Crain's Detroit Business, Jan. 12, 2015 issue by Crain's Detroit Business

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www.crainsdetroit.com Vol. 31, No. 2

JANUARY 12 – 18, 2015

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Page 3 Search for new DIA director is well-timed CRAIN’S MICHIGAN BUSINESS

A princely sum

What’s on tap for state’s growing beer makers? Page 9

Deal to name Palace could hit $100M

This Just In Homecoming digital group among Knight plan finalists

NEWSPAPER

A Crain’s Detroit Business proposal for a Detroit Homecoming digital community is one of 126 finalists nationwide for the Knight Cities Challenge, an effort by the John S. and James L. Knight Foundation to foster “new ideas to make the 26 communities where Knight invests more vibrant places to live and work.” The proposal is one of 25 Detroit-area proposals under consideration as part of 126 ideas from around the country being reviewed. The Homecoming proposal is an offshoot of the three-day event Crain’s convened in September to re-engage successful Detroit expatriates; Homecoming repeats this fall. The digital community is designed to keep, initially, 10,000 expats in touch with news about the city and about themselves. “We discovered in the Homecoming that thousands of people who grew up in the metro area but now live and work elsewhere still ‘carry the D’ in their hearts,” said Crain’s Publisher Mary Kramer. “We can build a community around that affection that can be an economic force for Detroit.” The Miami-based foundation received more than 7,000 submissions for Knight Cities, more than 1,300 of which came from the Detroit area. Winners are to be announced in the spring, and will receive a share of $5 million in grants. Other local proposals range from creative ways to clean up blight in the city, to resources for entrepreneurs in underserved communities.

COURTESY OF PALACE SPORTS & ENTERTAINMENT

based Premier Partnerships to aid in brokering a deal for the venue’s naming rights. AND MONEY aming rights for The Palace of Mannion declined to say how Auburn Hills could fetch nearly What’s a name much the Palace naming rights expect worth? Page 19 $100 million over 20-plus years. to sell for, but expect to find a buyer Where nameThat’s based on the terms of other calling is a big within the next 12 months. arena deals in recent years. deal, Page 19 “It would be a substantial deal,” he “That’s probably within the range said, adding that a “low deal” would of the scope of average dolbe $3.5 million a year. lars,” said Dennis Mannion, For context, he said, the Palace’s West Atripresident and CEO of the Deum naming rights alone would sell for more troit Pistons and Palace Sports than $1 million annually and the North Pavilion & Entertainment. name is worth more than $1.5 million a year. Palace Sports, the manageAny deal will be for at least 10 years, Manment company for the 27-yearnion said. old, 22,076-seat arena, last year hired Santa Monica, Calif.See Palace, Page 19 Mannion BY BILL SHEA CRAIN’S DETROIT BUSINESS

MONIKERS

Crittenton expected to ascend under Ascension BY JAY GREENE CRAIN’S DETROIT BUSINESS

Ascension Health’s pending acquisition of Crittenton Hospital and Medical Center is expected to financially strengthen the 290-bed hospital and also expand specialty referrals to Ascension Health’s five Southeast Michigan hospitals, according to local health care experts. Since last week’s announcement that Rochester Hills-based Crittenton signed a letter of intent to be acquired by Ascension over four other competing systems, there appears to be a consensus among experts that the deal is a natural fit for both health organizations. The proposed deal, in which the financial terms were not disclosed, is expected to close within six months after final negotiations are completed. Discussions include agreement on clinical services and capital projects. Joining the nation’s largest and most profitable Catholic health system — Ascension’s net income in 2014 was $1.8 billion for a 9 percent profit margin — helps Crittenton in several ways, experts say. First, Crittenton — which has lost more than $73 million on operSee Crittenton, Page 20

Biz taps new way to find investors amid the crowd BY GARY ANGLEBRANDT SPECIAL TO CRAIN’S DETROIT BUSINESS

When husband-and-wife team Rachel and Tarek Kanaan opened their specialty beer and tea business, Unity Vibration Living Kombucha Tea LLC, in 2009, they quickly racked up debt, to the point of short-selling their house. But it wasn’t because the Ypsilanti-based business wasn’t successful. Quite the opposite: Distributors were asking for more product, and the Kanaans were trying to build out their brewing operations and add a tasting room to

IS CROWD INVESTING FOR YOU? Crowd investing worked for Unity Vibration. Is it the right way for your firm to raise capital? See our Second Stage section on Page 13 for a complete look at the opportunities and challenges in this new industry. keep up with demand. But they already had burned through their line of credit getting open, and they said that banks weren’t willing to offer any expansion capital. So the pair turned to crowd in-

vesting, a form of crowdfunding that allows people to actually invest in a business rather than just giving donations the way Kickstarter and other platforms are structured. “This was one of our only options,” Rachel Kanaan said. They turned to Indianapolisbased crowd investing platform Localstake LLC to help them through the legal complexities of raising capital in this manner. Over six months, they raised $136,300 from 26 people. The Kanaans say they would See Crowd, Page 20

LEISA THOMPSON

Tarek and Rachel Kanaan used crowd investing to get Unity Vibration off the ground.

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CRAIN’S DETROIT BUSINESS

MICHIGAN BRIEFS Sports Creek Raceway closes; only Northville, Hazel Park remain

Autocam not required to offer birth control despite law

After 29 years, harness racing at Sports Creek Raceway near Flint ended Jan. 1, MLive.com reported. The Michigan Gaming Control Board took the action after the track couldn’t come to an agreement with the Michigan Harness Horsemen’s Association. General Manager Chris Locking said the track will look for a new owner to develop the property. The raceway, in Swartz Creek, employs about 40 during simulcasting and about 100 during live races. Swartz Creek City Manager Adam Zettel said the city gets about $44,000 a year from the track. Only Northville Downs continues to host harness racing in Michigan. Hazel Park Raceway, a thoroughbred track, is the only other horse track in Michigan.

Autocam Corp. is not required to provide employee health insurance for birth control as a result of a U.S. Supreme Court decision, Judge Robert Jonker ruled last week in U.S. District Court in Grand Rapids. Autocam, based in Kentwood near Grand Rapids, is covered by the court’s decision last year in the Hobby Lobby case, Jonker ruled. Some private employers can avoid the contraceptive requirement in the Affordable Care Act. Autocam, which makes auto parts and medical supplies, is owned by the family of CEO John Kennedy, a Roman Catholic who opposes contraception and abortion. Because of Jonker’s ruling, the federal government will be on the hook for Autocam’s legal bills, The Associated Press reported. the second half of 2015, pending approval. The Bank of Holland and The Bank of Northern Michigan will operate under the Chemical Bank name. Acquiring Lake Michigan Financial would make Chemical Financial the largest bank based in Michigan in terms of deposits and the seventh-largest operating in the state.

With acquisition, Chemical Financial to be top state bank Midland-based Chemical Financial Corp. plans to acquire Hollandbased Lake Michigan Financial Corp. in a $184.1 million deal, MiBiz reported. Lake Michigan Financial is the parent of The Bank of Holland, which has offices in Holland, Grand Haven and downtown Grand Rapids; and The Bank of Northern Michigan in Petoskey and Traverse City. The deal is expected to close in

A reminder from last winter: It cost shipping industry cold cash It seems kinda cruel to relive the misery of last winter, but here are a couple of economic numbers of note. The Cleveland-based Lake Carriers’ Association, which represents

Charles F. Gray

At least eight Michigan businesses representing more than 1,000 employees were among those hailing the Supreme Court’s 5-4 ruling in July that closely held for-profit companies have the same religious freedoms their owners do when it comes to contraceptive coverage. Besides Autocam, Oxford-based Barron Industries Inc., Utica-based Weingartz Supply Co., Ann Arbor Township-based Domino’s Farms Corp., Davisonbased Mersino Dewatering Inc., Clinton-based Eden Foods Inc., Kalamazoo-based Willis Law and North Branch-based MK Chambers Co. brought court challenges in Michigan or Washington, D.C., to a U.S. Department of Health & Human Services regulation requiring employer coverage for 20 approved forms of birth control.

U.S. cargo shippers on the Great Lakes, said last year’s deep freeze cost the economy an estimated $705 million, The Associated Press reported. The association said the volume of freight that U.S.-flagged ships hauled on the lakes between Dec. 1, 2013, and May 30, 2014, was about 7 million tons lower than the same period a year earlier. In another report, this courtesy of The Bay City Times, Saginaw River shipping traffic fell to a 10year low in 2014 as — what else? — cold weather shortened the season. A total of 110 ship visits were recorded in the Saginaw River from around May to mid-December, down from 139 in 2013 and nearly 70 percent fewer than the 347 visits recorded in 2005.

MICH-CELLANEOUS The $88.2 million acquisition of Grand Rapids-based Founders Financial Corp. by Evansville, Ind.-based Old National Bancorp closed at the start of the new year, MiBiz reported. Old National, with 40 offices in the state, has $11.2 billion in assets. Monroe-based Mercy Memorial Hospital System is officially part of Toledo-based ProMedica, the two health systems said in a news release. The new name for the hospital will be ProMedica Monroe Regional Hospital. Two systems signed a definitive agreement in July 2014. Marysville auto supplier SMR Automotive Systems plans to hire 100 more employees over the next year, the Times Herald in Port

Huron reported. SMR currently employs nearly 750. Kalamazoo-based Stryker Corp. plans to buy the assets of hospital bed maker CHG Hospital Beds Inc. of London, Ontario, Bloomberg News reported. Terms of the all-cash deal were not disclosed.

CORRECTIONS A column by Mary Kramer on Page 7 of the Jan. 5 issue should have said Crain’s is working with MiQuest on a new series of business roundtables. Crain’s list of largest accounting firms in the Book of Lists incorrectly omitted Mattina Kent & Gibbons P.C. at No. 24. Also, the name and address of No. 16 should have been Metzler Locricchio Serra & Co. P.C., 1800 W. Big Beaver Road #100, Troy 48084, (248) 822-9010, www.mlscocpa.com. The corrected list is in the online version of the Book of Lists at crainsdetroit.com/lists. A Page 3 story in the Jan. 5 edition should not have said a bill on Gov. Rick Snyder’s desk requires companies to post a notice informing customers of their obligation to tell restaurant employees about food allergies. That provision of the bill was eliminated before it passed the state House in December.

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January 12, 2015

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DIA self-portrait: Stability, support Experts: Museum paints good picture to director candidates BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

The Detroit Institute of Arts will be going head-to-head with at least three other big-city U.S. museums in its search for a new top executive. The directors of the High Museum of Art in Atlanta, the Museum of Fine Arts in Boston and the Phoenix Art Museum are all retiring, said Ford Bell,

president of the Washington, D.C.based American Alliance of Museums. They will join the DIA’s Graham Beal, who announced last week he will retire at the end of June after 16 years as director of the museum. “And we may see a few more in the mix, as well, as the year goes by ... some of these heads of museums are getting close to retirement age, so it’s a natural time of transition,”

said Bell, who is set to retire at the end of May. Though the potential sale of the DIA’s artwork during Detroit’s bankruptcy created distress in the art world, “we’re past that,” Beal he said. “Graham labored long and hard to put the museum in a great position to be able to attract a great director. He got the millage passed, got through the bankruptcy, the

collection is preserved. These are big things.” The museum has also regained its independence from the city of Detroit for the first time since 1919. In addition, the reinstallation of its internationally renowned collection, led by Beal, has garnered national and international attention for making art more accessible to the common man as well as art enthusiasts. Those all present a stable picture to museum candidates, Bell said. But there’s something else he

Inside

Michalski: Is this Beaumont’s last in-house CEO? Page 7

See DIA, Page 21

Company index

Barbat builds his portfolio of downtown real estate BY KIRK PINHO CRAIN’S DETROIT BUSINESS

It was just 11 months ago that Joe Barbat bought his first building in downtown Detroit. Since then, however, he has added two more to his portfolio and has another — the century-old Gabriel Richard Building — under contract, with a $35 million-plus plan to convert them into nearly 400 multifamily residential units with first-floor retail space. Barbat, CEO Barbat and chairman of Southfield-based Wireless Toyz and chairman of the West Bloomfield Township-based real estate investment and management company Barbat Holdings LLC, most recently purchased the 86,000-square-foot Philip J. Neudeck office building at Clifford and Bagley downtown for $2.3 million from Wayne County last month. He plans to turn the building, to be renamed The Philip House, into about 100 apartments or condominiums. The majority of the financing is coming from Southfield-based Hantz Bank, Barbat said. His latest pending purchase: the 96,000-square-foot Gabriel Richard, which he has under contract for $3.2 million and plans to turn into about 110 units in a $6.5 million renovation at Michigan Avenue and Washington Boulevard. The building, formerly occupied by the Archdiocese of Detroit, would be renamed The Gabriel House after he closes on the purchase, expected

These companies have significant mention in this week’s Crain’s Detroit Business:

A show of force T

he North American International Auto Show is a numbers game. Automakers and suppliers spend X (exhibits, new model debuts, etcetera) to attract Y (you) to sell Z (cars). SCHEDULE But for show organizers, it’s a far more comPress Preview: Monday-Tuesday Industry Preview: Wednesdayplex equation. Thursday Fifteen weeks elapse from start to finish of the city’s Charity Preview: Friday largest annual event, which will attract more than 800,000 Public Show: Jan. 17-25 people to Cobo Center. Crain’s coverage: crainsdetroit.com/autoshow The NAIAS is expected to generate more than $400 million in economic impact for the region. As highlighted by the numbers below, the event is the sum of thousands of people, parts and hours of labor.

NAIAS

■ 1,500-plus union workers are hired to install exhibits over a 10-week period ... and then dismantle them over two weeks.

lights used in Cobo Center

750

in Cobo, 500+ on show floor

bottles of champagne and wine used for the Charity Preview

■ More than 200 product specialists work on the show floor.

Accio Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Akadeum Life Sciences . . . . . . . . . . . . . . . . . . . . . 18 Altair Engineering . . . . . . . . . . . . . . . . . . . . . . . . . 11 Amway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Ann Arbor Spark . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Arvina Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Autoliv . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Arcadia Brewing . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Ascension Health . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Barbat Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Beaumont Health . . . . . . . . . . . . . . . . . . . . . . . 7, 20 Bell’s Brewery . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Cascade Partners . . . . . . . . . . . . . . . . . . . . . . . . . 20 Clark Hill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Cooper-Standard Automotive . . . . . . . . . . . . . . . . 11 Crittenton Hospital and Medical Center . . . . . . . . . 1 Deloitte Consulting . . . . . . . . . . . . . . . . . . . . . . . . 20 Detroit Institute of Arts . . . . . . . . . . . . . . . . . . . . . . 3 Detroit Pistons . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Domino’s Pizza . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Dykema Gossett . . . . . . . . . . . . . . . . . . . . . . . 14, 15 Federal-Mogul Holdings . . . . . . . . . . . . . . . . . . . . 11 Financial One Accounting . . . . . . . . . . . . . . . . . . . . 5 Founders Brewing . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Funderbuilt . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 15 General Motors . . . . . . . . . . . . . . . . . . . . . . . . . . 11 George P. Johnson . . . . . . . . . . . . . . . . . . . . . . . . 11 GRB New Detroit . . . . . . . . . . . . . . . . . . . . . . . . . 21 Harmony Brewing . . . . . . . . . . . . . . . . . . . . . . . . . 10 Inteva Products . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Invest Detroit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Jaffe Raitt Heuer & Weiss . . . . . . . . . . . . . . . . . . . . 8 Jewish Community Center . . . . . . . . . . . . . . . . . . . . 5 Jewish Federation of Metropolitan Detroit . . . . . . . . 5 Joyce Julius & Associates . . . . . . . . . . . . . . . . . . . 19 Kelly Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Metaldyne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Michigan Brewers Guild . . . . . . . . . . . . . . . . . . . . 10 Michigan Department of Community Health . . . . . . 18 Michigan eLab . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Michigan Grape and Wine Industry Council . . . . . . 10 Michigan Municipal League . . . . . . . . . . . . . . . . . 15 Michigan State Medical Society . . . . . . . . . . . . . . 18 New Holland Brewing . . . . . . . . . . . . . . . . . . . . . . 10 Newell Rubbermaid . . . . . . . . . . . . . . . . . . . . . . . 10 Nora Contracting . . . . . . . . . . . . . . . . . . . . . . . . . 13 North American International Auto Show . . . . . . . . . 3 NSF International . . . . . . . . . . . . . . . . . . . . . . . . . 11 Palace Sports & Entertainment . . . . . . . . . . . . . . . . 1 Princeton Enterprises . . . . . . . . . . . . . . . . . . . . . . 21 RHP Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Small Business Administration . . . . . . . . . . . . . . . 13 Sun Communities . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Toering Law Firm . . . . . . . . . . . . . . . . . . . . . . . . . 14 Together Health Network . . . . . . . . . . . . . . . . . . . 20 United Way for Southeastern Michigan . . . . . . . . . . 4 Unity Vibration Living Kombucha Tea . . . . . . . . . 1, 13 University of Michigan . . . . . . . . . . . . . 8, 14, 15, 18 Workforce Intelligence Network . . . . . . . . . . . . . . . 17 Ziebart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Department index ■ The show floor includes 400,000 square feet of raised flooring (the equivalent of 85 basketball courts.)

BUSINESS DIARY . . . . . . . . . . . . . . . . 16 CALENDAR . . . . . . . . . . . . . . . . . . . . 16 CLASSIFIED ADS . . . . . . . . . . . . . . . . 17 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 6

More than 78,000 square feet of carpet laid (1 1/3 football fields)

LETTERS . . . . . . . . . . . . . . . . . . . . . . . 6 OPINION . . . . . . . . . . . . . . . . . . . . . . . 6 PEOPLE . . . . . . . . . . . . . . . . . . . . . . 16 RUMBLINGS . . . . . . . . . . . . . . . . . . . 22 WEEK ON THE WEB . . . . . . . . . . . . . . 22

See Barbat, Page 21

THIS WEEK @ WWW.CRAINSDETROIT.COM

PIERRETTE DAGG/CRAIN’S DETROIT BUSINESS

Crain’s takes an auto show road trip Reporters and editors will be roaming the floor of Cobo Center this week to let you know what’s new and what’s news.

