A REALLY BIG DEAL
SMALL BUSINESS SPOTLIGHT: Tech innovations to stay viable during pandemic PAGE 8
By going public, Mat Ishbia and UWM Corp. lay claim to the largest SPAC deal in history. PAGE 3 CRAINSDETROIT.COM I JANUARY 25, 2021
OVERGROWN MARKET REAL ESTATE
With nearly a year’s worth of supply for sale, downtown Detroit’s condo market looks oversaturated BY KIRK PINHO | For nearly two years, Detroit has had an excess of condominiums for sale on the market. To developers, that means an added challenge in an already tough building climate plagued with long-rising construction costs eating into profit margins — not to mention economic upheaval caused by a deadly global pandemic. For sellers of already existing units, those on the other side of the transaction have more options now to pick from, giving them more negotiating power. More than 15 years worth of inventory data compiled by Berkshire Hathaway HomeServices The Loft Warehouse on seven key downtowns — Detroit, Royal Oak, Birmingham, Ann Arbor, Northville, Plymouth and Rochester — shows that Detroit’s is the only one experiencing a consistent trend of excess supply of condos for sale.
The Pullman Parc development has been rethought to focus on lowerpriced condos amid signs of a glut. KIRK PINHO/CRAIN’S DETROIT BUSINESS
Inside: Charting Detroit’s condo market by months of supply . PAGE 19
“Four to six months is a healthy market where (supply) and demand are nicely balanced. If the inventory goes lower than that, it becomes a seller’s market, higher than that, a buyer’s market,” said Jerome Huez, owner of Detroit-based Berkshire Hathaway HomeServices The Loft Warehouse, a residential brokerage firm. Buyer’s market it is, then. The company reports that buyers
can expect to pay 91 percent of the asking price, or a 9 percent discount, as a result of the hefty inventory. Since February 2019, Detroit has had seven months or more worth of supply on the market. In the middle of September, the city had a year’s worth of inventory, although in recent weeks there has been about 11 months worth of supply. The last time Detroit’s condo market was this saturated was 2010-11, according to data provided to Crain’s.
ECONOMY
Bankruptcy filings scarce in pandemic
PPP, auto rebound helped keep firms afloat in tough year BY DUSTIN WALSH
When automotive supplier and defense contractor Lapeer Industries Inc. filed for bankruptcy protection on Aug. 5 last year, it was only the 11th corporate bankruptcy filed in U.S. Bankruptcy Court in Detroit
since the start of the COVID-19 pandemic in March. Only a month before Lapeer’s bankruptcy, Michigan saw its greatest economic decline in recorded history — recording a decline in gross domestic product at an annualized rate of 41 percent in the second
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quarter and the shedding of 1.2 million jobs. Yet the company’s slide into insolvency had nothing at all to do with the economy-leaching pandemic. Instead, Lapeer suffered its fate after the completion of a large contract to produce armor plated parts for military vehicles in December 2018 — a revenue stream it simply failed replace. Such goes the story of corporate bankruptcy in Michigan. Only 21 Chapter 7 or Chapter 11 corporate bankruptcies were filed in Detroit’s bankruptcy court between March 15 and the end of last year. There were 26 corporate bankruptcies in the Eastern District in 2019, a year where the economy grew at a good clip. See BANKRUPTCY on Page 20
5 BIG IDEAS FOR WHITMER’S THIRD YEAR PAGES 10-15
See CONDOS on Page 19
NEED TO KNOW
PEOPLE
THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT of all COVID-19 tests in Michigan on Wednesday were positive, the lowest daily positivity rate since Oct. 15, state data show.
KILPATRICK RELEASED AFTER TRUMP COMMUTATION THE NEWS: Former Detroit Mayor Kwame Kilpatrick, who served more than seven years of a 28-year prison sentence for corruption crimes, was released from federal prison Wednesday after President Donald Trump commuted his sentence. Kilpatrick’s sentence was reduced but his 24 felony convictions still stand. He is still on the hook for $195,000 owed to the Internal Revenue Service and $1.5 million to Detroit. WHY IT MATTERS: Kilpatrick’s sentence was controversial because it was one of the longest ever handed out for corruption in public office.
COVID CASES, POSITIVITY KEEP HEADING DOWNWARD THE NEWS: New cases of the coronavirus have continued to decline in Michigan as the statewide testing positivity rate this week hit a threemonth low. Just less than 4.9 percent
WHY IT MATTERS: The figures represent major progress in the battle against the disease. Two months ago, the positivity rate was over 14 percent two months ago on the day after Gov. Gretchen Whitmer announced a “pause” in dine-in service at restaurants and bars that has since been extended until Feb. 1.
WHY IT MATTERS: Campbell is the Lions’ 20th head coach since their last championship in 1957 and 12th since their last playoff victory in 1991. Maybe the 20th time is the charm as principal owner Sheila Ford Hamp is putting her own stamp on the team.
BOWLING ALLEYS FILE SUIT OVER HEALTH ORDERS
LIONS HIRE DAN CAMPBELL AS NEW HEAD COACH
THE NEWS: Members of an association representing bowling alleys and other entertainment centers made good on their plans to file a federal lawsuit against Michigan Gov. Gretchen Whitmer and members of her administration. The complaint was filed Wednesday afternoon in U.S. District Court for the Western District of Michigan by attorney David Kallman. The lawsuit claims that Whitmer, the state Department of Health and Human Services and its director, Robert Gordon, issued emergency health orders that kept bowling alleys, roller skating rinks and other places of indoor amusement closed for nearly eight months during 2020.
THE NEWS: The Detroit Lions have hired Dan Campbell as their new head coach in a six-year deal, concluding the NFL franchise’s speedy search for new leadership. Campbell, who was assistant head coach for the New Orleans Saints, had been considered the front runner for the past few days, and the Saints’ playoff loss Jan. 17 cleared the way for his hire.
WHY IT MATTERS: The lawsuit on behalf of the Michigan Independent Bowling & Entertainment Centers Association contends that health orders made by Gov. Gretchen Whitmer and state health director Robert Gordon violated state and federal constitutional rights by taking their properties for public use without just compensation.
New president, new jobs It’s the administration shuffle. A pair of local officials is switching jobs as Joe Biden replaces Donald Trump in the Oval Office. U.S. Attorney Matthew Schneider, a Trump appointee, resigned last week and is taking a job with De- Schneider Jemison troit-based law firm Honigman LLP. He will serve as co-leader of its White Collar Defense and Investigations Practice with Grand Rapids attorney Mark Pendery. He will be a partner based in the firm’s Detroit office and working in its new Washington, D.C., office. He’ll be replaced in the U.S. attorney role by Saima Mohsin, who had been first assistant U.S. attorney. Going in the other direction is Detroit group executive for planning, housing and development Arthur Jemison, who is leaving city government for a role in the Biden administration. Jemison is now principal deputy assistant secretary in the Office of Community Planning & Development at the U.S. Department of Housing and Urban Development.
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Philanthropy 2021 trends: Reparations, social justice Tighter scrutiny of where dollars go BY SHERRI WELCH
Reparations for the country’s exploited populations are expected to increasingly become a topic of conversation for foundations this year. At the same time, funding for social justice efforts and scrutiny of where philanthropic dollars are and are not flowing is expected to rise in 2021. Those topics are among the Behrens new and escalating trends identified in “11 Trends for Philanthropy in 2021” released last week by the Dorothy Johnson Center for Philanthropy at Grand Valley State University in its fifth annual look at the trends. Other 2021 trends noted by the Johnson Center include: `Blurring of boundaries between government and philanthropy, with foundations being asked to help fund things like personal protection equipment and COVID-19 testing `Blurring lines between business and philanthropy, with increased for-profit giving models aimed at social impact, such as the Ballmer Group, which is set up as a limited liability company ` Continuation of disruptive forces such as increased wealth inequality, the growth of data collection and focus and renewed attention on racial inequities With current events in the U.S., including the racial justice moment, increased recognition of health disparities, inclusive growth and a focus on civic engagement, “philanthropy is being asked to play a role in all of these different arenas right now (and) getting called out on how it can be a part of addressing these issues,” said Johnson Center Executive Director Teri Behrens. See PHILANTHROPY on Page 18
The New York Stock Exchange welcomed United Wholesale Mortgage (NYSE: UWMC) on Friday. | NEW YORK STOCK EXCHANGE
SPAC-tacular bid
UWM-Gores deal stands as one for the record books BY NICK MANES
Mat Ishbia took UWM Corp. public amid a boom of the residential mortgage market.
Mat Ishbia has taken UWM Corp. public amid a boom of the residential mortgage market and now lays claim to the largest SPAC deal in history. The deal consisted of Ishbia, the president and CEO of the Pontiac-based mortgage lender, merging his 35-year-old business into a special purpose acquisition company (SPAC) sponsored by Los Angeles private equity billionaire Alec Gores at a valuation of more than $16 billion. According to a regulatory filing in December, Mat Ishbia and his father and UWM founder Jeff Ishbia were expected to jointly control
the equivalent of more than 1.5 billion shares of the company’s common stock. That stock would be worth $16.5 billion at the $11 price the stock was trading at Friday afternoon on the New York Stock Exchange under the symbol UWMC. A company spokesperson said Friday that new filings expected in the next 10 days would outline the specific holdings of major shareholders after the deal and it would not comment further on stock ownership. The Ishbia family controls 79 percent of the company’s voting power and nearly 94 percent of the shares. That dynamic should send a positive message to investors, Mat Ishbia said Friday morning during an interview
on CNBC after he rang the bell on the New York Stock Exchange. “I’m the largest shareholder, so I’m on the same team as them,” Ishbia said, noting that the company’s strong financial position — such as more than $400 million in profit in 2019 — allows for immediate dividends to be paid out. “Second off, the investors we spoke to were excited about that. They said, ‘I’m not cashing out — I’m putting fuel on the fire of our company’s growth.’ I’m 41 years old. I’m excited to continue to grow and (investors) wanted my leadership and our leadership team to continue.” See UWM on Page 17
FINANCE
Michigan venture capital sector achieves strong 2020 BY NICK MANES
While the economy remains mired in a downturn from the ongoing COVID-19 pandemic, the venture capital sector — nationally and at the state level — had a standout year in 2020. Venture capital firms in the U.S. in 2020 achieved record levels for investment and fundraising, according to the findings of a new report by the National Venture Capital Association trade group and research organization Pitchbook. Michigan VC activity, meanwhile, continued on its yearslong upward trajectory for overall investment levels and deal count,
Fortino
Glaza
according to the report. Michigan venture capital firms deployed a total of more than $558.4 million in 139 deals in 2020, a year in which many public-facing businesses were shuttered due to the coronavi-
rus, resulting in millions of lost jobs. For total capital deployed, that figure only trails the $785 million invested in 2019, according to the Pitchbook data, which dates back to 2014. Venture capitalists in Michigan acknowledge the overall disconnect between their sector and the broader economy. VC funds and the startups they invest in were largely well-positioned to quickly transition to all remote work, they say, meaning that activity only briefly slowed in the first weeks of the coronavirus spreading rapidly in the early spring. “There are a lot of industries by their nature, by their very structure,
they couldn’t necessarily operate in a remote way,” said Adrian Fortino, managing director and head of the Ann Arbor office for Mercury Fund, a Houston-based VC firm. “Whereas, by default, venture capital and a lot of tech-based businesses can operate remotely. To some extent, it’s a bit of an unfair advantage because they’re just built that way.” Patti Glaza agreed with that analysis, adding that 2020 made for a good year for venture funds to work with their portfolio companies first and foremost. See VENTURE on Page 18
VC investments through the years Total venture capital investment and deal counts for 2014-20: Year
Investment
Deal count
2014 2015 2016 2017 2018 2019 2020
$341.7 million $534.5 million $178.4 million $338.8 million $382 million $785 million $558.4 million
128 141 91 101 128 129 139
SOURCE: NATIONAL VENTURE CAPITAL ASSOCIATION CRAIN’S DETROIT BUSINESS GRAPHIC
JANUARY 25, 2021 | CRAIN’S DETROIT BUSINESS | 3
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The planned Pullman Parc project on the Elmwood Park neighborhood’s border with the Lafayette Park neighborhood has been deKirk scribed to me and PINHO others as a joint venture between Farmington Hillsbased Hunter Pasteur Homes, Detroit-based Broder & Sachse Real Estate Services Inc. and Detroit-based Woodborn Partners LLC, all established developers of for-sale and forrent multifamily properties in Detroit. But documents a little bird sent my way show that Dan Gilbert, Detroit’s most powerful landlord and real estate developer, also had money in the project — until recently. Buckle up. An entity called Green Forest LLC was the 50.002-percent owner of the entity, Lafayette Park Investment Co. LLC, that had a minority ownership interest in another entity, Hunter Pasteur Homes Lafayette Park LLC, which was the sole member of Lafayette Park Land Owner LLC that owned a chunk of land that Hunter Pasteur was to turn into 81 condominiums. “Gilbert is not an investor in the multifamily component of the project being developed on a separate site by Broder & Sachse and Woodborn Partners,” Sachse Construction CEO Todd Sachse said. Lafayette Park Investment Co. LLC raised $5 million from 13 investors, including Vinnie Johnson ($500,000), the former Detroit Pistons guard who is now chairman and CEO of Southfield-based Piston Group, and Andy Beltskiy ($100,000), owner of the NoJo Kicks shoe store in downtown Detroit. Green Forest’s stake was $2,500,100. Why is Green Forest important? It’s that entity that made Gilbert a partner on the condo component (the development is also planned to have 180-200 apartments across nearly 4.8 acres of the former
Friends School site). That chunk of land was sold Dec. 30 to Bloomfield Hills-based residential developer Robertson Bros. Co. for a price I haven’t been able to determine yet. Robertson Bros. plans forsale units on the site. Howard Luckoff, Gilbert’s longtime friend and his general counsel at the time the March 1, 2018, operating agreement for Lafayette Park Investment Co. LLC was signed, is linked to Green Forest entity in the document. Gilbert is also named several times in the 30-page agreement, which allows Gilbert to buy out other investors if they threaten his gaming li-
er documents offer a rare peek behind the curtain — and whose money is involved and what they stand to earn — of a major real estate development effort in the city. The for-sale products’ pro forma shows that it was initially expected to cost about $28.21 million and bring in $38.34 million in revenue through unit sales, the approximately $10.13 million profit on which would be split 50-50 between Hunter Pasteur Homes and the minority investor entity, Lafayette Park Investment Co. LLC. (A November 2019 application to the Detroit City Council for a Neighborhood Enterprise Zone tax incentive for Hunter Pasteur Homes Lafayette Park LLC says the for-sale component had increased to $40.7 million in a little over 18 months.) But the condos, which hit the market in April 2019, were not built as originally envisioned. Stay tuned for additional information on this project as it develops with a different roster at the helm.
