Ventures and Michigan Rise, both in East Lansing, and Invest Detroit and Invest Michigan, both in Detroit. “Kevin is my mentor and helping me get investors,” said VanMiddendorp, referring to J. Kevin McCurren, Gateway’s commercialization program director. VanMiddendorp has won three business-plan competitions for a total of $38,500, got $80,000 in grants that did not dilute equity and has raised $350,000 from angel investors. He said he will soon start raising a round of $400,000. A marketing team will be needed down the road. For now, as the company’s only employee, he only needs a desk in shared work space in downtown Grand Rapids. Contact: thenderson@crain.com (231) 499-2817; @TomHenderson2 A rendering of the Perrrigo Building in Grand Rapids. | ROCKFORD DEVELOPMENT
looking out that window,” he said, referring to the Meijer building and the Perrigo site. “At the University of Washington, I built private-public partnerships throughout Washington and Asia, and I came here to apply what I learned and to have a transformative impact. How do you connect research to the health of patients?
How do you bring industry partners in? “It’s miraculous the pace at which we’ve been able to move. I always say, ‘Everything is possible if you don’t care who gets the credit.’” Contact: thenderson@crain.com (231) 499-2817; @TomHenderson2
JANUARY 18, 2021 | CRAIN’S DETROIT BUSINESS | 11
FOCUS | GRAND RAPIDS
MAGIC EYE
ANGELS
From Page 9
Entrepreneur wants to change how we shop using facial recognition
the technology. “We’ve been in clandestine mode,” said Meeks. “We want to do a frictionless point of sale without a lot of infrastructure. Can Grand Rapids be a center for computer vision?” There is a certain irony that he is hoping Iris can help Grand Rapids become a center for a new technology in a building that was once the scene of an older technology made in Grand Rapids. They are based in the old Metal Office Furniture Co. plant number two building, just south of downtown. Metal Office was a precursor of Steelcase, and the four-story building was built in 1909. It was added to the National Register of Historic Places in 2004. “Iris is one of the most compelling applications I have seen in some time. By combining complex computer vision and machine learning, the platform can solve a variety of real-life applications in supply chain, retail commerce and asset management,” said Mike Morin, a venture partner at Wakestream Ventures, the investment arm of Start Garden, the DeVos family startup incubator in downtown Grand Rapids. He said he has been tracking Iris’ progress for a possible investment. Meeks said Iris’ technology can be used in non-retail settings. He said he will be targeting health care systems, too. The technology could be deployed in operating rooms, for example, to track how instruments and equipment are used, eliminating one major source of surgical error and infection: when sponges are left inside patients.
In addition to the basic restructuring, Erickson said the Grand Angels have created two new classes of member. One will be emeritus members, investors who having hit a certain age and are perhaps unwilling to invest any more in the high-risk, high-reward nature of angel investing. But they can add insight and advice, mentor younger investors and be part of the due diligence process of vetting potential investments. The other will be emerging members. Until now, like most angel groups, members in the Grand Angel had to meet federal requirements for being considered high-net-worth individuals. Now, members can include those who are not yet high-net-worth individuals but might be one day. They won’t be able to invest, now, but they can benefit by seeing how investments are vetted and from building their networks. Erickson said a major benefit of having emerging members is it will allow the Grand Angels to diversify membership by welcoming in more women and people of color. “Angel investors are very white and very male. Right now, the percentage of women in the Michigan Capital Network is in the single digits,” he said. He said he will use the model he instituted seven years ago at Atomic Object, a web design company he founded in Grand Rapids. “Fewer than nine percent of our employees were women, and we wanted to change that. You have to go fish in different ponds. You need to go looking in different places. You need to use your networks and make an effort.” He said female employment jumped to 35 percent in four years and is at 40 percent, now. Last year, as COVID-19 hit, the various angel groups in the state went from holding in-person pitch events for those looking for investments to doing virtual events. Erickson said he hopes to boost deal flow and the recruitment of new angels by being able to get back to in-person meetings once vaccinations have become widespread. He said deal flow will be increased also by a stronger partnership with other early stage investors around the state, including Invest Michigan and Invest Detroit of Detroit and Michigan Rise, a fund affiliated with the Michigan State University Foundation.
Contact: thenderson@crain.com (231) 499-2817; @TomHenderson2
Contact: thenderson@crain.com (231) 499-2817; @TomHenderson2
BY TOM HENDERSON
Some startups have modest goals: they just want to carve out a niche for themselves and make a profit on the margins. Grand Rapids-based Iris Technology Inc., isn’t one of those startups. What it has in mind is something far grander — using its facial recognition software and computer vision technology to replace the bar codes that are everywhere in the world of retail, to replace the scanning systems that read those codes and ultimately eliminate the checkout lines that customers funnel through at stores. In other words, it wants to revolutionize how we shop. Iris was co-founded by James Meeks, who is co-founder and managing partner of Grand Rapids-based Rapids Venture, a boutique investment firm with a handful of early stage portfolio companies. He has a partner in New York, where Iris has launched a pilot project to demonstrate proof of concept with a packaged-food-to-go company called Fraiche Corp. Meeks is Iris’ president and chairman of the board. He has an MBA from Stanford University. The co-founder and CEO is David Stout, who got a bachelor’s degree from Stanford in machine learning. Fraiche is one of Rapids Venture’s portfolio companies. It markets itself as selling fine-dining food at fast-casual prices, with dishes made from ingredients primarily sourced from organic farms close to New York. The business model is to remove the store-as-middleman, with products on shelves in stand-alone refrigerator units in building lobbies or at local gyms. Sample dishes include wild roasted sockeye salmon with greens, seasonal veggies, mustard vinaigrette and sunflower-seed herb salsa; roasted alewife with carrots, chickpeas, dates, hummus and lemon vinaigrette; and a Manhattan cobb salad, with greens, smoked chicken, bacon, cheddar cheese, veggies and boiled egg with maple shallot vinaigrette. The one Fraiche location that uses Iris’ technology eliminates the need for a consumer to take the product to an employee to have it rung up and paid for. No staff is required to handle transactions. When customers register with Iris, their face is scanned by the company’s facial-recognition technology. Then they enter their credit-card information.
GIFTS
From Page 9
There are about 120 artisans with items for sale at her website, packelephant.com, most of them based in Michigan and many in and around Grand Rapids. Those items are stored in a warehouse in Pinckney. Kirton said that about 90 percent of the artisans are women, minorities or LGBTQ. Many of the rest are veterans. Kirton also benefited from an entre-
Above, James Meeks (left) and David Stout in Iris’ headquarters. At left, a Fraiche vending fridge. | IRIS
The refrigerator has two cameras, one aiming at food on the shelves, the other at the buyer. When the buyer picks up food and leaves, his or her credit card is billed for each item taken. Meeks said he has meetings scheduled soon to demonstrate the technology to two large grocery retailers. He said the plan is for him
and his partners to fund proof-ofconcept and early rollout of the technology and then bring it to venture-capital friends on the East Coast and in Silicon Valley for possible investments. Crain’s has confirmed that at least one venture-capital firm in Ann Arbor is in the process of setting up a meeting to get a demonstration of
preneurial support program in Austin, Texas, called MassChallenge Texas, one of the most prestigious pitch events in the country, annually showcasing entrepreneurs from around the U.S. Kirton was there in June 2019 and met Kathleen Lucente, founder and CEO of Red Fan Communications LLC, a marketing and PR firm in Austin, Texas. Lucente, the former head of public relations in the Hong Kong office of JPMorgan Chase, was there as a guest speaker, advising entrepreneurs on how to build their brand.
Kirton approached her afterward for more advice, which led to Lucente hiring Kirton to do her gift bags for the 2019 holiday season, for about 40 clients and 13 employees, a gig Kirton kept in 2020 and, says Lucente, will keep as long as she wants. “She’s amazing,” said Lucente. “I liked that she was supporting local artists, that all her gift bags had beautiful pieces. There was none of this ‘I found this shirt in Texas’ T-shirts. Corporate gifts are so cheesy so often. We hand delivered the gift bags
12 | CRAIN’S DETROIT BUSINESS | JANUARY 18, 2021
to clients and we got rave reviews. Half the gifts were from artists in Michigan and half were from Texas.” This past Christmas, depending on the client, gifts included one of Lucente’s favorite books, hand-knit caps, ceramic tea cups, handmade aromatherapy candles, CBD-infused coffee and leather goods. “What I can tell you is our clients absolutely love these gift boxes and the sentiment that goes with them. They don’t receive anything else like this,” said Lucente.
She passed on a note from a happy client: “You ROCK! I bet y’all can imagine my surprise when I discovered the package delivered to the house today. It was a pretty great feeling to discover all my new treasures inside. I love everything about this package, from your branding to the elephant paper clip. And I can’t wait to curl up on the couch with a good book and a cup of tea.” Contact: thenderson@crain.com (231) 499-2817; @TomHenderson2
TELETHERAPY Virtual care for behavioral health has been a revelation during pandemic
HEALTH CARE
TELEMEDICINE TAKES OFF
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Telehealth may continue to grow, but only if payment, benefits and regulations remain favorable to patients, providers Telemedicine popularity rose significantly in 2020 as the COVID-19 pandemic shut down physician offices and hospital ERs and ICUs were filled with seriously ill patients. But will the virtual care growth continue past the pandemic? Experts interviewed by Crain’s believe telemedicine is here to stay as many new users experienced its value and others realized the inherent danger of viral spread in hospitals and doctor’s offices. Patients also appreciated the safety and convenience of using virtual care at home when possible. `BY JAY GREENE |
“PATIENTS ARE VERY HAPPY WITH THE CONVENIENCE OF TELEHEALTH, GAINING SO MANY MORE HOURS BACK IN THEIR DAY FROM NOT HAVING TO SIT IN A DOCTOR’S OFFICE.” — Kimberly Lovett Rockwell, M.D., an attorney with Jones Day in Detroit and a family medicine physician
“Telemedicine’s time has finally come and there is no going back,” said Tracy Watts, Mercer’s U.S. health policy leader. “Thoughtful policy decisions made at this critical time can have an enormous impact on the positive role telemedicine can and should play in the future of the health care ecosystem.” How much telemedicine will grow past 2021 heavily depends on whether legislators make permanent the many laws and regulations that have allowed people to easily access telemedicine providers. Expanding mobile technology and improving Internet connection also must be addressed to reach all potential users.