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U Way CEO Brennan looks to new social issues after upcoming exit BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

There’s no shortage of social issues in Detroit. The region is arguably “the country’s largest social lab,” with social and economic issues more acute and dense in scale here than perhaps anywhere else in the country, noted Michael Brennan, president and CEO of United Way for Southeastern Michigan, in a recent blog. That reality and a longtime interest in “driving innovation in the social sector” will keep Brennan busy after his retirement at year’s end. As Crain’s reported last week, Brennan, 52, will leave United Way after 30 years in its network, the last 12 as head of the Detroit-based agency. During his tenure, Brennan led the merger of the Detroit United Way and the former United Way of Oakland County in the spring of 2005. He also spearheaded the agency’s controversial shift from its longtime model of funding a wide variety of agencies year after year to a community impact model with focused funding and convening aimed at “moving the needle” in three areas identified through community surveys: educational preparedness, financial stability and basic needs. Under his direction, United Way launched the 211 health and human services hotline in the region,

NOMINATIONS FOR M&A AWARDS NEAR DEADLINE Involved in a merger or acquisition in 2014? You may be eligible for Crain’s M&A Awards. Crain’s Detroit Business and the Association for Corporate Growth will honor companies and individuals in the following categories: 䡲 Best Deal of the Year: Under $100 million and $100 million or more. The deal must have closed in 2013. The buyer or the business sold must be in Wayne, Oakland, Macomb, Washtenaw or Livingston counties. 䡲 Dealmaker of the Year/buyerseller. 䡲 Dealmaker of the Year/adviser. M&A experts, lenders, CPAs, consultants and attorneys, among others, are eligible. Dealmaker candidates also must be in Wayne, Oakland, Macomb Washtenaw or Livingston counties. Winners will be profiled in the March 23 issue of Crain’s Detroit Business and will be honored at an awards event in May. For questions about the awards, contact Executive Editor Cindy Goodaker at cgoodaker@crain.com or (313) 446-0460. For questions concerning the nomination process or the nomination form, contact YahNica Crawford at ycrawford@crain.com or (313) 446-0329. To nominate, see crainsdetroit.com/nominate. The deadline for nominations is Jan. 19.

Brennan

ing at institutional fixes, he said. Last year, Brennan was one of four professionals from across the U.S. chosen to attend a 10week program at Stanford University’s Institute of Design, . which teaches “design thinking” as an approach to problem-solving. Brennan isn’t yet sure if his concept will evolve into an independent nonprofit or perhaps operate as a program of another organization. And he doesn’t yet know if there is a specific social issue he will focus on. “But I wouldn’t be doing this unless I felt there was a great need ... not only ... in Detroit but in the country,” he said. Sherri Welch: (313) 446-1694, swelch@crain.com. Twitter: @sherriwelch

Brennan plans to bring a “center for social innovation” concept to the region

raised more than $500 million — including a $27.1 million grant from the GM Foundation — and diversified the agency’s revenue. For his encore career, Brennan said he plans to bring a “center for social innovation” concept to the region, marrying social change and human-centered design, a discipline used by Fortune 500 companies and government agencies around the world. Human-centered design puts the person in the middle in trying to solve “messy problems” rather than first look-

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How Oak Park Jewish center operated so long in debt underlies closure debate BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

The proposed closure of the Jewish Community Center’s Oak Park site has prompted questions from constituents about how the center might remain open or continue its programs while continuing to improve its financial position. An oversight committee is expected to recommend the Oak Park center’s closure at the conclusion of the fiscal year May 31. The center operates at an annual shortfall of $800,000-$1 million each year, has heavy deferred maintenance needs, and offers little chance to increase revenue because of space constraints, the organization said. The JCC has set a public meeting for tonight at its Oak Park center to discuss the future of the site and to answer questions. Programs for residents of the Oak Park, Huntington Woods and Southfield area will continue, JCC said, even if the building closes. But the possible closure of the building and continued operation of the much larger West Bloomfield Township JCC site, nearer more affluent Jewish residents, is causing tension among some members of the community. The focus is on the possible closure of the Oak Park center, a fixture in community since 1957. But underneath everything is the question of how the JCC operated for so long at a deficit — $1 million to $1.2 million total annually — and why it was allowed to continue to do so for what some say, according to its interim CEO, may have been as long as 10 or more years. Longstanding financial challenges at the JCC surfaced in the fall of 2013, leading to the creation of an oversight committee to assess the JCC’s finances and oversee its operations. In January 2014, the Detroit Jewish News said the JCC’s controller had produced inaccurate financial reports that overstated revenue and understated liabilities. The controller was fired immediately after disclosing what she had done, the paper reported. Executive Director Mark Lit officially left JCC at the end of May 2014, after an eight-year tenure. The JCC board “thought we were getting right information from the people who were doing the accounting,” said board Chairwoman Florine Mark, president and CEO of WW Group Inc. Mark “They loved it, so they were not giving us the right information.” The board got so busy “trying to make it the best community center we could, we just kind of never delved into the financials as much as we should have,” Mark said. “It just got out of hand,” she said. When the organization realized the extent of the issue — debt total-

ing $6 million or more and a host of unpaid vendors — it asked the Jewish Federation of Metropolitan Detroit, a major funder and umbrella organization for JCC and 16 other Jewish agencies, for help. Between January and May 2014, the Jewish Federation provided approximately $3.2 million of additional support to the JCC, which was used to pay off all existing vendors and to reduce the agency’s debt to approximately $2.6 million, JCC said. The JCC contracted with James Issner of West Bloomfield Township-based Issner and Associates Co. LLC to serve as interim CEO of the organization while the review took place. Issner also served as interim CEO of the Michigan Science Center as its finances were sorted out and new funding was raised to reopen the center in Detroit. JCC also hired Financial One Accounting Inc. to oversee its accounting. Late last spring, Issner and Financial One finished their financial review. The review reported that the JCC had been operating for years at an annual loss of about $1 million, financed through unpaid vendors, lines of credit, deferred maintenance and the significant support of the Jewish Federation beyond its annual

campaign allocation of $1.5 million. The run-up of debt was to fund operating shortfalls over the years, Issner said. “It wasn’t just the West Bloomfield or Oak Park building; essentially, the cost of operating JCC was greater than the revenue.” Part of the shortages was funded by debt. And part of it was on the backs of JCC’s vendors, which brought the situation to a head in the fall 2013, Issner said. Today, JCC has $2.6 million in remaining debt, but it’s current on all of its accounts and set to break even for the 2014-15 fiscal year on a budget of $14 million. A revenue boost came from its hosting of the Maccabees games — weeklong recreation, sports and arts programs that draw teenagers from around the world. Issner and Financial One also are putting financial controls in order “because we want this never to happen again,” Mark said. Going forward, the board will closely look at finances, programs and everything that goes on at the Jewish center, Mark said. “Nothing will be hidden from us.” Sherri Welch: (313) 446-1694, swelch@crain.com. Twitter: @sherriwelch

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LETTERS

OPINION

To WSU: Aim high for naming rights N

aming rights for The Palace of Auburn Hills? As Bill Shea reports on Page 1, as much as $100 million, paid over 20-plus years. And the CEO for the nationally known sports and entertainment complex hopes to sell those rights within a year. Naming rights for one of the state’s leading business schools? Well, probably not quite that much, but certainly worth more than some of the bargains of recent years (ranging from $5 million to $10 million at area universities). As we report on Page 22, Wayne State University could be in the enviable position of entertaining proposals from two major forces in downtown Detroit — each of whom might like to have the prestige — and the foot traffic — of WSU’s School of Business Administration in their developments. Our advice: Don’t go cheap. There are pros and cons to breaking away from the main Midtown campus to head south to downtown; will students leave campus to follow? Still, the idea of more traffic on M-1 Rail and more pedestrian traffic day and night in a core part of downtown is tantalizing — to real estate developers as well as restaurateurs.

Give IT training programs a reboot Editor: It’s so hard to find great articles that talk about my industry with a real eye on a key component: experience, or the lack of it. (Mary Kramer column: “Focus on IT training brings jobs,” Dec. 15.) It’s not easy taking individuals that are unemployed, underemployed or ex-offenders; throw them on a computer; and expect them to remember what they learned in 12 weeks so they can earn $70,000. Heck, I sometimes forget what happened last week, and I have over 18 years of experience as a web master. Technology changes so quickly that by the time you finish loading the software on your computer, there’s a new version out. So the real question here is how are IT schools teaching their students to learn to code? It’s the power of motivation and influence. What is the motivator? The money. And how do you influence

Exiting leaders leave legacies Leadership matters. We salute the leadership of Gene Michalski, who announced he would be retiring as CEO of Beaumont Health, the new entity Michalski helped to create from a merger with two other systems. Three systems, three cultures, but the new name is still Beaumont Health. Still, Michalski knows the new system has to create its own culture to be successful — and that to do it, it could need an outside CEO who has no allegiance to any existing brand. So thank you, Gene Michalski. And welcome to metro Detroit, John Fox, whose pedigree includes executive roles at several health care systems, including Emory Healthcare. Having the academic experience likely will serve Beaumont well. Michalski was one of three leading nonprofit executives announcing they would bow out of their current roles. United Way’s Michael Brennan and the Detroit Institute of Arts’ Graham Beal both will retire later this year. Both have weathered major upheavals and will leave lasting legacies, especially Beal, whose transformation of the art museum’s physical layout and public display formats were likely a foundation for voter approval of a millage to support the DIA. Both institutions likely will have national searches. Fortunately, Detroit has a special buzz these days, which may help recruit top candidates.

Crain’s Detroit Business welcomes letters to the editor. All letters will be considered for publication, provided they are signed and do not defame individuals or organizations. Letters may be edited for length and clarity. Write: Editor, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 48207-2997. Email: cgoodaker@crain.com the student? Hands-on experience is the best teacher. SW Design School LLC, which separated from a communications firm two years ago, has a campaign called “Hire a Student Designer.” Business owners from any state can hire our graduates to create a professional website for their business starting at $100. Yes, we’ve cheapened the industry a little, but our students gain experience and can earn $200 a day working from home taking two

clients at a time. SW Design also offers several web, graphic and mobile design training courses to students in seven states. Many executives of IT schools have never designed a website, yet they create or approve curriculums to teach web or mobile development. I’ve incorporated handson learning in all of our courses. If we can teach students how to learn, the money is no longer the motivation. Accomplishments become their new motivator. The money will come because the industry pays well to those who are experienced learners and thinkers. In my opinion, the reason our schools are failing our students is because many have lost the key purpose: teaching our students how to learn instead of teaching them how to get by. Tarsha Weary SW Design School LLC West Bloomfield Township

TALK ON THE WEB From www.crainsdetroit.com Re: Sherri Welch blog: Macy’s plans to close Northland Center store I see a new Macy’s opening in downtown Detroit. Arnold Kevin Hill I truly miss having a large retailer in downtown Detroit. I love downtown Chicago; having the major stores provides an anchor and solidifies the area. I feel having a blend of large and smaller retailers creates a more exciting downtown. JJS The larger retailers will have to come to downtown Detroit; it’s inevitable. I will miss Macy’s in Southfield, yet I wondered how they lasted as long as they did. Cynthia R. Johnson

Re: Groups ponder value of ballot plan for roads funding Here’s an idea: Spend the $15 million (expected to be spent on a

Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity. public awareness campaign) on road repairs and just let the people decide. RobertArch

Re: Just Baked closes shops; here’s how the cupcake business evolved So predictable. There was no way there was enough volume in those high-cost cupcakes to pay for the infrastructure that was put in place. I was suspicious from the get-go. Dukeoftralee

Re: MM3rdQB: Detroit Lions suffer from foul playoff officiating Do the majority of Lions fans actually believe that if it were not for that call the Lions would have won the 2015 Super Bowl? Nobody mentions that Stafford underthrew that ball and hit Hitchens in the back. Was the ball catchable for Pettigrew? Carolyn Mazurkiewicz There are bad calls every game. Fact is, the Lions were 42 yards away from moving on and Stafford gave up the ball. Plain and simple. John

Re: Retiring DIA Director Beal: ‘It’s been quite a ride’ He’s done an excellent job and I thank him personally for saving the collection that some of our family donated to the DIA. grandslam

KEITH CRAIN: Auto show a time for Detroit to shine It doesn’t seem over a quarter of a century ago that Detroit had a sleepy auto show that was nice but didn’t do much for anyone. Now it is the reigning North American International Auto Show and has been for all these 26 years. Next week, Detroit will be center stage for thousands of journalists from around the world, well over 5,000 strong. There is a good chance that we’ll be able to skip the snow and let them see the best part of Detroit. Hopefully, they will be able to

see noticeable improvement in our city from year to year. And let us not forget that in addition to these thousands of journalists descending on our city, there will be lots of top executives from auto companies both in the United States and all over the world looking to get as much positive press as possible, as well as being able to see just what the competition

has in store for them. Whenever you have lots of automobile manufacturers around, you’re going to have lots of suppliers as well. This is a week, before the public show starts Saturday, when Detroit has a chance to put its best foot forward and show the world just how great it is doing since last year. There is plenty to do downtown.

We have lots of new restaurants. And even though it may be a trek out to watch the Pistons play, they are on a winning streak that will undoubtedly stir interest. Certainly the Red Wings represent a true international sport and one that always has lots of interest for our visitors. Detroit has gone through a lot in the past couple of years, and these journalists have been able to document the good and the bad over the past quarter of a century. Happily, this year we can all be proud of our city. From the time

our visitors arrive at our international airport to seeing the revisions to Cobo Center and using the new media center, the entire experience should be dramatically improved. Mayor Mike Duggan has fought hard to reduce the blight and get as many lights replaced as possible. Our police department is doing a great job to reduce crime, and it’s showing in the results. This is a time for Detroit to shine. It’s been worth the wait.

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Michalski the last ‘homegrown’ Beaumont CEO? integrative work es- tals with 3,337 beds, 153 outpatient wants to set the table,” he said. Over the years, Michalski has After more than 34 years sential to move Beau- sites, 5,000 physicians, more than After leaving, Michalski said he served on a slew of boards, includas an employee of William mont forward.” 33,000 employees and about 3,500 doesn’t plan to sit around and ing the American Cancer Society OakBeaumont Hospital in Royal Michalski said Fox volunteers. It also was the force watch the snow melt. He wants to land County chapter and the AmeriOak, the last four as CEO, “brings the academic behind the formation in 2008 of the remain involved in the community can Heart Association. He is a Gene Michalski has anmedical center experi- Oakland University William Beaumont and the local health care scene. member of the boards of the Greater nounced he will step down ence, his great experi- School of Medicine. “I promised my wife (in 2010) Detroit Area Health Council, Oakland in the next few months to ence with Emory, and Over the next three months, be- five years. We both agreed to County Michigan Medical Main Street make way for a non-BeauClarian Health (Indi- fore Fox begins work in late spend (retirement) time to enjoy and the Detroit Regional Chamber. mont trained executive. anapolis), working March, Michalski said he will the grandchildren and travel. I In a statement, John Lewis, Whether this is a good with community hos- spend many hours by phone and will not be in Michigan in January chairman of Beaumont Health, thing or a bad thing, time pitals, employed med- emails briefing Fox about his du- when it is 9 degrees.” said: “His commitment has been will tell. On top of the mergical doctors, health ties, facts and nuances about BeauBut Michalski said he has oppor- truly exemplary. ...The successful er with Oakwood Healthcare plan and medical mont, to smooth his transition. tunities for volunteering and other formation of Beaumont Health is a and Botsford Health Care, group operations.” Michalski said he will stay on af- activities, which he implied might fitting capstone to his remarkable which created the new Jay Greene As the local market ter Fox arrives. “We will work out include consulting. and successful career.” Beaumont Health, a new “I certainly want to stay active. I This originally appeared as a “outside” CEO will certainly be a leader with more than 30 percent, the length of time and the role (I blog at crainsdetroit.com. sea change for employees and Beaumont consists of eight hospi- will have) after he decides how he am just that kind of person.” physicians. Several longtime Beaumont doctors I have spoken with recently certainly lament how the culture of the 60-year-old hospital is changing, first with the new merger — which they view more positively than the earlier proposed merger with Henry Ford Health System — and now with an incoming CEO who has no historic ties to Beaumont. One doctor told me: “Do you have a Beaumont doctor? ... This has been our key branding line for years. ... I sit in the doctors’ dining room with other senior Michalski physicians and we all know that the Beaumont legacy is gone. ... The chairman of the board comes from Oakwood, 40 percent of top leadership comes from Oakwood and 20 percent from Botsford. ... So, the new players have 60 percent. ... Whatever Beaumont has been since its founding is no more.” But the physicians say they want to give the benefit of the doubt to incoming CEO John Fox, a proven leader at multiple executive stops. They say they eagerly await whether to see if Fox can articulate a dynamic and clear vision that keeps the greatness of Beaumont but positions it for the future under Obamacare and the more competitive landscape. Michalski, 66, despite public hints that he might like to stay on to see more of the merger be completed and successes realized, said he has no regrets about leaving. “I feel great about this. When I stepped into the role (as CEO in 2010), it was with the understanding with the board that I would work for five years, then step out. Five years, this coming May, I will be 67. It is perfect,” said Michalski, who started at Beaumont as a phlebotomist in 1971 and is one of Crain’s 2014 Newsmakers of the Year. Since the merger closed in September, I heard rumbles that BeauBlue Cross Blue Shield of Michigan and Blue Care Network mont’s CEO search produced a have a wide range of comprehensive health plans to help number of local and national candidates. Many names were menyou make the right choice for your business. tioned to me, including Emory Healthcare’s Fox, who accepted the GROUP HEALTH PLANS | DENTAL | VISION | bcbsm.com/employer job a couple of weeks ago. “I don’t know him (personally). I have somebody (Sam Flanders, M.D., Beaumont’s chief quality and safety guru) on the team who Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. worked with him,” Michalski said. “I think he is fabulous. He has the right credentials, the right experience base to do the formative and

Health care

having options

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Sun Communities sharpens age focus with Green Courte deal BY KIRK PINHO CRAIN’S DETROIT BUSINESS

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Sun Communities Inc. is turning more of its focus to age-restricted communities in an effort to grow its profile among institutional investors and buyers of manufactured homes. Sun, the Southfield-based real estate investment trust (NYSE: SUI), closed last week on the second phase of a $1.32 billion deal announced last year with Green Courte Partners LLC. The deal increases the Sun portfolio share of age-restricted manufactured housing from 13 percent of its roughly 89,000 residences to 24 percent. That’s no accident, said Gary Shiffman, CEO and chairman of the board of Sun. The company’s portfolio now has 243 manufactured housing communities under ownership and management — with more on the way. “Everyone discusses the aging population and the advancements in health care and longevity,” Shiffman said. “We’ve really focused on strategically diversifying the portfolio so we can better serve that growing population of residents.” About 73 percent of the 19,000 residences in the 59 Green Courte properties are restricted to residents 55 and older. The portfolio includes three Michigan properties that are not age-restricted: Egelcraft in Muskegon and Frenchtown Villa and Elizabeth Woods, both in Newport in Monroe County, Karen Dearing, CFO of Sun, said in an August interview with Crain’s. About 11,000 of the residences are in Florida. The rest are in Arizona, New York, Colorado, Illinois, Maine, Minnesota, Montana, Pennsylvania and Wisconsin. It increases the Sun portfolio value by about one-third, to $5.1 billion, Dearing said last summer. The deal also gives Sun a larger share of the manufactured-housing market, making it more attractive to institutional investors such as pension funds, private equity funds, high-net-worth individuals and others, Shiffman said. “That has a meaningful effect on creating greater financial flexibility,” he said. Sun isn’t stopping its senior housing moves with the Green Courte portfolio, however. Last month, the company announced a $257.6 million deal to buy seven individually-owned manufactured housing communities — three of which are age-restricted — with about 3,150 residences around Orlando, Fla. That deal is expected to close in the second quarter, Shiffman said. The deal would bring Sun’s portfolio to 26 percent age-restricted. Industry experts said Sun increasing the size of its age-restricted community portfolio is a good strategic move.