“GILBERT IS NOT AN INVESTOR IN THE MULTIFAMILY COMPONENT OF THE PROJECT BEING DEVELOPED ON A SEPARATE SITE BY BRODER & SACHSE AND WOODBORN Orleans Landing retail PARTNERS.” tenants named — Todd Sachse, CEO, Sachse Construction
censes or might pose other regulatory risk for his casinos and don’t remedy that during a cure period. This was back when he still had a substantial gaming operation through Jack Entertainment LLC, which he recently sold to his longtime lieutenant Matt Cullen. In addition, an unnamed entity created by Luckoff and Randy Wertheimer, president and CEO of Hunter Pasteur, had another 1.998 percent ($99,900) ownership interest. Gilbert’s involvement in Pullman Parc has not previously been known. I reached out to Gilbert’s Bedrock LLC real estate development, ownership, management and leasing company for comment this morning, as well as his Rock Ventures LLC. “Dan is simply a private investor with no controlling interest,” a spokesperson said in an email last week. The operating agreement and oth-
If you’ve been along the Detroit riverfront the last couple of years, you’ve noticed the Orleans Landing apartment development. I’ve often wondered about the retail space in that project and why it’s still vacant. It turns out that a few leases have been signed but the businesses have not yet opened up, according to St. Louis-based developer McCormack Baron Salazar. Fitness facility Shut Up and Box is expected to take 2,724 square feet opening at some point this year, while Grind Grind, a clothing retailer, is expected to take 1,422 square feet at some point. A coworking company, Femology, had a lease for 2,879 square feet but terminated it, according to a spokesperson for McCormack Baron Salazar. The total retail space is 10,800 square feet. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB
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CRAIN’S VOICES
State pulls double-whammy on small businesses BY BRIAN CALLEY
COMMENTARY
Run for the border will end with dining restoration
I
n mid-November, Michigan Gov. Gretchen Whitmer and Ohio Gov. Mike DeWine took different steps to rein in a surging number of new cases of COVID-19 that was threatening the capacities of health systems in the two neighboring rival states. Whitmer’s health department shuttered bars and restaurants for the second extended period in 2020. DeWine’s public health department let them stay open for dine-in service, but with social-distancing rules to spread out patrons and a mandatory 10 p.m. closure. The Ohio Republican governor’s order forced restaurants and bars in downtown to Toledo to start closing up at 9 p.m. or earlier in order to get their employees out of the building by the 10 p.m. curfew. It also prompted an untold number of Southeast Michigan residents to drive an hour south to Toledo for a night out. “We definitely noticed more traffic from our Michigan neighbors,” said Julie Ketterman,
Ye Olde Durty Bird, a downtown Toledo gastropub, saw an uptick in Michigan patrons since mid-November when the Michigan Department of Health and Human Services prohibited dine-in service in bars and restaurants as part of an effort to slow the rapid spread of the coronavirus. | CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS
Chad
LIVENGOOD
co-owner and general manager of Ye Olde Durty Bird, a downtown Toledo gastropub. The DeWine approach to bars and restaurants still didn’t make up for the fact that most of downtown Toledo’s office buildings remain vacant during the day and there are no entertainment venues open at night. That has left Ye Olde Durty Bird with a much smaller customer base and 40 percent fewer employees than last January, Ketterman said. But plexiglass shields on shared high-top tables at the Ye Olde Durty Bird beats the alternative that Michigan’s sit down restaurants have had to endure — selling takeout meals and laying off thousands of workers that contributed to Michigan’s hospitality industry shedding a staggering 47 percent of its workforce last year. “That was out of my control,” Ketterman said of her competitive advantage over restaurants in Michigan just a few miles away from her establishment across the street from Fifth Third Field, home of the Toledo Mud Hens, the Detroit Tigers’ AAA affiliate. “We are very sympathetic to our neighbors,” Ketterman said. “We know how hard it is ourselves.” The playing field is about to be more level. Whitmer announced Friday that bars and restaurants can reopen at 25 percent of their fire code capacity, or up to 100 patrons, as of Feb. 1. See DINING on Page 7
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 25, 2021
Crain’s Voices is a series of occasional essays from a panel of contributors selected by Crain’s Detroit Business to offer thoughtful, informed commentary that spans the political and industry spectrums. Today’s contributor, Brian Calley, is the president of the Small Business Association of Michigan and the former Lieutenant Governor of Michigan. His community engagements include serving on the boards of Sparrow Health System, Highpoint Community Bank and the Autism Alliance of Michigan.
most employers understand that the state intends to stick them with the bill. But it should be fully understood that this is a huge shift in costs to small businesses, and it comes as a double whammy. Not only did the state take away their ability to make an income, it is now asking small businesses to pay higher unemployment taxes precisely because the state took away their ability to remain open. That is not fair. Fine. I wish that were all. But there is more insult to add to this injury. The first insult is the completely false notion that employers received an unemployment insurance tax cut. There have not been, nor will there be, any tax cut or break given to employers for the trust fund. Employer costs have gone up. And they are going to stay up for a very, very long time. Only with government math can they say “your taxes could have gone up more, so that means you got a cut.” Perhaps the ultimate insult to the severe economic injury suffered by small businesses is this: The governor is proposing to expand benefits from the already depleted trust fund and vetoed funding to cover the cost. If the government decides that it wants to enhance the benefit for unemployment AND require business closures at the same time, shouldn’t the state cover the cost? It is often said that small businesses are the backbone of the economy. It is true. But that backbone is breaking under the strains of government piling on more costs while taking away the ability to take in income. Small businesses are being taken for granted at a time when our communities need them the most.
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S
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mall businesses were stunned when Gov. Gretchen Whitmer exercised a line-item veto in late December to eliminate a $220 million investment to help workers who face long-term unemployment as a result of the state’s pandemic management. She called it a “giveaway” for business. Nothing could be further from the truth. The state needs to start taking some responsibility for its own actions. The Unemployment Insurance Trust Fund is funded by employers to support employees when there are layoffs. Unemployment benefits are basically an insurance policy for workers. But the state and federal governments co-opted the trust fund for a broader public purpose during the pandemic. Rather than being an insurance policy, it became a social safety net for government-imposed layoffs and a delivery mechanism for federal CARES Act dollars. Government-mandated decisions nearly bankrupted the trust fund, which was one of the strongest in the country before the pandemic began. In normal times, employers who lay off people more often pay more. Those who lay off employees less often pay less. But what do we do when the decision to lay people off is forced by the government for a broad public purpose such as preventing the spread of disease? This was the case in 2020. The fund was depleted not because of employer actions, but because of government mandates. In 2020 and into 2021 many small businesses in certain industries have been required to close and lose all or most revenue. Is it fair that the cost of forced layoffs be charged to small businesses who were simply following government mandates to close? Furthermore, the federal unemployment addition in 2020 made the total state/federal unemployment benefits higher than regular pay for many workers, creating a disincentive to return to work. Therefore, stints on unemployment assistance were generally longer, further depleting the trust fund. As a practical matter, we all know that small businesses will have to pay the bill for these government mandates, regardless of promises made by political leaders. I think
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.
DINING
From Page 6
She also adopted the same 10 p.m. curfew that DeWine imposed in Ohio more than nine weeks ago. Ohio’s daily COVID case counts are back to where they were in mid-November when DeWine imposed the night time dining curfew. On Jan. 21, there were 624 new COVID-19 cases per 1 million people reported — the same exact number of cases for every million people on Nov. 16, according to the COVID Tracking Project. Michigan, by contrast, saw its daily case count fall from 740 per million residents in mid-November to 225 last week, said Dr. Joneigh Khaldun, the state’s chief medical executive. Under the Michigan Department of Health and Human Services’ latest order, nightclubs still can’t reopen, a restriction rooted in the state’s experience from last June when COVID-19 spread from the dance floor Harper’s Restaurant & Brew Pub in East Lansing to at least 180 people in 15 counties. Restaurant and bar owners remain furious with the governor’s restrictions, feeling that their industry has been singled out when the state’s own outbreak data doesn’t show that they’re the problem. The state’s own data shows the problem with COVID outbreaks continues to lie with nursing homes, schools, manufacturing facilities and retail stores. MDHHS lifted a closure order for high schools before Christmas. For the week ending Jan. 14, local health agencies were investigating 128 outbreaks involving two or more cases. About 29 percent of the outbreaks were associated with nursing homes and other long-term residential facilities, while 18 percent could be traced back to manufacturing and construction industry settings and 12 percent originated from retail stores, according to MDHHS data. When they were open, restaurants and bars never came close to producing this volume of the total outbreaks. But Whitmer and her public health advisers have insisted bars and restaurants are inherently more dangerous places to be because masks are removed to eat and drink. And despite placing her policy endorsement on allowing dine-in service to resume, the state’s top doctor urged people not to do it. “The safest thing to do is not eat inside a restaurant, but we still want you to order from them” for takeout or outdoor dining, Khaldun said Friday at a news conference with Whitmer. Khaldun’s message seemed to undercut whatever confidence the public is supposed to have in venturing inside a restaurant.
underway for nearly four weeks. Retail pharmacy giants CVS and Walgreens are exclusively operating vaccination clinics under a partnership with the federal government. But the administration of shots has gone far slower than state health officials hoped. As of Jan. 20, CVS and Walgreens had reported administering 70,251 shots from a stockpile of 245,100. That stockpile would have been larger had the federal government not given Michigan permission to divert two weekly shipments of more than 60,000 doses each to the rest of the population that’s eligible to get the shot, including individuals over age 65 and teachers. Based on the latest data, the Health Care Association of Michigan believes CVS and Walgreens
should be done with first shots of the Moderna vaccine in 412 skilled nursing facilities by early this week, HCAM CEO Melissa Samuel said. The big challenge going forward is vaccinating elderly residents in more than 4,000 assisted living settings, Samuel said. One reason why CVS and Walgreens are holding onto vast quantities of vaccine is ensure that there’s enough for second shots as part of a program that involves three clinics for each nursing home, Samuel said. “We’re comfortable that they’ll be there when they’re needed, that they’ll be replenished,” Samuel told Crain’s. “It’s absolutely working the way it was intended to.” Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood
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Tracking nursing home vaccinations A big part of the public’s confidence to resume normal economic activities revolves around getting one of the two vaccines for COVID-19. Nursing homes are ground zero in the pandemic, accounting for 38 percent of the deaths and 7.5 percent of the total cases in Michigan. Of course, it’s not the residents who are bringing COVID into nursing homes — it’s their caregivers, physical therapists and support staff. The mass inoculations of some 300,000 residents and staff in skilled nursing homes and assisted living facilities is far from over, despite being
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SMALL BUSINESS SPOTLIGHT
Turning to tech: Small businesses find new ways to stay viable during pandemic
SWEET TASTE OF TECH-CESS “I’VE DEFINITELY BEEN ABLE TO REACH A WIDER AUDIENCE. IF YOU GO ON MY WEBSITE TO SIGN UP FOR A (VIRTUAL) COOKING CLASS, YOU MIGHT ORDER A CAKE, TOO. THAT’S JUST MORE EXPOSURE.”
Macomb Township resident Chantele Jones ran a thriving catering business, Estella’s Cuisine, prior to the pandemic. Jones shifted to offering virtual cooking classes via Zoom.
— Chantele Jones, the owner of Estella’s Vegan Cuisine and Desserts
CONTRIBUTED PHOTOS
BY JASON DAVIS | Business was booming for Chantele Jones, the owner of Estella’s Vegan Cuisine and Desserts.
The 32-year-old Macomb Township resident works as a chef, food educator, caterer and baker. Each month she pulled in between $3,000 and $4,000 — sometimes as much as $5,000 if she served her dishes at a pop-up shop. Then the COVID-19 pandemic shutdowns came. “It was kind of scary at first — my kitchen being closed down,” Jones said. “... The catering side really took a hit.” Jones also sells her goods at bakeries in Ferndale and Shelby Township, a revenue stream that also dried up. As a way to keep her livelihood going, Jones began teaching virtual vegan cooking classes, which brought in a new group of customers. She joined many other small business owners who during the pandemic began placing an added emphasis on technology in an effort to remain viable and relevant. According to a Dec. 16 report in The Center Square, pandemic restrictions forced 32 percent of Michigan businesses to close at least temporarily — the most of all 50 states. The failure of small businesses has a major impact on the U.S. workforce. Small businesses have placed an added emphasis on online sales, implemented and expanded curbside pickup and ramped up their social media presence, essentially reshaping business models to survive.
Virtual classes lift business Jones didn’t want to lose the customer base she had built and wanted to branch out. “I started by going 8 | CRAIN’S DETROIT BUSINESS | JANUARY 25, 2021
live on social media. As it grew, I thought I could monetize it, so I switched to Zoom,” she said. “I’ve definitely been able to reach a wider audience. If you go on my website to sign up for a (virtual) cooking class, you might order a cake, too. That’s just more exposure.” Jones’ new online presence has helped expand her customer base. She’s now offering shipping on baked goods. Jones offered holiday-themed classes during Thanksgiving and Christmas, which brought in 10 and 12 participants, respectively. She ran a vegan Christmas dish course, which cost $45 to participate. She also facilitated a $20 Christmas cookie course. Jones allows up to 15 participants in each course. The venture was not without its issues. Early on, some participants experienced technical issues, but everyone remained patient throughout the early stages. See SPOTLIGHT on Page 9
TECH TIPS Five tips for small businesses looking to stay top of mind for customers during the pandemic and beyond: Social media is free: Facebook Live and Instagram Live are available at no cost to users. The platforms allow business owners to connect with longtime and prospective customers from anywhere at any time. Think outside the box: Curbside pickup service allows you to service customers without them ever passing through your doors. The service can be offered at no charge or for a small fee. Go global: Having an online presence, such as a store website, makes your brand and products available to the world. According to a November report, more than 36 percent of small businesses do not have a website. Be flexible: Offering online shopping allows customers to place orders when it is convenient for them.
No longer able to host in-person cooking classes due to the pandemic, Chantele Jones last year began offering virtual classes for up to 15 participants.
Be creative: Try a new way of marketing your company, like using a hashtag on social posts, starting an email newsletter or creating video.
FOCUS | SMALL BUSINESS SPOTLIGHT
Buddy’s Pizza CEO Burton Heiss (left) chats with Andrew Blake, president of Blake Farms in Macomb County and co-owner of Blake’s Hard Cider and Kinder Products, during the recording of Blake’s “Everything Borrowed” podcast at the Buddy’s downtown Detroit location. | NIC ANTAYA FOR CRAIN’S DETROIT BUSINESS
SPOTLIGHT
From Page 8
“It’s been very successful,” Jones said. “We’ve definitely had quite a few participants. I ran the courses out of a classroom before. There’s no overhead when you do them virtually. You’re not paying for space or assistants. This is definitely something I’ll continue after the pandemic is over.”
New web series For Ann Arbor-based EntryPoint, a new weekly web series has served as a way to bring together members of the small business community from across the Midwest. The five-person group partners with organizations to deliver research insights and implement data-driven programs to promote entrepreneurship. In April, it launched “The Cackle,” a 30-minute weekly web series that discusses trends, challenges and what’s on the horizon for the country’s small business and startup groups. “The Cackle” is viewed by about 10,000 people each week, according to EntryPoint founder and Managing Director Emily Heintz. A special holiday edition, focused on shopping local and small businesses, reached 40,000 people in one week, she said. Implementing the program was necessary as EntryPoint lost 30 percent of its revenue last year, Heintz said. At one point, the company experienced a 50 percent drop in revenue after projecting an increase from 2019. “As a research institution that delivers comprehensive research insights and implements effective data-driven programs that promote entrepreneurship across the Midwest, it’s critical to EntryPoint’s work that we stay involved in the small business and startup community,” Heintz said. “When the pandemic began and we had to forgo in-person meetings and gatherings, we lost nearly all of our program revenue.” Heintz said EntryPoint is now receiving some financial support for “The Cackle,” but declined to name the investors. She said there is increasing interest from potential partners in how EntryPoint showcases and supports the small business and startup communities. Heintz and her team began using
EntryPoint founder and Managing Director Emily Heintz (left) is joined on “The Cackle” by Candice Matthews Brackeen of Lightship Capital to talk about fundraising and opportunity in venture capital. | SCREENSHOT
online graphic design tool Canva to make EntryPoint’s digital channels more visually appealing, she said. EntryPoint streams the show through Streamyard, which allows users to publish content to all major social media platforms simultaneously. “We’re a five-person organization that started using a few new tools to start ‘The Cackle’ and it’s been super successful in getting our faces, names and what we do out there,” Heintz said.