Nationwide, telemedicine visits accounted for nearly 20 percent of physician visits in early December, down from 50 percent in April, but still significantly higher than the less than 1 percent seen before the pandemic, according to an analysis by the Chartis Group and Kythera Labs using claims data from commercial payers and Medicare Advantage health plans. Kimberly Lovett Rockwell, M.D., an attorney with Jones Day in Detroit and a family medicine physician, said much of the telemedicine growth will continue as patients and providers have found it worthwhile. See TELEMEDICINE on Page 15
JANUARY 18, 2021 | CRAIN’S DETROIT BUSINESS | 13
FOCUS | HEALTH CARE
Teletherapy reaches people in need at home Teletherapy, once only used in small pilot projects or infrequently by providers, has become a critical tool during the seemingly never-ending COVID-19 pandemic to combat mental health issues, depression and substance use addiction. One of the revelations that has come out of the pandemic is the high use of telemedicine for behavioral health services, especially substance abuse and opioid use disorder syndrome, said Dr. Kimberly Lovett Rockwell, an attorney with Jones Day in Detroit and a family medicine physician. “It just can’t be understated that access to mental health services is so difficult these days and to be able to reach more patients through telehealth in a private, comfortable setting where the patient feels comfortable and safe, it was just incredible,” Lovett Rockwell said. Vicki Bucciere, a sole practitioner therapist with BlueSpace Behavioral LLC in Northville, said her clients easily transitioned to 50-minute virtual care therapy from face-to-face visits in March. “Prior to the pandemic, I was seeing all of my clients in person,” Bucciere said. “And just suddenly, about March, everything changed. And all of my long-term clients have switched over to telehealth. It’s been very practical, and I would say it’s been very successful.” Dr. Jeffrey Guina, chief medical officer with Easterseals, said from March through December, the nonprofit providing disability services conducted more than 121,000 teletherapy visits, compared with several hundred in 2019. Overall, Easterseals served more than 15,000 people from last year, an increase of 9 percent. “Back in 2019, we started doing a telehealth pilot project for intake assessments. Any time a person came for services, we had an intake person do telehealth visits with them,” said Guina, adding some limited teletherapy services were offered to those bed bound or distance prohibited. “Our big goal was to ramp up in 2020. We wanted to improve access to care because people have transportation difficulties, work schedules and problems with child care,” Guina said. “Then COVID hit. Everything needed to be telehealth, and we changed over in 48 hours.” Now, after Easterseals received 13 grants and donations totaling $1.7 million, the mental health agency was able to offer clients laptops, tablets, webcams, microphones and good internet connections, about 98 percent of patients use telemedicine. One of the chief barriers in seeking mental health services for many people has been the stigma of making an appointment and following through with services, experts say. “There is a huge stigma of going to see a mental health provider. Just going to see a provider is hard to do,” Lovett Rockwell. “People with mild symptoms, feeling depressed, overwhelmed, those people are accessing services more. If I am crying, I don’t feel as much vulnerable if I am home.” Bucciere said she didn’t lose any clients in the switch to teletherapy.
SORBETTO VIA ISTOCK
BY JAY GREENE
“My clients have actually come to embrace this form of therapy. And I think we’re gonna have a little bit of difficulty going back to in-person, if anything,” she said. To conduct teletherapy, Bucciere asked her clients to download the Google Duo video calling app. It has one of the best security features in the commercial market, she said. To encourage telemedicine, the federal government waived some of the privacy requirements under the Health Insurance Portability and Accountability Act of 1996 (HIPPA) that temporarily allows online medical conversations. “We need to develop some client privacy protections under HIPPA if we continue to use the app,” she said. Bucciere said her clients love the convenience of setting up appointments and simply turning on their computer, tablet or smartphone. “We don’t have the traditional barriers in trying to set up an appointment to find someone to take care of the kids and get in your car and drive somewhere,” she said. “You’re right in the comfort of your own space.” Michigan data shows families with children struggling during the COVID-19 crisis have suffered mental health challenges as unemployment and stay-at-home orders affected their well-being, according to a report by the Annie E. Casey Foundation and released by the Michigan League for Public Policy. “We have an opportunity to do more at both the state and federal level to help parents get by during these difficult times, including being able to put enough food on their table, keep a roof over their heads and keep them physically and mentally well,” said Kelsey Perdue, Michigan
14 | CRAIN’S DETROIT BUSINESS | JANUARY 18, 2021
Kids Count project director at the Michigan League for Public Policy, in a statement. As of October, 34 percent of Michi-
“PRIOR TO THE PANDEMIC, I WAS SEEING ALL OF MY CLIENTS IN PERSON. AND JUST SUDDENLY, ABOUT MARCH, EVERYTHING CHANGED. AND ALL OF MY LONG-TERM CLIENTS HAVE SWITCHED OVER TO TELEHEALTH.” — Vicki Bucciere, a sole practitioner therapist with BlueSpace Behavioral LLC
gan households with children said that they have felt nervous, anxious or on edge for more than half of the days or nearly every day for the past seven days, and 22 percent said they felt down, depressed or hopeless for half or more of the previous week. These mental health concerns have been even higher for Black residents, who also have been at greater risk of contracting and dying from COVID-19 and experience other racialized outcomes, according the Casey Foundation report. Due to COVID-related insurance access, medical costs and exposure concerns, nearly one-third of Michigan families reported delaying medical care. And a quarter of Michigan households raising kids said that
they simply did not get needed medical care because of the COVID-19 crisis, according to the Casey report. Bucciere said anxiety and mood dysphoria levels have increased across all age groups and income levels. “There is just a general sense of worry about what’s going on, not only in my personal life, but in the world,” she said. “People reach out because they’re looking for some source of support, emotional support.” The majority of patients are referred to Bucciere through employee assistance programs, she said. “These are employees who ordinarily are working, but now they’re working remotely, and they’re experiencing lots of problems in relation to that,” she said. “They have relationship conflict, substance abuse and mood problems. Most of these people ordinarily would be going into the workplace every day.” Another major development with teletherapy has been the increased numbers of people with substance use disorders using telemedicine, experts said. “(The federal government waived) the Ryan Haight Act to get opioid treatment” through telemedicine, Lovett Rockwell said. “One company reported nearly 50 percent of patients seen through telehealth have never been seen before. More people getting treatment now and the potential of reaching drug disorder patients when not in the ER is huge.” Lovett Rockwell said using telemedicine for substance abuse issues reduces the stigma of having to show up in person. Substance abuse teletherapy expansion is much needed now, Guina
said, because drug overdoses have skyrocketed during the pandemic. “There has been a 42 percent increase in overdoses” in May during the pandemic over the same month in 2019, said Guina, citing the federal ODMAP study. “The direct stress of the pandemic, people dealing with grief and loss and the indirect effect of shutdown, the loss of jobs.” Guina said some people are just bored and using more drugs and alcohol. “The way I see coping skills, we all have a list of skills. When stressed you go to this list to cope with stress. Once you use up your healthy skills — like going to the gym or seeing friends or family — you go to unhealthy skills like suicide, drug or alcohol use,” said Guina, adding that he estimates up to 15 percent of Americans started using unhealthy coping skills last year. Guina said the biggest surprise he has seen with people using telemedicine services is the high customer satisfaction. Before the pandemic, people complained about technology not working, the quality of service or feeling disconnected during the online visit, he said. “I’ve done a lot of telehealth in the past in my own career. And so I knew that it was that sometimes people are a little hesitant at first because it’s new and different,” Guina said. “Our customer satisfaction surveys were very high. If anything, people were saying: ‘I love this new way of doing this. I am so glad I don’t have to deal with the transportation issues. I don’t have to deal with rounding up my kids and figuring out how to get there. I don’t have to take time from work.’” As thousands of people have been hospitalized from COVID-19, health care workers are facing exceptional stress levels and provider burnout is becoming more serious, experts said. “I have colleagues who have PTSD symptoms for being on the front lines of the pandemic,” Lovett Rockwell said. “Physicians have taken pay cuts and experienced increased workload. This the quintessential formula for burnout. I hope that physicians are getting help for burnout. But physician burnout is a very serious, very real, very big problem.” Shaya said he is hearing from physician friends that burnout is “going through the roof. “The stress the front-line people are going through, the uncertainty every day, is a new challenge,” he said. “A lot of providers don’t see light at the end of the tunnel. Even with vaccine, the scare is almost as worse as the pandemic. A lot of people have retired because of the pressures and strain.” Guina said he also is highly concerned about the pandemic’s effects on providers. “Even before COVID, there’s been a lot of recognition about physician wellness and health care provider wellness in general,” Guina said. “A lot of people in health care are really good at helping other people, but they’re not always so good at helping themselves. And a lot of times, they don’t necessarily follow their own advice to get help.” Contact: jgreene@crain.com; 313-446-0325; @jaybgreene
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“We’re going to see an improvement in patient outcomes,” said Kimberly Lovett Rockwell, an attorney and a family medicine physician. | CYDNI ELLEDGE FOR CRAIN’S DETROIT BUSINESS
TELEMEDICINE
From Page 13
“Patients are very happy with the convenience of telehealth, gaining so many more hours back in their day from not having to sit in a doctor’s office,” Lovett Rockwell said. “Physicians are overall very satisfied with telehealth. Some of the growth we’ve seen are for places that don’t have a sustainable solution” such as care at home for seniors with chronic conditions or behavioral health coverage. (See sidebar, Page 14). Forty-one percent of U.S. patients indicated they would continue to use telemedicine to meet with their providers after the pandemic, according to a report from the Healthcare Information and Management Systems Society in Chicago. Projections show that virtual care could surpass 440 million visits in 2021, down from 2020, which is on track to hit 481 million visits, said Forrester, a Cambridge, Mass.-based market research firm. Dr. Steve Shaya, chief medical officer with J&B Medical in Wixom, which operates the subsidiary company HNC Virtual Care Solutions, said health care organizations, health insurers and government should make permanent all the waivers granted to telemedicine during the pandemic. “Health care has fundamentally changed from the bricks and mortar. It’s going to accelerate more and more as people try to do things virtually,” Shaya said. “There’s a lot of folks
that do not want to walk into a doctor’s office, or into a hospital now, because they feel they’re increasing their risk of getting exposed to something.” Lovett Rockwell agreed the fear of being infected with COVID-19, influenza or another community transmissible disease could drive more telemedicine use. “Certainly I think the public has become more aware than when you go to a hospital or doctor’s office, you’re being exposed to sick people,” Lovett Rockwell said. Shaya said there will always be a need for in-person diagnostic testing and patient evaluations, especially for diagnosis. But with the expansion of remote testing devices such as body-worn continuous glucose monitors, heart rhythm devices, Bluetooth weight scales, pulse oximeters and blood pressure cuffs, all used at home, the use telemedicine for followup visits is just beginning, he said. “There’s a lot of momentum around using telehealth technology to treat and even identify chronic conditions to meet patient needs,” Shaya said. For example, HNC has partnered with National University’s Nurse-Managed Clinic in Watts, Los Angeles, and other community groups, to improve health care access for residents. Key to treatment success is first identifying a population’s barriers to care, which has been called social determinants of health, he said. “We manage one of the largest pa-
tient populations of patients with diabetes in the country (in Los Angeles) and you can get them their insulin, you can get them their supplies, you can get them their insulin pumps. But if they don’t have a refrigerator to put the insulin in, there’s
“THE MOST PRESSING LEGAL NEED, FROM A TELEHEALTH PERSPECTIVE, IS A PERMANENT CHANGE TO THE GEOGRAPHIC AND ORIGINATING SITE RESTRICTIONS FOR MEDICARE REIMBURSEMENT. ONCE MEDICARE MAKES A CHANGE, EVERYONE (OTHER HEALTH INSURERS) FOLLOWS SUIT.” — Kimberly Lovett Rockwell, M.D.