Shiffman

Partrich

“It’s a good niche, especially with the (baby) boomers retiring,” said Tim DeWitt, executive director of the Okemos-based Michigan Manufactured Housing, RV & Campground Association, which has a membership of 700 that includes manufactured home community owners and builders.“They are really capitalizing on the aging demographic, and I think it’s a very high-quality portfolio in very strong and diverse markets,” said Ross Partrich, CEO of Farmington Hills-based RHP Properties Inc., which owns and manages a portfolio of 214 manufactured housing communities in 23 states with about 53,000 residents. RHP has 17 age-restricted communities with 4,200 residences. “We’ll seek to acquire more. We think it’s a very good strategy,” Partrich said. He said that age-restricted manufactured housing communities are generally considered higher quality than all-age ones because the properties overall are better kept and there tends to be “a greater sense of pride and a greater sense of community from a senior.” DeWitt said there were just over 1,100 licensed manufactured housing communities in Michigan in 2013, the last year for which data was available, with over 176,000 residences. It was not known how many of those were age-restricted. As part of the Green Courte deal, Randall Rowe, chairman and founder of Green Courte, based in the Chicago suburb of Lake Forest, and James Goldman, vice chairman and CIO, became members of the Sun Communities board of directors. It was financed with a mix of cash, debt and stock issuances. Sun Communities, one of Crain’s 2014 Fast 50 last year, had $415.2 million in revenue in 2013, up from $263.1 million in 2010, a 58 percent increase. Bank of America Merrill Lynch and Citigroup were financial advisers for Sun on the deal, while Southfield-based Jaffe Raitt Heuer & Weiss PC was the legal adviser on the two-phase deal. “The deal is structured in two phases to accommodate the needs of the seller; (we don’t know) the needs, but it wasn’t a big deal to us either way,” said Arthur Weiss, chairman of Jaffe Raitt. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

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PUBLISHER’S NOTEBOOK Contact Mary Kramer at mkramer @crain.com.

CRAIN’S MICHIGAN BUSINESS Mary Kramer

New paths to city walking Over the New Year’s weekend, I walked about three miles a day. It wasn’t a fitness resolution, just the normal part of a long weekend in New York City. Short city blocks, an easy-tonavigate grid system and lots of interesting things to look at – or shop in. That’s a great prescription for a walkable city – in this case, the borough of Manhattan. Back home in Michigan? If I walk at all, it’s usually on a treadmill. Especially in winter. The irony hit me when I read a recent report in the Grand Rapids Business Journal about parking lot pricing strategies in downtown Grand Rapids. That city’s parking commission was looking at a new pricing strategy – cheaper rates around the downtown perimeter – to encourage people to save a buck and walk or take a shuttle to get to work. The resistance? A “front door” mentality among downtown workers who want to be as close as possible to the entrance. The malady is everywhere. Maybe that explains a couple of things. First, why we have so many parking spots; Detroit-based urban planner Rob Linn, who works magic with data and maps, noted in a 2012 blog that Michigan has 14 million off-street parking spaces – stunning, since our population is under 10 million. Second, why Michigan cracks the top 10 list for states with high obesity rates. Fortunately, downtown Detroit and at least seven other Michigan cities are giving us more reasons to walk. The transformation in downtown Detroit is remarkable. Other cities – Cadillac, Flint, Holland, Jackson, Kalamazoo, Marquette and Midland – are enrolled in PlacePlans, a project to create walkable districts with economic impacts. The Michigan Municipal League and Michigan State University’s School of Planning, Design and Construction created the project, with some funding from the Michigan State Housing Development Authority. Cadillac wants to convert a parking lot on Lake Cadillac to a plaza with seasonal “people magnet” events that connect people to local businesses. In Holland, a “western gateway” around that city’s farmers market could extend the downtown and promote the local food industry. Likewise, Jackson hopes to transform alleys near the farmers market to support businesses along the route. Flint hopes to create a bike/walk trail on a 3-mile old railroad line. That’s my resolution this year. Get to a meeting early, park a couple of blocks away and walk. But maybe I’ll wait until the temperature breaks 30 degrees.

PHOTOS COURTESY OF FOUNDERS BREWING CO.

Founders Brewing Co. became one of Michigan’s most well-known craft brewers seemingly faster than it takes to order another round. As part of its plan to ramp up expansion, the founders of Founders sold 30 percent of the company to Spain brewing giant Mahou-San Miguel Group.

What’s on tap? How do craft brewers grow without growing stale? Industry’s about to find out BY ROD KACKLEY SPECIAL TO CRAIN’S MICHIGAN BUSINESS

rand Rapids-based Founders Brewing Co. has led the craft brewing industry in Michigan to such a position of prominence that billboards along highways leading into its hometown proclaim the erstwhile “Furniture City” to be “Beer City USA.” Now Founders is leading craft brewers in the state into the second stage of the industry’s development. In the case of Founders, that means overseas. Mark Stevens and Dave Engbers, the co-founders of Founders, have enlisted Spain’s “most prominent and oldest brewer,” Mahou-San Miguel Group, to begin marketing their beer to an international audience. As part of the deal, Founders will sell 30 percent of the company. Other terms of the arrangement were not disclosed. Stevens and Engbers think the venture with Mahou-San Miguel will help

Founders grow to become an international brand through the company’s “extensive global distribution footprint.” The founding partners pointed to the “financial stability” of Mahou as “opening doors to new opportunities for us.” “After a lot of reflection, we decided that it was important to partner with a brewer, not a bank,” Stevens wrote. “We considered many options and felt most comfortable partnering with a brewer because they have the best understanding of our world: We all get up every day and head to work, where we make beer.” Isn’t growth what all businesses strive for? Yes, but craft brewers might find, along with the challenges of any expansion, the additional challenge of bringing customers along for

the ride. “Many beer lovers care very deeply about if the beer in their hand is made by a small, independent brewer or a large, multinational brewery,” said Julia Herz, the craft beer program director at the Boulder, Colo.-based Brewers Association. This is not all subjective. Brewers Association standards limit how big a brewer can get before it ceases being a craft brewer. Herz said the true craft brewer has to be small — brewing less than 6 million barrels of beer a year. It has to be independently owned, with no more than 25 percent ownership by a noncraft brewing entity. And if 50 percent of the brands that a single brewer makes are flavored malt beverages, the brewer could not be known as a craft brewer. Herz said the goal is to keep the international brewers from slapping a “craft brewed” label on their beers.

See Beer, Page 10

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Where Rubbermaid meets road to smart design: Kalamazoo BY JACK NEFF CRAIN NEWS SERVICE

Newell Rubbermaid makes everything from plastic storage containers that go in kitchen cabinets to the Irwin hand and power tools used to build those cabinets. Then there’s Graco baby car seats, Calphalon cookware, Sharpie pens, Levolor blinds and Goody hairbrushes in a mix that might look to some like an untidy clutter of brands crammed into a company with not quite $6 billion in sales. But Newell’s chief design officer, Chuck Jones, thinks it all fits neatly into a box. That box would be the minimalist, modern design center he opened in May to bring roughly 120 designers from about 20 sites around the world to a techJones nology and research park at Western Michigan University in Kalamazoo. The center is part of a plan to take Newell on a journey that Jones, who joined Newell in late 2012, likens with a laugh to the distance separating Veg-O-Matic marketer Ronco and the lofty heights achieved by Apple Inc. Newell’s benchmark is a four-

step staircase the Design Management Institute uses to describe the design maturity of companies. He rates Newell a two — defined as where design management works on a project level — “nibbling on the edges of three,” where design is a true companywide function. Ultimately, Jones wants to get to four, where design infuses company culture to the point that “people stop talking about it,” he said. But that’s “a 10-year journey,” said Jones, a veteran of top design posts at companies including Michigan-based Herman Miller Inc. and Whirlpool Corp. as well as Connecticut-based Xerox Corp Ltd. He sees the design center as an early move in the right direction. “Where a lot of corporations (go) wrong is that they’ll make the investment in people, but they’ll stop there and not think about what’s the enabling culture,” Jones said. The Kalamazoo center is a key enabler, making once farflung designers a cohesive unit. It’s all one part of Chairman and CEO Mike Polk’s vision of moving Newell from a holding company to an operating company, where all the pieces work together. But why Kalamazoo, especially when not one of Newell’s businesses is based there and the headquarters is in Georgia? The Kalamazoo area has a rep-

utation — albeit a quiet one — as a global design hub, as home to furniture makers Herman Miller and Steelcase Inc. and appliance maker Whirlpool. The design-intensive automotive industry is in nearby Detroit, and Chicago isn’t far, meaning around 1,800 designers are in the region. Newell’s center now has designers from 18 countries speaking 12 languages. Sure, Newell is competing against bigger, more cosmopolitan cities for talent. None of them, however, have the Kalamazoo Promise: a pledge by a group of anonymous donors to pay 65 percent to 100 percent of the tuition at any Michigan state university for four-year graduates of Kalamazoo public high schools. That’s been a big draw for designers with school-age children, Jones said. The increased output from the designers already can be seen in improved concept test scores. Lately, Newell has had so many high-scoring ideas with the research firm Ipsos that it has had to increase the minimum threshold that ideas must meet for further development, Davies said. While it’s early to cite products that have come from the center, Jones said: “When I look at 2015, I get excited. When I look at 2016, I get more excited. When I look at 2017, I’m positively vibrating.” From Advertising Age

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Beer: How to brew bigger ■ From Page 9

“So when someone is drinking a Blue Moon Belgian Wheat Beer, they often believe that it’s from a craft brewer, since there is no clear indication that it’s made by SABMiller,” the Brewers Association said in a statement. The Founders deal was “very isolated based on the fact that you have 3,200 craft brewers in the United States, and I am hardpressed to give you more than 10 or 12 deals that have happened over the past few years,” Herz said. Still, Founders is an example of a craft brewery growing at a remarkable rate, said Scott Graham, executive director of the Michigan Brewers Guild. Although Founders declined to disclose annual revenue, Sarah Aldrich, the company’s communications manager said they produced 193,356 barrels of beer in 2014. Labels aside, Graham doesn’t think Founders “fundamentally changed from one day to the next” just because it took on a partner to facilitate international expansion. What began as a craft has now become big business in Michigan. The Michigan Brewers Guild estimates the total economic contribution of the craft brewing industry in the state at $608.9 million in 2012. That includes $232.4 million in wages to the 7,137 people who work in the industry. The Brewers Association lists 131 craft breweries — fifth in the nation — that produced 582,909 barrels of beer in 2013, or 2.5 gallons per adult, 13th in the nation. Michigan craft beer now represents 5 percent to 6 percent of all the beer sold in the state, according to the Brewers Guild estimate. By comparison, Michigan’s wine industry — which boasted 19 wineries in 1998, about the time craft brewing started to take off in the state — had 110 at the start of the year, said Linda Jones, executive director of the Michigan Grape and Wine Industry Council. In 2013, state wineries produced about 1.46 million gallons of wine. The enthusiasm of Michigan’s craft beer drinkers might be best measured by the enthusiasm for an event centered on drinking cold beer outdoors in one of the coldest months of the year. The Brewers Guild’s 10th annual Winter Beer Festival at Fifth Third Ballpark just north of Grand Rapids had to be expanded to a two-day event, Feb. 27-28, to handle the thousands expected to attend. Mike DiBernardo, an economic development specialist with the Michigan Department of Agriculture and Rural Development, said craft brewers with growth on their minds now have the attention of state officials, too. “We try to concentrate on helping where we can on connecting supply chain opportunities,” he said. State economic developers are also boosting the industry with the usual incentive packages. As a result of its $26 million downtown Grand Rapids expansion, Founders was awarded a $2 million Michigan Business Development Program performancebased grant with repayment terms. The city of Grand Rapids has of-

fered a 12-year property tax abatement valued at about $300,000. Another Grand Rapids craft beer company, Harmony Brewing LLC, last October received an $89,574 Michigan Community Revitalization program grant as well as a $397,000 abatement on personal and real property from the city. The state and local incentives are meant to help Harmony with its $1 million expansion into a second location. Harmony Brewing and Founders are not the only craft brewers expanding in Grand Rapids. Holland-based New Holland Brewing Co. plans to anchor a $17 million development on the west side of Grand Rapids, including a distillery and tasting room, brewery, restaurant and beer garden. New Holland has also gone international, beginning distribution to Ontario in October. Bell’s Brewery Inc., based in Galesburg near Kalamazoo, distributes its beers in 20 states and Puerto Rico through distributors. Bell’s brewed 319,000 31-gallon barrels of beer in 2014. Unlike Founders, Bell’s founder and President Larry Bell has no intention of partnering with a larger company. “I don’t need to,” Bell said. “I think we are at an advantage being a family-owned company and making decisions about the beer and not being run by accountants. Tim Suprise, founder and president of Arcadia Brewing Co. in Battle Creek, said he doesn’t have any plans to seek out a partnership with a larger brewer, either. “While there is always the upside of access to capital for growth, a distribution network and/or a host of other strategic advantages, I also believe it to be crucially important that craft brewers maintain and further develop the spirit, passion and commitment that elevated them to the level that many could’ve never imagined,” said Suprise, whose company produced 13,000 barrels in 2014, largely in Midwestern markets. Is the craft brewing explosion in Michigan sustainable over the next five to 10 years? Or — if it isn’t slurped up by parched international brewers — will it go flat? Graham can see Michigan’s craft beer market share getting up to 10 percent, “and I am not sure it won’t go to a 20 percent share.” But he admits his forecast presents more questions than it answers. If the volume is going to double or even quadruple, Graham wonders where the investment will come from and what kind of alliances will result from the continuing evolution. “We have always evolved in the craft brewing industry,” he said. “It is just that more people are paying attention and the evolution is becoming more noteworthy.” Rex Halfpenny, publisher of the Michigan Beer Guide, said he had not heard of any other brewers that might be in play for a merger or acquisition. But that does not mean it is out of the realm of possibility. “I do not think you will find many breweries who think they need a partner right now,” he said. “But they will one day if they want to stay alive.”

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South Korea

WHERE MICHIGAN DOES BUSINESS

W Altair Engineering employs 50 in South Korea.

ith a 2013 GDP of $1.3 trillion, South Korea is the world’s 14th-largest economy. It has steadily become more integrated into global markets and become more industrialized during the past several decades. Common exports include vehicles, auto parts, home appliances, steel, ships, wireless communications equipment and computers. Its major export partners are China, the United States and Japan. Common imports include machinery, oil, optical instruments, machinery, organic chemicals and transport equipment.

Altair Engineering Inc. Based: Troy Operations: Offices in Gyeonggi-do, Daejeon and Busan Employees: 50 Services: Engineering simulation software, software for on-demand computing, software for industrial design and engineering services Top executive: Song-soo Moon, representative director of Altair Korea Clients: Hyundai Motors, Kia Motors, GM Korea, Samsung Electronics, LG Electronics, Doosan Infracore and Korea Air Lines

N. KOREA Seoul

Gyeonggi-do

Incheon

Siheung-Si Anseong

Ansan Seosan Cheonan

Pyeongtaek

S. KOREA Gyeongju Ulsan Busan

Amway Corp. Based: Ada Operations: Amway Korea Limited headquarters and Amway plaza in Seoul; brand center in Seongnam; distribution center in Busan Employees: 400 Products: Nutrilite, a vitamin and dietary supplements brand; and Artistry, a premium skin care brand. Also home care and home tech products, including eSpring and Atmosphere air and water treatment systems. Top executive: Se-Joon Park, Amway Korea Limited president and representative director

Autoliv Inc. Based: Auburn Hills Operations: Facilities in Hwaseong and Wonju Employees: 1,200 Products: Airbags, seatbelts, buckles, retractors, steering wheels, impact sensors and sled testing Top executive: George Chang, president of Autoliv Passive Safety Clients: Hyundai, Kia, Renault, Samsung, SsangYong Motor Co., GM Korea

Cooper-Standard Automotive Inc. Based: Novi Operations: Manufacturing facilities in Gimhae, Seocheon and Gunsan; technical facility in Pangyo; sales and engineering facility in Seoul Employees: 299 Products: Sealing and trim systems Top executive: Song Min Lee, president for Asia Pacific Clients: Dong Kwang Tech. Co. Ltd., Dong-A Hwa Sung Co. Ltd., General Motors, Inalfa Korea Ltd., Renault, Nissan, SH Global Co. Ltd., Shanghai General Motors, Ssangyong, Visteon, Windsor Mold

Domino’s Pizza Inc. Based: Ann Arbor Operations: Headquartered in Seoul, with 400 stores throughout the country

Each World Watch features a different country. If you know of a Michigan company that exports, manufactures abroad or has facilities abroad, email Jennette Smith, managing editor, at jhsmith@crain.com.

COMING UP February: France

president of GM Korea Co. More information: In 2013, GM Korea sold 780,518 vehicles (151,040 units in the domestic market and 629,478 units in export markets).

George P. Johnson Co. Based: Auburn Hills Operations: One office in Seoul Employees: 21 Services: Experiential marketing with complete event services including creative, technology, strategy and production Top executive: Donnie Kim, managing director Clients: IBM, Cisco Systems Inc., Oracle Corp., Nvidia, Samsung, Rotary International, Life Technologies, BMW, Toyota

Metaldyne employs 100 in Pyeongtaek.