‘We had curbside before Target’ Molly Ging, owner of The Little Seedling in Ann Arbor, which specializes in baby clothing, gear and children’s toys, began offering online ordering in 2003 after giving birth to her first child as a way to give herself more flexibility. That experience has served the business well during the pandemic — “We had curbside (pickup) before Target,” Ging said — but faced with a drop in revenue Ging tried virtual personal shopping to keep and expand her customer base. Through FaceTime, Facebook Live and Instagram sessions, Ging, 46, walks through her store highlighting new or popular items. Links to each item on the store website are posted in each video. She offers the service at no charge. “I started doing the videos off the cuff, not professional in any way,” said Ging, who previously worked in IT for the University of Michigan and Ford Motor Co. “It was just me with a mask on showing people different things in
the store. “We’ve found that a lot of people are into it. It lets them see what we have to offer without leaving their house. However we can get information out to customers, we’re going to do it.” With limited store hours due to coronavirus concerns, about 95 percent of The Little Seedling’s sales now come from online orders, which Ging said can be a gift and a curse. She knows customers generally will spend more when shopping in the store. “It’s easy to total up what you have in the cart when you’re shopping online and take things out of the cart,” she said. The store ended 2020 with about a 20 percent drop in revenue from the previous year, she said.
New tool for brand Andrew Blake, co-owner of Blake’s Hard Cider and president of the Blake’s family of companies, which includes Armada-based Blake’s Farms, started a weekly podcast late last year. “Everything Borrowed” features leaders from a variety of industries who share ideas and discuss a variety of topics. The first episode aired on iHeartRadio on Dec. 15. The show can also be downloaded at StartUp Nation, the Google Play Store and at Apple podcasts. “It’s been a lot of fun to not only talk with Michigan business owners and entrepreneurs, but national people, too,”Blake said. . Blake's family business actually came out ahead in 2020, bringing in
Molly Ging, who owns and operates Ann Arbor-based children’s store The Little Seedling, has used social media to give customers a look at the store’s inventory, while offering online ordering and curbside pickup. | MOLLY GING/THE LITTLE SEEDLING
‘I can really see this continuing for a while’
about $30 million, up from $19 million in 2019, with $7 million of it coming from its hard cider operation. “The philosophy behind the show was to create more conversation on entrepreneurship given the climate we’re in. It’s been rewarding. “There are a lot of people who want to share their business’ story. I’m fortunate to have had on people from companies that listeners know and want to hear from.” Blake thus far has recorded 15 episodes of a 22-episode season. Guests have included Emagine Entertainment CEO Anthony Laverde, American Coney Island owner Grace Keros and Woodward Throwbacks founder and Carhartt Ambassador Bo Shepherd. It costs nothing to submit a podcast to iHeartRadio. Revenue is generated through advertising sales and placement. Advertising brokers sell commercial spots at rates of $25 to $50 for every 1,000 podcast downloads. The podcast since its launch has reached 100,000 listeners across all platforms. Blake said “Everything Borrowed” was self-financed initially and won’t pay for itself for another year. But he didn’t start the podcast to turn a profit, rather to generate conversation on issues facing entrepreneurs.
Ging believes online sales will continue to be a major part of her business for the foreseeable future. “You’ve got moms at home nursing babies and shopping online. I can really see this continuing for a while,” Ging said. “We feel like robots right now, just pulling products off the shelves and putting them in bags. We’re thankful things have worked out, but we can’t wait to have people back inside the store.” Blake said that in conversations for his podcast he’s discovered there’s more optimism than some might think. “There’s an overwhelming sense of change in how people look at businesses,” he said. “That’s a common thread I’m hearing. Even though people are frustrated and emotions are high, there’s an underlying sense to improve. “Part of running a business is learning how to adapt with the changing times. I’ve heard a lot of great examples of that. It’s beautiful to see the strides people are taking right now.” Contact: jason.davis@crain.com (313) 446-1612; @JayDavis_1981
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JANUARY 25, 2021 | CRAIN’S DETROIT BUSINESS | 9
STATE OF THE STATE
CHARTING A NEW COURSE:
5 BIG IDEAS FOR WHITMER’S THIRD YEAR
S
`BY CHAD LIVENGOOD
ome sectors of the economy are running on fumes. There’s political division and unrest across the land. And there’s a plague still ravaging a state of 10 million people who are restless and fatigued from 10 months of mask-wearing, social distancing and seemingly endless work-from-home Zoom calls. Gov. Gretchen Whitmer faces these governing dynamics — and an intransigent Legislature that sees her the same way — as she prepares to deliver her third State of the State address Wednesday in front of an empty room without lawmakers, Supreme Court justices and other dignitaries because of the COVID-19 pandemic that now defines her governorship. Whatever the Democratic governor and her advisers mapped out a year ago as their third-year agenda was likely upended by the global pandemic that swept into the state last winter and took the lives of nearly 14,000 Michiganians. Governors often have sounding boards from within their own party. We thought it would be informative to ask some of Whitmer’s own political allies for a candid assessment on how she should proceed during these extraordinary times, and add a range of opinions from outside that circle and from the other side of the aisle in the columns that follow. See BIG IDEAS on Page 14 10 | CRAIN’S DETROIT BUSINESS | JANUARY 25, 2021
HERE ARE 5 MORE: `Jase Bolger: A range of priorities that governor can make work in bipartisan way. PAGE 12
`Amber Arellano: How to address crisis COVID wrought in education. PAGE 12
`Mike Shirkey: Restore balance and common sense in state’s pandemic response. PAGE 13
`John Walsh: Give up battle over Line 5 and focus on a workable solution. PAGE 13
`Dan Gilmartin: A real recovery hinges on city government recovery. PAGE 14
COMMENTARY INSIDE
BILL NOLL VIA ISTOCK
JANUARY 25, 2021 | CRAIN’S DETROIT BUSINESS | 11
STATE OF THE STATE COMMENTARY
Nine ways Whitmer can work toward post-COVID strength BY JASE BOLGER
The annual State of the State address is an opportunity for governors to outline their past success and define their future goals. In this trying time, Gov. Gretchen Whitmer should move Michigan beyond the health and economic uncertainty of COVID and deliver a plan that provides goals in a way that are clear to all and easily followed. Opening Michigan safely: While Michigan’s vaccination rate slowly rises, a clearly defined plan for opening our state that is measured by data we can all track and science that has been tested by experts needs to be a significant portion of Whitmer’s speech. While those who are not feeling well should remain at home, and the rest of us need to practice good hygiene, social distancing and mask wearing, other states have proven that they are saving more livelihoods while also saving more lives. Effective vaccination: An important part of the speech also needs to detail the plan for vaccinations. A plan that is specific in its steps to get everyone vaccinated. When COVID first entered our state, we saw and heard from employers about the importance of wearing a mask and protecting others. Especially due to our long business history in and great talent throughout logistics, Michigan’s slower rollout comparted to other states is unfortunate. Working safely: Whitmer needs to address the numbers of lives who have been lost as a result of COVID, as well as the number of livelihoods that have been destroyed as a result of state closures. Since the last restrictions in Michigan began in November, Wisconsin has
Jase Bolger served as Republican speaker of the Michigan House of Representatives from 2011-14. He is currently president of Tusker Strategies LLC and serves as the policy adviser for the West Michigan Policy Forum. had a similar experience with cases — despite far fewer restrictions. With precautions, work can be safe and people can be inspired. Saving lives: Most tragic, though, is that while other states are saving more livelihoods, they’re also saving more lives. While Michigan has seen 142 deaths per 100,000 residents, Indiana has experienced 133, Florida is at 107, Wisconsin is even fewer at 95 and Ohio is the lowest in our region with 83 deaths per 100,000. This, of course, does not include the impact of job loss on mental health, addiction or suicide. Simply, put, the data on deaths due to COVID alone questions the efficacy of Michigan’s prolonged restrictions. Restoring jobs and building careers: We need to ask, then, what is the impact on the health and safety of those that were employed by or running one of the thousands of small businesses who have permanently closed as a result of state restrictions? We need a plan to provide hope to those that are suffering from job and business loss. The brightest hope comes from those who turn ideas into jobs and the fulfillment that comes from work well done. Affordable housing: After the population gains of the prior decade workers have faced
challenges in finding affordable housing. Whitmer should announce a goal of working with private job creators to find solutions that will increase housing supply, reduce the barriers and costs that punish low-income workers and avoid the unintended consequences all too common with government intervention. Quality education: Part of the COVID-19 recovery plan also needs to include a path forward for students. Our children’s access to learning has been severely restricted. With the challenges they’ve been faced with, students deserve a focus on quality education and measurement of progress. Student preparedness should not be suspended or ignored. Failing to educate kids or forcing them on and out without the preparation they need to have a chance for success is cruel. Reforms like A-F school grading and third grade reading requirements may be needed now more than ever. All kids deserve access to a full education and the individual help they need, even if that means more time to learn if they can’t at least read at the second grade level before going to the fourth grade. Bipartisan solutions: Working with the Legislature is not easy. But, the legislature represents the people’s voice and brings concerns from every corner of the state. Especially in challenging times, varied opinions are needed and compromise is valuable. Whitmer should lay out a plan to work together with the Legislature to forge bipartisan solutions for our diverse state. A better plan of action: My hope is that the governor focuses on specific solutions for our state and our people, avoiding blame and providing a commitment to work past the divisions of history and for a better plan for all of Michigan.
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COMMENTARY
Pandemic disruption to K-12 requires years of academic catchup BY AMBER ARELLANO
As Michigan nears the one-year anniversary of the statewide school shutdowns from the COVID-19 pandemic, it’s more apparent than ever that the effects of the interrupted learning for our state’s students could be devastating and long-lasting — unless we take bold action now and act with urgency. A recent poll we conducted with Global Strategy Group sheds light on the priorities that parents, who have grave concerns about their children’s learning loss, say should be a focus for Michigan’s leaders. Among those: 85 percent of Michigan parents polled say the state’s leaders should have a plan to address pandemic learning loss — and make sure all students catch up to their current grade level. Despite the considerable efforts of many educators during this difficult time, virtual instruction remains less effective for more students. Additionally, nearly half of Michigan parents say that the quality of teaching and instruction their children receive is worse amid the crisis, which threatens to compound Michigan’s longstanding lackluster progress in raising student achievement. Just over a third of all parents rate remote learning as successful or extremely successful. If we don’t act with urgency, we risk worsening longstanding education inequities that 12 | CRAIN’S DETROIT BUSINESS | JANUARY 25, 2021
have plagued the state’s students for decades, especially for the most vulnerable students, which would be devastating not only for their futures, but for the future of our state. Instead, we urge state leaders to prepare and act now by implementing immediate and far-term Amber Arellano solution-based strategies is executive to invest in and accelerate director of The the educational recovery Education of Michigan’s students’ Trust-Midwest. learning. In the immediate term, we see three priorities.
Support extended and expanded learning strategies State leaders must provide students with both the academics and wraparound social services they need in the fall and coming years. That plan should include making the best use of extended-day learning or extended-year options aligned with Michigan’s college and career-ready standards. Our polling found that parents are hungry for this assistance. Eighty-three percent of parents polled agree that state leaders should provide
safe, free and voluntary in-person summer school for students that need to catch up. The state should provide funding and guidance for ways to conduct learning, including through a mix of socially distanced, safe, indoor and outdoor education this summer and for the next several summers, too. Other options should be integrated into the school day, such as through high-dosage tutoring and traditional after-school programs, as well as extended learning opportunities, especially for Michigan’s most vulnerable students. To catalyze Michigan’s educational recovery process, investment and planning for such efforts need to begin now. Additionally, Michigan has committed to becoming a top 10 state for early literacy. We can’t lose sight of Michigan’s ongoing literacy crisis — or lose sight of far-term strategies needed — amid the immediate health crisis. Already, less than half of Michigan third graders were proficient in ELA on the statewide assessment before the pandemic and Michigan is in the bottom 10 states for African American students’ performance in early literacy. And, as we have found, learning disruptions due to the pandemic can be particularly harmful — and expensive — for high school students preparing for postsecondary education. Even before the COVID-19 crisis, nearly a quarter of all Michigan high school students were re-
quired to take at least one remedial course upon enrolling in one of Michigan’s two- and four-year college or university programs. State leaders should prioritize funding to ensure juniors and seniors impacted by COVID-19 learning disruptions have access to no-cost remedial courses at Michigan community colleges. Anticipated federal stimulus dollars should be invested in the strategies that research shows are among the highest impact in terms of learning — and prioritized first and foremost for children who are the farthest behind.
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COMMENTARY
Restore balance, common sense in state’s response to pandemic BY MIKE SHIRKEY
Gov. Gretchen Whitmer has been at the center of debate about whether restrictions on business amid COVID-19 went too far. | OFFICE OF THE GOVERNOR
In 2020, we watched Gov. Gretchen Whitmer embrace the heavy hand of unilateral government. In doing so, the governor likely created more problems than she solved. We do not yet know the full scope of the impact of unilateral governing, but we already see devastating effects. Senate Republicans have been fighting to restore balance and commonsense in the state’s strategy to address COVID-19. At the top of our list of priorities for 2021 is safely reopening Michigan’s economy. Local businesses have proven they are capable of meeting reasonable health and safety regulations. Yet, there are still specific industries, like restaurants, that have been singled out by the governor despite no evidence showing these establishments are a significant source of virus spread. Thousands of local businesses are teetering on the brink of failure because of the governor’s repeated shutdowns. The Senate Republicans will pursue additional support measures for small businesses disproportionately impacted by the governor’s closure policies and advocate for a full restoration of the economy across all sectors. The health and well-being of our population is critical. Millions of Michiganders are waiting for the opportunity to be vaccinated against COVID-19. The Senate Republicans will hold the governor and her administration accountable for the disorganized distribution of the vaccine to eligible Michiganders. State government should ensure reliable delivery of the vaccine, but that has not been the case in Michigan.
IF WE DON’T ACT WITH URGENCY, WE RISK WORSENING LONGSTANDING EDUCATION INEQUITIES THAT HAVE PLAGUED THE STATE’S STUDENTS FOR DECADES, ESPECIALLY FOR THE MOST VULNERABLE STUDENTS, WHICH WOULD BE DEVASTATING NOT ONLY FOR THEIR FUTURES, BUT FOR THE FUTURE OF OUR STATE.
Empty classrooms and virtual learning have left more Michigan children in danger of falling behind. LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS
Close the digital divide The state also must work to address the ongoing challenges in access to digital devices that has disproportionately affected Michigan’s students of color, students from low-income backgrounds and students in rural communities. Indeed, long before the pandemic, millions
of children across the nation, especially the most vulnerable, faced challenges accessing online resources to complete homework assignments, improve digital literacy skills and continue their learning at home. While laudatory local efforts have sought to address gaps in digital access in Michigan, many students statewide still don’t have the proper access to technology, reliable internet, native-language technology support or an appropriate place to learn, especially students in the most underserved communities. State leaders certainly can — and should — play a leading role in ensuring equitable access to technology, including setting standards for high-quality, consistent virtual instruction aligned with college- and career-ready standards during and following the crisis. And they should support efforts to improve infrastructure and expand broadband access across the state.
Sen. Mike Shirkey is the current Michigan Senate Majority Leader. The Republican represents the 16th Senate District in Jackson, Hillsdale and Branch counties.
SENATE REPUBLICANS HAVE BEEN FIGHTING TO RESTORE BALANCE AND COMMONSENSE IN THE STATE’S STRATEGY TO ADDRESS COVID-19. AT THE TOP OF OUR LIST OF PRIORITIES FOR 2021 IS SAFELY REOPENING MICHIGAN’S ECONOMY. Senate Republicans will get to the bottom of this failure. We will also continue to pursue legislation that encourages more and better access to physical and mental health care across our state through the passage of bills like a state nursing compact to ensure our health systems have access to qualified workers. Senate Republicans believe government should never be an obstacle to Michiganders pursing opportunity and exploring their unique purpose. This school year, the governor limited opportunity for our young people by limiting access to education. Parents are rightfully concerned their kids are falling behind because of shuttered schools and unreliable schedules.