gonna be issues,” Shaya said. Mercer said because of the pandemic telemedicine utilization increased more in the last year than was expected by 2025. Moreover, 68 percent of employers with active telemedicine programs said they were satisfied with their programs
and 27 percent were very satisfied, said Mercer in a June survey of more than 600 employers. “With the pandemic, everyone has become more accustomed to virtual and digital services and I do think that will continue, because of expectations consumers have,” said Watts, who also is a board member of the American Benefits Council, a Washington, D.C.-based group that advocates for employer benefits. But for telemedicine to continue growth, Mercer, the American Benefits Council and Catalyst for Payment Reform have proposed in a report four key telemedicine considerations for policymakers: ` Make permanent the provision in the CARES Act allowing health saving account-eligible high-deductible health plans to cover telemedicine services on a pre-deductible basis. ` Ensure that if an employer expands telemedicine services it does not violate federal health laws, including the Affordable Care Act of 2010 or the Employee Retirement Income Security Act of 1974. ` Remove state barriers to telemedicine care such as requiring that patients have a pre-existing relationship with the provider before receiving virtual care and allow licensed providers to deliver telemedicine services to patients in other states. ` Modify mandates that require parity in payments to providers for virtual and in-person services, which could limit employers’ flexibility to innovate and pursue value-based care.
“Over the long term, employers have been looking for more flexibility with HSA plan designs. And so things like telemedicine or things like the use of an on-site clinic, that prior to the pandemic has all been subject to a deductible, does enable employers to reduce or waive ($50 to $60) copays if they wanted to,” Watts said. While most private health insurers have temporarily waived cost sharing for telemedicine services during the pandemic, they haven’t committed to doing so forever. “A lot of that volume increase in telemedicine is happening in areas that don’t currently have projected permanent sort of reimbursement support or legislative support for the long term,” said Lovett Rockwell, adding: “There is some optimism that may change.” Last June, the Michigan Legislature approved and Gov. Gretchen Whitmer signed five bills, effective Oct. 1, that expanded telemedicine under the Medicaid program for physical and mental health services. The laws now allow Medicaid patients to be at home and receive telemedicine services. “The bills weren’t earth-shattering” but they will help, Lovett Rockwell said. “The most pressing legal need, from a telehealth perspective, is a permanent change to the geographic and originating site restrictions for Medicare reimbursement. Once Medicare makes a change, everyone (other health insurers) follows suit.” See TELEHEALTH on Page 16
JANUARY 18, 2021 | CRAIN’S DETROIT BUSINESS | 15
FOCUS | HEALTH CARE
TELEHEALTH
From Page 15
Under Medicare’s geographic and originating site restrictions, beneficiaries can only use telemedicine if they are in a designated rural area or if they are located in a medical office. Doctors can be located anywhere, but beneficiaries can’t be at home, Lovett Rockwell said. While those rules have been temporarily waived during the COVID-19 pandemic, Lovett Rockwell said Congress must enact statutory changes to make the rules permanent. “There have been several bills introduced. There is a lot of optimism in the coming year’s legislation to change Medicare’s (and Medicaid) coverage with regard to the originating site and rural rule,” Lovett Rockwell said. “Not being allowed telemedicine at home sort of defeats the whole purpose.” In addition, under the new Medicare physician fee schedule approved in December, Medicare has expanded the list of telemedicine services covered by more than 140 eligible services through 2021 or the year in which the public health emergency ends. The new telemedicine services allow provider reimbursement for initial observation care, remote physiologic monitoring, initial inpatient and nursing facility visits, discharge day management services, certain neurostimulator analysis and programming services, and cardiac and pulmonary rehabilitation services. “The sad thing about it is that Medicare is now reimbursing for the use of emergency department telemedicine services, but that is one of the services that will go away at the end of 2021” unless Congress acts, Lovett Rockwell said. “CMS is conducting a report and is supposed to issue a report on telemedicine services sometime in 2021 that will evaluate utilization of telehealth services and exam and all of that, and potentially, that could lead to some additional positive changes,” she said. Before the pandemic, one of the biggest challenges to telemedicine was lack of technology and infrastructure for physician organizations, health systems and telehealth companies, Lovett Rockwell said. As a result, many health care organizations have spent millions to build out the infrastructure they now have, she said. “That’s one of the reasons we think there’s really no putting the cat back in the bag,” Lovett Rockwell said. Another concern is whether government and private payers will continue to reimburse doctors for telemedicine at the same level as in-person visits. “Physicians prefer in-person visits because of the higher reimbursement,” Lovett Rockwell said. “If (payers) lower reimbursement, it is unclear how (doctors) will sustain it.” On the other hand, telemedicine historically has increased health care costs without much evidence of cost-savings from avoided ER visits or hospitalizations because people used it as an additional service, not as a replacement. But in the future some experts believe it will either keep costs stable or reduce them. “We’re going to see an improvement in patient outcomes and I feel so
“IF YOU COULD IDENTIFY HIGH-RISK, HIGH-COST PATIENTS, USING TECHNOLOGY, YOU CAN MEASURE THEM REGULARLY AND MANAGE THEIR CARE AND REDUCE THE NUMBER OF FOLKS WHO END UP IN ERS AND HOSPITALS.” — Dr. Steve Shaya, chief medical officer with J&B Medical
Stephen Shaya, M.D., holding Health Net Connect’s VideoDoc tablet. | J&B MEDICAL
confident about that because patients are more satisfied and they have more confidence that they can reach their doctor when they need to. It is always helpful for managing chronic condition,” Lovett Rockwell said. Others have a concern about rising costs from more telemedicine utilization. Andréa Caballero, Catalyst for Payment Reform program director, said telemedicine has proven its ability to improve access to health care for many people. But Caballero said employers and other purchasers “are concerned that continuing to pay the same for telehealth visits as in-person visits will not only raise costs but be inappropriate, as certain care can only be provided in person.” While there haven’t been any significant medical malpractice lawsuits filed against telemedicine providers, Lovett Rockwell said the federal government has issued warnings about telemedicine fraud and abuse issues. “The government has expressed an interest in creating more scrutiny around the delivery of telemedicine because there has been such a rapid proliferation of the technology and the relaxation of laws and regulations surrounding the delivery of telemedicine,” Lovett Rockwell. “The government really wants to be sure that the services that are being delivered are medically necessary services.” Last September, the U.S. Department of Justice charged 345 people,
16 | CRAIN’S DETROIT BUSINESS | JANUARY 18, 2021
including more than 100 doctors, nurses and other licensed medical professionals, submitting more than $6 billion in false and fraudulent claims to federal health care programs and private insurers, including more than $4.5 billion connected to telemedicine, according to a press statement.
Telemedicine and chronic disease Besides minor injuries, routine sore throats, coughs, colds or urinary tract infections, telemedicine can best address monitoring patients with chronic diseases, experts said.
