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www.crainsdetroit.com Vol. 31, No. 4
JANUARY 26 – FEBRUARY 1, 2015
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©Entire contents copyright 2015 by Crain Communications Inc. All rights reserved
Page 3 The promise of free community college: But is it worth the price?
BIG DEALS OF 2014 113 DEALS
$43.7 BILLION IN VALUE
Dealmaking finally escaped the recession doldrums
More than 60 percent came from cars and manufacturing, but others did well, too
‘A fantastic year’ Adell creates magic kingdom from ex-Disney A.M. station Agree Realty triples its portfolio size
Inside Adoba hotel works to resolve tax bills with county, Page 4
This Just In Talks collapse between DMC, McLaren on Karmanos
NEWSPAPER
Lawyers for Detroit Medical Center and Flint-based McLaren Health Care Corp. failed to reach a settlement late Friday in a 16-month contract dispute over Barbara Ann Karmanos Cancer Institute in Detroit. Oakland County Circuit Court Judge Wendy Potts asked lawyers to return this week for instructions that could lead to a trial in early 2016. In September 2013, the McLaren and Karmanos boards entered into an affiliation in which Karmanos joined 11-hospital McLaren. Each then filed separate lawsuits. McLaren asked the court to declare DMC’s 2005 affiliation agreement void; DMC charged McLaren with breach of contract. Officials said the organizations could not agree on two key points: how Karmanos’ name could be used outside Wayne County and how much Karmanos would pay to DMC for support services. — Jay Greene
Auto, manufacturing led aggressive M&A market; PE flexed its muscles BY TOM HENDERSON CRAIN’S DETROIT BUSINESS
I
f 2009 was the perfect storm for mergers and acquisitions, then 2014 was a day at the beach, watching a double rainbow with a mint julep on the way. Sure, there was $80.9 billion in deal value in 2009, but all save $4.3 billion of that was tied to bankruptcy or government bailout acquisitions. The 113 deals completed in 2014 came to nearly $44 billion, and there were very few distress deals among them. Instead, the market had a very large appetite for auto-related and manufacturing companies. Half of the deals — 56 — and $28.5 billion of value were in those sectors. “It’s a beautiful world. It was a fantastic year,” said Michael DuBay, the group practice leader for private equity
for the Detroit-based law firm Honigman Miller Schwartz and Cohn, which does a national M&A practice. He said the firm is still tallying the deal totals it advised last year, but the number of transactions was more than 100 and could hit a deal value of up to $10 billion, compared to $8.2 billion in 2013. About half of that was in Michigan. “Everybody was in the game — U.S. and foreign strategic buyers, private equity firms and banks,” he said.
Biggest deals, the list: ZF-TRW leads the pack, see Page 11
See Big deals, Page 20
ON THE WEB 䡲 Venture capital investment nearly doubles from 2013
䡲 Searchable database of deals, crainsdetroit.com/bigdeals ISTOCK PHOTO
McLaren now eyes lower-cost, short-stay hospital 2 opponents of full-service plan on board BY JAY GREENE CRAIN’S DETROIT BUSINESS
Blocked by the Michigan Legislature, the courts and business opposition in its efforts to build a new full-service hospital in northern Oakland County, Flint-based McLaren Health Care Corp. is now relying on its architects, consultants
MCLAREN’S PLAN B Old proposal: A $300 million medical-surgical hospital at its 80acre McLaren Health Care Village at Clarkston. New proposal: A $30 million to $50 million, 30-bed short-stay hospital with high-tech diagnostics and a 24-hour emergency department. CONtroversial? Unlike acute-care medical-surgical beds, short-stay beds don’t require certificate of need approval.
COURTESY OF MCLAREN HEALTH CARE CORP.