Ensure consistent and timely public reporting Michigan needs to face its educational challenges honestly, making sure that clear information about the response to and impact of COVID-19 for Michigan students is made available in a timely, accessible manner for all stakeholders — including students, families, educators and policymakers. Importantly, the progress of all Michigan students’ academic progress should be assessed this spring. The bottom line is that we cannot diagnose a problem we cannot see. In our poll, the vast majority of all parents — particularly Black parents and parents of color — expressed concern about their child falling behind, with 91 percent of Black parents and parents of color and 83 percent of White parents reporting concerns. And yet nearly half (47 percent) of all parents polled indicate they have received little or no information from their child’s school about whether their child is suffering from learning loss or has fallen behind grade-level expectations. By collecting data on student learning and reporting it publicly, state leaders, educators and parents will be much better positioned to help ensure that students who have fallen most behind from the pandemic receive the support and resources they need to catch up to their grade.
Senate Republicans are committed to advancing legislation to help combat learning loss. This past year saw our homes converted into offices and classrooms. While parents struggled to cope with the demands of work and school from home, many Michiganders struggled with access to technology. Senate Republicans are focused on improving infrastructure in all forms. Many communities still lack access to reliable internet service. Antiquated infrastructure should not be the reason kids cannot access educational opportunities or that parents are unable to work. Improved access to technology also means improving access to health care through telemedicine options. Senate Republicans will strive to improve the quality of life for many by improving infrastructure throughout our state. Michigan’s short-term economic forecast appears rosy, but it is not a reflection of the difficult discussions being had around kitchen tables and the tough choices being made by local business owners. Senate Republicans pledge that we will not place any additional financial burden on families or local businesses in crafting the state budget. Michiganders have sacrificed too much in the face of COVID-19 and their pain has been needlessly exacerbated by Whitmer’s continued policies. Effective government requires willing participants, balance and compromise. We are willing to work with the governor to strike a balanced approach to state government, but we will not compromise if it means our constituents will suffer. This new year brings new opportunities for commonsense government and the Senate Republicans are committed to a better Michigan.
Beyond the immediate moment As important as the immediate moment is, near- and far-term plans to make Michigan a top 10 state for education cannot be lost amid the crisis of now. The strategies outlined here are intended to be a multi-year process because the anticipated recovery could take three or more years. Indeed, our public schools were already underperforming other states before the pandemic, especially among our most underserved student groups, and now COVID-19 threatens to make our attempt to reach our top 10 education state goal that much more difficult. Now is the time to double down and recommit to these goals and address the large structural barriers harmful to our most underserved students, including students of color, English learners, low-income students, and students with disabilities. That includes addressing Michigan’s longstanding inequitable funding system and challenges to our school talent system; improving post-secondary opportunities with more resources and supports; and making sure all students are collegeand career-ready, starting with early literacy. Bold leadership is needed to advance students’ educational recovery. State leaders should start by listening to the pleas of parents and develop solution-based strategies that propel our state forward and broaden opportunities for all students, both now and long after the health crisis subsides. JANUARY 25, 2021 | CRAIN’S DETROIT BUSINESS | 13
STATE OF THE STATE
BIG IDEAS
From Page 11
Defeat the pandemic After a year of containment, the public is craving direction on how to stop the pandemic’s deadly toll and economic restrictions through access to the Pfizer and Moderna vaccines, said John Cherry Jr., a former lieutenant governor under ex-Gov. Jennifer Granholm. “People are almost solely occupied by the pandemic,” Cherry said. Whitmer has to sell new Democratic President Joe Biden’s 100-day plan for quickly accelerating vaccinations in order to get public buyin, Cherry said. “I think the best thing to do, in terms of the big picture, in getting the public’s attention is to kind of pivot off of what the president is doing and kind of show how those new initiatives are going to unfold here in Michigan,” he said. Job No. 1 is continuing to get the vaccine in as many arms as possible, said David Waymire, a veteran Lansing communications strategist and partner at Martin Waymire. “She needs to focus on delivering services, especially delivering this vaccine — that’s going to be a huge metric for her in the next 24 months,” Waymire said. By this time next year, the Republican Party will likely have recruited a challenger and Whitmer’s 2022 re-election campaign will “be on in earnest,” Waymire said. “If she’s got everybody vaccinated by then, people are going to remember that,” Waymire said. “And if it’s still hanging out there, people are going to remember that. ... People might not remember some other stuff, but, boy, if that vaccine is not getting out there, then her base is going to have concerns.” Whitmer’s prioritization of public health through business shutdowns continues to clash with legislative Republicans who want to reopen the economy and resume everyday activities that are known to spread the virus, such as mask-less dining. Dianne Byrum, a former Democratic lawmaker and partner at the East Lansing political consulting firm Byrum & Fisk Communications, said the governor should emphasize that goals of both saving lives and livelihoods can be accomplished through mass vaccinations. “The rapid deployment of getting vaccines in arms can accommodate both,” said Byrum, who also chairs Michigan State University’s
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rapidly, especially in metro Detroit, should prompt a renewed public campaign emphasizing hand-washing, mask-wearing and social distancing, said Vernice Davis Anthony, a veteran public health expert and consultant. “That’s going to be No. 1 because the amount of vaccines that we’re getting may not be enough to turn this wagon around,” said Davis Anthony, a former CEO of the Greater Detroit Area Health Council. Davis Anthony serves on Whitmer’s Michigan Economic Recovery Council, a group of corporate and hospital CEOs, public health experts and university presidents that DTE Energy Co. Executive Chairman Gerry Anderson assembled last spring to advise the governor on reopening the economy.
Educational recovery
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board of trustees. “We should come together with that understanding that they’re connected — they’re not separate issues.” “That’s unfolding right now and people have to rise to the occasion and show some statesmanship and some leadership here,” Byrum added. “And the pettiness and partisanship has to fall to the side.” Cherry said the governor should “avoid pointing your finger” at the Trump administration’s failings — and move on. “If the object here is to try and move forward, I would spend my time molding the positive thing that’s coming,” Cherry said. One big unknown variable is the new highly contagious strain of COVID-19 that originates from the United Kingdom. The real potential for the UK variant to spread
The learning loss for 1.5 million school-aged children and the long-term impact on academic achievement may not be fully known for years to come. But that makes it all the more important for Whitmer and the Legislature to focus on supporting educators this year, Byrum said. “This is going to be an area that’s going to need a lot of focus and it’s going to need extra resources,” she said. The extra financial resources are already sitting at the Capitol doorstep. The latest federal aid package that Congress passed last month contains $1.7 billion for public education, according to the state budget office. Whitmer proposed last week adding $300 million in one-time surplus tax funds to the pot. She wants the state’s portion to come from a projected surplus of $1.2 billion in tax revenue for the current fiscal year that state budget planners just agreed to. Spending the combined $2 billion in additional aid for schools — and how to spend it — requires approval of the Legislature, where some GOP lawmakers want to tie the disbursement of federal funding to Whitmer’s health department lifting COVID restrictions on public-facing businesses. The governor’s plan calls for a new funding formula that would give more money to districts with a larger proportion of students living in poverty or with disabilities and special needs. This proposal could set in motion a longer-term debate over equity in K-12 education funding. “Our kids have had their education disrupted significantly, and it really has drawn attention the inequities that kids face in their education,” Byrum said.
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Donald Trump may no longer be president, but his political base maintains an outsized voice in the ear of Republican state legislators. This may be the political intersection of a winning legislative strategy for the Democratic governor and the Republican legislative leadership, Waymire said. Mandating businesses provide employees with earned paid sick leave would have appeal to
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COMMENTARY
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Time for Whitmer to stop fighting the Line 5 tunnel project
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Rounding the corner to 2021, the pandemic that many believed would end months ago continues to take its toll on people’s lives and our economy. While Michigan can be immensely proud that Pfizer, one of our state’s most prominent manufacturers, is leading the way in speeding a life-saving vaccine to market, Michigan’s economic recovery is years away. One thing is for certain, the pandemic has altered the way we work, go to school and shop, among other things. In other words, the way we consume things. For Michigan, where good manufacturing jobs are highly desired and where we work hard to ensure our companies can compete around the world, basic economic principles of supply, demand and workforce remain challenged and uncertain. But the demand for goods, especially food, medical supplies, clothing, safety products and many others, continues despite, and because of the coronavirus. Michigan manufacturers have risen to the challenge, changing auto assembly lines to hand sanitizer, ventilator and mask-making production lines to meet the safety needs of 14 | CRAIN’S DETROIT BUSINESS | JANUARY 25, 2021
front-line workers and citizens everywhere. Once the Arsenal of Democracy, Michigan is flexing its manufacturing muscle again as the Arsenal of Health. Michigan manufacturers are gearing up to power up Michigan’s economy as we John Walsh is emerge from COVID’s grip. president and But manufacturing takes CEO of the a lot of energy, and Gov. Michigan Gretchen Whitmer’s recent Manufacturers Association. He is actions to shutter Line 5 — Michigan’s energy lifeline a former — in early 2021 just three Republican state years before a planned tunrepresentative from Livonia and nel solution can be comwas a state pleted, threatens the speed budget director of and strength of recovery. Gov. Rick Snyder. Her actions risk manufacturing jobs and the mere survivability of some manufacturers. They threaten to raise the price of nearly every product made in Michigan — from pickles to potato chips and automobiles to appliances — and sold here and around the world. Transportation — essentially fuel — costs are
a key driver; fuel used to get raw materials to manufacturing plants and fuel used to move finished products to market, whether by truck, rail, or air freight. Detroit Metro Airport, which relies on Line 5-based jet fuel for more than half its needs, is vital to our ability to ship more 480 million pounds of cargo each year. Increased transport costs hurt Michigan’s competitiveness, plain and simple. The administration’s plan for backfilling Michigan’s energy needs rests on moving oil currently transported by Line 5 into tanker trucks on Michigan’s roads or rail cars on its rail lines. According to one study, it will require more than 504,000 trucking miles on Michigan’s already well-worn roads each month to replace the fuel transported safely by Line 5. That’s an estimated 2,100 tanker trucks on our road each day. We believe continued operation of Line 5 under the watchful eyes of our state and federal regulators during construction of the tunnel to be both responsible and appropriate for the health of our citizens, a vibrant economy and the continued safety of our Great Lakes. Even if the trucks and trains manage to deliver their loads safely every time, they’ll pump out carbon emissions in the process, a backslide for carbon control progress. That’s not
more environmentally friendly. Line 5 delivers the fuel Michigan manufacturers rely on to fuel production lines, build Michigan products and to make Michigan jobs possible. Ours isn’t the only industry that counts on the pipeline, but it’s among those that count on it most. Just as important as the Line 5 fuel is to powering manufacturing, it’s personally vital to the more than 55 percent of Michigan families that depend on Line 5 to reliably deliver propane at prices they can afford. The governor has no real, viable, cost-effective alternative that meets the needs of Michigan’s rural and U.P. dwellers and many economically vulnerable citizens. Pipelines have proven to be the safest and most efficient way to deliver fuel over the alternatives. The plan to bury Line 5 deep under the lakebed in a new tunnel will only make it safer. Last year has presented Michigan manufacturers with significant challenges. They’ve persevered and are prepared to put Michigan’s economy on the road to recovery. The governor should refrain from harming a recovery now so critical to Michigan’s workers and families. Let’s back Michigan manufacturers. Let’s keep Line 5 open and let’s build the Great Lakes Tunnel.
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level of 20 percent of the federal credit would be costly to the state’s general fund budget. When Whitmer asked lawmakers to raise the EITC from 6 percent to 10 percent of the federal credit in the 2020 fiscal year, the nonpartisan Senate Fiscal Agency estimated the annual cost at $76 million. Gilda Jacobs, president and CEO of the Michigan League for Public Policy, said the EITC could be incrementally increased with growth in the economy. “I recognize that it is revenue-driven and we have to be realistic,” said Jacobs, a former Democratic state senator from Huntington Woods. “But I think it needs to get on everybody’s radar screen.” Another area where Whitmer and the Republicans may find common ground is lowering the cost of child care — an issue that cuts across urban, suburban and rural lines. House Speaker Jason Wentworth and Rep. Jack O’Malley, Republicans from rural Clare and Benzie counties, respectively, have both expressed an interest in exploring policies that could lower the cost of child care for working families. “When (the pandemic ends) and parents go back to work, many of them are going to need help with child care,” Waymire said. “Child care is just a huge killer for the budgets of a lot of low-income families.”
Capitalize on Biden ties
Delivery of COVID-19 vaccines will be one yardstick on which the governor will be measured. Here, RN Jeffrey Suhre administers a vaccine to Mamie Cokely, 85, at the TCF Center in Detroit on Jan. 13. | NIC ANTAYA FOR CRAIN’S DETROIT BUSINESS
workers in rural parts of the state, Waymire said. “If you’re a single mom trying to make things work in Roscommon, you have as much need for (paid sick time) as a single mom trying to make that work in Flint,” Waymire said. With the exception of some Lake Michigan enclaves, rural counties in outstate Michigan are almost always poorer than the urban and suburban counties.
Advocates for the poor have long contended former Gov. Rick Snyder and Michigan lawmakers made a mistake in 2011 when they pared back the state’s Earned Income Tax Credit as part of an overhaul of the individual income tax code to help pay for a tax cut for businesses. But changing the EITC calculation of 6 percent of the federal tax credit back to the pre-2011
Last year, Whitmer drew the ire of Trump for routinely criticizing his administration for its national strategy for battling the pandemic. She did so as Trump told states they were on their own to navigate shortages in personal protection equipment for hospitals and first responders. Whitmer is arguably as close as any Democratic governor to President Joe Biden, having been vetted to be his running mate and served as a national co-chair of his campaign committee. The new president recently tapped Whitmer to serve as vice chair of the Democratic National Committee and invited her to his inauguration. “She has a really important working relationship with the Biden administration, which should result in there being lots of support and aid for the state and for our local units of government,” said Sheila Cockrel, a former Detroit city councilwoman. Biden already has a close relationship with Detroit Mayor Mike Duggan, a partnership dating back to the city’s 2013-2014 municipal
bankruptcy, when the Obama administration sent expertise to City Hall to help state and city officials navigate the crisis. Biden’s proposed $1.9 trillion COVID economic relief spending bill would provide $350 billion in aid to municipalities. Whitmer must make the case to Congress and the state Legislature that this aid is needed to blunt “the devastating impact the pandemic has had” on municipal budgets, Cockrel said. “Austerity is coming to local units (of government) at a level that nobody planned for because things were all getting better — and they are no longer all getting better,” said Cockrel, CEO of CitizenDetroit, a civic engagement organization.