Metaldyne LLC Based: Plymouth Operations: Manufacturing facility in Pyeongtaek Employees: 100 Products: Balance shaft modules, integrated engine covers Top executive: H.S. Yoon, general manager, Metaldyne Korea Ltd. Clients: Hyundai, Kia, GM Thailand, Doosan Infracore More information: Metaldyne’s manufacturing operation in South Korea serves automotive customers in the Asia Pacific region, providing products to Hyundai and Kia since 2004.

Inteva Products LLC

The grand opening of Domino’s 300th store in South Korea. It now has 400.

Employees: 1,000 Products: Pizza, chicken, bread sides and beverage products Top executive: Kenny Oh, CEO Clients: Retail pizza customers More information: South Korea is one of Domino’s five largest markets outside of the United States.

Federal-Mogul Holdings Corp. Based: Southfield Operations: Manufacturing facilities in Sejong, Ansan and Chungnam, and one warehouse in Sejong Employees: 350 Products: Bearings, friction products and pistons Top executives: Felix Cheng, vice president and general manager of China and Korea for Federal-Mogul Powertrain; Keith Power, president of Asia Pacific for Federal-Mogul Motorparts

Based: Troy Operations: Technical Center in Seoul, and one manufacturing and operations site for its Korean Door Systems joint venture with SL Corp. based in Daegu Employees: 250 Products: Latches, strikers, door handles, power folding-mirror components and injection molding lines, roof systems and motors, window motors and sunroofs. Top executive: Ws Ryu, managing director Clients: General Motors Korea, SsangYong Motor, Hyundai, Volkswagen and PSA

Kelly Services Based: Troy Operations: Offices in Seoul, Suwon and Daegu Employees: 65 Products/services: Executive headhunting, professional and technical recruitment, staffing services, HR/recruitment and business process outsourcing services, payroll and contractor management, and leadership coaching Top executives: YouMe Jeon, managing director for Kelly Services, South Korea; Natalia Shuman, senior vice president and general manager for Europe, Middle East, Africa, Asia Pacific and COO for North Asia

NSF International Based: Ann Arbor Operations: Offices in Seoul and Busan Employees: 30 Services: Auditing, testing, certification, consulting and training for seafood, food, food equipment, plastics, water, consumer product, health science and automotive part industries. Top executives: Peter Bracher, Asia Pacific managing director; Kathy Yang, North Asia regional director

Ziebart

General Motors Co. Based: Detroit Operations: Headquarters and product engineering center with a proving ground and a design center in Incheon; manufacturing facilities in Bupyeong, Gunsan, Changwon and Boryeong Employees: 17,000 Products/services: Build and sell General Motors vehicles, Chevrolet products and after-sales services. Top executive: Sergio Rocha, CEO and

NSF employs 30 in South Korea.

A General Motors assembly line in Bupyeong.

Based: Troy Operations: Master licensee located in Seoul; 53 franchised sites across the country Employees: 114 Products/services: Appearance and protection services, including professional detailing, paint protection coatings, underbody sound barrier, sprayed-on bed liners, automotive glass repair, architectural film, window tint, paint protection film, truck accessories, electronics and scratch repair services. — Compiled by Natalie Broda

DBpageAD_DBpageAD.qxd 1/6/2015 11:39 AM Page 1

Retooling Globalization Strategies for Auto Suppliers By Gary Anglebrandt he automotive industry team at Bank of America Merrill Lynch (BofAML) spends its days fine-tuning and funding the strategic plans of middle-market parts suppliers. What do these companies say are their most pressing concerns as the new year begins? Globalization and capacity. Matthew Elliott Michigan State But there is a new twist on these familPresident iar pressures — a paradigm shift toward Bank of America Merrill Lynch what the BofAML team calls “manufacturing in theater.” OEMs expect suppliers to follow them around the globe, setting up shop near assembly plants instead of shipping parts around the world from one country to another. This presents considerable risk to suppliers who must weigh which countries to enter first, then figure out how to go Brian Kundich about it. All options are costly, but also Senior Credit Products Manager potentially very profitable. Bank of America BofAML sees these forces at work Merrill Lynch from the inside out as it helps its clients manage capital investments, acquisitions, joint ventures, international cash flow and currency fluctuations. These clients cover the industry spectrum: raw materials producers, parts suppliers, OEMs, dealerships and consumers. Covering the full spectrum of the automotive ecosystem helps BofAML see David K. Komrska Senior Credit Products trends and pressures before they become Officer Bank of America apparent to much of the rest of the Merrill Lynch world. Here’s more on these trends from my conversation with the BofAML team that included Matt Elliott, Michigan state president and commercial banking market executive, and senior credit officers Brian Kundich and David Komrska.

a cash management system to handle the expanded global enterprise and we’re now reevaluating the capital structure to position the company for the next phase of growth. The company has made five acquisitions in the last 18 months in Europe and the U.S. The next project is a joint venture in China. Another client of ours was thinking about buying a foreign company for the first time. The first thing on their plate was arranging a financial package — before getting into deep discussions with potential buyout targets. Their big concern in picking a financial partner was they wanted to know we had done it before, that we knew how to structure a deal and had the people who know how to do it. Clients like these are looking for an international bank. They’re saying, “We need a partner that can help us go to places like Europe, China, India, Brazil.” We have bankers who structure and advise automotive clients in those markets and they work alongside our local U.S.-based teams to deliver the entire global firm to the client.

WHAT ISSUES DO COMPANIES FACE IN THESE SITUATIONS? There’s a lot of risk and complexity when entering a foreign market, and much of that stems from jumping into an unknown regulatory environment, which is why it’s important to bring in knowledgeable people. One supplier, a smaller public company, always had used a contract manufacturer to make its product, in what really was a two-player market — this company and a European company.

Our client wanted to buy their competitor, but it was three times its size, and was majority owned by a German hedge fund and a collection of individual investors. This supplier needed help financing the purchase and navigating German laws concerning tender offers and shareholder rights. It had asked a few banks for ideas and nobody came back with a great answer. They came to us and we recommended and executed a strategy for them, getting them financed and working through all the legalities, while arranging a cash management system for what had become overnight a global company. We were able to do this in a short time because of our in-market expertise.

WHAT OTHER PRESSURES ARE SUPPLIERS FACING? Lightweighting (removing weight from vehicles), powertrain electrification, autonomous vehicle technology and mobility are coming into play. These developments will drive change, and change requires investment, talent and experience. Another big issue we consistently hear from business owners is that lack of talent is handicapping growth. They’re also wondering about the sustainability of the current sales volume. Every supplier is skeptical of sales projections they get from customers. Excess capacity in this industry is not your friend if you’re a supplier. It’s a classic greed-versus-fear dilemma. To learn more, visit go.bofaml.com/auto and contact our dedicated automotive team: matthew.b.elliott@baml.com, brian.kundich@baml.com, david.komrska@baml.com.

HOW DOES THE CAPACITY SITUATION LOOK? The capacity envelope left after the economic crisis has been filled up. Now expansion is required to support an increase in sales volume. The slow growth of sales after the recession really delayed capacity concerns, but everyone knew we’d hit that wall eventually. Now we’re at the tipping point.

WHY ARE AUTOMAKERS SO KEEN TO BRING SUPPLIERS CLOSER TO PLANTS? For one, OEMs want to shorten and strengthen their supply chains — it’s a lesson from the 2011 tsunami in Japan that highlighted weaknesses in the supply chain. At the same time, OEMs also expect suppliers to work at an international scale to support the automakers’ global platforms. So, for example, a manufacturer that wants to supply a part in North America also has to produce it in two or three other geographies. We call this “manufacturing in theater,” and it means the supplier either has to find a local partner or build a plant in that new location. Each option costs money and entails risk, but has the potential to be very lucrative.

CashPro®. It goes with you. It grows with you. It’s integrated. It’s smart. And it lets you stay on top of your working capital in real-time. Most importantly, it’s totally pro-business. baml.com/explorecashpro

WHAT DO SUPPLIERS HAVE TO DO TO GET STARTED, AND WHAT’S THEIR BIGGEST CONCERN WHEN PLANNING THESE GLOBAL STRATEGIES? Getting the finances in place is usually one of the first orders of business. We have a client, a small public company, that knew it needed more of a global manufacturing footprint but was behind the curve. We first helped them increase debt capacity to make acquisitions. Then we helped implement

The power of global connections

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growing small businesses EDITOR’S NOTEBOOK

Ypsilanti-based Unity Vibration Living Kombucha Tea LLC raised $136,300 to expand the specialty beer and tea business. But husband-and-wife owners Tarek and Rachel Kanaan had to lower their amount sought and extend their deadline twice.

Amy Haimerl is entrepreneurship editor and covers the city of Detroit. She can be reached at (313) 446-0416 or at ahaimerl@crain.com

Amy Haimerl

SBA program helps biz get lender’s ‘Yes’ With all the talk about crowdfunding, don’t overlook some of the traditional sources of support for entrepreneurs. The Small Business Administration, for example, is seeking businesses to join the second class of its “Getting to Yes” program. The Michigan-centric program started last year as a pilot after Michigan District Director Gerald Moore toured all of the state’s 83 counties. After hearing the challenges small businesses faced in accessing capital, he wanted to develop a program that would address many of their issues. Getting to Yes targets small businesses that have been open at least two years and are looking to grow or expand. The initiative has four stages: education, consultation, mock loan preparation and lender meetings. “This unique approach to accessing capital greatly improves the probability of accessing capital,” said Moore. “Participants will develop a comprehensive loan package, get a chance to rehearse their pitch in front of a panel of lenders, and gain access to a wide variety of traditional and alternative lending institutions.” It worked for recent graduate Domenic Maiuri, CFO of Detroit-based Nora Contracting. The SBA matched Maiuri with mentor Julie Oldham from the Small Business Development Center because her specialty is helping growing businesses manage their expansion. She helped Maiuri prepare for a mock loan committee, which gave him immediate feedback on the strengths and weaknesses of his application. In the end, he met with 13 lenders in one day — and received a $90,000 increase in the company’s line of credit. “That’s something I would never have without the program,” he said. The program is free and open to established businesses in the metro area. In some cases, Detroit-based startups may be considered. Either way, be prepared to submit two years’ worth of personal and business tax returns as part of the application, as well as balance sheets and other financial documents. The eight-week program begins on March 10. To apply, email Catherine Gase at catherine.gase@sba.gov. Application information and program details can be found at sba.gov/mi.

LEISA THOMPSON

Crowdfunding 101 Investor platform young – and complex. Here’s a 4-step program BY GARY ANGLEBRANDT SPECIAL TO CRAIN’S DETROIT BUSINESS

uch has been made of crowdfunding in the wake of the credit crunch created in the recession years. There have been million-dollar campaigns on Kickstarter and actual sale of equity through crowdfunding platforms. Last year, for example, Rachel and Tarek Kanaan used equity crowdfunding to raise $136,000 to expand their Ypsilanti-based business, Unity Vibration Living Kombucha Tea LLC. Second-stage businesses hungry for capital have to wonder whether they should try their hand at this new form of fundraising, too. But second-stage companies, those high-growth firms with revenue between $1 million and $50 million, shouldn’t burn their bank agreements just yet. Crowdfunding is a young industry with several paths, and the legal sands it rests on are still shifting. Crain’s helps you find your way

CROWDFUNDING DEFINED Rewards crowdfunding: Online fundraising campaigns such as Kickstarter that allow supporters to give monetary “gifts” in exchange for a “reward.” Supporters of an independent movie production might get listed as producers in the film credits, for example, in exchange for donating to the campaign. Investment crowdfunding: Online fundraising campaigns in which investors purchase securities, such as shares of ownership and debt. This allows individuals to be investors or owners in the company, not just donors. There is strict legal oversight on these campaigns in terms of who can and cannot invest. Related terms include equity crowdfunding, securities crowdfunding, crowd lending and crowd investing.

through the labyrinth of information and decide when, or if, crowdfunding is right for your business.

Step 1: Decide on rewards or equity Crowdfunding can be split into two broad categories: rewards crowdfunding and securities crowdfunding.

Rewards crowdfunding is what most people think of when they hear about crowdfunding. These are Kickstarter campaigns, for example, that allow people to raise money for a business or project in exchange for “rewards.” Sometimes these rewards are a T-shirt, sometimes it’s an advanced copy of the product being built. Locally, cousins Lucy Carnaghi and Molly Mitchell used Kickstarter last year to raise the final $19,000 they needed to open Rose’s Fine Food on East Jefferson Avenue. And Avegant Corp., an Ann Arbor-based startup, raised $1.5 million to produce a video headset called Glyph. But donors don’t own any part of the business, and there is little to no recourse for them if a company fails to send the promised rewards. Kickstarter is littered with failures. What most second-stage companies should be paying attention to is securities crowdfunding, otherwise known as crowd investing. See Crowdfunding, Page 14

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Crowdfunding: Invest in some advice â&#x2013; From Page 13

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This funding model actually allows backers to become investors in the business, not just gift givers. The deals are far more complex and typically involve selling equity in the company or revenuesharing deals. The industry is so new that numbers are hard to come by, but Michael Melfi, a Birminghambased attorney and consultant, estimates that between 15 and 50 securities crowdfunding deals have been done in Michigan. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s defiMelfi nitely not 10, and itâ&#x20AC;&#x2122;s definitely not 100,â&#x20AC;? he said. Melfi also is general counsel for Southfield-based platform Funderbuilt, which has gotten three companies funded under securities crowdfunding rules since its launch in July. Other crowd investing platforms active in Michigan include Indianapolis-based Localstake LLC; Washington, D.C.-based Fundrise LLC; and San Francisco-based CircleUp. Unity Vibration used Localstake to wage a successful crowd investing campaign last year to build out its brewing operations and add a tasting room. Investors who fund projects through Localstake agree to revenue-sharing, which is a type of loan. But instead of being paid back at set interest rates over definite time periods, investors receive a percentage of monthly revenue until they earn back their investment plus an amount beyond that, usually 1.5 times the investment. But business owners canâ&#x20AC;&#x2122;t just go to Localstake.com and plant a campaign, as they do on Kickstarter. Because of state and federal laws, Localstake must first see a business plan, financials, background checks and references before it can approve a campaign.

Step 2: Understand the legal limitations

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There are almost no legal limitations to rewards-based crowdfunding, but there are significant complexities to crowd investing. The Securities Act of 1933 and decades of regulation behind it seek to protect investors from fraud or getting in over their heads. This is done by limiting how a security may be solicited and delineating between accredited and unaccredited buyers. (An accredited investor is defined by the U.S. Securities and Exchange Commission as having annual income exceeding $200,000 or net worth greater than $1 million.) To offer securities, a company must register with the SEC, which requires extensive public disclosure and reporting. This is expensive and time-consuming â&#x20AC;&#x201D; and far too complex for the needs of most small businesses. But some owners saw the need for a less complex way to raise investment funds through their com-

munities. So in 2012 the federal government attempted to make crowd investing less onerous through exemptions in the Jumpstart Our Business Startups (JOBS) Act. The first exemption allows businesses to solicit as openly as they want as long as they sell only to accredited investors. The second exemption, written expressly for crowdfunding, allows nonaccredited investors to participate â&#x20AC;&#x201D; with restrictions. Issuers can raise up to $1 million in a 12-month period but have to mind how much is sold to different investor classes. For example, investors whose annual income is less than $100,000 can only invest up to $2,000 or 5 percent of their income, whichever is greater. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s not as practical because you can only raise so much money,â&#x20AC;? said Richard McDonald, a securities lawyer in the Bloomfield Hills office of Dykema Gossett PLLC. â&#x20AC;&#x153;Most small businesses donâ&#x20AC;&#x2122;t have the means to get McDonald audited financial statements. Would you rather have two investors that each can put in $200,000, or 200 that can put in $2,000?â&#x20AC;? Another problem is that no one can use it. The JOBS Act legislation instructed the SEC to come up with rules supporting the new exemptions by the end of 2012, but the SEC has not yet done that â&#x20AC;&#x201D; and doesnâ&#x20AC;&#x2122;t plan to until October at the earliest. Because of this, industry experts say crowd investing is still too new and uncertain to be a viable alternative to more serious capital fundraising needs for businesses. â&#x20AC;&#x153;My question is whether crowdfunding will live up to its expectations,â&#x20AC;? said Douglas Toering of Toering Law Firm PLLC in Troy, who chairs a small-business forum for the State Bar of Michigan. â&#x20AC;&#x153;Small businesses are siToering multaneously excited about it but also wondering how this will play out.â&#x20AC;?