“PLAN SPONSORS HAVE A ROLE IN THAT IN TERMS OF HOW THEY DESIGN THE BENEFIT, THE TYPES OF INCENTIVES TO SAY SUPPLY THEIR ARRANGEMENTS WITH THEIR VENDOR PARTNERS AND HOW THEY’RE STRUCTURED.” — Tracy Watts, Mercer’s U.S. health policy leader
“Some just need follow-up care, a little bit of adjustment of their medications. So, diabetics, chronic heart (or lung) disease, anybody with a chronic condition, who just needs follow up care or a little adjustment in their medications, can benefit,” Lovett Rockwell said. Shaya said many chronic disease patients with diabetes, coronary artery disease or respiratory problems can be more closely monitored using telemedicine. “Right now 4 percent of the population is on continuous glucose monitors (with diabetes),” Shaya said. “They are almost 60 percent of the total spend of the group we manage. If you could identify high-risk, high-cost patients, using technology, you can measure them regularly and manage their care and reduce the number of folks who end up in ERs and hospitals.” Shaya said some chronic disease patients have appointments with their doctors several months apart. During this time, conditions often worsen. “You would talk with your doctor every week, or more likely a case manager or nurse,” he said. “The model would be every day the patient takes vitals (using remote technology) and if there are changes the visit could be elevated to the physician.” Another new use of telemedicine addressed overcrowding in hospital emergency department waiting rooms last year, Lovett Rockwell said. “Patients check in at the nursing triage, and if they have a very low acuity problem, they can then be seen by a provider in a telehealth booth,” she said. “You can reduce emergency room waiting time and emergency room exposures.” In addition, a worried-well type of patient who can’t decide whether to go see their doctor and what to do can turn to telemedicine. “Someone has a sprained ankle, or they develop bronchitis, or they get a bad splinter and don’t know what to do about it,” she said. “Those are great for telehealth and can really reduce traffic into and crowding for primary care offices.” Shaya said preventive care could reduce costs and hospitalizations by 10 percent, making telemedicine cost effective and good for patient outcomes. “Telemedicine could help fill in the gaps of what we do in between in-person appointments,” he said. Watts said one concern experts have is that virtual care visits could drive more referrals to specialists for fear of a medical malpractice lawsuit or simply missing a diagnosis. “Are we driving defensive medicine with virtual care” and unnecessarily raising costs? said Watts, noting a Health Affairs blog in which a survey of New York doctors raised the concern. Watts said employers, insurers and other stakeholders must ensure that incentives are correctly aligned for the proper use of telemedicine. “Plan sponsors have a role in that in terms of how they design the benefit, the types of incentives to say supply their arrangements with their vendor partners and how they’re structured,” Watts said. “It is up to all of us to figure out how to make it work that way. And I’m hopeful that that will be the case.” Contact: jgreene@crain.com; (313) 446-0325; @jaybgreene
Michigan enacts five laws related to telemedicine and physical, behavioral health
Last June, the Michigan Legislature approved and Gov. Gretchen Whitmer signed five bills, effective Oct. 1, that expanded telemedicine under the Medicaid and Healthy Michigan program for physical and mental health services. Public Act 97 (HB 5412): Bars an insurer from requiring face-to-face contact between a health care professional and a patient for services appropriately provided through telemedicine. Public Act 98 (HB 5413): Bars a group or nongroup health care company from requiring face-to-face contact between a health care professional and a patient for services appropriately provided through telemedicine. Public Act 99 (HB 5414): Add the following definition for telemedicine to the Mental Health Code: “Telemedicine means the use of an electronic media to link patients with health care professionals in different locations.” Health care professionals must examine a patient via a HIPAA (federal privacy laws) compliant, interactive audio or video system, or through the use of store and forward online messaging. Public Act 100 (HB 5415): Requires the state Department of Health and Human Services to provide coverage for remote patient monitoring services through the medical assistance program and Healthy Michigan program. Collection of medical or other related data must be electronically transmitted via a HIPAA-compliant, secure system to a health care provider in a different location for assessment and recommendations. Public Act 101 (HB 5416): Covers telemedicine services under the medical assistance program and Healthy Michigan program if the originating site is an in-home or in-school setting. SOURCE: MICHIGAN LEGISLATURE
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UNDER
Assistant Superintendent of Human Relations and Labor Relations, Oakland Schools
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
Contact: Debora Stein at dstein@crain.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-squareBy Annalise Frank foot 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 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 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 neighboring buildings at 1515 Wood- Woodward Ave. UBS Group AG’s U.S. and Canadian groups can use free 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 Management Americas. ward Ave. and 1529 Woodward Ave. fice will resources be “significant,” he said, as its the other wealth management offices. don’t really have adequate Fourteen metro of Detroit employees announced Monday. “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 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. will will 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. THE CONVERSATION Hills, Plymouth “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.
UBS to open downtown Detroit office
Bedrock LLC
Bedrock LLC
Bedrock LLC
UBS to open downtown Detroit office
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. `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. ` Explain workf 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.
`II don’ don’t think it’s overblown to use the word “crisis” for Ann Arbor’s affordafford able 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
PROMOTE. Why not?
October 30, 2017 | crainsdetroit.com
PHOTOGRAPH BY JACOB LEWKOW FOR CRAIN’S
T
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 ttoo cold in the winter.
`Can you give thumbnail sketch of coming here and what your
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
Laura P car e o
Rep n s Sa es Manage Phone (732) 723 0569 Fax (888) 299 2205 Ema p ca e o@c a n com
18 | CRAIN’S DETROIT BUSINESS | JANUARY 18, 2021 Laura Picariello
Reprints Sales Manager Phone: (732) 723-0569 Fax (888) 299-2205 Email: lpicariello@crain.com
Ce eb a e you Success w h Rep n s & Recogn on P oduc s
DISPARITY
F om Page 1
“Tha s nsane We need o demand ac on a h s po n ” sa d Shera Sm h execu ve d rec or o he Grandmon Roseda e Deve opmen Corp n De ro O her c es w h a sma er gap han De ro s are S Lou s Mo (41 percen ) C eve and (39 7 percen ) M waukee (a so 39 7 percen ) Buffao (43 percen ) and B rm ngham A a (42 8 percen ) “You don have o rave very ar rom De ro o find o her very h gh ra es” sa d eff Horner sen or ec urer n he Urban S ud es and P ann ng Depar men a Wayne S a e Un vers y
Limiting economic mobility For una e y or K ng h s home va ua on was a er rec fied “ don know ha was he appra ser no be ng am ar w h ha area bu ended up go ng w h ano her financ a ns u on and he r appra ser go r gh ” sa d K ng a 24year emp oyee o De ro D ese board member or he Grandmon Commun y Assoc a on and an organ zer o he Grandmon Ar Fa r Ye he overa d spar y causes ano her barr er o wea h genera on n he B ack and H span c commun es Sm h and o hers sa d “Tha s one o he ma n ways peop e can pass wea h down generaona y and a hose h ngs g ve you a eve o flex b y o do h ngs o so ve prob ems and you ack ha (genera ona wea h) ha can d sadvan age you and ock you ou o oppor un y n he econom c ma ns ream” Sm h sa d Marc Norman assoc a e pro essor o prac ce n he Taubman Co ege o Arch ec ure and Urban P ann ng a he Un vers y o M ch gan n Ann Arbor sa d ha he gap u ma e y rans a es o more m ed econom c mob y “ your par cu ar house your arges asse s va ued 20 percen or 40 percen ower ha means your ab y o No 1 pu wea h ou or No 2 rade up s severe y m ed ” The Brook ngs ns u on de erm ned wo years ago ha “owner-occup ed homes n B ack ne ghborhoods are underva ued by $48 000 per home on average amoun ng o $156 b on n cumu a ve osses” (Tha s udy a so ound ha homes n ma or y B ack ne ghborhoods n he De ro -Warren-Dearborn Me ropo an S a s ca Area are va ued 36 9 percen ower or $28 023 han n ne ghborhoods where ess han 1 percen o he res den s are B ack ) Norman a so no ed however ha he be eves he Z ow s udy s flawed n s me hodo ogy “ h nk h s s udy un or una e y d s or s De ro because he ma or y o A r can Amer cans are n he c y o De ro wh ch a ready has ower hous ng va ues and ownersh p ra es” Norman sa d “ you hen add ha o he me ro and do a compar son beween B ack and wh e homeowners you are exacerba ng he d spar y ” Z ow sa d averaged ou home va ues across Z P codes o come o s conc us ons n an examp e Z ow sa d ha n a fic ona me ropo an area cons s ng o wo Z P codes where ha o B ack homeowners ve n a Z P code where he yp ca home va ue s
B ack homeowne s n me o De o ace he g ea es home va ue d spa na on acco d ng o a ecen Z ow G oup nc s udy K RK NHO CRA N D
$100 000 and he o her ha o B ack homeowners ve n a Z P code where he yp ca home va ue s $200 000 Z ow wou d assume he yp ca home va ue or B ack homeowners s $150 000 Tha me hodo ogy was hen app ed across a races Wh e homeowners had home va ues 7 5 percen h gher ($209 880) han he yp ca home va ue wh e As an homeowners had home va ues 20 8 percen h gher ($235 934) han he yp ca home va ue n he MLS accord ng o Z ow nd genous homeowners home va ues were 21 3 percen ower han hose across he reg on a $153 744