Besides a short-stay hospital, McLaren also would also like to expand its outpatient cancer center and build a second medical office building at its Clarkston Health Care Village.
and business intuition to come up with a plan to build a cutting-edge short-stay hospital in Indepen-
dence Township. McLaren’s “hospital of the future” may not be the $300 million
medical-surgical hospital it once proposed at its 80-acre McLaren Health Care Village at Clarkston. It may be, instead, a much smaller, less costly, $30 million to $50 million, 30-bed short-stay hospital with high-tech diagnostics and a 24-hour emergency department. At least two leading opponents of McLaren’s $300 million hospital — St. Joseph Mercy Health System CEO Rob Casalou and Economic Alliance for Michigan President Bret Jackson — now are on board for McLaren’s developing plan for a high-tech outpatient health care facility. Over the next six months, Truven See McLaren, Page 21
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CRAIN’S DETROIT BUSINESS
MICHIGAN BRIEFS Grand Rapids economy looks good in 2 reports, near bottom in third Grand Rapids fared well in two of three economic reports released in the past week. But one report was, to put it charitably, sobering. The Grand Rapids metropolitan area had the ninth-fastestgrowing economy in the U.S. last year and the 69th fastest-growing economy among the 300 largest metropolitan areas in the world, according to a study released by the Brookings Institution. Macau, China, was No. 1. The Detroit metropolitan area was 237th. The Grand Rapids-Wyoming metro area was named the top-performing city in the Midwest and ranked 25th on the list of the “25 Best Performing Cities,� produced by The Milken Institute, a think tank. Joel Kotkin, a contributor to Forbes.com, ranked Grand Rapids second-worst in a column titled “The Cities Where African-Americans Are Doing the Best Economically.� The professor at Chapman University in California ranked cities on home ownership, entrepreneurship or self-employment, and median household income.
Ski resort trashed by group of unorthodox Greeks from UM The movie “Animal House� probably seems a bit less amusing
Flint residents upset; must be something in the water If your water is so bad that even Erin Brockovich takes note on her Facebook page, you have a problem. And anyone in Flint who drinks water has a problem. On the same day that residents came to a public meeting carrying bottles of discolored tap water, the city’s emergency manager, Jerry Ambrose, said progress is being made, The Flint Journal reported. This month, Flint officials reported that municipal water has elevated levels of a disinfection byproduct called trihalomethane. Some residents say the water gives children skin problems. Flint officials say the water is safe. The problems arose in April after Flint switched from using Lake Huron as its drinking water source. As Crain’s has reported, the city plans to use Flint River water through the end of 2016, when the to the folks at Treetops Resort near Gaylord after the Sigma Alpha Mu fraternity at the University of Michigan caused about $50,000 in damage the weekend of Jan. 17. Resort General Manager Barry Owens said furniture, carpet, walls and ceilings were sacrificed in the pursuit of youthful indiscretion. Sigma Alpha Mu Michigan chapter President Joshua Kaplan said that members “are embarrassed and ashamed of the behavior� and that they would pay all damages and cleaning costs. (Cue Dean Vernon Wormer: “Fat, drunk and stupid is no way to go through life, son.�)
Karegnondi Water Authority is to open a new pipeline to Lake Huron. Flint had disconnected from the Detroit Water and Sewerage Department last year, fearing the prospect of ever-higher rates. The departure of those customers has been estimated to shave more than 12 percent off revenue for the Detroit water system, Crain’s has reported. Detroit has offered to reconnect Flint, but Flint officials say that would cost $12 million more a year. Flint Mayor Dayne Walling last week called on the state to help address the problem. Said Steve Busch of the Michigan Department of Environmental Quality: “Is there a risk in the short term? That depends on you ... it’s an individual thing. You can make a judgment.� Cheers.
MICH-CELLANEOUS Tennessee-based Community Health Systems Inc. plans to buy an 80 percent equity interest in Metro Health, based in the Grand Rapids suburb of Wyoming. The agreement includes Metro Health Hospital, outpatient centers and related assets and businesses. The deal is subject to regulatory reviews. State auditors estimated that the secretary of state’s office could have collected an additional $9.2 million to $36.5 million a year in use-tax revenue if it strengthened its procedures for verifying values, The Associated Press reported.