Overhaul public health systems State and local public health agencies have been routinely overwhelmed during the spring and fall COVID-19 surges. During the more precarious weeks in early November, contact tracers only had the capacity to reach 20 percent of those infected by the virus on any given day. Early on, mass testing of tens of thousands of residents each day across 83 counties was an almost non-existent enterprise. County health agencies, the state health department, universities and hospital systems went in multiple directions trying to stand up testing systems. Then came shortages in vaccine and problems with distribution, exposing holes in the state’s public health infrastructure. “We had a few bumps in the road last week, having a lot to do with access to the vaccine as well as distribution and the infrastructure set up to deliver large amounts of vaccine to large amounts of people,” said Davis Anthony, whose career in public health spans multiple posts in Detroit, Wayne County and state government during the Engler administration. “We did not have the infrastructure for that.” Whitmer, having been the public face of managing a once-in-a-century pandemic, should lead a statewide conversation with stakeholders on how to best redesign the system, Davis Anthony said. “I definitely think it’s time to really assess where we are with the infrastructure so we’re not crushed by the next big wave of diseases,” Davis Anthony said. “What will we have learned when this over?” Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood
COMMENTARY
Businesses, cities need equitable recovery from COVID-19 effects BY DAN GILMARTIN
As we embark on a new legislative session and prepare to hear from Gov. Gretchen Whitmer in her annual State of the State address, the first priority is to ensure a strong recovery from the COVID-19 pandemic in ways that leave no one behind. Communities large and small are the heartbeat of our state. They are where our families build memories and where local businesses thrive with support from residents and visitors. Communities are also where Michigan’s economic growth outlook hangs by a thread, and they must be a focus of the state’s COVID recovery planning. The Michigan Municipal League urged state leaders in 2020 to adopt a community stabilization plan that would have ensured our local governments were able to deliver core services that families and businesses need now and into the future. This plan recognized that municipalities are on the front lines of the pandemic response and are struggling to meet the demands placed on them. Our communities entered the pandemic wounded by years of disinvestment by the state. The tax structure that raises the money to pay for police, parks and other important services is
overly reliant on a property tax system that locks down revenue when times are bad and keeps it from rising with the economy when times are better. The 24 communities that charge an income tax are being hurt as employees inDan Gilmartin is creasingly work from home rather than in the commuCEO and nities where they would executive pay the tax. director of the The severity of this oneMichigan two punch of COVID-19 Municipal and decades of careless and League. compounding disinvestment cannot be overstated. The Treasury Department estimates Michigan’s 24 local income tax communities will lose up to $250 million in revenue this fiscal year alone. Vacant office space and closed businesses risk devaluing property, leading to drops in local property tax revenues. If the community stabilization plan isn’t fully adopted, residents will feel unnecessary pain from the cuts their communities will be forced to make, undermining public safety and other critical services that families and businesses
need for their livelihoods. At the extreme, local governments could once again face the appointment of emergency managers, or even worse, insolvency and bankruptcy. It does not have to be this way. We have been here before. We can chart a new course. Adopting the remaining components of the community stabilization plan would address the unintended consequences of Michigan’s municipal finance policies, and it does so without raising taxes. An economic recovery plan that focuses on investing in our communities, their businesses and their people is how we will recover from this pandemic. Anything short of this all but guarantees more poverty and diminished quality of life for everyone. Humans are social beings, and the pandemic has proven how important our social fabric is to our happiness. From the local restaurant, barber shop and beauty salon, school, sporting event, bike trail or park, the social interaction people crave is developed and nurtured in our cities and towns. Without the right supports, that social fabric will remain shredded and in tatters. Happiness and commitment to an improved human experience are the bedrock of commu-
nity wealth building and they need to be the cornerstone of our recovery. This effort begins by taking action that encourages a sense of trust and belonging in our communities. In partnership with policymakers, we can make strategic investments in our local public services that work for people and business. To be competitive, our streets need fixing, our water systems need modernizing and highspeed broadband needs to be as commonly available as electricity. Why should we settle for anything less? Our governor and the Legislature have the power to breathe new life into the shared assets all of us use to support ourselves, our loved ones and our livelihoods. An equitable rise from the pandemic demands our state leaders finally recognize the indispensable role community plays in our quality of life and, indeed, in the recovery from this tragedy. Let’s not repeat the broken playbook state policymakers used to respond to the Great Recession. We know how that turned out. By adopting the community stabilization plan, restoring investment, and focusing on a bold community wealth building agenda, your town, your family and our economy will bounce back and thrive together. JANUARY 25, 2021 | CRAIN’S DETROIT BUSINESS | 15
HEALTH CARE
McLaren agrees to $7.75M settlement on opioid charges Agreement ends investigation in which employees were alleged to have diverted drugs BY JAY GREENE
McLaren Health Care Corp., a 14-hospital health system based in Grand Blanc, has agreed to a $7.75 million civil settlement over the health system’s handling of controlled substances in its retail pharmacy program, federal officials said Tuesday. The settlement resolved allegations that McLaren violated certain provisions of the federal Controlled Substances Act, according to a statement from U.S. attorneys Andrew Birge in the Western Michigan District and Matthew Schneider in the Eastern Michigan District. It ended an investigation over several years in which employees at multiple McLaren facilities in Michigan were alleged to have diverted drugs from about 2014 to 2019 and violated federal laws, officials said. “At nearly $7.8 million, this is the largest civil Controlled Substances Act settlement in American history involving a health care system whose internal practices were so deficient that it allowed the diversion of drugs, including opioids,” Schneider said. “McLaren clearly didn’t have a sufficient system in place to catch these problems. But now, under this settlement, McLaren is stepping up and implementing more robust compliance measures. That’s exactly what we expect of corporations in Michigan who do wrong: They recognize their mistakes and learn from them, which benefits their employees and the public.” The DEA began its investigation after learning that an unregistered substance abuse treatment facility was improperly receiving controlled substances from a McLaren subsidiary pharmacy in the Western District of Michigan by calling in prescriptions
for “office stock.” For example, investigators learned that McLaren Port Huron Pharmacy and McLaren Yale Pharmacy in St. Clair County dispensed Schedule II drugs without written prescriptions. The investigation found that despite warnings, those drugs were being diverted by McLaren’s pharmacist-in-charge. The “red flags” included pattern prescriptions for the same type of drugs, in the same quantities, from the same prescriber; prescriptions for excessive quantities of highly addictive Schedule II drugs; repeated early prescription refills; significant outlier drug volumes for individual patients and prescribers; prescription entries in the names of fake patients; and discrepancies between the cash reported and cash collected for controlled-substance prescriptions. “Everyone from the manufacturer of a controlled substance to the prescribing health care provider has a legal obligation to ensure pharmaceuticals don’t get into the wrong hands,” Drug Enforcement Administration Special Agent in Charge Keith Martin said in a statement. “When
they violate these obligations, we will investigate and hold them accountable.” In a statement, McLaren said it has since fired a pharmacist at McLaren Port Huron who was involved in diverting opioids for his own personal use in 2018. McLaren said it conducted its own investigation of pharmacy protocols at other McLaren facilities and found recordkeeping irregularities, dispensing and distribution of controlled substances in some instances stretching back 12 years. At the conclusion of its review, the DEA identified irregularities associated with recordkeeping, dispensing and distribution of controlled substances, particularly among retail pharmacies operating under legacy pharmacy protocols that had been in place prior to McLaren’s acquisition of their operations. In 2018, unrelated to the settlement, McLaren exited the retail pharmacy business, including the retail pharmacies that were the subject of this investigation. McLaren has since contracted with Walgreens to take over its pharmacy operations.
` Kode Labs, Detroit, a real estate technology company, was selected by QuadReal Property Group, Vancouver, Canada, a real estate investment firm, and Stream Realty Partners, Dallas, Texas, a commercial real estate company, to provide the smart building operating system for the planned RiverSouth workspace project, Austin, Texas. Website: kodelabs.com
ment company, has renewed and expanded its partnership with the Women’s Football Alliance, Exeter, Calif., a women’s tackle football league, to be the official equipment and uniform partner of the WFA for the 2021 and 2022 seasons. Websites: xenith.com, wfaprofootball.com
McLaren said it has voluntarily “invested significant resources toward and made substantial improvements to its oversight and processes regarding its handling of controlled substances.” April Rudoni, interim compliance director and chair of McLaren’s controlled substance oversight committee, said the health system regrets any actions that violated regulatory laws and where it failed to meet its own standards. “From the moment the DEA’s first concern was brought to our attention we have worked diligently to strengthen protocols across our system,” Rudoni said in a statement. “I am proud of the culture of accountability and compliance we maintain and look forward to continued collaboration with the DEA moving forward.” In addition, the DOJ further alleged that McLaren failed to notify the DEA of known employee thefts of controlled substances. These violations, the government claimed, stemmed in part from certain facility policies that were inconsistent with the controlled substances act requirements. “While our health systems provide critical services to patients, they carry broader public responsibilities as bulwarks against the drug diversion that contributes to the surging opioid crisis in the state of Michigan,” Birge said in a statement. As part of the settlement, McLaren admitted the following: ` The McLaren Port Huron and Yale pharmacies did not have written prescriptions for approximately 1,255 Schedule II prescription events between May 1, 2014, and Feb. 22, 2018. ` McLaren’s prescription services pharmacy distributed controlled substances to an unregistered treatment facility in Boyne Falls between Nov.
22, 2015, and Nov. 13, 2017, without making a good faith inquiry into whether that treatment facility was registered with DEA. ` McLaren Greater Lansing did not notify DEA of certain thefts of controlled substances between July 27, 2007, and May 31, 2019. ` Theft and diversion of controlled substances occurred at certain of McLaren’s locations. ` Some of McLaren’s corporate policies, including legacy policies that remained in place after McLaren’s integration with Port Huron Hospital, were not consistent with the requirements of the Controlled Substances Act and regulations. As part of its three-year agreement, McLaren agreed to continue the extensive actions and protocols it has established in recent years to ensure compliance with pharmacy regulations and prevent similar situations in the future, including: ` Formation of a multidisciplinary Controlled Substance Oversight Committee, which has developed a systemwide drug diversion policy that replaced all subsidiary-specific and legacy policies. ` Mandatory training for about 10,000 employees who have regular access to controlled substances. ` Creation of hospital-based teams and task forces to monitor compliance with relevant drug protocols, investigate possible diversion and provide ongoing education and training. ` Retention of an outside pharmacy management company to manage and operate its inpatient pharmacies. ` Ongoing early detection measures, including electronic and manual measures, to ensure discovery of possible diversion activities.
Inc., Novi, producer of trailer running gear, chassis assemblies and related components, acquired Nordelettronica S.r.l., Gaiarine, Italy, an electronics specialist. The acquisition expands ALKO’s product portfolio in the area of electronic components for recreational vehicles. Websites: alko-tech.com, dexko.com, nordelettronica.com
` Hansgrohe SE, a subsidiary of Masco Corp., Livonia, manufacturer of home improvement and building products, has an agreement to purchase a majority stake in Easy Sanitary Solutions B.V., Oldenzaal, The Netherlands, manufacturer of Easy Drain shower channels and other products for barrier-free showering and bathroom wall niches. ESS will operate as a subsidiary of Hansgrohe SE. Websites: masco.com, easydrain. com
Contact: jgreene@crain.com; (313) 446-0325; @jaybgreene
DEALS&DETAILS ` APPOINTMENTS Edward Schwartz, president of Bloomfield Hills-based Schwartz & Co., an investment advisory firm, was named one of five national appointees to serve on the U.S. Department of Labor’s Employee Retirement Income Security Act Advisory Council for a three-year term. The ERISA Advisory Council advises the Labor Secretary and the Department of Labor regarding regulation and oversight of the country’s 401(k), pension and other institutional retirement plans. This is Schwartz’s second appointment to the bipartisan council.
` CONTRACTS ` The Coretec Group Inc., Ann Arbor, designer of materials for advanced technology markets, has partnered with Theion, Berlin, Germany, a battery technology company, to create batteries for electric vehicles and other energy storage applications. Websites: thecoretecgroup.com, theion.de ` Iljin USA Corp., Novi, a wheel bearing supplier, has been named the sole wheel bearing/hub assemblies supplier for Advance Auto Parts’ CQ Professional brand. Websites: ILJIN.com
` SkySpecs, Ann Arbor, equipment provider for the wind energy industry, has an agreement with TEPCO Ventures, Tokyo, Japan, subsidiary of Tokyo Electric Power Company Holdings Inc., an electrical utility, to deliver autonomous drone inspections, blade asset management software and predictive maintenance planning to the Japanese wind energy market. Websites: skyspecs.com, tepcoventures.co.jp ` Plante Moran, Southfield, an accounting, tax, consulting and wealth management firm, selected VMLY&R, New York, N.Y., a marketing and communications company, as its agency of record. The work will be run from VMLY&R’s Michigan offices in Detroit and Kalamazoo. Websites: plantemoran.com, vmlyr.com ` Xenith, Detroit, a football equip-
16 | CRAIN’S DETROIT BUSINESS | JANUARY 25, 2021
` Baker College, Owosso, a private, not-for-profit college, and Henry Ford College, Dearborn, a public community college, have a credit transfer agreement for Henry Ford students to enter bachelor’s degree studies at Baker College. Websites: hfcc.edu, baker.edu
` EXPANSIONS `StockX, Detroit, an online marketplace, opened new authentication centers in Hong Kong, Toronto and Portland, Ore. The three new locations grow the company’s global network by 50 percent. Website: stockx.com `Park West Gallery, Southfield, an art dealer, opened a new museum and art gallery at Caesars Palace in Las Vegas. Website: parkwestgallery.com
` MERGERS & ACQUISITIONS `AL-KO, a subsidiary of DexKo Global
` Ascent Global Logistics, Belleville, a transportation and supply chain provider, acquired Hageland Aviation Services LLC, Anchorage, Alaska, and launched Rambler Air LLC, a new air service provider within Alaska. Rambler will serve commuter flights as well as passenger and cargo charters. Service is expected to launch in early 2021 with eight Piper Chieftain Navajos and two Beechcraft 1900Ds. Rambler Air will be headquartered in Anchorage at Lake Hood. Websites: ascentgl.com, ramblerair.com ` Kelly Services Inc., Troy, acquired Greenwood/Asher & Associates Inc., Miramar Beach, Fla., an executive search firm specializing primarily in higher education. Terms of the acquisition, which were effective Nov. 18, were not disclosed. Greenwood/ Asher will continue to operate under its own brand. Websites: kellyservices.com, greenwoodsearch.com
` TriMas Corp., Bloomfield Hills, manufacturer and provider of products primarily in the consumer, aerospace and industrial end markets, acquired Affaba & Ferrari, Borgo San Giovanni, Italy, a designer and manufacturer of precision caps and closures for food and beverage and industrial product applications. Website: trimascorp.com ` Uniprop Inc., Birmingham, a family office, and Seneca Partners Inc., financial planner, Southfield, acquired Michigan Chandelier Inc. of Southfield. Calder Capital LLC, Grand Rapids, a mergers and acquisitions firm, represented Michigan Chandelier in the transaction. Websites: michand.com, uniprop.com, senecapartners.com, caldergr.com
UWM
From Page 3
The completed deal gives UWM nearly $1 billion in new capital which Ishbia said on CNBC that he plans to put to use by investing in the mortgage company’s proprietary technology and further growing the wholesale mortgage channel in which the company operates as the largest player. UWM’s southern neighbor, Detroit-based Rocket Companies Inc. (NYSE: RKT), also operates in the wholesale broker channel to a smaller degree, but dominates the retail sector of the mortgage market. Gores, whose Gores Holdings IV Inc. (GHIV), was the vehicle used to take UWM public, has been labeled a “blank check baron” by financial research organization Pitchbook based on his track record of SPAC deals in recent years. In 2020, some 244 SPACs — or blank check companies that are simply shells and exist to take existing companies public — raised more than $73 billion, according to Pitchbook. Gores, whose brother Tom Gores runs Platinum Equity LLC and owns the Detroit Pistons, still has another three SPAC vehicles that have priced, but have not yet closed a transaction, he said Friday on CNBC. A securities filing shows that Alec Gores holds just more than 25 million shares of the new company — about 1.6 percent — and at an $11 price those shares are valued at $275 million. Gores said Friday he plans to hold his shares in UWM “for a long time.”
Finding alignment Gores’ GHIV shell company went public in early 2020, raising $425 million. The company quickly began headhunting for potential companies to acquire, looking specifically for businesses with enterprise value of at least $1.5 billion, and that will be “positioned, operationally and financially, to be successful as a public company,” according to a federal securities filing. In that filing The Gores Group said it analyzed more than 40 potential acquisition targets other than UWM, and entered into nondisclosure agreements with 18 companies. Serious talks that got into due diligence and negotiations occurred with two other unnamed companies, one in retail sporting goods and one a medical device company. Talks between UWM and Gores Group ramped up last spring, according to the SEC filing. Blake Kolo, UWM’s executive vice president and chief business officer, on April 9 began discussions with executives from The Gores Group about a possible deal, and an NDA took effect April 15. Ishbia’s first involvement in the looming deal occurred during a phone call April 20 that included talk of “how a potential business combination involving the Company and UWM would be structured ... (and) how blank check companies operated.” Gores on Friday morning said that despite all the due diligence with other companies, UWM was the obvious choice to merge with and take public. “We’ve been doing this for awhile, for over 40 years,” Gores said of his time in the PE industry. “In this case, with UWM, we have Mat as an amazing leader. He’s been in business for a long time, has an amazing company,
UWM CEO Mat Ishbia (center) rings the opening bell at the New York Stock Exchange on Friday in celebration of the Pontiac-based mortgage company going public. | NEW YORK STOCK EXCHANGE
On the UWM board United Wholesale's nine-member board is composed of six insiders and three independent directors: Mat Ishbia: UWM’s president and CEO Alex Elezaj: executive vice president and chief strategy officer at UWM Kelly Czubak: assistant vice president of First National Bank of America in East Lansing Jeff Ishbia: Mat Ishbia’s father, the founder and chairman of UWM and the managing partner at Birmingham law firm Ishbia & Gagleard PC
bert, went public in August of last year. Home Point Capital Inc., an Ann Arbor-based mortgage lender formed in 2015 through a series of acquisitions, also eyes public status in the coming months. While some bit of “follow the leader” seems to be playing out, the mortgage market had a banner 2020. Fueled by rock-bottom interest rates and a pandemic that had many looking to upsize their homes due to stayat-home orders, industry trade group The Mortgage Bankers Association
has forecast that originations last year would surpass $3.5 trillion. Going forward, the group said that originations will likely fall to about $2.17 trillion by 2023, but there remains $11.1 trillion in outstanding mortgage debt, which is forecast to grow to $12.68 trillion by 2023. Ishbia on Friday acknowledged the cyclical nature of the mortgage sector, but told CNBC that UWM’s business will be primed to grow even in a slowdown because of the focus on the wholesale brokerage sector.