es n he RO BU N
peop e don have $40 000 n he r bank accoun and becomes an nves or ne ghborhood So many are enan -occup ed proper es and enan ed proper es are ess va uab e”
Ripple effects
Wh e he d spar y be ween B ackowned homes n he De ro area s he mos pronounced na ona y he reg on s a so one o on y a ha -dozen n he coun ry where ha same d spar y s nor h o 20 percen or he H span c commun y n De ro s 20 8 percen w h an average home va ue o $154 686 compared o $195 270 or a home owners O her areas w h gaps more han 20 Mortgage crisis, percen are Los Ange es (24 1 percen ) foreclosures factors P sburgh (28 2 percen ) C eve and Reasons or he d fference are myr- (20 6 percen ) San ose (23 percen ) ad rang ng rom sys em c rac a s- and Ok ahoma C y (23 2 percen ) Hec or Hernandez execu ve d recsues ke red n ng wh e fl gh a er or o De ro -based Sou hwes Econom c “WHEN YOU DON T HAVE BANK FINANCING IN A NEIGHBORHOOD, TWO THINGS HAPPEN: So u ons a d v s on o nonprofi Sou hwes IT MAKES IT MORE DIFFICULT TO AFFORD So u ons sa d he d sHOMES BECAUSE MOST PEOPLE DON T HAVE par y be ween he average home va ue and $40,000 IN THEIR BANK ACCOUNT AND IT hose n he B ack and BECOMES AN INVESTOR NEIGHBORHOOD.” H span c commun es — Dav d A ade a De ro based deve oper has a r pp e effec ha goes beyond obs n hose homeowners ab es o crea e he 1967 upr s ng aga ns po ce brua y pervas ve ob oss n he 1950s genera ona wea h or he r ch dren “The proper y va ues bege he nand 1960s and he subpr me mor gage cr s s and he b as rad us had ves men n he commerc a d s r c s on mor gage and proper y ax orec o- and he amen es o hose ne ghborhoods” he sa d sures B gh emerged as vacan The na ona d spar y be ween avhomes were e o he mercy o scrappers vanda s and arson s s Tha as erage home va ues and B ack-owned home va ues s 16 2 percen wh e we p umme ed proper y va ues he d spar y or H span cs s 10 2 Darra yn Bowers a Sou hfie d-based percen mak ng De ro s ra e near y rea es a e agen who s ac ve n De ro r p e he va ue gap or B acks and commun es ke Bos on Ed son and he Un vers y D s r c no ed ha B ack more han doub e he va ue gaps or H span c homes homeownersh p n De ro was h ghes Z ow says na ona y hose approx ma e y 25 years ago bu hen ob s ab y decreased and he orec o- spreads are mprov ng a er h ng a peak dur ng he Grea Recess on sure cr s s se n “ has aken near y a decade or “When we had he orec osure cr he home va ue gap o re urn o s s we had a very h gh percen age o he gap home ownersh p ha was os ” she pre-recess on eve s bu s sa d “Now he number o A r can rema ns very arge” Z ow econoAmer can ren ers exceed he num- m s Treh Manher z sa d “W h B ack bers ha own proper y or a con- and brown commun es and obs h d spropor ona e y hard n he pang omera e o reasons” Dav d A ade a De ro -based de- dem c here has been reason o worve oper work ng on s ng e- am y ry ano her d p may be on he hor zon ha cou d s ow or s op he progress” homes n he c y s F zgera d ne ghborhood near he Un vers y o De- Bu Mahner z sa d he ac ors ha ro Mercy sa d a ack o mor gages w dened he gap n he Grea Recesssued n he c y has been one o he s on are no sur ac ng h s me “However hrough hese urbu en con r bu ng ac ors mes con nued v g ance and ar“There were v r ua y no mor gages eav ng work ng c ass o ks o buy ge ed n erven on by po cymakers s cruc a o keep he progress go ng homes n he c y w h cash” A ade or commun es o co or” sa d “When you don have bank financ ng n a ne ghborhood wo h ngs happen makes more d ffi- Con ac kp nho@cra n com (313) 446 0412 @k rkp nhoCDB cu o afford homes because mos
GIVING
Changing corporate giving
From Page 3
Crain’s asked companies how their giving has changed during the tumultuous year of 2020 and how they expect it to change in the coming year.
“We’ve had a lot of new substantial corporate philanthropists emerge. I think Detroit is in a much better position today than it used to be,” Ragan said. Despite the fears of decreased funding, corporations became a very stable and consistent source of philanthropy last year, with some nonprofits on the front lines even seeing increases in philanthropy, Ragan said. “A lot of corporations continue to be generous, despite their own challenges,” he said. “The survey shows the corporate sector outlook is still strong.”
Amount of total giving in 2020 compared to 2019: When compared to 2019, was your company’s total philanthropic giving in 2020 more, less or about the same?
Corporate community bullish on giving Seventy-eight percent of companies responding to the corporate giving survey said they gave as much or more in 2020 as they did the year before. This year, about half expect 2021 giving to be on par with 2020. Another 43 percent project their company will give more this year, with over half expecting increases of 1 to 9 percent. Fifteen percent or 10 companies said they plan to increase giving by 10-24 percent, and one expects to give 25 percent or more this year. The survey unearthed shifts happening under the surface in corporate giving. Sixteen percent said they altered their philanthropic priorities. About 27 percent shifted part or all of their giving to COVID-19 response last year. And 65 percent said they reserved part of their 2020 and/or 2021 giving specifically for organizations combating COVID-19 and its effects. Racial equity initiatives are another area of rising interest. Nearly half or 47 percent of companies responding to the survey said they have earmarked some portion of their charitable giving this year to racial equity initiatives. Within those, companies expected to allocate a third of their budget, on average, up from 30 percent last year and 21 percent in 2019. In a positive sign for fundraising events, just under a third of companies responding to the corporate giving survey said they plan to purchase tables, tickets and program book ads this year, roughly the same number as last year and about the same number plan to provide program support or sponsorships this year. “I think what you can interpret from that is that they will eventually come back to (fundraising) events,” Ragan said. Corporate projections on support of fundraising events is surprising at first blush, given the cancellations of in-person events, said Bridget McGuiggan, chief strategy officer for the Council of Michigan Foundations. But corporate sponsors are leaning in as nonprofits pivot to virtual events. “What we (see) is organizations continuing to find ways they can support nonprofits ... communities and their employees,” she said. Companies signaled projections for decreased support for capital projects (29 percent this year vs. 40 percent last year). And only 29 percent anticipate making unrestricted grants vs. 39 percent who said they made those “no strings attached” grants in 2020. The survey responses indicate that while companies are prioritizing the immediate challenges and aftermath of COVID with support for food, housing, social services and educa-
Down 25% or more Down 10 to 24% Down 1% to 9% About the same Up 1% to 9% Up 10% to 24% Up 25% or more
0
10
20
30
Projected total giving in 2021 compared to 2020: When compared to 2020, do you anticipate your company’s total philanthropic giving in 2021 will likely be more, less or about the same? Down 25% or more Down 10 to 24% Down 1% to 9% About the same Up 1% to 9% Up 10% to 24% Up 25% or more
0
SOURCE: CMF AFP CORP GIVING SURVEY
tion, they’re also not abandoning organizations they’ve supported for years, Ragan said. Many nonprofits have been reluctant to approach companies because of their financial challenges, he said, but the survey reflects that corporations are willing to make investments in organizations that are effective. “It’s going to be important for nonprofits to continue to communicate very closely to their donors and their
“I really think it came down to organizations leaning in to their strengths and the ways they could contribute,” McGuiggan said.
Michigan Nonprofit Association impact survey Sustained support from the corporate sector, along with support from foundations and donors, and for some, PPP support, has helped non-
— Bridget McGuiggan, chief strategy officer for the Council of Michigan Foundations
Giving back in other ways The survey revealed other ways companies, many feeling the impact of COVID-19 themselves, are also helping, McGuiggan said. They ranged from making personal protection equipment and securing masks for charities to helping field calls to the 211 health and human services hot line administered by United Way, supporting efforts to ensure students and families have Internet connectivity and providing technical assistance to help nonprofits understand the federal Paycheck Protection Program and opportunities for funding there. Just over a third of companies said they planned to provide in-kind support of goods and services for nonprofits this year, down slightly from last year. Employee volunteerism is expected to increase slightly this year, with 36 percent of companies saying they expect to sanction employee volunteerism this year. As Crain’s reported in the fall, skilled volunteerism increased in 2020 as companies pulled back from in-person volunteering to protect employees and avoid any liability. “We had to suspend our in-person employee volunteerism due to liability risk,” one survey respondent noted. “However, we are hopeful to resume those activities as soon as safely possible in 2021.” In another form of support that’s emerged, a quarter of companies said they are actively supporting nonprofit partners in conversations exploring or expanding collaboration and consolidation opportunities with other nonprofits.
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CRAIN’S DETROIT BUSINESS GRAPHIC
“WHAT WE (SEE) IS ORGANIZATIONS CONTINUING TO FIND WAYS THEY CAN SUPPORT NONPROFITS ... COMMUNITIES AND THEIR EMPLOYEES.” potential donors how they are responding to the challenges of the time. That’s even more true for those organizations that aren’t on the front January 18, 2021 lines,” Ragan said.