Step 3: Understand MILE A small number of states, restless over the SECâ&#x20AC;&#x2122;s foot-dragging on the crowdfunding exemption, have tried to move crowd investing ahead by enacting their own laws. At the end of 2013, Michigan enacted the Michigan Invests Locally Exemption, or MILE, which allows nonaccredited investors to buy crowdfunded securities. Under MILE, Michigan businesses can raise up to $1 million every 12 months from nonaccredited investors. If the issuer is willing

to supply audited financial statements, it can raise up to $2 million. Nonaccredited individuals can invest up to $10,000 in a given business in a year, and can do that with as many businesses as they like. There is no limit on the amount issuers can raise from accredited investors. The law takes advantage of a Securities Act registration exemption for intrastate offerings. That exemption requires the issuer to be based in the state, derive at least 80 percent of its income from within the state and use at least 80 percent of the proceeds from the securities issue within the state. Buyers of securities also must be residents of the state. Additionally, there are reporting and disclosure requirements under MILE, including quarterly reports containing financial and management compensation information that must go to purchasers and the Michigan Department of Licensing and Regulatory Affairs. And the federal rules on solicitation still stand. So while MILE allows issuers to solicit to any Michigan resident, to stay in federal compliance an issuer still has to somehow keep those solicitations within state bounds. Tweeting about an upcoming equity offer would be to flirt with danger. â&#x20AC;&#x153;The SEC has said if small businesses advertise on social media, that could be an issue for using the MILE exemption,â&#x20AC;? said Dana Thompson, a University of Michigan law professor. This takes some of the punch out of MILE. Its main advantage is that it allows nonaccredited investors to participate, but if getting word to them risks federal violations, that advantage is diminished. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s such a gray area that a lot of attorneys just say, â&#x20AC;&#x2DC;I donâ&#x20AC;&#x2122;t knowâ&#x20AC;&#x2122; and take a conservative approach,â&#x20AC;? said Kevin Hitchen, co-founder of Localstake. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s why you donâ&#x20AC;&#x2122;t see a lot of businesses (using MILE). Itâ&#x20AC;&#x2122;s Hitchen restrictive.â&#x20AC;? Attorney Jeff Aronoff believes the SEC guidance gives companies some wiggle room. The outgoing executive director of D:hive in Detroit has set up a consultancy called Sidewalk Ventures for businesses that want to raise money on Localstake under MILE rules. â&#x20AC;&#x153;If youâ&#x20AC;&#x2122;re getting into the details on social media or any internetbased solicitation, it can be problematic,â&#x20AC;? he said, but itâ&#x20AC;&#x2122;s possible to avoid stating specifics of an offering while still announcing one, and also to set up barriers against out-of-state website visitors. But MILE is definitely better suited for small businesses that intend to stay small, he said. â&#x20AC;&#x153;The best MILE candidates are not companies with business models to grow into a $50 million company,â&#x20AC;? Aronoff said. See Next Page

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CRAIN’S DETROIT BUSINESS

Second Stage From Previous Page

Step 4: Decide if crowd investing is for you In the year since MILE was enacted, exactly one company has been funded under its rules. That company, Tecumseh-based Tecumseh Brewing Co. LLC, raised $175,000 last spring to launch a microbrewery. Localstake was the platform that funded the deal. The Michigan Municipal League has been giving presentations on crowdfunding and MILE to local groups and chambers of commerce, promoting Localstake and Fundrise in particular as economic development tools. Summer Minnick, MML’s director of policy initiatives and federal affairs, said securities crowdfunding is wellsuited to established businesses because their proven revenue encourages people to invest. Restaurants are Minnick a good example, she said, because the business is familiar to the community. Other businesses, such as larger B2B businesses — a tool and die shop, a payroll outsourcing firm, an engineering software company — can benefit, too, but have to work harder, she said. “It’s a question of how creative they can be to reach out to people in the community and people they do business with,” Minnick said. “It’s too early to rule things out. ... Right now (crowdfunding) might be more utilized by certain sectors, but the more common it gets and the more people understand it, the more it will open up.” Others are more skeptical. “I don’t want to come across as a naysayer, but I don’t think it’s going to reform the way businesses invest,” said Daniel Minkus, a transactions attorney at Clark Hill PLC’s Birmingham office. “A lot of people are sitting on the sideMinkus lines watching.” Small community businesses stand the best chance of benefitting from securities crowdfunding, McDonald said. Larger businesses with bigger capital needs are going to want sophisticated investors with deeper pockets to make it worth their while. “For smaller companies raising a couple hundred thousand dollars or opening a doughnut store, and maybe some smaller kinds of manufacturing, it has potential but it’s still not the first choice,” he said. “It’s gotten a lot of press and it’s popular politically, but the reality is that it’s quite limited in its use.” Heads of crowdfunding companies also say the time has yet to come for larger, established businesses. These firms typically are looking for amounts between $1 million and $20 million, and the largest amount raised on Funderbuilt thus far is $480,000. “Companies seeking over $1 mil-

Crowdfunding? Plan before you decide Need capital? Considering equity crowdfunding to raise the money? Here are five points to consider before embarking on a campaign. 䡲 Set aside some time. A common misconception is that crowdfunding is fast and easy. Just because it’s on the Internet doesn’t mean a campaign can be posted one week and money collected the next. Gathering investors, even through online platforms, calls for financial documents, business plans, investment plans, risk assessments and anything else a business would bring to traditional investors. “Taking on investors is a serious decision,” said Kevin Hitchen, founder of Localstake LLC, an Indianapolis-based crowdfunding platform that has helped several Michigan companies. “You can’t just put something up and cross your fingers.” 䡲 Get an attorney. Because federal and state laws are new, attorneys and regulators are still figuring out how to apply them, and legislators will continue tinkering. “What’s legal to say one day might not be tomorrow,” said crowdfunding consultant Michael Melfi, who’s also general counsel for Southfield-based platform Funderbuilt. With each regulation or law comes a different set of disclosure requirements and parameters for how campaigns can be run. Signals from the U.S. Securities and Exchange Commission suggest the regulators there aren’t too keen on crowdfunding. “They clearly don’t like it,” said Dana Thompson, a University of Michigan law professor who studies crowdfunding. lion should seek more traditional funding outlets,” Melfi said. Crowdfunding also is not an ideal setup for high-tech startups of the sort spawned by university research and end up backed by venture capital firms, Thompson said. She represents UM student startups and has worked with momand-pop businesses in the past. Crowdfunding is more attractive for the latter than the former — traditional businesses that can’t get a traditional loan, not companies hoping for rapid growth, she said. “If a company is interested in venture funding, then crowdfunding can be problematic because they’ll have so many investors in the company they’ll have to track down,” Thompson said. The legal burden to informing all those investors scares off VC money. “I’ve talked to some venture capital firms that have expressed concern with crowdfunding,” she said. These types of companies also would have a hard time generating interest from the general public. “If it’s a complex, life sciences company working on a cancer drug, most people won’t be able to understand what they’re doing,” Hitchen said. As it stands, securities crowdfunding right now means tapping

䡲 Identify the target investor audience. The policy question posed by crowd investing concerns protections for nonaccredited investors: Will novices get in over their heads? Each law and regulation takes a slightly different path in addressing this question. Hitchen said some businesses, such as those developing complicated life science technologies, can avoid those tangles since they would get more traction from accredited investors anyway. Others, like a restaurant, might want to raise money from neighbors and other nonaccredited investors. 䡲 Get your ducks in a row. Crowdfunding capital is no less serious than traditional capital. “You need to have a plan and professional advisers, and … you need to have the proper documentation and understand what it is you’re doing with the offering,” Melfi said. 䡲 Try traditional routes first. The paperwork, legal risk and time it takes to screen investors puts investment crowdfunding at the bottom of the list for capital options, said Richard McDonald, a securities attorney at the Bloomfield Hills office of Dykema Gossett PLLC. “Exhaust all traditional methods of raising capital before reaching out to the crowd. If you can raise money the traditional way, there’s no reason to do this,” he said. “Most companies want people that understand their business, understand the risks and are used to doing this sort of thing. Most businesses don’t want a grandmother from Scranton.” — Gary Anglebrandt into the same “crowd” that’s always been available for raising private capital — accredited investors — not the general public. “It’s a misnomer. It’s completely incorrect,” Dan Miller, president of Fundrise, said of the term “crowdfunding,” in that it implies anyone can buy private securities online. That, however, may be the reason capitalMiller seeking businesses should at least keep an eye on securities crowdfunding. As the industry develops, its usefulness could prove to be in creating an efficient way of reaching accredited investors, instead of relying on lawyers and bankers. Securities crowdfunding still has three to five years to go before it develops the track record needed to bring institutional investors to the table, Miller said. But as it does, it will serve to “tighten the supply chain of capital” and begin serving up the $3 million-$10 million transactions that mid-market businesses need — “transactions that are too big for local banks but too small for Wall Street,” he said.

Page 15

2015 UPCOMING

PARTNER EVENTS 3rd Thursday Beans & Cornbread Network with Southfield Area Chamber, Engineering Society of Detroit and the City of Southfield! Jan. 15 • 4:30 - 6:30 p.m. 29508 Northwestern Hwy., Southfield Red Velvet Room $10 for non-members. Register: www.southfieldchamber.com Marketing & Sales Executives of Detroit (MSED) Automotive Industry Outlook: Opportunities and Risks Speaker: Mike Wall, Director of Automotive Analysis, IHS Automotive, will present the IHS Automotive Outlook for 2015 and beyond. Focusing on the impact of economics, fuel economy requirements, supplier dynamics and the influences of new trends. Mike will provide a strategic look at the coming challenges and opportunities in North America and global markets. Jan. 29 •5 - 8 p.m. Management Education Center, Troy Members: $45; non-members: $60 Register at www.msedetroit.org or call Meeting Coordinators at (248) 643-6590. Start 2015 the right way for your small business! CEED has made $5.5 million in loans and created more than 1,800 jobs. Now, after 30 years of providing access to capital, CEED is increasing its commitment to small business by reducing its interest rate. Loans up to $50,000 are offered at a 5 percent fixed rate for equipment, inventory, supplies and some working capital. To learn more, call (734) 677-1400 or visit www.miceed.org

For more local events, visit Crain’s Executive Calendar at crainsdetroit.com/executivecalendar

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CRAIN’S DETROIT BUSINESS

PEOPLE

BUSINESS DIARY ACQUISITIONS & MERGERS Eastside Wholesale Supply Co., Detroit, dba Siding World, a distributor of exterior building products, has been acquired by ABC Supply Co. Inc., Beloit, Wis., a distributor of exterior building products, tools and related supplies to building and remodeling contractors. Quarton Partners LLC, Birmingham, acted as the financial adviser to Siding World. Websites: abcsupply.com, quartonpartners.com.

CONTRACTS Arotech Corp., Ann Arbor, a provider of defense and security products for military, law enforcement and homeland security markets, announced that its Training and Simulation Division received $6.7 million in new orders and contract modifications. These orders include a $2.6 million award for its MILO Use-of-Force training system to the military of an allied Middle Eastern country and $2.3 million to continue on-site logistical support for its fielded Virtual Clearance Training Suites. Website: arotech.com. CGE Energy, Brighton, has completed installing Cree LED lighting at Golling Automotive Group dealerships in Lake Orion, Bloomfield Hills and Waterford Townships. The updated lighting will save a projected $1.4 million in energy costs over the next 10 years. CGE also will maintain Golling’s indoor and outdoor lighting through its RAMP light-

ing maintenance program. Website: cgeenergy.com.

IN THE SPOTLIGHT

EXPANSIONS Gentherm Inc., Northville, a provider of thermal management technologies, announced it intends to open two manufacturing plants that will produce a full line of seat comfort and industrial products. The first phase of the plant near Prilep, Macedonia, would be about 65,000 square feet and is expected to provide up to 1,000 jobs. The new plant in Duy Tien, Ha Nam Province, Vietnam, will be about 220,000 square feet and provide up to 1,500 jobs. Both plants are tentatively scheduled to open in the fourth quarter of 2015. Website: gentherm.com. Guy Hurley Blaser & Heuer LLC, Troy, an independent insurance and surety brokerage, has opened Guy Hurley of Florida LLC, an insurance and surety bond office in Sarasota, Fla. Website: ghbh.com. Faurecia North America Inc., Auburn Hills, an automotive supplier, is constructing a 122,000-square-foot plant in Simpsonville, Ky. Production is scheduled to begin in February 2016 and will employ 410. Website: faurecia.com.

NAME CHANGE PCGCampbell, Dearborn, an independent communications agency, is now

Campbell Marketing & Communications. Telephone: (313) 339-9000. Web-

Gerwing

Newman

ARCHITECTURE Jeff Gerwing to vice president and director of operations,

SmithGroup JJR Inc., Detroit, from director of operations. Also, Lise Newman to vice president and workplace studio Varga leader from workplace studio leader, and Bob Varga to vice president and design principal from design principal.

CONSULTING Richard Vanpraet to regional sales director, Valued Pharmacy Services, Hazel Park, from pharmacy benefit consultant, Cigna Health & Insurance Co., Hazel Park.

site: campbellmarketing.com.

ENGINEERING Todd Shelly to director of survey operations, Pro-

fessional Engineering Associates Inc., Troy,

Shelly

from program manager, Metro Consulting Associates LLC, Chicago.

FINANCE Brian Boike to executive vice presi-

The Skillman Foundation named Maria Woodruff Jordan as vice president, operations, and CFO. Jordan comes to the Detroitbased foundation after nearly six years at the Ruth Mott Foundation in Flint, where she was director of finance and Jordan administration and, before that, controller. Jordan, 51, previously spent 12 years, including five as president, at Expressway Ford in Clio. A Detroit native, she holds a bachelor’s degree in computer science from Northwestern University and an MBA from the Ross School of Business at the University of Michigan. The Skillman Foundation also promoted Jahnke Krista Jahnke to senior communications officer from communications officer. Jahnke came to the foundation in 2012 after nine years as a reporter and editor at the Detroit Free Press.

vice president, FirstMerit Bank, Bloomfield Hills.

LAW Craig Scheuern to shareholder, Quinn Law Group PLLC, Novi, from senior associate.

NONPROFITS

Hudson

Stimac

Tim

Hudson to chief development officer, Forgotten Harvest, Oak Park, from director of development for institutional advancement and the College of Business, University of MichiganDearborn. Velasco Kris Stimac to executive director, Boll Family YMCA, Detroit, from district operations manager, LA Fitness, Troy. Emma Velasco to COO, Eastern Market Corp., Detroit, from deputy director, Grant Associates Inc., Detroit.

TECHNOLOGY Jeff Kinnelly to UX team lead, C/D/H,

dent and treasurer, Flagstar Bank, Troy, from director of capital planning and stress testing, FirstMerit Bank, Flint. John Ransom II to wealth management adviser and vice president, Fifth Third Bank, Eastern Michigan, Southfield, from client wealth adviser and

Detroit, from consultant.

TELECOMMUNICATIONS Jim Spadafore to general manager, Michigan, for Comcast Spotlight Inc., a division of Comcast Corp., Bingham Farms, from director of regional and national sales.

CALENDAR THURSDAY

Grow Your Business Through Exporting: Tips to Get Started. 11 a.m.-1 p.m. Au-

JAN. 15

tomation Alley. Keynote speaker is Noel Nevshehir, director of international business services, Automation Alley. Southfield Public Library. $10 advance, $20 door. Preregistration closes end of day Jan. 13. Contact: (800) 427-5100; email: info@automationalley.com; website: automationalley.com.

13th Annual NAIAS Breakfast. 7:309:30 a.m. Inforum. Keynote speaker is

Werner Struth, board member, Robert Bosch GmbH. Michelle Krebs, senior analyst for AutoTrader.com, leads a discussion with Struth; Sheryl Connelly, manager for global consumer trends and futurist for Ford Motor Co.; and Suzanne Dickerson, director for international business development and marketing at Clemson University’s International Center for Automotive Research. Detroit Marriott Renaissance Center. $40 Inforum members, $55 nonmembers, $25 students. Contact: (877) 633-3500. Register at inforummichigan.org.

Call Joe Haney President-Principal Certiﬁed Risk Architect

It’s time to rethink your insurance strategy 888.525.7575 | 586.323.5700 | sterlingagency.com Sterling Insurance Group is a Michigan based company.

CoreNet Michigan 2015 Economic Forecast. 11 a.m.-2 p.m. CREW Detroit. Chuck Stokes, editorial director at WXYZ-Channel 7, oversees a luncheon and panel featuring Matt Cullen, president and CEO, Rock Ventures LLC; Sam Munaco, president, Advocate Advisors; Rodrick Miller, president and CEO, Detroit Economic Growth Corp.; and Bob Riney, president and CEO, Henry Ford Health System. The Dearborn Inn, Dearborn. $52 members, $67 nonmembers. Contact: Norma Lee Beuter, (248) 646-9629; email: beuter@comcast.net; website: crewdetroit.org. Multicultural Media Luncheon. 11 a.m.-2 p.m. The Ajamu Group LLC. Keith Clinkscales, CEO, Revolt Media & TV, emcees this awards program and speaks on brand reinvention. Westin Book Cadillac Detroit. $75 general admission, $150 VIP. Contact: Cheryl Ajamu, (248) 223-0904; email: cheryl.ajamu@ajamugroup.com; website: ajamugroup.com.

FRIDAY JAN. 16 2015 Macomb Economic Forecast & Luncheon. 11:30 a.m.-1:30 p.m. Chamber Alliance of Macomb County. With

Jim Jacobs, president, Macomb Community College. Andiamo Banquet Center, Warren. $35 chamber members, $45 nonmembers. Contact: Bri-

CALENDAR GUIDELINES If you want to ensure listing online and be considered for print publication in Crain’s Detroit Business, please use the online calendar listings section of www.crainsdetroit.com. Here’s how to submit your events: From the Crain’s home page, click “Events” in the red bar near the top of the page. Then, click “Submit Your Events” from the drop-down menu that will appear, and you’ll be taken to our online submission form. Fill out the form as instructed, and then click the “Submit event” button at the bottom of the page. That’s all there is to it. More Calendar items can be found at www.crainsdetroit.com.

ana Koehn, (586) 731-5400, ext. 11; email: events@shrcci.com; website: shrcci.com. 2015 AutoGlow. 4:30 p.m-1 a.m. Ford Motor Co. fundraiser “The Future Starts Here” benefits the Children’s Center. Ford Field, Detroit. $325. Contact: (313) 262-7123; email: autoglow@thechildrenscenter.com; website: thechildrenscenter.com/ autoglow.

UPCOMING EVENTS MLK Day Celebration. Noon-1:30 p.m. Jan. 19. Henry Ford Hospital. Richard Jackson, M.D., chairman of environmental health at UCLA’s School of Public Health, is keynote speaker; the Mosaic Youth Theatre and Words | Speak Entertainment will perform. Buerki Auditorium, Henry Ford Hospital, Detroit. Free. Contact: Synthia Bryant, (313) 8744036; email: sbryant3@hfhs.org; website: henryford.com. Open City: Be the Change. 6-8 p.m. Jan. 19. Build Institute. A panel discusses social entrepreneurship in Detroit. Cliff Bell’s, Detroit. Free. Contact: Muna Danish, (313) 318-1328; email: muna@dhivedetroit.org; website: buildinstitute.org. The Big Four. 11:30 a.m.-1:30 p.m. Jan. 20. Detroit Economic Club. Featured speakers are Oakland County Executive L. Brooks Patterson, Detroit Mayor Mike Duggan, Wayne County Executive Warren Evans and Macomb County Executive Mark Hackel. Cobo Center, Detroit. $45 DEC members, $55 guests of members, $75 others; includes admission to North American International Auto Show. Contact: (313) 963-8547; email: info@econclub.org; website: econclub.org.