“We’re focused on purchase, along with helping the brokerage firms grow,” Ishbia said. “So yes, if the market slows down a little bit, that’s OK because actually we’ll gain share. Our broker channel is gonna grow as more and more consumers understand (brokers) are the fastest, easiest way to get (a mortgage). So we’re gonna grow. Our pie will grow at UWM.” Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes
Isiah Thomas: NBA Hall of Famer who played for the Detroit Pistons from 1981-94 and has held a number of executive roles with basketball teams and other businesses
GET A HEALTHIER OUTLOOK ON CHILDHOOD
Justin Ishbia: brother of Mat Ishbia, a member of UWM’s advisory board since 2011 and the managing partner of Shore Capital Partners LLC, a Chicago investment bank
Tune in to WJR 760 AM for Caring for Kids, a monthly radio program highlighting issues and efforts locally, regionally and nationally, that impact the health and wellness of children.
Melinda Wilner: executive vice president and COO of UWM
LISTEN TO WJR AM LIVE
Laura Lawson: executive vice president and chief people officer at UWM
Robert Verdun: a veteran business executive and CEO of consulting firm Third Wave LLC
has a great track record. So we have the luxury of looking at a lot of opportunities (and) in this case we thought this is the best opportunity by far.” Ultimately, Gores said getting SPAC deals done correctly is a “bit of an art, and a bit of a science.” The goal is getting all the partners — sellers and investors — completely aligned.
Positioned for growth UWM is the second Michigan mortgage company to go public in the past six months. Rocket Companies Inc. (formerly Quicken Loans Inc.), founded by billionaire Dan Gil-
Tuesday, January 26 at 7pm
Advocating for the health & wellness of children and families
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MATT FRIEDMAN Founder Tanner Friedman Chair, Board of Directors The Children’s Foundation
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UBS to open downtown Detroit office By Annalise Frank
groups • UBS plans to open wealthcan use free of charge • Bedrock-owned buildings
office in Detroit “I’m impacting lives now. management I know undergoing renovations in mid-2018 6,000-squarethe effect food insecurity• Office had onto includeUBS plans to open an office in downfoot space nonprofits and civic town Detroit in mid-2018, the company Annalise Frank growing groups meByand my peers up, andcan useannounced free of charge Monday. • Bedrock-ownedUBS buildings Group AG’s U.S. and Canadian UBSan plans to open wealth this•was opportunity toundergoing make a renovations wealth management business, New Jermanagement office in Detroit sey-based Wealth Management change I wish an adult UBScould plans to open an office UBS in downin that mid-2018 Americas, to lease 13,000 square town Detroit in mid-2018, theplans company • Office to include 6,000-squarefeet on the connected sixth floors of have made for me.” announced Monday. foot space nonprofits and civic
UBS to open downtown Detroit office Bedrock LLC
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
UBS will lease 13,000 feet from Bedrock LLC starting around mid-2018 in two buildings: the Grinnell Building (center left) at 1515 Woodward Ave. and the Sanders Building (center right) at 1529
Bedrock LLC
Bedrock LLC
buildings at 1515 Wood- Woodward Ave. Group AG’sneighboring U.S. and Canadian groups can use free UBS of charge ward Ave. and Fourteen metro Detroit employees don’t really have adequate resources wealth management business, New 1529 Jer- Woodward Ave. • Bedrock-owned buildings The twoManagement buildings built around 1900 are will move to the downtown office to or adequate office space to host dosey-based UBS Wealth undergoing renovations by Detroit-based will lease LLC 13,000 feet from Bedrock LLC starting around mid-2018 buildings: Grin- meetings or things nor events the or board start, but the office has the capacity toin two Americas, plans toowned lease 13,000 square UBSBedrock nell Building (center at 1515 Woodward andnew the Sanders Buildingalong (centerthose right) at 1529 Bush said. and are undergoing said left) lines,” hold another six toAve. eight staff memon inthe connected sixth floors of renovations, Reprinted with permission from Crain’s Detroit Business. © 2019 Crain Communications Inc. All RightsUBS reserved. plans to open anfeet office downAve. for bers, Bush said. It will act as an extension John Bush, 60, WoodMichiganWoodward market head UBS’s investment in the new ofneighboring buildings at 1515 Further duplication without permission is prohibited. Visit www.crainsdetroit.com. #CD1134 town Detroit in mid-2018, the company UBS Wealth ManagementFourteen Americas.metro of fice will resources be “significant,” he said, as its the other wealth management offices. don’t really have adequate Detroit employees announced Monday. ward Ave. and 1529 Woodward Ave. “The real impetus open atonew The twoCanadian buildings built around 1900 arefor us “uniqueness Bush is based Birmingham office space to hostcomes do- at a price.” He said willto move the downtown office out to ofortheadequate UBS Group AG’s U.S. and office inBedrock Detroit is to support what’s owned by Detroit-based LLC he could or not yet provide an estimate but travels to to the will meetings norothers eventsand or board things start, but the goofficeoffice, has the capacity wealth management business, New Jering renovations, on in the city, ” saidhold Bush, a Detroit and are undergoing said on the be spending in thealong Detroit branch. those lines,” Bush said.cost of the build-out, as some another six to eight new stafftime memsey-based UBS Wealth Management nativemarket who grew City. “We John Bush, 60, Michigan headup forin Garden have yet The location have atheless UBS’s investment in the new of- to be finalized. said. will act asDetroit an extension fromBush Bedrock LLCItstarting around mid-2018 in twowill buildings: Grin- contracts Americas, plans to lease 13,000 square UBS will lease 13,000 feetbers, UBS Wealth Management Americas. really felt like we wantedofto have a physfice will be “significant,” hecompany said, as its the other wealth management offices. The plans to start its buildtraditional, more “urban” feelright) than 1515 Woodward Ave. and the Sanders Building (center atthe 1529 feet on the connected sixth floors of nell Building (center left) at “The real impetus for us to open new ical presence downtown to reinforce “uniqueness comes at saidnext year, depending Bush is based outothers, of the he Birmingham outa price.” processHeearly 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.
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 workforce housing versus workf 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’t don’ 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
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 pla place to live. We’d live there year-round, but it’s a little too cold in the winter.
Can you give thumbnail sketch of coming here and what your
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
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18 | CRAIN’S DETROIT BUSINESS | JANUARY 25, 2021 Laura Picariello
Crain’s People on the Move showcases industry achievers and their companies to the Detroit business community.
PROMOTE.
40 40
Dandridge Floyd, 37
Assistant Superintendent of Human Relations and Labor Relations, Oakland Schools
VENTURE
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“ nves ors ook he oppor un y o shore up ex s ng compan es” sa d G aza he manag ng d rec or and execu ve v ce pres den o D Ven ures he ven ure arm o ph an hrop c econom c deve opmen group nves Dero “ wou dn ca ha compan es necessar y were n d s ress Bu here s he me e s ga van ze he nves ors make sure he compan es have he runway ” G aza con nued “Bu a so here were us a o o grea compan es You can bu d ech bus nesses remo e y” G aza sa d ha 2020 s ands as D Ven ures arges year ever n erms o overa cap a dep oyed The und yp ca y nves s around $2 5 m on o $3 m on bu d d c oser o $6 m on as year she sa d The nves men was rough y sp be ween cap a o new compan es and shor ng up ex s ng nves men s For Mercury Fund he VC und eschewed new dea s n 2020 and on y made one o ow-on nves men — pu ng an add ona $200 000 n o Ann Arbor-based R pp e Sc ence Corp — bu expec s a flurry o ac v y n he new year accord ng o For no Mercury Fund fin shed a $100 m on undra s ng round us pr or o he s ar o he pandem c so has money o use n u ure dea s he sa d Tha appears o be he case na ona y as he VC sec or as a who e has $152 b on n dry powder accord ng o he NVCA and P chbook repor
PHILANTHROPY
F om Page 3
Repara ons or he descendan s o ens aved peop e are ga n ng renewed a en on o ow ng he rac a unres ha erup ed n 2020 cen er researchers sa d Across he sec or am y donors and ns u ons are “wres ng w h he roo s o ph an hropy s co ec ve nher ance” much o accumu a ed hrough exp o a ve ac s hey sa d The mpera ve o r gh he deep wrongs o ns u ona h s or es s becom ng more urgen and promp ng more d a ogue and ac on “B ack peop e have no had he oppor un y o grow wea h because o h s or ca d scr m na on n hous ng and d spar es n wages and educaona a a nmen … have con nued hose d spar es” Behrens sa d “We ve seen some ounda ons s ep up and a eas a k abou repara ons w h a deep unders and ng o he h sor c ac ors ha con r bu e o wea h and econom c d spar es How do we use he money ha s been -go en as some wou d say o he p repa r he damage?” Nobody h nks ha ph an hropy can pay cash o r gh he pas Behrens sa d Bu members o he us ce Funders nc ud ng he Ca orn a Endowmen and Marguer e Casey Founda on are ook ng a how hey accumu a ed wea h and power and s ar ng o ake s eps o r gh wrongs hrough effor s such as mak ng bo der nves men s n B ack- ed organ za ons “They are ook ng a how do you urn dec s ons abou d s r bu ng ha wea h over o hose commun es o peop e who have been h s or ca y exp o ed or marg na zed” Behrens sa d There are a so und ng cons dera ons or ra s ng awareness and advocacy educa on and eadersh p de-
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MAG
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Dealmaking aplenty Cra n s n 2020 and ear y 2021 repor ed on a flurry o VC-backed dea s nc ud ng The $18 5 m on ra sed n a Ser es B round by De ro -based n erne o h ngs so ware firm Guardha Ano her mass ve hau or Dero -based S ockX A $1 5 b on ex or An Arbor-based A company L amaso nc A $15 5 m on round or Ann Arbor cybersecur y firm Censys nc So w h VC and s ar up ac v y on he r se are we see ng a sh away rom he ac v y ha s ong been cen ered on he coas s? Yes and no P chbook recen y no ed ha or a he boos n ac v y n M ch gan and o her “hear and” areas he o a amoun o cap a dep oyed s s rough y he same as n 2016 G aza w h D Ven ures no es ha
“THEY ARE LOOKING AT HOW DO YOU TURN DECISIONS ABOUT DISTRIBUTING THAT WEALTH OVER TO THOSE COMMUNITIES OF PEOPLE WHO HAVE BEEN HISTORICALLY EXPLOITED OR MARGINALIZED.” — Ter Behrens execu ve d rec or Johnson Cen er
ve opmen espec a y or grassroo s organ za ons ohnson Cen er researchers no ed Conversa ons around repara ons are a gned w h he grow h o soc a us ce und ng ano her rend he ohnson Cen er den fied or 2021 The year 2020 saw arge donors and unders mp emen a number o po cy changes des gned o “deco on ze” he r wea h and hand over more conro o he peop e and organ za ons rece v ng ha wea h ohnson Cen er researchers no ed The New York-based Ford Foundaon or examp e n Oc ober comm ed o doub ng s payou s o rac a us ce and c v r gh s groups w h new und ng or hose ocused on crea ng sys em c change hrough s ra egc ga on po cy advocacy and grassroo s organ z ng “We ve seen more organ zed ph anhropy s ar suppor ng soc a us ce movemen s” w h organ za ons ke B ack L ves Ma er beg nn ng o a rac und ng rom bo h we -es ab shed unders and rom grass roo s effor s hrough crowd- und ng p a orms Behrens sa d And he Counc o M ch gan Founda ons new s ra eg c p an makes rac a equ y a cen ra par o s work w h new y ormed work ng groups
means s a es ke M ch gan are keepng up w h hubs ke S con Va ey and he Bos on area bu e ground s be ng ga ned For no adds ha w h much o he sec or opera ng v r ua y oca on s becom ng ess mpor an so can cu bo h ways “ eve s he p ay ng fie d across he board” sa d For no add ng ha Mercury Fund has recen y go en more ac ve n he Sou heas ern and m d-A an c reg ons o he U S “Tha s because here s us more access b y and v r ua ne work bu d ng ha s been he p u or us Bu or coas a unds ( hey re) a Zoom away Everybody across he board s more com or ab e w h Zoom nves ng n he end becomes a more effic en marke or he en repreneurs and ounders” Con ac nmanes@cra n com (313) 446 1626 @n ckrmanes d scuss ng he po cy mp ca ons o d spar es h gh gh ed by COV D-19 she sa d As ph an hropy moves more heavy n o und ng soc a us ce effor s he ohnson Cen er cau ons however ha ounda ons guard aga ns “movemen cap ure” “There s some h s ory ha shows ha once soc a movemen eaders s ar ge ng und ng rom rad ona ounda ons o en sh s he ocus o he r work” Behrens sa d The cau on she sa d s or unders and gran rec p en s a ke ha unders no undu y nfluence he work o hese groups ha group ounders ho d rue o he r m ss on and no be undu y nfluenced and ha nonpro s w h s m ar ocus no ge pu ed rom he r core work n response o demands rom unders Wh e hose conversa ons spread here s a so ncreas ng scru ny o where ph an hrop c do ars are flowng and where hey are no Behrens sa d and ncreased ca s rom he med a and groups ormed o promo e ncreased g v ng or more o hose ph an hrop c do ars o be gran ed Concerns ha ounda ons and nd v dua donors are s ng on money ra her han pay ng ou became e eva ed n 2020 w h he hea h econom c and rac a us ce cr ses Behrens sa d “There s more pub c scru ny n he med a and eg s a on ha s been nroduced o ry o encourage and requ re ounda ons and nd v dua s o g ve more whe her s ounda ons (g v ng) more rom he r endowmen s more rom donor-adv sed unds or ques on ng why super-wea hy nd v dua s aren g v ng more” she sa d “And h nk we re go ng o see ha con nue” Con ac swe ch@cra n com (313) 446 1694 @Sherr We ch
From Page 1
However, it’s nowhere near as bad as it was during the fall of 2006, when Detroit’s condo market had nearly three years worth of inventory for months on end. But still, 2020 fared worse on a number of key metrics for Detroit condos compared to 2019, including fewer transactions (330 in 2019 compared to 310 last year), lower total sales volume ($91.5 million in 2019 compared to $84.6 million in 2020) and a reduced average price per square foot ($214 per square foot in 2019 compared to $203 per square foot in 2020), according to Berkshire Hathaway HomeServices The Loft Warehouse. Moddie Turay, a Detroit-based developer running City Growth Partners LLC and a former Detroit Economic Growth Corp. executive, said nuance is needed when examining the greater downtown Detroit market from neighborhood to neighborhood. He is working on an eight-unit development known as Brush 8 in the Brush Park neighborhood, where three of the units have been pre-sold, including one for north of $800,000. “The number and type of product is important and all those things have to be considered and when they are you will see successful areas” such as Brush Park and Lafayette Park, Turray said.