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profits weather the pandemic. Eighty-six percent of the 172 Michigan nonprofits responding by the end of 2020 to an impact study being conducted by MNA reported having six months of operating cash on hand, said MNA Vice President Kelley Kuhn. Just over half of the respondents reported an annual operating budget prior to March 2020 of $1 million or less, she said. The survey includes responses from nonprofits in 75 counties, representing a diverse range of
causes. Forty-five percent of responding nonprofits are in Southeast Michigan. MNA provided a “snapshot” of responses made by the end of 2020 in the impact survey. It’s continuing to take responses for the study in the hopes of collecting a broader pool of responses from the state’s nonprofit sector and getting a sense of the impact the second round of PPP and annual appeals that are closing out will have for nonprofits, Kuhn said. Over half of the nonprofits responding to the MNA survey said they have six months or less of operating cash on hand, Kuhn said. That’s alarming, “but it provides opportunities to think about solutions before things get into a panic” with additional cuts or furloughs, programmatic cuts or worst-case scenario, shutting their doors, she said. Fifty-three percent of nonprofits reporting less than six months of operating cash said their main source of revenue comes from annual fundCRAIN’S DETROIT BUSINESS raisers/events. Another 46 percent count on individual donations as the main source of their funding. Fifty-five percent are experiencing financial distress and most estimate losses this year of 11 percent to 30 percent. Among other findings, the survey shows that nonprofits are doing more with less. Over half of the nonprofits
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surveyed have expanded programs and/or launched new programs to meet community needs. At the same time, a quarter of respondents said they had to lay off or furlough employees, most of them program or administrative staff. “When combined, the responses to the survey tell (nonprofits’) story of resourcefulness and resiliency,” Kuhn said. “They’ve had to adapt and pivot program and service delivery ... all while making sure people are safe.” The way nonprofits are delivering programs and services may change for good, MNA said. Over half of nonprofits responding anticipate keeping a hybrid work culture, even after restrictions are lifted. MNA is sharing the results of its survey, especially around the number of nonprofits with six months or less of cash reserves on hand, to foster broader thought about solutions that are needed, including donors giving as much as they can and the importance of unrestricted grants to help fund operations, Kuhn said. “Since the beginning, nonprofits have been providing programs and services that address issues and solve problems as a result of the pandemic,” she said. “If nonprofits aren’t providing these services, who will?” Contact: swelch@crain.com; (313) 446-1694; @SherriWelch
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JANUARY 18, 2021 | CRAIN’S DETROIT BUSINESS | 19
COMMENTARY
NAIAS: An auto show on life support nalists the vehicle’s real capabilities downtown next year.” The North American InBut it won’t be the auto under the bright desert sun? ternational Auto Show is Hell, in 2017, BMW abandoned unshow we remember. Decanceled. Again. Reschedtroit’s auto show was al- veiling its M5 sports sedan in Frankuled. TBD. ready in flux for nearly a de- fort or Detroit and instead let the car The news last week that cade prior to COVID-19. debut in the Electronic Arts’ Need for the show’s organizers were Organizers called for trans- Speed Payback video game. once again stymied by the Hundreds of automakers and supformation as the industry COVID-19 virus — the show slowly abandoned the pliers moved offerings — now focused was canceled for its June Dustin big-ticket reveals and media on mobility, connectivity and autono2020 posting and reschedblitz of auto shows past. At- my — to the Consumer Electronics uled for September before WALSH tendance never recovered Show in Las Vegas, which also occurred meeting its current fate. after the 2008-2009 finan- in January and severely cut into the Two sources confirmed Michigan’s automakers ultimately cial crisis that led automakers, includ- auto show’s standing in the last decade. NAIAS tried to recapture the now pulled the rug out from the show this ing then-bankrupt Chrysler and General Motors, to scale back the tech-centric auto sector in 2017 by coming fall. launching a new Instead the show blends into a lux- multimillion dolury car event in Pontiac called Motor lar displays. THE RISE OF SOCIAL MEDIA exhibit and seminar program The rise of soBella. The move is an instant blow to called AutomobiDetroit, which relied on the estimated cial media in the IN THE 20-OUGHTS $400 million in economic activity the 2 0 - o u g h t s PROVED A GAME CHANGER li-D. The new entry into the show show generated from hotel room rent- proved a game program was als, dinners, and other associated changer for the FOR THE AUTO SECTOR’S meant to showsector’s MARKETING STRATEGY. events, and which held an auto show auto case new industry in its city limits since 1907 until 2019. marketing strate(A federal ban on new auto sales gy. The automakers no longer had to tech. But the new addition never blosduring World War II put the auto show rely on the capital-intensive auto somed into the CES-killer it hoped. This precipitated a new aggressive shows to reach the wide audience of on hiatus from 1941-1953.) The question on everyone’s mind automotive journalists. Now, auto- strategy in 2019: Move the show from is: Will the North America Interna- makers could stop competing for January to June in 2020 and make it a tional Auto Show return to Detroit in print media space in just two days in tech-heavy festival to showcase DeDetroit and engage those same jour- troit’s summer vibes and allow these 2022? The answer is murky and compli- nalists at their own independent event new technologies to be “experienced” cated, but it’s still probably yes. There’s and watch those same journalists dis- instead of just seen. But COVID delittle evidence to suggest it won’t. De- tribute the news instantaneously railed that gambit. If the show does return in 2022, there troit Mayor Mike Duggan told report- across digital channels. Why unveil the latest and greatest will have been a roughly 40-month gap ers earlier this week that “Ford, GM and FCA all made an absolutely solid production sport utility vehicle inside since the last show in Detroit. That gap commitment that they will not be sup- TCF Center (formerly Cobo) under is providing automakers ample opporporting anything in Pontiac this year thousands of fluorescent bulbs when tunity to rethink the age-old show sysunless there’s an unequivocal com- an automaker can fly a cadre of jour- tem executives have been rethinking mitment for the auto show to be back nalists to Moab, Utah, and show jour- for more than a decade.
CHARITIES
From Page 1
“With this latest announcement, I think we’re going to have to regroup and assume it’s not coming back,” said Debora Matthews, president and CEO of The Children’s Center in Detroit. The DADA is planning a “charity initiative” of some sort as part of the six-day Motor Bella show slated for late September at the M1 Concourse in Pontiac to continue the longstanding commitment to children and families in need, DADA Executive Director Rod Alberts said in an emailed statement. But the shift in format and location, uncertainty about the future of the auto show in Detroit and how long the pandemic will remain a threat, it’s looking less and less likely the charity preview will ever return to its traditional format and place as one of the region’s largest one-night fundraisers. It would be the DADA’s hope to return to the traditional format with the event, Alberts said. “But right now, we are focused on making 2021 the best show possible under current conditions.” “It is too early to talk with certainty about future years,” he said.
Budget hits The Children’s Center has been able to count on raising money through charity preview for most of the past 25 years, Matthews said. “We’ve always called it our million-dollar night.” In 2019, during the last January, charity preview at Detroit’s Cobo Center, The Children’s Center raised $374,000. It brought in another
Hardy-Foster
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$513,000 from its Ford Motor Co.-sponsored Auto Glow after party at Ford Field for a total of $830,000. The funds accounted for more than 3 percent of its $25 million budget that year, Matthews said, and nearly half of the amount it needed to raise through philanthropy that year. The money was unrestricted or “no-strings-attached” funding the nonprofit could use wherever it needed to meet costs that weren’t covered under its behavioral health youth services contracts with Wayne County Integrated Health Network, she said. In 2020, it budgeted $885,000 from the charity preview, prior to COVID’s arrival on the scene. When the event was canceled last year, the center had to cut about 50 of its 280 employees and shut down its behavioral analysis services program for children with autism to make up the loss, Matthews said. It still ended fiscal 2020 in September with $1.7 million loss, though PPP dollars are expected to help offset that once the U.S. Small Business Administration completes its audit and determines what portion of the funds will be forgivable and convert to revenue, she said. It had budgeted $580,000 from the preview for the fiscal 2021 event that won’t be happening now, she said. “We, of course, are going to try to
20 | CRAIN’S DETROIT BUSINESS | JANUARY 18, 2021
tag on to Motor Bella, but we have no way of knowing ... (how much) we could make this year.” “We’ve got to regroup and come up with some sort of Wilson fundraising, whether it’s another event or some other strategy to make money,” Matthews said. Farmington Hills-based Judson Center, a provider of autism and foster care and other services, has been a beneficiary of the preview for over 20 years. It raised $405,000 through the 2019 event toward its $27 million budget that year. “That money helped to cover costs across the board in every program that we have … programs that don’t generate money to cover their costs,” President and CEO Lenora Hardy-Foster said. “The amount is one thing. But the loss of unrestricted funding is crucial.” With the loss of the funding last year, the nonprofit held off on filling several open staff positions, cut the number of letters it sends to donors to reduce publishing costs and cut costs in other areas, she said. Judson would love to continue as a beneficiary of a preview event for another two decades, Hardy-Foster said, and will always be grateful to DADA and the team behind the auto show. “However, based on the past two years, we have to become creative in thinking of new opportunities to generate unrestricted income,” she said. Boys and Girls Clubs of Southeastern Michigan raised $490,000 from the last charity preview two
Let me be clear. Automakers don’t want another North American International Auto Show. For now, it remains unclear whether the industry will forge ahead with its “festival-like” approach to Detroit’s big show or wholesale abandon it, leaving it as a smaller regional show. And let’s not dawdle here. There’s nothing wrong with the Detroit auto show reverting to a large regional show where auto dealers simply reap the rewards of showcasing the latest cars customers can buy RIGHT NOW. More than 800,000 potential car buyers — it’s estimated as many as 55 percent of attendees intend to buy a car in the next 12 months — walk into TCF Center every year. Glenn Stevens, executive director of Michigan’s auto industry marketing association MichAuto, said the city will make the show happen by sheer will because of the dollars it generates. “What’s important to Detroit from a economic standpoint, we can’t lose this epicenter we’ve created,” he said. “The institutions and the ability to gather people around an event, that’s a big part of the equation. We need to figure that out.” For that reason alone, the Detroit Auto Dealers Association that puts on the show will not let it die. It shall return but it may not be what we had expected or even hoped for. The North American International Auto Show is dead. All hail the auto show. Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh years, or about 10 percent of its $5 million budget. “One of the most important things charity preview provided was unrestricted dollars. … the other thing it (did) is connect us to the automotive industry — not just for the resources but for the mentors it provides,” said CEO Shawn Wilson. Last year, with virtual fundraising, its return to Pontiac and the launch of its Fashion Industry Club in Detroit, the nonprofit was able to make up for the charity preview loss, Wilson said. Fifty-seven percent of the nonprofit’s donors last year were new. “But you don’t know how many will come back,” as the club looks to make up a gap again this year, he said. The nonprofit budgeted more conservatively this year, anticipating it could make $200,000 from the preview. But Wilson isn’t sure if BGCSM, which is operating on a $6.5 million budget for 2021, will be able to raise as much through a charity fundraiser at Motor Bella. There are many variables, Wilson said, including the nature of the enthusiast event planned and the unknown status of COVID-19 vaccination by the fall. “I’m not sure it’ll ever fully come back in its current form, but I hope our partners are committed to finding a new and innovative way to impact youth across southeastern Michigan,” he said. “Ultimately, at this point we will need to pull any projections out of our budget (and) hope for the best but develop a strategy to overcome the gap.” Contact: swelch@crain.com; (313) 446-1694; @SherriWelch