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January 12, 2015

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THE STATE OF EMPLOYMENT: WHAT THE NUMBERS SAY

JOB FRONT

added 5,200 more total jobs than the Detroit area, which has about triple the population. The upcoming QCEW report will draw upon data for 98 percent of all U.S. jobs. Its report for the Detroit area for June 2014, for example, showed 28,023 more jobs, compared to the CESâ&#x20AC;&#x2122;s 4,700. The two reports differ for other areas too, he said, but Detroit more so due in part to seasonal work and a mix of industries where the numbers tend to shift more. Lisa Katz, executive director of

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the Workforce Intelligence Network for Southeast Michigan, said hiring isnâ&#x20AC;&#x2122;t quite as robust as a year ago, but still stronger than during and shortly after the recession. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;m not surprised that (this time of year) ... weâ&#x20AC;&#x2122;d see a downward bump, because we always do, and it always gets worked out after the first quarter,â&#x20AC;? she said. â&#x20AC;&#x153;You always see progress through the year. And over time, longitudinally, that low point is still getting higher and higher.â&#x20AC;? â&#x20AC;&#x201D; Chad Halcom

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Percent growth 0.20% 1.52%

Metro Detroit for both Current Employment Statstics and the Quarterly Census of Employment and Wages compiled by the U.S. Bureau of Labor Statistics comprises Wayne, Oakland, Macomb, Lapeer, Livingston and St. Clair counties. Total QCEW jobs do not include workers who are ineligible for unemployment insurance, which accounts for about 2 percent of employees nationally but varies by region.

BUSINESSES WANTED

marie.acosta@transwestern.com

Change from June 2013 4,700 28,023

FRANCHISE OPPORTUNITIES

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2014

Slower jobs growth in metro Detroit than the rest of the state may be partly attributable to a higher share of layoffs and plant closings compared with the state as a whole in 2014, according to the state Workforce Development Agency. The federal Worker Adjustment and Retraining Notification Act generally requires companies with more than 100 employees to notify state and local government officials 60 days before closing a plant or building or laying off workers that affect more than 50 employees. But a notice can often mean a business has lost a contract to another company, which will assume those contractâ&#x20AC;&#x2122;s employees or transfer jobs elsewhere. Layoff notices filed with state and local officials under the WARN Act donâ&#x20AC;&#x2122;t necessarily translate into real job losses or affect employment in any region. For example, Atmosphere Hospitality Management LLC filed a notice in October of 234 layoffs at the Adoba Hotel in Dearborn, when Israeli owners Royal Realties LLC replaced Atmosphere as the management company with Lodging Host Hotel Corp. of Texas. The stateâ&#x20AC;&#x2122;s second-largest hotel has continued operations. A July notice from Penske Logistics affecting 183 employees in Riverview reflects that Ford Motor Co. was replacing Penske with Comprehensive Logistics as a transportation vendor, which intended to keep most employees. But a November notice from Farmington Hills-based American Laser Skincare reflects the companyâ&#x20AC;&#x2122;s

2013

EMPLOYEES AFFECTED

2014

6,206*

CES QCEW

Employment June 2014 1,896,900 1,834,601

Michigan

Southeast Michigan (Wayne, Oakland, Macomb and Washtenaw counties)

9,993

METRO DETROIT CLOSE UP

POSITIONS AVAILABLE

Transwestern, an international commercial real estate firm is expanding in Michigan, and is seeking a motivated and assertive person for our Detroit office. You would be joining an established, leasing & sales team to assist with our 6.2 million square foot portfolio of office properties throughout metro Detroit. Sales and/or other direct customer contact experience is essential; commercial real estate experience would be a plus. Compensation package is competitive and flexible. All inquiries will be held in strict confidence. Please email resume to :

Change from Percent Nov. 2013 change 40,000 1 1,800 0.84 0 0 300 0.8 12,500 0.7 300 0.2 17,700 4.1 4,600 3.9 -500 -0.9 2,600 1.8 2,600 1.1 100 0.2 400 0.6 -700 -1.1 3,300 3.6

No. employed Nov. 2014 Michigan 4,206,000 Ann Arbor 215,600 Battle Creek 59,500 Bay City 38,300 Detroit-Warren-Livonia 1,898,600 Flint 139,500 Grand Rapids-Wyoming 429,500 Holland-Grand Haven 121,600 Jackson 54,500 Kalamazoo-Portage 141,900 Lansing-East Lansing 229,700 Monroe 42,100 Muskegon-Norton Shores 62,800 Niles-Benton Harbor 60,300 Saginaw-Saginaw Twp. North 91,500

6,564

Employment changes for Michigan and its metropolitan statistical areas.

Layoff, plant closing WARN NOTICES notices may factor in slower jobs growth

Metro Detroit may look like a laggard in job growth with other parts of the state, but there are reasons that experts think this picture will change in time. The federal Bureau of Labor Statistics shows metro Detroit adding 12,500 jobs in November, the most recent month for which local figures are available, for 0.7 percent growth compared with a year earlier. Statewide, the rate was 1 percent. Those figures draw on the BLS Current Employment Statistics (CES) monthly survey of more than 140,000 businesses and government agencies. Later this year, the BLS will release its more comprehensive Quarterly Census of Employment and Wages (QCEW) for the same period. â&#x20AC;&#x153;Youâ&#x20AC;&#x2122;ve got a bit more of a slowdown in growth for Southeast Michigan compared with the rest of the state, but itâ&#x20AC;&#x2122;s overstated because of the methodology of the CES data,â&#x20AC;? said Donald Grimes, senior research associate for the University of Michigan Institute for Research on Labor, Employment and the Economy. â&#x20AC;&#x153;Part of it is that Wayne County slowed drastically, and that may have been the Detroit situation. Youâ&#x20AC;&#x2122;ve got some firms not moving into or investing in that specific area or having enough confidence before the bankruptcy got finalized, and then through bankruptcy you also have some reduction in government jobs themselves.â&#x20AC;? Far outpacing the Detroit area in November were metro Grand Rapids, Holland-Grand Haven and Saginaw. In fact, Grand Rapids

REGIONAL EMPLOYMENT IN MICHIGAN: WHERE DETROIT STANDS

7,763

Regionâ&#x20AC;&#x2122;s job growth lag called overstated, likely to change

2013

*Estimate Source: Michigan Workforce Development Agency. Figures do not include notices that did not list a number of jobs affected.

decision to close 100 clinics, including 11 with 94 employees in Southeast Michigan. Three WARN notices from Sears Holdings Corp. in July and September also cover about 450 total employees of three Kmart stores now closed: in Detroit, Southgate and Madison Heights. â&#x20AC;&#x201D; Chad Halcom

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January 12, 2015

CRAIN’S DETROIT BUSINESS

Michigan eLab invests in biotech startup for cancer research BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

Michigan eLab LLC, a venture capital firm founded in Ann Arbor last year by three veterans of Silicon Valley, has made its first local investment in Akadeum Life Sciences LLC, a startup that hopes to make it easier, cheaper and faster to prepare tissue, water or food samples for testing. Michigan eLab invested $150,000 in the seed round of funding in Akadeum, which was founded last March by John Younger, a physician and researcher at the University of Michigan, and Brandon McNaughton, a local tech veteran who has been an entrepreneur in residence with the Detroit Innovate Fund, a lecturer at the Center for Entrepreneurship at UM and a consultant for startup companies in UM’s Office of Technology Transfer. Akadeum is unusual for a new biotech startup in that it already has paying customers, eight so far. The company makes tiny glass beads that are coated with antibodies to quickly gather and concentrate the particular kinds of cells that are being looked for in a culture. While traditionally it can take two or three days to grow enough target cells in a culture to make an identification, Akadeum’s technology can reduce that time significantly. McNaughton doesn’t want to be specific about reductions of time, which will vary with what is being cultured, until more studies are done, but said they will be significant, especially for those trying to identify a particular pathogen. Akadeum’s first customer was Ebrahim Azizi, M.D., who heads a team at the UM Comprehensive Cancer Center that studies tumor cells circulating in the blood. To do the studies, Azizi’s team must gather what are relatively tiny numbers of cancer cells from millions of other cells in blood

Younger

McNaughton

samples. “It is a needle-in-thehaystack problem,” he said. After a meeting with Younger, Azizi said, he ordered some beads and ran a trial in late December. He coated some beads with the specific antibody that would attach to cancer cells, coated some with the wrong antibody and left some uncoated. The trial went well, he said. The beads coated with the correct antibodies collected cancer cells quickly and efficiently. The beads were dispersed throughout a sample of blood, then floated to the top, the antibodies that coated them having latched onto the cancer cells he was looking for. As the beads floated to the surface, they concentrated the cancer cells into a much smaller volume than when they were evenly dispersed in the blood. “It made it easier to manipulate the cancer cells and take them out,” said Azizi. He said that it takes five to six hours to gather the cancer cells using the beads, cutting the traditional time about in half, but the real promise is in ease of use and cost. He said other methods of separating cancer cells require trained technicians using expensive equipment that often is unavailable because it is being used by other researchers, while Akadeum’s process requires no specialized equipment or training. Azizi said further tests are needed, and that Akadeum is currently working on making beads more effective for his cancer studies by

making them smaller. Currently the beads are 15-18 microns in diameter. There are 25,400 microns in an inch. “This is a disruptive technology that can move quickly to market,” said Doug Neal, one of eLab’s general partners. “What I love is they are attacking a problem in the market where there’s been no innovation in 30 years. There’s been no innovation on the cell preparation side.” Bill Mayer, vice president of entrepreneurial services at Ann Arbor Spark, says Akadeum is an example of the cooperative nature of the local entrepreneurial community. The company got a grant from Spark that paid for 80 hours of time from a consultant to provide market research and profile potential end-users. Spark also helped arrange a provisional patent application for Akadeum by Jeffrey Schox, whose Schox Patent Group is a highly regarded Silicon Valley patent firm. Akadeum is a member of the Great Lakes Stem Cell Innovation Center at Detroit’s TechTown, where it makes the tiny glass beads at the heart of its technology. Akadeum is based in the TechArb in Ann Arbor, a tech incubator that shares space and resources with Menlo Innovations, a highly regarded software design firm. And NSF International, an Ann Arbor nonprofit that helps develop public health standards to protect food, water and consumer products, has agreed to conduct a pilot study for Akadeum on how its technology can help test for pathogens in food. “Akadeum has been doing the right thing. It’s got solid technology and a strong team. John has a deep background in scientific research, and Brandon has a deep business background, and that’s a combination that gets you excited,” said Mayer. “They’re sharp guys who understand what steps they need to take

to validate the technology. There’s a real market opportunity here. It’s a value proposition that is real,” he said. Mayer said Akadeum has been lining up other funding support, if needed, from Invest Michigan, a Detroit organization affiliated with the MEDC that runs the Michigan Pre-Seed Capital Fund 2.0, and from Detroit-based Invest Detroit, a nonprofit that has two early stage investment funds. Patti Glaza, an Invest Detroit vice president who is managing director of its Detroit Innovate and First Step funds, said she continues to follow Akadeum’s progress for a possible investment. “Absolutely. We’re staying very close. We’re meeting with them once a month,” she said. “They’re having some pilot tests we’ll be looking at. Brandon is extremely smart, and he clearly understands the need for market validation. It’s cool technology, but how do you move the technology to a point where it’s commercializable?” McNaughton said Akadeum is planning to raise a much larger round of funding in the second half of the year. “We’re already starting to talk to some people,” he said. Previously, McNaughton founded Life Magnetics Inc., which in 2011 was briefly the hottest of UM’s spinoffs, growing out of a paper he had published about being able to detect single bacterial cells by measuring changes in rotational velocity of tiny beads in a magnetic field. The company got some seed funding, but McNaughton and the management team soon realized that they had more of a science experiment than a company, and that the path to market would be too long and costly. Michigan eLab was founded in 2012 by four entrepreneurs with longtime ties to Silicon Valley. Three of them also have ties to UM. It recently held a first close of

more than $20 million of what it hopes to be a $40 million fund to do early-stage investing in tech companies. In January 2013, the firm got a commitment of $2.25 million from the Pure Michigan Venture Development Fund, a $9 million fund overseen by the Michigan Strategic Fund of the Michigan Economic Development Corp. Neal spent 15 years in Silicon Valley in leadership positions at Hewlett-Packard Co. and Symantec Corp. and then as CEO of Mobile Automation, a software security company for mobile platforms that he co-founded in 2000. After Mobile Automation was sold to iPass Inc. in 2005 for $20 million, Neal returned to Michigan to raise his family. Since then, he has been on the review board of the Michigan Pre-Seed Capital Fund; helped found TechArb, an incubator in downtown Ann Arbor that houses student-run startups; and, from 2009 until June 2013, was managing director of the Center for Entrepreneurship at UM. The three other eLab founders, who are also general partners, are: 䡲 Rick Bolander, who has a master’s degree in electrical engineering from UM and an MBA from the Harvard Business School and in 1999 co-founded San Mateo, Calif.-based Gabriel Venture Partners, an earlystage VC firm that invests in clean tech and information technology. 䡲 Scott Chou, a venture capitalist since 1997 who specializes in tech spinoffs from universities and government labs and who is also a managing director at Gabriel Venture Partners. 䡲 Bob Stefanski, a UM engineering and law school grad who is a partner in the Silicon Valley law firm of Reed Smith LLP. He has been involved with UM’s Center for Entrepreneurship since its founding in 2007 and has been an adviser and mentor at TechArb. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

Physicians face smaller Medicaid payments – but it could have been worse BY JAY GREENE CRAIN’S DETROIT BUSINESS

Thousands of Michigan physicians taking care of nearly 500,000 newly insured Medicaid patients under the Affordable Care Act will continue to receive slightly higher reimbursement levels this year under legislation signed by Gov. Rick Snyder. But the enhanced payments are lower than the previous two years, leading to questions as to how many Michigan primary care doctors will continue to participate in the Healthy Michigan Medicaid expansion program. Under the Affordable Care Act, the Michigan Department of Community Health received about $175 million in enhanced payments to increase primary care physician Medicaid reimbursement about 30 percent to the equivalent of Medicare rates.

So far, $147 million has been paid either directly to physicians or to Medicaid HMOs to increase reimbursements, said Tim Becker, deputy director of Community Health. Another $20 million to $30 million will be paid out over the next few months for services rendered at the end of last year, he said. Becker said the state Legislature approved about $25 million in additional funds to increase physician payments above normal Medicaid levels. Another $47.5 million is federal matching funds. “This restored half of the Affordable Care Act increase and was paid ($25 million) through general funds,” said Becker, noting that the funding will continue at that rate into the future unless the Legislature acts to lower it. But will the reimbursement boost act to keep primary care doctors in the Medicaid system?

“That is what it was intended to do,” Becker said. “We will see.” There are now approximately 2.4 million people enrolled in the Medicaid program in Michigan, or about 25 percent of the state’s population. Last December, a new survey of Michigan’s primary care physicians showed that 64 percent are accepting new Medicaid patients and 87 percent said they could accept more patients, said the Ann Arbor-based Center for Healthcare Research and Transformation. In 2012, a similar survey found that only 54 percent of physicians were accepting new Medicaid patients. However, the survey didn’t ask doctors if they would continue to accept Healthy Michigan Medicaid patients if payments dropped because Affordable Care Act funding expired. Colin Ford, manager of state af-

fairs with the Michigan State Medical Society, said he believes physicians will continue to participate in Medicaid — at least for the time being. Ford said the medical society asked the Legislature to fully restore Medicaid funding to Medicare levels. The legislature originally fully funded the Medicaid uplifts, but the funding was reduced in House-Senate conference committee. Medicaid rates for 2015 in Michigan will be set at around 78 percent of Medicare, up from 60 percent prior to the Affordable Care Act, according to the state medical society. Of the 28 states that expanded Medicaid, 15 — including Michigan — agreed to continue some or all of the primary care fee increase in 2015. Besides Michigan, Colorado, Hawaii, Maryland, Maine and

Nevada pay physicians at or below 75 percent of Medicare, said the Kaiser Family Foundation in a recent survey. Earlier in the year, Ford said some physicians complained of payment delays from the state and various Medicaid health plans. “There were a variety of complicating factors why doctors didn’t receive the uplifts to Medicare rates,” he said. “Unfortunately, that transaction was not as clean as one might have hoped.” But Ford said officials in the Department of Community Health worked diligently to resolve the payment issues. Becker said most physicians have received their uplift payments by now except for services in the fourth quarter of 2014. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

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Palace: Naming rights for arena could reach $100 million ■ From Page 1

He didn’t speculate on the maximum length of a deal, but said modern technology and metrics allow any arrangement to be modified. “It’s so different from when it was just signage-based promotion,” he said. Interestingly, the Palace’s development agreement with the city requires that Auburn Hills be part of the building’s name, a quirk that Mannion said isn’t a problem. “We can easily comply. It’s a very simple, tasteful execution,” he said. Over the past six months, Premier Sponsorships has done an inventory evaluation at the Palace — determining what the venue offers to potential buyers — and has talked to more than 200 regional and national companies to get business intelligence on feelings about the building and the region, Mannion said. Now, the list of potential buyers will be culled — and no one involved can disclose names. “We are not at a pitch stage yet,” Mannion said. “Even when you get strong interest, there’s a pretty long process you go through. What can that company do for our fans?” Obvious contenders are companies that can offer discounts or other perks to fans, such as national retailers and service providers. However, the Palace will consider a “major corporate partner who isn’t necessarily consumer-oriented who can do amazing things for the facility or community,” Mannion said. Premier Partnerships attempts to align the business objectives of both the buyer and seller, and both must have a strategy for any naming-rights deal, said Jeff Marks, Premier Partnerships’ managing director. “It is companies that want to have a dominant presence in their marketplace,” he said. Sectors that spend millions to put names on stadiums and arenas include banking, insurance, telecom, airlines, energy, beverage, automakers and cable providers. Such deals can include a dizzying array of elements beyond the name on the side of the building, such as capital financing for facility improvements and perks for fans and employees. For example, Troy-based United Shore Financial Services LLC recently bought the naming rights to the Palace’s Club West for an undisclosed sum in a multiyear deal that includes sponsorship of theme nights.

The trends The top 20 arena naming-rights deals in a 2011 Sports Business Journal list averaged $98.2 million over 21 years, and are worth a combined $1.9 billion. The magazine’s list of the top 20 stadium deals averages $150.6 million over 23 years, and collectively are worth $3 billion. The only arenas without a corporate name in the 30-team National Basketball Association are the Palace and Madison Square Garden in New York.