Success stories
Buyer’s market Since February 2019, Detroit’s condominium market has had at least seven months of inventory. The last time Detroit's condo market was this saturated was 2010-11. 15
May 1, 2010: 15.0
Dec. 1, 2020: 11.2
12
9
Months of Inventory
CONDOS
Jan. 1, 2017: 2.8
6
3
1/10
1/11
1/12
1/13
1/14
1/15
1/16
1/17
1/18
SOURCE: BERKSHIRE HATHAWAY HOMESERVICES THE LOFT WAREHOUSE
1/19
1/20
CRAIN’S DETROIT BUSINESS GRAPHIC
Rising construction costs The excess inventory only adds to the challenges Detroit developers have faced the last several years, causing several for-sale projects to be shelved or scrapped entirely. Even prior to the inventory surge, developers of some of the city’s largest condominium projects were grappling with increasing construction costs that were chipping away at anticipated profit margins. The Platform LLC, the Detroit-based developer led by Peter Cummings, for the time being has shelved its plan to do high-end condominiums on a site at Cass Avenue and York Street. The plan was for 56 luxury condos, plus apartments and a parking deck. In addition, the Ashton Detroit condominium building that was going to have 83 condominiums at 600 W. Lafayette Blvd. has been reimagined as a 154-room Cambria Hotel, set to open this year. A joint venture between Detroit-based The Means Group Inc., whose founder Eric Means died last year, and Holdwick Development Group was working on that project. The developer behind the planned The Mid high-rises on the Midtown site immediately north of the Whole Foods grocery store has also sacked its plan for 60 luxury condos that were to be part of its sweeping vision for 3.8 acres owned by an entity registered to Ciena Healthcare CEO Mohammad Qazi. Just at the end of last year, an affiliate of Farmington Hills-based Hunter Pasteur Homes sold off a chunk of its land on which it was going to build 81 condos to Bloomfield Hills-based Robertson Bros. Co. as part of the Pullman Parc project in the city’s Elmwood Park neighborhood. Jim Clarke, president and CEO of Robertson Bros., said his company plans 56 for-sale units in the $300,000 to $400,000 range, a departure from the 81 units ranging from $250,000 to north of $750,000 that Hunter Pas-
In spite of the shelved projects, some have gotten out of the ground, the most prominent of which is City Modern in the Brush Park neighborhood by Dan Gilbert. Spread across 8.4 acres, there are more than 100 for-sale townhomes and carriage homes that have been sold or placed under contract, with just six of the 112 remaining, according to Berkshire Hathaway HomeServices The Loft Warehouse. In addition, the 12-unit The Selden condo development at 438 Selden St. has been completed by Detroit-based Ferlito Group, and construction is progressing on the Fourth & Selden building with 26 condos as part of the $100 million Midtown West development by New York City-based Procida Cos. Matt O’Laughlin, partner and real estate agent for Detroit-based Alexander Real Estate LLC, the broker on the project, said three of the units had been sold so far as of earlier this month. Move-ins are expected to begin this summer on the building, which cost about $10 million. Experts said selling condos in high-rise buildings like the Westin Book Cadillac and Fort Shelby, both downtown, has been difficult as a result of COVID-19 leading to people steering clear of things like elevators, fitness centers, coffee shops and other shared amenities. That has led to heightened interest in townhouse-style and smaller for-sale buildings. “We’ve seen properties staying on the market almost a year in those kind of (high-rise) buildings,” Huez said.
Too much, too fast
The Stone Soap Building on the east Detroit riverfront is being redeveloped into condominiums and other uses by Banyan Investments. | KIRK PINHO/CRAIN’S DETROIT BUSINESS
Condo supply in metro Detroit downtowns How many months a city has in condominium inventory indicates whether it’s a seller’s or a buyer’s market. Here’s where seven key metro Detroit downtowns were trending on Dec. 1, 2020, for each of the downtowns in terms of months of inventory. Royal Oak: Rochester: Ann Arbor: Northville:
4 1.6 6.2 2
Birmingham: 5 Plymouth: 2.2 Detroit: 11.3
SOURCE: BERKSHIRE HATHAWAY HOMESERVICES THE LOFT WAREHOUSE
New condo construction on Townsend Street, along with the two-phase redevelopment of the St. Charles School there, has been completed. | KIRK PINHO/CRAIN’S DETROIT BUSINESS
teur had planned. “I don’t want to say there is a hole in the market, but I think we’ll get better traction in the $300,000 to $400,000 range than the $600,000 to $700,000 range,” Clarke said. “There are fewer buyers in the higher price ranges than the lower price ranges.” Aamir Farooqi, a Detroit developer
who heads up Banyan Investments, which is active in the city’s neighborhoods east of East Grand Boulevard, said 2021 should be an improved year for the for-sale market. “There is less uncertainty,” he said. “That helps, and couple that with the fact that going into the pandemic, you had quite a high amount of con-
struction activity with projects not getting completed as quickly because of stressed and stretched supply chains. All of those things are now on their journey back to normalcy, and I think you will see a marked rebound in 2021.” Banyan is working on a redevelopment of the Stone Soap Building on the east Detroit riverfront into condominiums and other uses, and has completed a two-phase redevelopment of the St. Charles School on Townsend Street, along with new construction there.
For Austin Black II, the founder of brokerage firm City Living Detroit, one of the key things driving the excess supply is pricing — namely, unit costs increased too much and too fast. “There are sales within the greater downtown market that really justify the price premium and those are selling fast even at a high price,” he said. “But I think the perception was that increase in value for very particular, special properties — people began to apply it across the entire market and that wasn’t necessarily an accurate reflection.” Toni Jennings of Abode Detroit also said pricing is factoring into the supply glut. “Remember, we did a lot of condo conversions — the Park Shelton (on Kirby Street), Garden Court (on East Jefferson), and the condos were selling pretty quickly, but there was also an influx of new development with Dan Gilbert in Brush Park and others in Corktown,” she said. “A lot of people stopped looking at the existing inventory and were more interested in the new build. The problem with that is the price points.” Clarke, the Robertson Bros. president and CEO, said he understands the need for more modestly priced units around greater downtown. “We are not proposing to play in the upper end of those price points,” he said. “We are able to deliver a product that will meet the needs and financial ability of more working people as opposed to urban cottages for executives.” Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB
JANUARY 25, 2021 | CRAIN’S DETROIT BUSINESS | 19
BANKRUPTCY
“MANY DISTRESSED COMPANIES HAVE BEEN ABLE TO SURVIVE WITHOUT HAVING TO GO THROUGH BANKRUPTCY THANKS TO PPP LOANS AND RENT DEFERRALS.”
From Page 1
The dearth of bankruptcy filings in Michigan is a paradox as Chapter 11 bankruptcy filings for the U.S. in 2020 were up 29 percent over 2019. According to bankruptcy experts, Michigan companies avoided the national toll through a perfect confluence of events: governmental support through relief programs such as the federal Paycheck Protection Program; cooperative banks; an automotive sector that recovered quickly from the early shutdowns during the pandemic; and a yearslong trend of bankruptcy forum shopping among large companies. “It’s been almost like the perfect storm of good things happening,” said Dennis Loughlin, partner and bankruptcy attorney for Southfield-based law firm Warner Norcross + Judd LLP. “Each one of those components provided options and alternatives for distressed or potentially distressed companies to weather the storm and make it though to the other side.”
— Joe Sgroi, partner and lead attorney of the restructuring and insolvency practice at Honigman LLP
Pre-pandemic punch Livonia-based environmental remediation services company United Resource LLC filed for Chapter 11 bankruptcy protection in the Eastern District on March 15, the first company to file after the pandemic hit Michigan, after running afoul on a $1.2 million loan from Comerica Bank. Only five days earlier, the state recorded its first two cases of the deadly coronavirus. A day after the filing, Gov. Gretchen Whitmer signed an executive order to close all dine-in restaurants, gyms and coffee shops as cases topped 50. In late 2019, United Resource’s financial situation became dire and the firm eliminated three salaried positions and hired a financial adviser as a last-ditch effort to turn the business around. It also attempted to sell equipment to fund day-to-day operations, but eventually turned to more high-interest cash advances totaling $70,000 to remain solvent, according to court records. However, the collateral United Resource put up to secure the short-term loans violated its loan agreement with Comerica and the bank put the company into default in late February 2020, leaving United Resource to rush a bankruptcy filing. United Resource’s story is a common one, even during the halcyon economic days between 2014 and 2019, as some companies struggled under bad management, bad contracts or bad luck. “There are always companies with systemic problems ... and they are always difficult cases even if you have the business to support it,” Loughlin said. But a lot of companies like United Resource were saved by the federal government’s PPP program and leniency from lenders after the pandemic began crippling the economy in late March. The feds made roughly 128,000 loans to Michigan companies to the tune of $16 billion. The program ended in August, but was restarted late last year. “Many distressed companies have been able to survive without having to go through bankruptcy thanks to PPP loans and rent deferrals,” said Joe Sgroi, partner and lead attorney of the restructuring and insolvency practice at Detroit-based law firm Honigman LLP.
Pandemic bankruptcies Corporate bankruptcies filed March 15-Dec. 31, 2020: March: United Resource LLC, Livonia. Chapter 11. Bedside Angels Home Care LLC, Ypsilanti. Chapter 11. June: Mount Group LLC, Dearborn. Chapter 11. Mount Clemens Investment Group LLC, Mount Clemens. Chapter 11. Home Niches Inc., Ann Arbor. Chapter 7. Walsay Inc., Ann Arbor. Chapter 7. SDR Group Inc., Bloomfield Hills. Chapter 7.
July: O’Dell Development LLC (Hackett Auto Museum), Jackson. Chapter 7. Columbus Oil & Gas, Fort Gratiot. Chapter 11. Sentinl Inc., Detroit. Chapter 11. August: Lapeer Industries Inc., Lapeer. Chapter 11. October: Michigan Property Managers.com LLC, Southfield. Chapter 7. With Love Homecare Inc., Warren. Chapter 7. Huron Pointe Excavating LLC, Harrison Township. Chapter 11.
“IT’S BEEN ALMOST LIKE THE PERFECT STORM OF GOOD THINGS HAPPENING. EACH ONE OF THOSE COMPONENTS PROVIDED OPTIONS AND ALTERNATIVES FOR DISTRESSED OR POTENTIALLY DISTRESSED COMPANIES TO WEATHER THE STORM AND MAKE IT THOUGH TO THE OTHER SIDE.” — Dennis Loughlin, partner and bankruptcy attorney for Warner Norcross + Judd LLP
Biding time? But PPP hasn’t saved everyone. Jackson-based Miller Tool & Die received a $654,200 PPP loan in April via Comerica Bank — a loan that was completely forgiven via the U.S. Small Business Administration in December. The company, which filed Chapter 11 bankruptcy on Dec. 22, blames the COVID-19-triggered shutdowns by Whitmer as the culprit in its insolvency, according to court filings. “Orders and requirements from customers decreased substantially at the outset of the shutdown due to reduced production and workflows,” the company said in a court filing. Prior to the pandemic, though, Miller Tool & Die was struggling and had been restructuring its business since 2019. The company had planned to sell to an unnamed buyer
20 | CRAIN’S DETROIT BUSINESS | JANUARY 25, 2021
in 2020 after 10 months of marketing by Colliers International. But the buyer walked away over the firm’s pension obligations. This seemed to haunt Miller Tool & Die throughout 2020 leading up to its bankruptcy filing. “During the several months that we were pursuing a potential investment partner or purchaser, (Miller Tool & Die) began suffering from the impact of the pandemic and the slowdown in the auto industry,” it said in a filing. The Miller Tool case is currently ongoing with a new buyer lined up. What remains unclear is whether PPP simply delayed the inevitable, said Sgroi. “Everyone has their guess on the outcome here,” Sgroi said. “A lot of companies added a lot of debt during the last nine months. Many went to the public markets and levered up. If
Physician’s Technology LLC, Monroe. Chapter 11. Henry Ford Village Inc., Dearborn. Chapter 11. November: Theresa Marie Inc., Shelby Township. Chapter 7. December: H & R Property LLC, Romulus. Chapter 11. First Response Fire Protection Inc., New Baltimore. Chapter 11. Rocket Transportation Inc., Taylor. Chapter 11. Miller Tool & Die Inc., Jackson. Chapter 11.
they can’t grow their businesses to sustain that debt load, they are going to have problems in the future. That will cause in increase in restructuring activity in the future.” Banks have been incredibly understanding during the pandemic as well, likely keeping hundreds of companies out of bankruptcy court. “There’s been an almost unprecedented attitude of ‘we’re all in this together’ from the banks,” said Loughlin. “So that payment relief and extensions would have provided some breathing room for companies that otherwise would have needed bankruptcy relief.”
Not here, then where? But even though bankruptcies are missing from the Detroit courts, they are not absent from others. More than 7,100 business filed Chapter 11 bankruptcy protection last year, according to data from legal services firm Epiq. Mass unemployment and a glut of employees working from home shattered the energy sector in 2020. Through October 2020, more than 500 oil and gas companies filed bankruptcy in North America, according to a report released in December by law firm Haynes and Boone LLP. Of those filings, 67 percent were filed in Texas with nearly all the rest being filed in Delaware
and New York. Of the total, 14 were multibillion-dollar bankruptcies. There was a single oil and gas filing in the Eastern District of Michigan last year: Fort Gratiot-based Columbus Oil and Gas LLC with nearly $26 million in debt. The oil extraction firm entered into bankruptcy after a two-year dispute with land owners in Cass County, which resulted in a lawsuit in Cass County Circuit Court. Land owners in the county alleged the leases held by Columbus Oil and Gas were no longer valid and blocked the company’s employees form entering the property. As a result, the land owners locked pipeline valves on their property, preventing oil from being pumped to the company’s processing facility. Coupled with the decline in oil prices during the pandemic, it proved too much for Columbus Oil and Gas. The case remains ongoing. As much of the lack of bankruptcies in Eastern District is from the response to the pandemic, it’s also about changing attitudes toward where bankruptcies are filed. While the oil and gas sector chooses its home courts in Texas, other large sectors such as retail and automotive have been shifting filings away from courts like Detroit to the Southern District of New York and Delaware, Loughlin said. “A lot of people will argue that there is a trend of forum shopping in the bankruptcy industry,” Loughlin said. “That’s a wholly different issue than the pandemic. I don’t see COVID or the pandemic influencing Chapter 11 numbers in the Eastern District substantially. Certainly there are smaller cases where their only option is to file somewhere in Michigan, but if you’re looking at a larger company with multiple locations, that gives them multiple options where they’d like to file.” But the pandemic’s wake has crippled the restaurants sector the most. While large restaurant chains often file bankruptcy protection — California Pizza Kitchen filed Chapter 11 in 2020, for instance — it’s uncommon for independent restaurants to file because, quite simply, they have very few assets. Most just go out of business. More than 2,000 restaurants have closed in Michigan since Whitmer first issued a shutdown order in March, according to Justin Winslow, president and CEO of the Michigan Restaurant & Lodging Association. “A lot of small businesses just went out of business (during the pandemic) because there is no true restructuring to do,” Sgroi said. “Those businesses don’t end up in court, they just go away.” Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh
HEALTH CARE
Grand Rapids center opens COVID-19 mental health unit Pine Rest psychiatric hospital converts units to help alleviate strain on hospital systems BY JAY GREENE
Pine Rest Christian Mental Health Services, a Grand Rapids-based mental health provider and one of the nation’s largest, has opened Michigan’s first COVID-19 behavioral health unit for mild and moderate conditions and plans to open a second unit later this month because of increased demand. Bob Nykamp, Pine Rest’s COO, said the state Department of Health and Human Services late last year asked Pine Rest for help housing a burgeoning number of COVID-19 psychiatric patients. “We had the Nykamp first spike in March and April and opened an eightbed COVID positive unit within our hospital for the state,” Nykamp said. “When things settled down in May, we closed that and then moved those beds back to just general adult inpatient psych instead of COVID.” But Nykamp said the fall surge in COVID-19 infections, which were much higher than spring, changed Pine Rest’s plans. Nykamp said the facility decided to delay opening a planned 40-bed residential facility for children and adolescents and instead convert part of it to COVID-19 patients. Since March, hospitals throughout Michigan have experienced a dramatic rise in demand for services amid surging cases of COVID-19 infection, challenging staffing and bed availability. Allen Jansen, deputy director of the Michigan Department of Health and Human Services’ behavioral health and developmental disabilities administration, said the state has been trying to find placement for psychiatric pa-
Pine Rest Christian Health Services’ Van Andel entrance to its Grand Rapids mental health facility. | PINE REST
tients with COVID-19. He said few behavioral health providers within the state are equipped to serve this population. “Our mission is to create a service network for Michigan residents who need behavioral health care so they can receive the help they need — particularly during the COVID-19 pandemic that has impacted the mental health of so many of us,” said Jansen in a statement. “After growing evidence that this need could be better met, we reached out to a number of providers and are appreciative that Pine Rest responded to our request,” Jansen said. “They prioritized space and staffing resources to address this clinical need at a time when resources were already stretched. This service is urgently needed and will be well-used for a very vulnerable group of our residents.” Pine Rest’s special care COVID-19 unit, which opened Dec. 21, uses negative air pressure in each room to create a safe space for staff and patients who
are asymptomatic or experiencing mild symptoms, Nykamp said. “We believe (our) mission calls us to support Michigan communities during this unprecedented time by offering the services most urgently needed,” said Mark Eastburg, Pine Rest’s president and CEO, in a statement. Nykamp said the 40-bed unit is constructed in four pods of 10 beds. The first pod is being used for COVID-19 patients referred by hospitals, community mental health agencies, private doctors and families. “We decided not to admit more than eight patients in the first pod,” he said. “We have three pods remaining. Two are being prepared if we need to expand for more COVID positive patients. The last is set aside for the state if it has issues with adult foster care homes.” Nykamp said the state also asked Pine Rest to be prepared to take adult foster care patients on an emergency basis. He said that unit could open later this month as well.