BETTING
From Page 3
“Are we excited about it? Absolutely. Just another opportunity for our customers,” Beatty said. “We think there is clientele for internet gambling and there will continue to be clientele for brick-and-mortar. We don’t think there’s a conflict.” Senior citizens, a core customer base for Greektown and other casinos, won’t be swapping pull levers for mobile phones anytime soon, Beatty said. At the same time, on-site sports betting is already helping lure in coveted millennial customers, and mobile betting is more bait. “We’re just excited to get in the game,” Beatty said. David Tsai, president and COO of MGM Grand Detroit, said in an email that he sees retail and mobile as complementary and that in-person entertainment will continue to be important for the business. “Nothing can replace watching your favorite sports game with a bunch of other fans, while enjoying great food and drinks,” he said. “For those looking for an exciting, full sports entertainment experience, we’ll be able to still provide that for our guests at venues like the BetMGM Sports Lounge.” The state of Michigan also stands to benefit from legalizing online gaming, which has been happening without government regulation for years. The black market won’t just go away, but legalizing it will give residents the option to choose a product they can trust, Richard Kalm, executive director of the Michigan Gaming Control Board, said last week during a board meeting. “There’s probably hundreds of offshore gaming sites that are accessible on the internet from Michigan that we are completely aware of,” Kalm said. “What we’re hoping to do is provide for a regulated gaming format that people have trust (in), that has integrity and protects the interests of the people in the state of Michigan, and compete directly. We’d rather have all those dollars stay in the state. We’d rather have all the operators and platforms regulated.” Lawmakers initially projected that online betting could generate up to $225 million in first-year revenue, but bill sponsor and former state Rep. Brandt Iden told Crain’s recently he believes that number will be higher. After investing millions of dollars in new sports books, Detroit’s casinos launched in-person sports betting March 11, the day after Michigan recorded its first case of COVID-19. Casinos were ordered closed less than a week later. Under current restrictions, they are allowed to operate at just 15 percent of their maximum capacity. Mobile betting is expected to feed pent-up demand caused by the closures and restrictions. Online sports and internet gaming revenues in Michigan this year could reach $650 million, according to industry news observer Michigansharp.com. That would yield $94 million in tax revenue for the state. As part of the legislation, one casino in Detroit and one tribal casino must go live at the same time. The gaming control board is expected to announce this week which will be the first to launch.
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Once live, online betting will allow residents to place wagers over the internet on casino games, poker and sports games, from the Super Bowl to NCAA Final Four. Bets can be placed anywhere inside state lines, from a bettor’s living room to places like Lit-
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tle Caesars Arena. Origins of bets will be geo-tracked and declined if placed outside of Michigan, according to regulators. Interstate parimutuel betting also will not be allowed, Kalm said. That requires striking compacts with other states, which likely wouldn’t happen until the end of the year at the soonest.
Who the providers are Online gaming platform providers are vendors of casino operators that must be licensed by the gaming control board. In Detroit, FanDuel is the provider for MotorCity Casino, BetMGM is the provider for MGM Grand Detroit and Barstool is the platform for Greektown. Each platform has launched mobile apps and offered incentives for creating an account. They’ve also invested heavily in advertising. Nationally, DraftKings has spent $93 million on advertising, while FanDuel has spent $61.2 million and BetMGM $8.1 million, according to an Ad Age report. Providers for the tribal casino include PointsBet, William Hill, Wynn Sports, BetAmerica, Parx Casino, Golden Nugget and Scientific Games. Terms of the deals between casino operators and platform providers have not been disclosed. MotorCity did not return requests for comment for this story. Beatty and Tsai declined to discuss finances.
Who gets a cut For sports betting and online gaming, Detroit’s casinos and the tribal casinos are subject to the same tax requirements. Tribal casinos have always operated independent from state authority, but in the case of online betting, tribal casinos
must be licensed through the Michigan Gaming Control Board. The internet gaming tax and payment rate ranges from about 20 percent to 28 percent, depending on the amount of gross receipts. The sports betting tax rate is 8.4 percent. For Detroit casinos, 30 percent of the tax revenue generated from online sports betting and internet gaming goes to the city of Detroit. Lawmakers projected the new gaming format could generate up to $10 million in revenue for the city per year.
Sports sponsorships Detroit may be ever the underdog, but it’s one of the country’s great sports towns nonetheless. That’s part of the reason gambling companies have raced to put their mark on Detroit’s professional sports teams. The Ilitch-owned Red Wings announced last week a multiyear sponsorship deal making PointsBet its “official gaming partner” and renaming the Sports & Social Detroit bar at Little Caesars Arena the PointsBet Sports Bar. It’s the latest in a flurry of similar deals made in the last few months. Here’s a recap of others: ` The Tigers, also owned by the Ilitch family, signed PointsBet to be its “official authorized gaming operator” this past summer. ` The Pistons signed multiyear sponsorship deals with DraftKings and FanDuel as “official sports betting partners,” making it the first NBA franchise to have simultaneous deals with both betting giants. ` The Lions signed a deal for BetMGM to be its first “official sports betting partner,” building off a prior sponsorship with MGM Grand Detroit. Contact: knagl@crain.com; (313) 446-0337; @kurt_nagl
The first major acquisition occurred in April 2015 when Home Point bought Maverick Funding Corp., a New Jersey mortgage banking firm. Between 2012 and 2015 Maverick originated about $3 billion in residential mortgages, according to industry reports at the time. “The acquisition of Maverick provides us with a strong entry point into mortgage banking,” Newman, 56, said in a news release at the time the company bought Maverick. “We intend on leveraging and expanding the core capabilities provided by the Maverick acquisition into a diverse, vertically integrated national mortgage banking organization.” Similar to the larger United Shore, which is set to go public this week via a reverse merger with a “blank check” company, Home Point acts as a wholesale lender, working with brokers nationwide. The value proposition it’s sought to bring is better connecting the front and back ends of the mortgage lending process, according to Phil Shoemaker, the company’s president of originations. “We believe that there’s a real need for mortgage companies out there that are connecting the value chain,” Shoemaker told Crain’s in an interview late last year, prior to any IPO plans being announced. “And what I mean by that is connecting the experience that a consumer has on the origination side with the experience they have as their loan is serviced. It’s a very disconnected part of our industry.” Executives at Home Point were not made available for additional interviews, citing the “quiet period” before an IPO that is mandated by federal regulators. Attempts to reach Stone Point Capital, the company’s PE ownership, were unsuccessful. In January 2017, Home Point made another acquisition, buying Stonegate Mortgage Corp. out of Indianapolis for $211 million in cash.
POLITICAL
From Page 3
“Is there a wide movement to purge Trump and sort of his acolytes and the ideological strain of populism that he has sort of garnered from the party?” Schuster asked, noting that under Trump the party had veered from much of the business-friendly policies members had long supported. “Tariffs and protectionist trade policies are not something that would be represented by business.” What is clear is that politics and elections have become far more expensive. That’s been particularly true since the landmark Citizens United case decided by the U.S. Supreme Court that allowed for unlimited political giving by corporations. The Washington, D.C.-based nonpartisan money-in-politics watchdog group Center for Responsive Politics reported late last year that spending in the 2020 election would hit $14 billion, the most money spent on record and more than twice as much as the previous record in 2016. “Donors poured record amounts of money into the 2018 midterms, and 2020 appears to be a continuation of that trend — but magnified,” Sheila Krumholz, executive director of the Center for Responsive Politics, said in the report. “Ten years ago, a billion-dollar presidential candidate
The deal made Home Point a top-25 mortgage originator and servicer and gave the company a national presence, according to a news release at Newman the time. “The combined business will have full national coverage across all channels of mortgage origination, as well as vertical integration across the mortgage value chain,” Newman said in a statement at the time, noting that the deal helped connect the customer experience mentioned by Shoemaker. “Most important, the talent and experience of the combined team will give us the ability to fulfill Home Point’s vision of being a leader in mortgage banking and financial services.” Another deal in April 2019 helped Home Point further grow its wholesale lending, when the company bought Platinum Mortgage out of Georgia, according to a report in industry publication Housing Wire. Taken together, the string of acquisitions has turned Home Point into the No. 3 wholesale originator by volume in the country and holding an overall 7.3 percent wholesale market share, according to the company’s pitch deck to investors, which cites data from industry trade publication Inside Mortgage Finance. Like its competitors Rocket (NYSE: RKT) and United Shore, 2020 made for a year of massive growth for Home Point, according to financial information in the company’s filing to go public. As Crain’s previously reported, for the first three quarters of 2020, Home Point reported net income of $422.6 million on revenue of $922.3 million. For all of 2019, the company reported a net loss of $29.2 million on total revenue of just under $200 million, according to its S-1 filing. Rocket Companies, by comparison, reported total revenue of just
more than $11 billion for the ninemonth period that ended on Sept. 30, 2020. Home Point now has approximately 3,000 employees. The company also shows some attributes of its status as a private equity-owned company. Last week, Home Point announced that it would take on $550 million in new debt, with half of the funds going to pay its PE ownership. The remainder will be used to repay outstanding amounts under its mortgage servicing rights financing facility and to pay related fees and expenses. Such deals have become common in recent years and some reports have called the strategy “divisive,” as it can add more leverage to companies during a strained economy, according to a Bloomberg report last summer. Such deals mark a quiet return for debt-funded payouts to shareholders, which were popular with buyout firms prior to the onset of the COVID-19 pandemic, only to screech to a halt as the coronavirus began to grip countries and their economies in March. Critics of the practice say it prioritizes paydays over a company’s financial health — the impact of which can be exacerbated in stressed and uncertain markets. Carpark operator Apcoa Parking Holdings GmbH and UK hotel chain Travelodge have struggled with their leverage amid the pandemic pressure this year, having previously added debt to make payments to owners. “Debt that relies on speculative capital market resolution makes the issuer more fragile and susceptible to ups and downs, accentuating the downside,” Edward Eyerman, managing director for European leveraged finance at Fitch Ratings, told Bloomberg in an interview last year.