WHAT’S A NAME WORTH? MILLIONS Recent sports venue naming-rights deals have been for eye-popping amounts. San Francisco-based jeans maker Levi Strauss & Co. agreed in 2013 to pay $220 million over 11 years for the naming rights to the San Francisco 49ers football stadium that opened this season. New York City-based Metropolitan Life Insurance is reportedly paying $425 million to $625 million over 25 years, through 2036, for MetLife Stadium, the home of the New York Giants and New York Jets. Another New York City-based financial giant, Citigroup Inc., is paying $400 million to call the home of the New York Mets “Citi Field” through 2029. That works out to $20 million annually. The economy can play havoc with naming-rights deals. For example, venerable British banking giant Barclays initially agreed in 2007 to pay thenteam owner Forest City Ratner $400 million over 20 years to put its name on the Brooklyn Nets arena that opened in 2012, but renegotiated it down to $200 million by 2009, the New York Post reported. That deal, the priciest for an NBA arena, runs through 2032. One mega deal exists currently only on paper. In 2011, Los Angeles-based Farmers Insurance Group said it would pay $600 million over 30 years for the naming rights to a $1.2 billion, 72,000seat National Football League stadium in Los Angeles proposed by L.A.based Anschutz Entertainment Group. Farmers isn’t obligated to pay anything if a stadium isn’t built, and thus far the NFL hasn’t committed to expansion in Los Angeles and there are no signed deals in place for a team to relocate there. — Bill Shea The naming-rights deals are not a pure windfall, Mannion said, because while such deals are a fee to the right to the building’s name, there are inventory and activation costs. “There are costs associated with the deal baked in — are the signage and activation costs paid by client?” Mannion said. “A big number doesn’t mean anything if it’s not a big net.”

understand benefits better than they ever have now, but as always, the

challenge is finding the right brand within the particular market, and at the right price point,” said Eric Wright, president and executive director of research at Ann Arbor-based Joyce Julius & Associates Inc., which measures the impact of sponsorships across all forms of media.

Past work

The recession “ really changed the industry for naming rights. Back then, the methodology was impression-based value. (Today) it has become much more measured.

”

Jeff Marks, Premier Partnerships’ managing director Post-recession, name buyers want metrics on how a naming-rights deal will help the bottom line, Marks said. “The recession really changed the industry for naming rights,” he said. “Back then, the methodology was impression-based value. (Today) it has become much more measured. ROI, you have to prove it.” Companies that buy sports venue naming rights today justify the costs by attributing value to various budgets, such as marketing, media, sales and hospitality for corporate events, he said. “You’re spending it anyway,” Marks said. “There are intangibles, such as ‘How much new business can you drive by bringing clients (to the arena)?’ ” Industry observers say namingrights deals have grown to be a sophisticated piece of sports business, but come down to the right fit. “I think properties and sponsors

Premier Partnerships, launched in 2003, has a notable history of arranging major stadium namingrights deals. Last year, the firm brokered a 10-year, $50 million deal that puts Oklahoma-based Globe Life and Accident Insurance Co.’s name on the Texas Rangers’ stadium, Globe Life Park. In 2011, Premier Partnerships brokered the deal for Salt Lake City-based online retailer Overstock.com Inc. to pay $7.2 million over six years to change OaklandAlameda County Coliseum’s name to what is now O.co Coliseum, home of the Oakland Athletics and Oakland Raiders. Premier Partnerships was paid $375,000 to broker the deal, according to the Berkeley, Calif., The Bay Citizen newspaper in May 2011. Its fee for a Palace deal hasn’t been disclosed. “The NBA gave (Premier Partnerships) a strong recommendation,” Mannion said.

Try again This is the second time Palace Sports has considered selling the name. In October 2011, Palace Sports hired Los Angeles-based sports marketing and talent management firm Wasserman Media Group to find a naming-rights deal. At the time, Sports Business Daily estimated a deal could be worth $2.5 million to $3 million annually. “With Wasserman, it was more an exercise to get a valuation,” Mannion said. And the expected value at the time wasn’t enough. Mannion said there were two impediments to selling the

Palace’s naming rights the first time. The building itself needed upgrades and improvements, and the right business staff wasn’t in place, he said. “I didn’t feel like we had the appropriate business team to execute a deal to command a large amount of money,” Mannion said. After $40 million in renovations, and a wholesale personnel change, the time is right, he said. The final decision on any name deal will come from Palace and Pistons owner Tom Gores. “He’s very engaged with this sort of thing. It’s always got to be first-class. He’s not putting the money first, but asking, ‘What’s this going to do for our fans and other partners?’ ” Mannion said.

Pistons woes Any naming-rights deal isn’t expected to be affected by the oncourt fortunes of the Palace’s primary tenant, the Pistons. The team’s recent win streak ended an embarrassing start to the season, but naming-rights deals are seen as a long-term investment. When the Pistons win, the Palace fills: As recently as the 2009-10 season, the Pistons led the NBA in average per-game attendance. Since then, they’ve not had a winning season and attendance has been near the bottom of the league. The Palace is used for concerts and events on non-basketball nights, and is a well-established stop for major tours. That reputation is why the Palace name change itself, apart from the “Auburn Hills” part that must remain, could happen in several ways. “The Palace does have an iconic name in a short amount of time in the world of concerts,” Mannion said. “A buyer might want to consider keeping the Palace name. You’d have instantaneous acceptance. Everyone in the country knows the palace is in Detroit or Michigan.” Mannion laid out three likely naming scenarios: A buyer immediately changes the arena’s name entirely, phases the Palace name out over time to an entirely new name, or adds the company name to the Palace name.

A good deal? While teams benefit from the influx of yearly payments, there is debate by economists and financiers on whether naming-rights deals are a good investment by the buyers. Now-retired financier Ira Malis has Malis tracked the publicly traded companies with stadium and arena naming-rights deals since 1996, and through August the share prices of those firms collectively have grown 580 percent, significantly outperforming the S&P 500 in that time (222 percent). His index has grown to 68 “nam-

WHERE THE NAME IS A BIG DEAL The Palace of Auburn Hills isn’t the only local sports venue that may get a corporate name. Detroit’s Ilitch family, through its Olympia Development of Michigan real estate business, is building a $535 million arena for their Detroit Red Wings, who currently play at city-owned Joe Louis Arena — named for the famed boxer. Olympia, through its financial and management agreement for the publicly owned new arena (scheduled to open by 2017), retains the right to sell the naming rights and keep all the revenue from the deal. Detroit currently has two sports venues with corporate namingrights deals: 䡲 In 1998, Comerica Bank Inc. (then based in Detroit but now headquartered in Dallas) signed a 30-year, $66 million deal for the naming rights for the Detroit Tigers’ home ballpark, which is owned by the Detroit-Wayne County Stadium Authority but subleased to the Ilitch-owned team. 䡲 Ford Motor Co. paid the Detroit Lions $50 million in three lump sums in 2002 alone to put its name on Ford Field for a 20-year term. The company paid $30 million in February 2002, $17.5 million in March 2002 and the balance in December 2002, according to U.S. Securities and Exchange Commission documents. The Ford family has had a majority ownership stake in the Lions since January 1964. Another stadium deal with Detroit connections is British pro soccer club Derby County, which in December 2013 inked a 10-year, $11.8 million naming-rights deal with new British sports drink manufacturer iPro to put its name on the team’s 33,597-seat Pride Park Stadium. The club’s chairman is former Detroit Pistons executive and Rochester sports entrepreneur Andy Appleby, who fronted a group that paid $100 million — and assumed $25 million in debt — for the club in 2008. — Bill Shea ing-rights companies” or NRCs. Through 2013, the NRC index beat the market in 13 of the 19 calendar years. The index doesn’t prove that naming rights are a good or bad business move, but it refutes a traditional narrative that companies that buy naming rights are poor investments — a theory fueled by the collapse of name-buyers such as Enron, TWA, Fruit Of The Loom, and Conseco. “There is, of course, no rational reason to believe that having your name on a stadium would make your stock outperform the market,” Malis wrote.” “It is rational to believe, however, that the sort of company that would have the means to afford the naming rights, and the product offering that would benefit from increased name recognition, could be a company that would be well-positioned in the stock market.” Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19

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Crittenton: Ascension Health expected to strengthen hospital ■ From Page 1

ations the past five years — can tap into Ascension’s lower-cost supply chain, its deep management bench strength and save money on capital borrowing expenses. Crittenton also can increase patient volume and revPowell enue through referrals from physicians affiliated with Ascension who have offices in the Rochester area, Crittenton CEO Roy Powell said. For Ascension, the addition of Crittenton fits a specific geographic market need for primary, specialty and inpatient care, said Gwen MacKenzie, Ascension Health Michigan’s market leader. Crittenton is 18 miles north of Ascension’s nearest hospital — St. John Oakland Hospital in Madison Heights — and 38 miles southeast of its Genesys Regional Medical Center in Grand Blanc Township. Ascension Health operates 12 acute-care hospitals in Michigan, including five hospitals in the St. John Providence Health System and Borgess Health in Kalamazoo, St. Mary’s of Michigan in Saginaw and St. Joseph Health System in Tawas. “Our medical staff is very aligned with Crittenton’s,” MacKenzie said. “If you look at a map of facilities ... we don’t have facilities in Crittenton’s market share area, so it is additive to us and them.” MacKenzie said Crittenton Hospital also fits in nicely with the recent formation of Together Health Network, a statewide managed care joint venture with Livonia-based Trinity Health. Together Health’s marketing pitch is that 80 percent of Michigan’s 10 million residents live within 20 minutes of an Ascension or Trinity health care facility. Acknowledging there will be investments, Powell and MacKenzie declined to discuss capital improvement projects or changes in services likely to be part of the sales agreement. “There will be a strategic planning process conducted with rep-

resentation from the board, medical staff and management from both Crittenton and Ascension that will review opportunities to build services,” Powell said in a statement to Crain’s. “Where resources are determined to be required, Ascension has committed to support those efforts,” Powell said.

A contender Joseph Spallina, director with Ann Arbor-based Arvina Group, said Ascension will help Crittenton become a stronger market competitor. “Specialty referrals traveled south to St. John Hospital and some to Henry Ford Hospital (both in Detroit). Beaumont (Troy) is too close as a referral source, given the competitive considerations,” Spallina said.

look at a “ If youmap of facilities ... we don’t have facilities in Crittenton’s market share area, so it is additive to us and them.

”

Gwen MacKenzie, Ascension Health Michigan’s market leader

By increasing Crittenton’s primary care base, Spallina said Crittenton can better control specialty referrals outside of the hospital and also keep those patients within the Ascension system. “This contributes to stronger financial performance,” he said. Ascension’s expertise in managing insurance contracts and developing clinical programs also can strengthen Crittenton’s finances, Spallina said. “Crittenton also can participate in Ascension clinical networks for

contracting, providing employers and employees with more options for choice north of Detroit where maybe Ascension did not have a strong presence,” Spallina said. As with the recent merger that formed eight-hospital Beaumont Health, Spallina said Ascension’s size also will help Crittenton reduce costs through economies of scale. “Back-office operations at Crittenton can be streamlined, and access to Ascension capital should be available at lower costs,” Spallina said. Experts believe there will be layoffs at Crittenton, but Ascension officials said no decisions have been made. Finally, Crittenton will serve as strong patient referral hub to St. John Providence and Ascension, Spallina said, and help “keep Crittenton viable and relevant in the highly competitive market increasingly dominated by large systems.” Jeff Lutz, principal in health care and life sciences with Deloitte Consulting LLP in Detroit, said all seven of the major health care systems in Southeast Michigan wanted Crittenton because of its location. “(Crittenton) dominates the Rochester market, which is relatively high end (health insurance coverage),” Lutz said. “Whoever took over Crittenton would own that population going forward.” Besides Ascension, the four other health systems interested in Crittenton were Flint-based McLaren Health Care Corp., Ann Arbor-based St. Joseph Mercy Health System, Detroit-based Henry Ford Health System and Royal Oakbased Beaumont, sources told Crain’s. Gene Michalski, CEO of Beaumont Health, confirmed that Beaumont submitted a proposal to Crittenton. But he added Beaumont probably was not the best fit because of its proximity to Beaumont Hospital Troy. “Our hospital is five miles away,” Michalski said. “One thing we considered when we brought together Oakwood and Botsford was the geographic fit. Our hospitals were not close together, and the administrators

and physicians are not competing.”

Profitable future While Ascension’s MacKenzie said no decision has been made yet on whether Crittenton would join the St. John Providence group or another Ascension system, Lutz said he believes Ascension will rename Crittenton and operate it through St. John Providence management team. “Crittenton has been operated very poorly the last decade or so — it has a great market and good volumes but still loses money because of their poor operations and high cost structure,” Lutz said. “St. John Providence management will quickly turn this into a very profitable operation.” From 2008 to 2013, Crittenton’s net losses, which include investment income, accounted for $31.3 million, said Medicare cost reports provided by Louisville, Ky.based Cost Report Data Resources. After losing $22 million on operations in 2013, Crittenton has earned $545,000 on revenue of $173 million through the first nine months of 2014, according to Medicare cost reports. Over the past 18 months, Powell said Crittenton has turned around its operations with expenses down and admissions and outpatient visits on the rise, reversing a previous multiyear trend. “The financial and operating strength of (Ascension Health) will dramatically improve the financial and operating foundation of Crittenton and continue its upward trend of financial stability,” Powell said in a statement.

Tipping points Experts have mixed feelings about the impact to Crittenton from the arrest and eventual conviction of oncologist Farid Fata, M.D., who practiced at Crittenton, and its eventual decision to sell. For years, Crittenton’s fiercely independent board fended off acquisition offers from the likes of McLaren Healthcare and the forprofit owners of Detroit Medical Center. One month after the arrest of

Fata for Medicare and insurance fraud of an estimated $225 million in 2013, Powell was hired by Crittenton to turn around its operations. Fata pleaded guilty on 16 counts of health care fraud last November. He is expected to be sentenced in February by U.S. District Judge Paul Borman. Lutz said he does not believe the negative publicity generated by the guilty plea by Fata will cause lingering problems for Ascension, which he said is very strong in oncology. Powell also downplayed the effect Fata had on Crittenton operations the past several years. He said other factors, including the loss of referring physicians, played a larger role. Still, several oncologists told Crain’s last year that it could take months for some patients to regain full confidence in oncology recommendations and treatment. Last April, Crittenton signed a management contract with St. John Providence to lease its 30,000-square-foot cancer center, which is now called the St. John Hospital Cancer Center. Spallina said the Ascension brand for high quality can help to create a stronger image of Crittenton in the community. Gary Lewis, managing director of Southfield-based Cascade Partners, said he doesn’t believe Fata’s medical malpractice and corruption was the last straw for Crittenton as an independent. “It certainly created issues, but with patient volume down, the direction reimbursement is going, (Crittenton) was hit from all angles,” he said. But Lewis said Crittenton’s oncology business problems could have led the hospital to selecting Ascension, which was already managing the cancer center. “This could have led them to decide they need to partner with a large system with a reputation for high quality care and strong management,” Lewis said. Lewis, who lives in Rochester Hills, said residents will soon have two strong options for health care: Beaumont-Troy and Ascension.

Crowd: A new way to kick-start businesses with investment ■ From Page 1

recommend Localstake and crowd investing to other entrepreneurs, though their overall experience was mixed. They liked working with Localstake — especially because it handled all of the minutiae that most small businesses don’t have the capacity to manage — but they had to extend their campaign deadline twice and drop their goal down from the original $250,000 to call it a success. “There were definitely pluses and minuses,” Tarek said. One struggle was that crowd investing isn’t as easy as it sounds. Businesses can’t just go to Localstake.com and put up a campaign

the way they do on Kickstarter. Because of state and federal laws, Localstake must see a business plan, financials, background checks and references before it can approve a campaign. On top of that, federal rules prevent the use of social media to put the word out on crowd investing campaigns. The Kanaans had to almost physically bring people to the table by hosting tasting events for their products and hustling to events to build interest in their campaign. “We put ourselves out there for eight months,” Rachel said. “It was a distraction in a lot of ways.” Localstake co-founder Kevin

Hitchen said his company tries to educate businesses early in the process about the time commitment. Some campaigns take longer than others, he said, but businesses that approach it thinking they’ll get $100,000 in five days will be disappointed. “You can’t just put something up and cross your fingers. Investors are investing in you; they will want to meet you,” he said. “The platform is not an angel group. It’s a dual effort.” One unexpected benefit the Kaanans got from their crowd investing experience was that of new connections. Some investors have turned into informal consul-

tants to whom the couple turns for advice. One of those investors is Jeffrey Basch, whose day job is business and operations manager for Ann Arbor-based startup Accio Energy Inc. He heard about Unity through the Ann Arbor food community — his wife owns a food business — and was interested in investing because he liked the products and that he could actually go meet the owners. “Localstake gave us a platform to make a reasonable investment; there was flexibility on size, and it was easy to do,” he said. “It’s allowing people to talk about investments more than they

could otherwise. It’s a middle ground between crowdfunding and having to do everything yourself.” Unity’s tangible, accessible product played a big role, too. “(Crowdfunding) hasn’t shown itself to be open to B2B. People want to see a product and relate to a product,” Basch said. That’s why Accio, which is venture-backed, isn’t looking seriously at crowd investing for its growth. “We’re more focused on missiondriven venture capital at the family-foundation level of investing because our next round will take millions of dollars,” he said.