“Our first COVID unit is full and we plan to open a second eight-bed unit the end of January,” he said, adding Pine Rest currently has an unspecified number of patients waiting to get into the COVID-19 unit. “We are taking a lot of calls now and we don’t know when we will have availability, which is why we are opening the second pod,” he said. For example, Pine Rest has received 42 percent of calls from Kent County, 8 percent from Kalamazoo and 4-8 percent from most every other county in the state, including Wayne, Kalkaska and Grand Traverse and Muskegon. “We are an acute psychiatric hospital and to be admitted you have to have a diagnosis that you are a danger to yourself or others,” Nykamp said. “Then they have to have a comorbid, positive COVID diagnosis. Some are asymptomatic with moderate symptoms. If it becomes serious we have an arrangement with Spectrum to transfer for medical reasons.” Dr. Darryl Elmouchi, president of
Spectrum Health West Michigan, said the Pine Rest COVID-19 unit makes it possible to effectively care for a patient’s range of health needs. “This effort is in the best interest of the patients and our health care community,” Elmouchi said in a statement. “We are proud and grateful to partner with Pine Rest on innovative ways to better serve our community and fight the ongoing threat of the pandemic.” Overall, Nykamp said all patients in the 238-bed hospital have experienced higher levels of illness than usual because some have been waiting longer to get assessed or treated. He said every week two or three inpatients become COVID-19 positive. “They are immediately transferred from our regular inpatient units directly into the special care unit,” Nykamp said. “This has allowed us to keep the regular units open to nonCOVID patient demand, versus closing the units due to a COVID outbreak.” Like most health care facilities, Pine Rest has dealt with staff coming down with COVID-19. Only about five staff are out with the virus or awaiting test results, far fewer than the 50 at the height of the pandemic. Most became infected through community spread. “Thanks to our vaccination program for our staff, we anticipate this number to remain very low,” he said. But Nykamp said patients in Pine Rest’s special COVID-19 unit have difficulty complying with mask and social distancing rules. “The problem is compliance with a COVID positive person in a psych unit,” he said. “It is difficult sometimes to keep them separated from other patients or to wear a mask. And so that’s kind of the extra burden.” Contact: jgreene@crain.com; (313) 446-0325; @jaybgreene
FINANCE
Detroit’s debt outlook gets a boost as city prepares to sell bonds BY ANNALISE FRANK
As the city of Detroit prepares to offer a first round of bonds to pay to demolish or secure 14,000 houses, credit ratings agencies backed pre-pandemic assessments of the quality of the city’s debt. Moody’s Investors Service assigned a Ba3 credit rating to the city’s bonds in a Tuesday report, keeping the value that it set in 2018 and didn’t change throughout the pandemic, despite COVID-19 hurting budgets across the country. Another agency, S&P Global Ratings, wasn’t quite as optimistic last year and dropped its outlook on Detroit’s debt from stable to negative in April. As of Wednesday, however, it wiped away that negative, returning it to stable. “The return to a stable outlook reflects the City’s strong fiscal management during the COVID-19 pandemic and Mayor (Mike) Duggan’s vision to strengthen every neighborhood through the rehab and demolition of vacant houses,” Jay Rising, the city’s acting chief financial officer, said in a statement.
Moody’s Investors Service maintained its pre-pandemic outlook on Detroit’s debt. | ANNALISE FRANK/CRAIN’S DETROIT BUSINESS
The ratings agencies offer insight on the municipal bond market, including how likely governments are to repay these debts. Though Detroit’s finances have improved and it’s balancing its budget in the years since the historic 2013-14 bankruptcy, it has far to go. Moody’s
and S&P ratings for Detroit are still below investment grade, making buying the city’s “junk” bonds comparatively risky in the eyes of investors. Municipal bonds carry little risk of default, though, so being “junk” isn’t as bad as it may seem, and the good news is that neither Moody’s nor S&P low-
ered their ratings even after a second wave of the pandemic. Moody’s latest report echoes its October take that also backed Detroit’s Ba3 rating. Also, the agency’s outlook on Detroit’s debt — a descriptor that doesn’t affect the rating but points toward the future — also remains “positive.” S&P issued a comparable rating — BB- in its own parlance — for the city’s outstanding debt. The reports come as Detroit plans to issue $175 million in unlimited tax general obligation bonds on Feb. 1, to be paid back through property taxes, according to a Municipal Securities Rulemaking Board filing. That issuance will bring the city’s total general obligation debt to $1.7 billion. “The positive outlook reflects the city’s early and significant response to revenue declines,” Moody’s said in the report. To d eal with a loss of expected 2020 and 2021 revenue that’s now expected to total $430 million, Detroit laid off workers, reduced hours for 2,200 employees, stopped capital projects and demolition spending, used surplus
funds and reduced other spending. If Detroit’s revenues hit hard by the pandemic, like its wagering taxes and income taxes, do show clear signs of recovering, Moody’s may decide to upgrade the city’s rating in the future, its report says. But it also points to areas where, if things don’t go well, Detroit’s finances will suffer and its debt will look more risky: For example, if Detroit doesn’t contribute enough to its pension savings fund, if its unemployment rate doesn’t decrease, if it loses more population or if it has to draw out all of its savings to meet current costs. Detroit ranks 41st out of 75 major cities when it comes to fiscal health, according to nonprofit Truth in Accounting’s 2020 Financial State of the Cities report released in January 2020, before the pandemic. The report found Detroit’s residents would have to pay $5,100 each to get rid of the city’s debt. Detroit ranks just below two other Midwest cities — Cleveland and Columbus — on the list. It also sits three spots above Seattle and four above Phoenix. Contact: afrank@crain.com; (313) 446-0416; @annalise_frank
JANUARY 25, 2021 | CRAIN’S DETROIT BUSINESS | 21
THE CONVERSATION
Intern to president: Jon Kramer talks career, infrastructure, talent OHM ADVISORS: Jon Kramer, president of OHM Advisors, joined the Livonia-based architecture, engineering and planning firm in 1993 as an intern. This year, he became president of the company, which has grown from fewer than 80 employees in one office when he started to a workforce of 530 employees across 16 offices in four states. OHM Advisors works closely on the design of water, wastewater and transportation infrastructure. Kramer, 47, says the new Congress needs to move quickly on infrastructure funding to both stimulate the economy and reverse the decline of aging roads and underground pipelines. This interview has been edited for clarity. | BY CHAD LIVENGOOD ` Tell me how you worked your way up from being an intern at OHM Advisors to being the president now of the company. Well, being an intern is exactly what you think. I started out making copies and running what we called “bluelines.” And if you ran them too much, the ammonia would make you pass out. I colored maps with crayons because back then they didn’t have computers that could delineate drainage districts as well. I assisted with field measurements. I think I made a little over $7 an hour at the time, which was slightly more than minimum wage, so I was very happy with that. ` And how many pots of coffee did you make? You know, I wasn’t a coffee drinker, so I may have escaped that here and there. But I’m sure I did a few of those things as well or shoveled a little snow on the front porch. ` You were most recently the chief operating officer at OHM Advisors. I imagine you’ve had a big role in hiring and recruiting over the years. What’s that like in your business, finding the right talent and competing for talent in your industry? It’s pretty complex. We’ve always had trouble finding talent. And in the last year, obviously it’s been very tumultuous with COVID and what that’s done to the state, to the country. So it’s difficult to find good talent and it looks like that was the case for the past five to 10 years, and it looks like that’s going to be the case in the future because the work is there, the need is there and licensed engineers and architects are in high demand. ` A lot of your engineering work is in wastewater and water treatment facilities. What other types of work does the firm do? We call ourselves an AEP firm — architecture, engineering and planning. We partner with a lot of government
leaders at all levels — state, local, township, county, city, schools, universities, private development community. A most recent project, one we’re real proud of, is called the M-102 rehabilitation, which your readers probably know as Eight Mile. I remember when we got (the contract), we’re excited because the design team was playing Eminem’s “Lose Yourself.” It’s a $100 million job, one of the largest jobs we’ve ever done. On the surface, it may sound kind of boring. It’s a rehab of 95 lane-miles and 70 traffic signals and hundreds of sidewalk ramps and we’re going to repair a bridge over I-75. But what really stands out with me is it has allowed us to create a momentous partnership with MDOT improving one of Michigan’s first superhighways. And it really bridges decades of social and racial unrest and division between Detroit and the outer ring suburbs. So that’s a really good thing because our (company) mission is advancing communities and we think this kind of project really hits home with that.
fixing the front end on their car. If a bridge falls or fails and gets closed, it’s extremely inconvenient and or there’s health and safety (concerns). And we do a lot of water main work as well and if people are without water, they get it. But this underground stuff — out of sight, out of mind, so people don’t see it. And there’s really not dedicated funding sources for stormwater.
` Anybody who has driven Eight Mile lately knows it’s a little rough in some spots. So OHM is doing the design work for the underground and above ground infrastructure? Yeah, in the underground we have 50,000 feet of sewer, which is 10 miles of replacing and rehabbing storm sewer, wastewater, water mains. It’s a pretty big scope. People get surprised when you say it’s a $100 million job. It literally is because there’s so much underground you don’t see and then a mile of pavement costs a pretty penny.
` So we have this infrastructure that we’ve neglected. Do we need a different way to fund and bond for this underground infrastructure to spread out that long-term cost? Because that’s always the issue is hitting people with huge water or assessment increases. For the last 10 or 15 years of my career, I’ve been responsible for going to Congress and letting them know the importance of this infrastructure
` You’ve done a lot of work for the Detroit Water and Sewerage Department. Great Lakes Water Authority is a client as well. What are some of the bigger challenges you see with stormwater infrastructure right now in Southeast Michigan? Funding. Roads and bridges, people get it — they’re fixing their tires, they’re
` When you’re redesigning Eight Mile, you’ll be pulling up original pipes, right? Yeah. Sometimes when we get into a project like Eight Mile or on Grand River, we actually pull out of the ground wooden water main (pipes), which everyone is just fascinated with. But over 100 years ago, your water was not transported in copper or ductile iron pipes or concrete pipes; it was actually wood. So when we see those on a site, they actually disappear pretty quickly because whether it’s a contractor or an engineer, they love to have that on their shelf at home.
funding. And the interesting thing is it’s a bipartisan issue — it always is, has been and will be. It doesn’t matter if you’re at the state level or the national level, everyone agrees it needs to be done but ... they just don’t agree on how to pay for it. We see right now as the time — and for a variety of reasons. (Short term) stimulus is absolutely needed, but that long-term funding has to be there. It has to be dedicated. ... Otherwise people are going to resort to just doing these little tiny projects. Jon Kramer is president of OHM Advisors
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RUMBLINGS
The Hub Stadium property in Auburn Hills listed for sale The Hub Stadium indoor entertainment venue in Auburn Hills, whose owner and ax-throwing practices have earned it a mixed reputation, has been put on the market for $7.5 million. The 27,500-square-foot building at 2550 Innovation Drive alongside I-75, which was for many years known as Big Buck Brewery, has been marketed for sale and lease since October, according to a listing from Berkshire Hathaway. But Brian Hussey, manager at The Hub, said the business will reopen Feb. 1 when restrictions on indoor dining due to COVID-19 are scheduled to lift. He said the business still
The 27,500-square-foot building at 2550 Innovation Drive alongside I-75 is being marketed for sale or lease. | COSTAR GROUP INC.
has around 18 years left on a 25-year lease and he was unaware of the property owner shopping around for new tenants. “We’re very much looking forward to reopening,” he said.
22 | CRAIN’S DETROIT BUSINESS | JANUARY 25, 2021
Multiple attempts to reach the property owner and listing agent were unsuccessful. The Hub opened in 2017 as ax throwing became something of a trend. The Hub had its liquor license temporarily suspended in 2018 after state investigators observed unsafe conditions such as, “patrons throwing axes at bottles of spirits, consuming shots from the bottle that was not struck … and a person attempting to balance feet on a strap, walking barefoot (tightrope style), carrying and tossing an axe at the target.” The ax-throwing business is regis-
tered to Gary Tenaglia, according to state records. In July 2019, Tenaglia took a plea deal in connection with a multimillion-dollar bribery scheme at Detroit Metropolitan Airport. According to records, Tenaglia owned Envision Engineering & Management LLC, which was contracted by the Wayne County Airport Authority, and was allegedly complicit in a defrauding scheme with ex-airport official James Warner. Tenaglia’s rap sheet also includes a conviction for public utility fraud. The property was owned by Michael Eyde, who died in November 2019. Records show the property belonging to AH One LLC in Lansing.
Crain Communications Inc. Chairman Keith E. Crain Vice Chairman Mary Kay Crain CEO KC Crain Senior Executive Vice President Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly, except no issues on 1/4/21 nor 12/27/21, combined issues on 5/24/21 and 5/31/21, 8/30/21 and 9/6/21, 11/15/21 and 11/22/21, by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Contents copyright 2021 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is prohibited.
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FEB.25 | 3:30 P.M. FEATURING
OAKLAND COUNTY Oakland County is home to 50 million square feet of
office space — more than 60% of the total office space in metro Detroit. As many employers await a full return of their workforce to their physical office, hear from industry leaders about what to expect in 2021. SPEAKERS INCLUDE:
COMMERCIAL AND
BRANDON CARNEGIE, Senior Associate, CBRE EKIN COCCIA, Senior Designer, HED Detroit
RESIDENTIAL REAL ESTATE TRENDS IN SOUTHEAST MICHIGAN
ROBERT GAGNIUK, Senior Lease Portfolio Manager, Friedman Real Estate
GARY GROCHOWSKI, Senior Vice President, Colliers ATTEND THIS FREE WEBCAST TO LEARN: How will that market recover and what does this mean for the commercial real estate industry? How are employers reconfiguring their spaces? What does this all mean for landlords? UPCOMING WEBCASTS:
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