would have been difficult to imagine. This cycle, we’re likely to see two.” Roughly one-third of the $14 billion spent in the lead-up to the 2020 election — $5.7 billion — came from large U.S. banks, according to a Bloomberg report, citing figures from the Center for Responsive Politics. Similar to the split between Rocket and Dow, large banks were announcing a variety of actions ranging from ceasing all donations to those who voted against certification, to broader pauses of all donations, according to a Bloomberg report. But not every banking group says it is re-evaluating donation strategy. Michael Tierney, the president and CEO of the Community Bankers of Michigan, an East Lansing-based trade group that donates to a broad swath of politicians on both sides of the aisle, said political contributions need to be made with a holistic viewpoint, rather than on individual votes. “I think it’s a very slippery slope when you start making decisions off of one single action,” said Tierney, who noted that he strongly objected to the attempts to overturn the election. “No matter what the issue is, when you make a decision of who you’re going to support or who you’re not going to support off of one single action, that’s probably not the best way to make your deci-
sions because you want to look at the whole of what somebody does.” It remains to be seen whether the current “pause” for many companies will move the needle in any meaningful way on overall corporate money for politics. Moreover, the “pause” for companies like Rocket and others comes at a time when there’s something of a lull for political donations, as the 2020 election cycle has concluded and the 2022 midterms have not yet begun in earnest. A spokesperson for Rocket declined to address further questions from Crain’s as to why the mortgage lender chose that route and whether the company would be back and donating in advance of the 2022 midterm elections. Schuster with the Michigan Campaign Finance Network said he’s skeptical that the overall landscape will change much. “I don’t think that by pausing … their political contributions, (companies) really have a ton to lose in that regard, because businesses and corporations have long, enduring influence in American politics,” said Schuster. “And I don’t think … these legislators who might be impacted by this, really see this as a long-term threat to their financial viability as candidates.”
Bloomberg contributed to this report Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes
Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes
JANUARY 18, 2021 | CRAIN’S DETROIT BUSINESS | 21
THE CONVERSATION
Law firm managing partner Ethan Dunn on practicing what you preach Maxwell Dunn PLC, Southfield: At the start of the COVID-19 pandemic, the small business bankruptcy law firm started virtual consultations called Small Business Saturdays, a weekly event to help clients navigate through the business troubles wrought by the deadly virus. But Ethan Dunn, the firm’s managing partner, was managing his own firm’s troubles as well as clients were peeling off amid tight budgets. What transpired, however, was the realization that the firm could learn alongside the same clients it was aiming to help. | BY DUSTIN WALSH ` The beginning of the pandemic brought a lot of uncertainty to the business community. What were you expecting? The expectations initially were we would see this huge influx of small business bankruptcies. Part of me had more faith in the resiliency of entrepreneurs. I knew they were going to do whatever they possibly could to stay in business, and we all recognized this would be a temporary situation. The CARES Act, along with PPP, came as almost a sigh of relief from entrepreneurs. But they tend to be an optimistic group of people. During our Saturday morning chats, we could see they were obviously nervous. But things were working out, at least from March through the summer. As the summer turned into fall, things started moving again in the direction people weren’t hoping and the anxiety came back. There is definitely a feeling now that this second or third wave, this may not be something that I or my business can survive. ` You’re a small business owner. But with the lack of expected bankruptcies, was business also difficult for your firm? Yes, in fact, at the beginning of the pandemic, we suspected we would be extraordinarily busy. But what we found is that business actually declined very quickly and significantly. Business owners were just stuck in this place of indecision until they learned more about how the pandemic would play out. Our business definitely had its challenges. We had to lay off a couple of people, but were able to later bring them back. It also forced us to really kind of dig deeper into our core business, to really understand what our mission was and what our values were. That was the only way we could get beyond the emotions of the other stuff that was going on around us. While this has definitely been a downturn for us, it’s also created an opportunity.
` What opportunities? The key for us was a greater level of transparency from the top down. We’re a relatively small team with a dozen people or so. We began to see the people who were down the line and separated from the leadership, they could see what was going on but felt powerless to help. We weren’t allowing them in that space and that created this fear among the staff. The only thing they could do was question whether they had a job next week. So we really started opening up and getting these great ideas. We made sure our people were actually part of the business. They felt like they belonged and weren’t simply a cog in the machine. Their ideas were being heard and implemented. ` How did you figure this out? Our Small Business Saturday calls. Talking to the small business owners we were trying to help. It happened early on and it started with me. I realized I had to get my personal perspective changed to implement change in the business. Businesses are run by people, and we all have the same challenges with our humanity. That fight or flight motive. Lawyers tend to think of themselves at the top of the food chain. We’re not. We actually serve the people behind the companies we represent. Once you get out of our ego, it allows you to really be receptive to tremendous ideas you can actually implement in your own company. I realized I have been telling my clients to breathe. To step back and ask themselves what’s the worst thing that could happen here. The worst is that I go out of business, terminate all my employees, go on food stamps and lose my house and car. Well, that’s not what’s going to happen to me. It allowed me to find some space about how much better it can be. That mindset takes you out of the thinking that I am limited by the circumstances to let me find some trusted people that have maybe experienced something similar and share some ideas. That is the essence of why we were doing our Saturday calls.
` Did you learn about specific steps you could make for your own business on these calls? One of the very specific things I learned is there are programs that were there to assist small business owners in retaining their employees. This was something I wasn’t aware of before these Saturday calls. It’s a state of Michigan program. As a law firm we never typically thought of it as an issue. But it’s something I was able to have access to and use it for retention of some of my own employees.
made some real decisions, we’re able to have a conversation with an owner and understand what they want and set a strategy. We realize people value things differently. Do they value their time, money or reputation? That’s my new mindset, as opposed to overlaying my initial thoughts as a lawyer for what we need to do to fight and make a company work. Because that may not be what the client actually wants. Ethan Dunn, managing partner of Southfield-based Maxwell Dunn PLC
` Has your attitude changed for good? I think so. I think we have learned to focus on the people behind the business. As we look at a company as simply the sum of its parts, marketing and sales, we tend to lose and not focus on the human needs that have built this company. We tend to miss the decision makers on what they really want. In times like these, you have to make a real decision for yourself about what it is you want. Especially now. This environment is one of the least judgmental times for small business. Everyone is struggling. That allows you an opportunity to make real decisions about who you are and what you’re choosing to be and develop a relationship to what you’ve built. Is it time to fight and rebuild or time to pivot and move in a different direction or time to retire and experience something different from your business entirely? After they’ve
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RUMBLINGS
Michigan ban on out-of-state retail wine sales upheld Out-of-state retailers will continue to be prohibited from shipping wine directly to Michigan consumers following the denial of an appeal last week by the U.S. Supreme Court. The Supreme Court in its Monday ruling upheld a Sixth Circuit Court of Appeals decision in the case of Lebamoff vs. Michigan. Lebamoff Enterprises, based in Fort Wayne, Ind., filed a lawsuit in July challenging a 2016 law that prohibits out-ofstate retailers from directly shipping wine to customers in Michigan. Lebamoff Enterprises runs Indiana-based Cap n’ Cork, also named as a plaintiff in the lawsuit. Michigan Beer and Wine Whole-
Wine illegally shipped into Michigan has been a steadily increasing problem, according to the Michigan Beer & Wine Wholesalers Association. | MICHIGAN BEER & WINE WHOLESALERS ASSOCIATION VIA FACEBOOK
salers Association President Spencer Nevins in a statement applauded the Supreme Court decision. He
22 | CRAIN’S DETROIT BUSINESS | JANUARY 18, 2021
said the court has recognized state rights under the 21st Amendment. Nevins said the decision also benefits in-state retailers. Any wine producer in the United States can ship a limited amount of wine to Michigan consumers if they actually manufacture the wine and if they have been issued a direct shipper permit by the Michigan Liquor Control Commission, Nevins said. Wine producers that ship wine more than is allowed, or wine they did not manufacture, are in violation of the law. Wine illegally shipped into Michigan has been a steadily increasing problem from the trade associa-
tion’s point of view. The organization in 2018 began compiling reports using MLCC and state of Michigan information to quantify how much wine is shipped into the state, both legally and illegally. During a six-month stretch in 2018, more than 1 million bottles of wine were shipped into Michigan, and at least 300,000 of those bottles were shipped illegally by out-ofstate retailers, the research found. In September, Michigan Attorney General Dana Nessel announced federal lawsuits against two California companies that were repeatedly shipping wine and beer illegally into the state.
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