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Barbat: Wireless Toyz founder buys into downtown ■ From Page 3

next month. The redevelopment would take about two years to complete. It is owned by GRB New Detroit LLC, an entity registered to Gary Roncelli, chairman of the Sterling Heights-based construction firm Roncelli Inc., according to CoStar Group Inc., a Washington, D.C.-based real estate information service. The Detroit office of Jones Lang LaSalle is marketing the building for sale. Barbat’s first foray into downtown real estate was 114 W. Adams St., which at different times was the Park Apartments and Hotel Briggs, which he bought in February for $3.25 million. He said construction is well underway at the building, which will be renamed The Briggs House and have about 118 units after a $10 million renovation is complete in the fourth quarter of 2015. Financing for the project comes from Fifth Third Bank, Barbat said. Next, he bought a 64,000-squarefoot building connected to the Hotel St. Regis in the New Center area in a June auction for $995,000. A $4 million renovation, also underway, would bring 60 new apartments in The Regis House — the building’s new name — online in the fourth quarter. The project is being financed by Capital Impact Partners, Barbat said. Barbat said he concentrates on historic buildings “that have been sitting vacant for some time and bringing them back to life.” Matt Lester, founder and president of Bloomfield Townshipbased Princeton Enterprises LLC, said Barbat’s greater downtown purchases put other real estate investors “in a position where we are sort of rooting” for his buildings to succeed. “You’re going to fall into one or two camps — either doubters or people who are hopeful and cheering that the buildings come online, on

budget and that they attract renters at every bit of $2 per square foot,” Lester said. “I would not bet against that.” Princeton Enterprises’ greater downtown real estate portfolio consists of 17 buildings totaling more than 1 million square feet and containing more than 1,000 multifamily residential units. Lester said Princeton strongly considered buying the Park Apartments, the St. Regis annex and the Gabriel Richard. Yet it’s not just downtown Detroit that has lured Barbat. He is redeveloping the former Montgomery Ward department store on South Fourth Avenue in downtown Ann Arbor into 30 condominiums, about a third of which have been sold; Barbat said he expects the rest to sell by the fourth quarter. The units range from $250,000 to $1 million. The project, which will be named the Montgomery House, also includes the Ann Arbor Comedy Showcase on the first floor and a restaurant. He bought the building in May 2013 for $2.5 million. Ann Arbor State Bank is financing the project, Barbat said. All told, the Barbat Holdings portfolio consists of residential, retail and office properties totaling more than 750,000 square feet that it owns in metro Detroit, Illinois, Arizona and Florida. Barbat, who founded the Wireless Toyz cellular and wireless multicarrier chain in 1995 and was a Crain’s 40 under 40 honoree in 2005, is the son of an Iraqi-American businessman who owned several video and convenience stores. He sold Wireless Toyz, which owns and manages 78 stores, in 2007 to an undisclosed private equity firm and bought it back in late 2009. Lester of Princeton Enterprises

BARBAT’S HOLDINGS 䡲 Park Apartments

(former Hotel Briggs) Address: 114 W. Adams St. Purchased: February 2014 Price: $3.25 million Renovation cost: $10 million Use: 118 apartments, first-floor retail New name: The Briggs House

condominium units, first-floor retail New name: The Philip House

䡲 Gabriel Richard Building Address: 305 Michigan Ave. Under contract: February closing Price: $3.2 million Renovation cost: $6.5 million Use: 110 apartments, firstfloor retail New name: The Gabriel House

䡲 Hotel St. Regis annex

Address: 3071 W. Grand Blvd. Purchased: June 2014 Price: $995,000 Renovation cost: $4 million Use: 60 apartments, first-floor retail New name: The Regis House

䡲 Philip J. Neudeck office building Address: 415 Clifford St. Purchased: December 2014 Price: $2.3 million Renovation cost: $6 million Use: 100 apartments or

䡲 Former Montgomery Ward

department store Address: 210-216 W. Fourth St., Ann Arbor Purchased: May 2013 Price: $2.5 million Renovation cost: Not available Use: 30 condominiums, first-floor retail New name: The Montgomery House

Source: Joe Barbat, CoStar Group Inc.

said Barbat’s real estate investments in Detroit should bear fruit. “This organization seems to have the financial sources that it’s going to take to bring those buildings up to the proper caliber and bring them to the market in a proper way,” Lester said. “That’s more

important than perhaps anything, that you have the financial resources, the staying power, the patience and determination to do right by those buildings.” Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

DIA: Experts say museum could lure top prospects ■ From Page 3

believes could set Detroit apart from the other museums vying for top talent: an engaged community. “I think it’s going to be really important that the community showed how much it values the museum,” Bell said. The community’s support for the DIA is evidenced by the museum’s ability to meet its $100 million commitment to the “grand bargain” as part of Detroit’s bankruptcy plan of adjustment and by the 10-year millage passed by Wayne, Oakland and Macomb county voters in 2012, Bell said. The millage brings the DIA about $22 million each year in operating funds. “I think that (support) is going to be something (a candidate) is going to pay a lot of attention to in terms of the attractiveness of this job,” Bell said. Without such support, running a museum on a day-to-day basis, securing acquisitions and handling other business matters are much more difficult, he said. “Whoever gets this job won’t have to worry if they’ll be able to pay the bills and keep the lights on.” Beal has filled the director shoes “admirably” during a time of enor-

mous testing, said Samuel Sachs II, who was director of the DIA from 1985-1997 and now is president of the Pollock-Krasner Foundation in New York City and director emeritus of The Frick Collection in New York City. “My hat is off to him,” Sachs said, for preserving the collection and for the support Beal garnered from the community and the DIA’s board. With a reasonably secure source of operating money, the DIA is in a position to raise endowment and stabilize its operating base over the longer term, Sachs said. During Sachs’ tenure as director of the DIA in the ’90s, the museum saw an $8 million cut to its state support overnight, he said. As a public institution, the DIA had been very reliant on public funding, and as a result, never built an operating endowment to help support its annual operations. The “financial muscle” to build an operating endowment is there now, he said, “and the sword of Damocles has been removed.” If the threats to the millage, collection and governance had not been resolved, Sachs said, the DIA would have had an extremely difficult time attracting a new director.

Wanted: A ‘thoughtful approach’ Potential candidates are not only interested in the financial climate but in the board leadership as well, he said. “In Gene Gargaro, the (DIA) board has had outstanding leadership in seeing this through,” Sachs said, referring to Eugene Gargaro Jr., chairman of the DIA board since 2003. For the right person who is both interested in growing a collection and establishing fascinating exhibitions, “the idea of stabilizing the museum’s operations for perpetuity is ... a very exciting opportunity,” Sachs said. There’s never a good time to say farewell to “a great leader like Graham,” said Gargaro. “But now, facing that reality, I like the time and the environment to find a new director for the DIA,” he said. The city is an attractive place for talented people, again a definite plus, he said. Its national and international stature, ability to control its own destiny in terms of its financial future and talented staff that Beal has brought together “bode well for our efforts to at-

tract, identify and retain the next director of the DIA,” he said. Gargaro is heading a search committee — still being named — that will look internally, nationally and internationally for someone who can fill Beal’s shoes. “Graham has created such a great template at the museum in the art world. ... I’m expecting we’re going to have some very well-qualified candidates from regions around the country and perhaps internationally,” Gargaro said. In addition to the fundraising prowess needed to help the museum increase its operating endowment from $120 million to about $400 million by 2022, the museum will likely look for a leader who brings the “creative, thoughtful approach” needed to foster collaborations between the museum and other arts institutions around the state, Gargaro said. That’s something the museum pledged to do in exchange for the state’s “grand bargain” support, which helped protect the collection and to spin the museum off as an independent nonprofit. Sherri Welch: (313) 446-1694, swelch@crain.com. Twitter: @sherriwelch

www.crainsdetroit.com EDITOR-IN-CHIEF Keith E. Crain GROUP PUBLISHER Mary Kramer, (313) 446-0399 or mkramer@crain.com ASSOCIATE PUBLISHER Marla Wise, (313) 4466032 or mwise@crain.com EXECUTIVE EDITOR Cindy Goodaker, (313) 4460460 or cgoodaker@crain.com MANAGING EDITOR Jennette Smith, (313) 4461622 or jhsmith@crain.com DIRECTOR, DIGITAL STRATEGY Nancy Hanus, (313) 446-1621 or nhanus@crain.com MANAGING EDITOR/CUSTOM AND SPECIAL PROJECTS Daniel Duggan, (313) 446-0414 or dduggan@crain.com SENIOR EDITOR/DESIGN Bob Allen, (313) 4460344 or ballen@crain.com SENIOR EDITOR Gary Piatek, (313) 446-0357 or gpiatek@crain.com WEB EDITOR Kristin Bull, (313) 446-1608 or kbull@crain.com RESEARCH AND DATA EDITOR Sonya Hill, (313) 446-0402 or shill@crain.com WEB PRODUCER Norman Witte III, (313) 4466059, nwitte@crain.com EDITORIAL SUPPORT (313) 446-0419; YahNica Crawford, (313) 446-0329 NEWSROOM (313) 446-0329, FAX (313) 4461687 TIP LINE (313) 446-6766

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CRAIN’S DETROIT BUSINESS

RUMBLINGS

WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF JAN. 1-9

What’s name plan for WSU biz school? hile the Wayne State University School of Business Administration doesn’t know how much it would require for it to be renamed after a single donor, it likely won’t be as much as the $100 million the University of Michigan business school received from Stephen M. Ross, prompting it to be renamed after the billionaire real estate developer. The WSU business school is in very early discussions about moving downtown into either a new building or leasing space there, and one of the issues that could come into play are naming rights — either for the building, or even the school itself, said business school Forsythe Dean Robert Forsythe. Ross’ donation was in 2004. Michigan State University’s business school was renamed the Eli Broad College of Business after a $20 million donation in 1991 from the billionaire and philanthropist. At WSU, the $42 million A. Paul Schaap Chemistry Building and Lecture Hall received $10 million from the A. Paul and Carol C. Schaap Fund, part of the Community Foundation for Southeast Michigan, according to Mike Brinich, WSU associate director of communications. And WSU’s $64.3 million Eugene Applebaum College of Pharmacy and Health Sciences building received $5 million from Applebaum, the founder of Arbor Drug Stores, which was later sold to CVS. Oakland University, meanwhile, has Elliott Hall and its new Elliott Tower, which is 151 feet and was funded through a $6.5 million donation from R. Hugh Elliott, CEO of Auburn Hills-based Elliott Group International Inc., and his wife, Nancy Elliott. The Elliotts have also given a $2 million donation to the School of Business Administration (which is housed in Elliott Hall), endowed scholarship and academic lecture funds and made other contributions. Eric Barritt, vice president of development, alumni and community engagement at

OU, said in a statement that building and school naming “is unique and should be viewed as an investment to meet the needs of the donor as well as the school. “Most philanthropy, including naming rights, can help build recognition on campus and in the community. However, gifts are usually made based on a broader vision that goes beyond brick and mortar to enhance the student experience through classroom offerings, programs or even professorship endowments.” Forsythe declined to say whom the WSU business school has spoken with about a possible downtown relocation. “You can probably guess who they are, but I’m not going to tell you,” he said. Anybody could guess that people with Dan Gilbert’s Bedrock Real Estate Services LLC and the Ilitch family’s Olympia Development of Michigan would be on that list. The school could also renovate its 70,000 square feet of space in Prentis Building and the adjacent Rands House instead of building new or leasing the 150,000 square feet that it’s looking for.

Metro Times again without an editor-in-chief The editor-in-chief job at Metro Times is vacant for the second time in a year after the Royal Oak-based altweekly’s ownership ousted Valerie Vande Panne on Thursday. Vande Panne was hired in April to replace Bryan Gottlieb, who was the weekly’s top editor after he left MT in January 2014. He was on the job less than a year, too. Andrew Zelman, majority owner of Cleveland-based Euclid Media Group LLC, which bought Metro Times in December 2013, has declined to comment. “I think there was a difference in editorial vision and management style. I’m very proud of the work we did at Metro Times,” Vande Panne told Crain’s. “The Metro Times team is amazing. It was an honor and a privilege to be at Metro Times.” She declined to discuss specifics of her departure, or go into details about her next career move.

Vince Grzegorek, editor of sister paper Cleveland Scene, was the interim editor between Vande Panne and Gottlieb, and he’s expected to again act as editor of Metro Times.

Metals institute to open this week in Corktown

John Waters to headline ‘Dirty Show’ preview

he American Lightweight and Modern Metals Manufacturing Institute will officially open in Corktown Thursday with a ribbon-cutting ceremony featuring Detroit Mayor Mike Duggan, institute Executive Director Lawrence Brown and others. The $148 million development — led by the University of Michigan; Columbus, Ohiobased manufacturing technology nonprofit EWI; and Ohio State University — is opening in a 99,000-squarefoot building at 1400 Rosa Parks Blvd. The 1-3:30 p.m. event will feature exhibits and demonstrations. More information at almmii.org.

Cult filmmaker John Waters, known for underground “trash” movies such as Hairspray and Pink Flamingos along with his trademark pencil-thin mustache, next month will headline Detroit’s annual erotic art exhibition, “The Dirty Show.” Waters, 68, will perform an updated version of his stage show “This Filthy World: Filthier and Dirtier” on Feb. 12, show organizers said in a statement. Afterward, he will meet attendees and sign autographs. Waters’ latest book, Carsick, a fiction-nonfiction account of his hitchhike from his native Baltimore to San Francisco, will be available at the show. The exhibition, now in its 16th year, is scheduled for Feb. 12-14 and 20-21 at the Russell Industrial Center at 1600 Clay St. More information is at DirtyShow.org.

BITS & PIECES 䡲 Gordon Krater, managing partner at Plante Moran, and Sandra Pierce, vice chairman of FirstMerit Corp. and chairman and CEO of FirstMerit Michigan, have been named the Harvard Business School Club of Michigan’s annual Business Leaders of the Year for 2014. They will be honored at a dinner March 26. Details and ticket information are at hbsmi.org.

ON THE MOVE 䡲 New Wayne County Executive Warren Evans named four top appointees: former state Rep. Rudy Hobbs, 39, as chief of staff; June Lee, 38, who was chief of staff to former county executive Robert Ficano, as assistant county executive; former Conway MacKenzie director Tony Saunders, 28, as chief restructuring officer; and Lloyd Jackson, 48, former assistant news director at WJR AM 760, as communications director. 䡲 Detroit-based Lutheran Social Services of Michigan named Sam Beals as CEO, effective Jan. 26, and Vickie Thompson-Sandy, who had been interim CEO, in the newly created role of president. Beals, who has been CEO of Wedgwood Christian Services in Grand Rapids, succeeds Mark Stutrud, who

Ignition speakers talk auto startups What will it take to create an environment for more automotive startups in Detroit? That’s the question on the table for three speakers Wednesday at the Ignition 2015 conference hosted by Crain’s along with the North American International Auto Show. A panel of speakers with ties to venture capital, startups and the automotive industry will talk about the elements needed for startups to thrive. A need for mentors, available capital and a willingness to fail in order to learn are key elements that speakers plan to address; Detroit needs these things for a startup community around the automotive industry to thrive. Speaking on that topic will be Dave Drach, a vice president with Boulder-based Techstars, which is in the process of creating an accelerator for automotive-oriented startups in Detroit. Additionally, the panel will feature Erica Klampfl, future mobility manager for Dearborn-based Ford Motor Co., and Chris Thomas, founder and partner of Detroit-based venture capital firm Fontinalis. As part of the Ignition event, there will also be a pitch competition, where five automotive-oriented startups will give 6-minute presentations. The audience will then pick the winner. Tickets are available at the door for the event, which runs from 9-11:30 a.m. on Wednesday in the atrium of Cobo Center, adjacent to the auto show. For more information, see crainsdetroit.com/events.

left in September to become CEO of Lutheran Social Services of Illinois. 䡲 The Detroit-based Luella Hannan Memorial Foundation named board Vice President Sandra Bulger as interim executive director as it seeks a permanent replacement. Bulger, 60, an attorney and CPA, succeeds Tim Wintermute, who retired at the end of 2014. 䡲 American Axle & Manufacturing Inc. named Donald Joseph in the newly created position of president of the supplier’s Asia operations. He had been managing director of that Shanghaiheadquartered business and a vice president for the company’s Detroit operations. 䡲 Novi-based supplier Cooper-Standard Holdings Inc. appointed Christine Krathwohl to vice president of global supply chain. Krathwohl, 43, replaced Gary Alstott, who left the company. Krathwohl had been managing director for Kennesaw, Ga.-based Jack Cooper Holdings Corp. 䡲 Luke Bonner left as vice president of economic development for Ann Arbor Spark to form an economic development advisory firm, Bonner Advisory Group LLC, with offices in Ann Arbor and Sterling Heights. Bonner, 38, will continue with Spark as an adviser on connected and autonomous vehicle strategy; Spark has not yet replaced him. 䡲 In the wake of its M&A activity, Van Buren Township-based supplier Visteon Corp. named two new board members: Joanne Maguire, retired executive vice president at Lockheed Martin Space Systems Co., and Rouzbeh Yassini-Fard, founder and CEO of Boston-based broadband consulting firm YAS Capital Partners LLC.

COMPANY NEWS 䡲 Macy’s, the last re-

maining anchor tenant of Southfield’s Northland Center, has signaled to the city that it intends to close its Northland location, said acting Mayor Donald Fracassi. He could not say when the Cincinnati-based retailer would close the store. 䡲 Just Baked, the Livonia-based cupcake retailer founded in 2008, closed all but four of its 14 stores. 䡲 Southfield-based Lear Corp. closed on its acquisition of Auburn Hills-based automotive leather supplier Eagle Ottawa LLC. Lear announced the $850 million deal in August. 䡲 Royal Oak-based marketing analytics startup Reach | Influence, a dba of MBR Intentional Marketing Inc., received $5 million in seed funding from two local venture capital firms,

Bloomfield Hills-based Vineyard Capital Group and Detroit-based Detroit Venture Partners, the company said. 䡲 A 19,000-square-foot building formerly owned by Cleary University will be the site of the second Plum Market grocery store in Ann Arbor. The store, expected to open this fall at 3601 Plymouth Road, will be 25,500 square feet after a 6,500-square-foot addition and employ 125. 䡲 The Barbara Ann Karmanos Cancer Institute in Detroit received a five-year grant for $5.3 million from the West Bloomfield Township-based Dresner Foundation to further research and provide services for patients with blood-related cancers. 䡲 Bloomfield Hills-based Austin Benefits Group acquired the existing employee benefits book of business from the Southfield-based Hantz Group for an unspecified amount. 䡲 Annual attendance at the Detroit Zoo surpassed 1 million visitors for the ninth consecutive year.

OTHER NEWS 䡲 Café 78, the newest addition to Detroit’s dining scene, is set to open Feb. 6 inside the Museum of Contemporary Art Detroit. The new café-bar is a collaboration between Wright & Co. partners Dave Kwiatkowski and Marc Djozlija. 䡲 The Parker House Apartments building in Detroit’s Indian Village has a new owner, Canadian company London Investment Corp., which bought the 54year-old building with 36 units last month. The purchase price was $340,000, said CoStar Group Inc. 䡲 The Southeast Michigan Purchasing Managers Index for December 2014 was 64.2, up from 56.8 in November. An index above 50 suggests economic growth. 䡲 During a visit to a Ford Motor Co. plant in Wayne, President Barack Obama delivered a sunny assessment of the U.S. economy to preview the State of the Union address he’ll deliver this month, Bloomberg reported. “America’s resurgence is real,” Obama said.

OBITUARIES 䡲 Edward Herrmann, a prolific stage and screen character actor, former Grosse Pointe resident and the popular voice of Dodge advertising in the 1990s, died Dec. 31. He was 71. 䡲 Edward King, a metro Detroit small-business consultant and former longtime director of Small Business Services at Wayne State University, died Jan. 5. He was 65.

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