Mark Howe, the city manager of Lowell near Grand Rapids, apologized for withholding raises from city workers who joined the International Brotherhood of Electrical Workers and threatening to replace them with nonunion workers, The Grand Rapids Press reported. A subsidiary of Grand Rapidsbased Universal Forest Products Inc. acquired a majority stake in Australia-based Integra Packaging Proprietary Ltd., MiBiz reported. Universal, which makes packaging products, expects Integra to generate $12 million in sales in 2015 and said the deal supports plans for international growth.
Gerald R. Ford International Airport in Grand Rapids set a record for passenger traffic last year, with 2,335,105 travelers passing through its concourses, the Grand Rapids Business Journal reported. That’s up 4.3 percent from 2013. Hurley Medical Center plans to move its Pediatric Residency Clinic and Pediatric Specialty Clinic into the second floor of the Flint Farmers’ Market, MLive.com reported. Grand Rapids Magazine has named Grove its Restaurant of the Year for the third year in a row. Readers of BuzzFeed’s community section have voted Lemonjello’s Coffee in Holland No. 2 on the website’s ranking of the “24 U.S. Coffee Shops to Visit Before You Die� — which seems rather akin to a list of “24 Paper Towel Dispensers to Use Before You Die,� unless coffee for you is a lifestyle choice. Find business news from around the state at crainsdetroit .com/crainsmichiganbusiness. Sign up for the Crain’s Michigan Morning e-newsletter at crainsdetroit.com/emailsignup.
CORRECTION
A story about the selling of naming rights for The Palace of Auburn Hills included an incorrect photograph of Ira Malis on Page 19 of the Jan. 12 issue.
Your deal gets done here
Aarkel Tool & Die, Inc. of Ontario
ASW Pipeline, LLC
Austrian & Associates, Inc.
Sale of stock to Zynik Capital Corporation
Acquisition of Geneva Pipeline pursuant to Bankruptcy Code § 363
Merger with G. Herschman Architects, Inc.
Eptec S.A. de C.V.
Futuramic Tool & Engineering, Inc.
Sale of its non-damper business and assets to J.D. Norman de San Luis Potosi, S. de R.L. de C.V.
Acquisition of assets of Hubert Global Systems, Inc. in an UCC Article 9 sale
Horizons Window Fashions, Inc.
Sale of assets
Ninth Street Capital Partners, LLC
Acquisition of Kitchen Cabinet Distributors
Indiana Limestone Company
Sale of assets pursuant to Bankruptcy Code § 363
Great Day Holdings, LLC Acquisition of Patio Enclosures
Light Beam Capital
Contech Castings, LLC
Cape and Islands Occupational Medicine, P.C.
Cap Lab Pathologists
CellNetix Labs and Pathology
Sale of assets
Sale of assets
Acquisition of Highline Pathology Associates, Inc., P.S.
Great Lakes Steel Holdings Corporation
Great Lakes Steel Holdings Corporation
Great Lakes Steel Holdings Corporation
Acquisition of assets of Fabpro Netwrap LLC and Fabpro Oriented Polymers LLC
Acquisition of assets of Bridon Cordage LLC and Heritage Trading Company, LLC pursuant to Bankruptcy Code § 363
Equity Purchase of H.F. Webster
LS Partners
Main Market Partners
Acquisition of DCI Design Communications LLC
Acquisition of chain of Gymboree Play and Music Centers
Remington Products Company
Selman & Company, LLC
Acquisition of assets of Arch Molds, LLC
Acquisition of assets of Association & Society Insurance Corporation
Mayesh Wholesale Florist, Inc.
Acquisition of Ricerca Biosciences
Acquisition of assets of Billingsley Wholesale Floral, Inc.
Sale of Dowagiac, Michigan facilities and operations to Premier Tool & Die Cast Corp.
Griffiths Furniture, LLC
Acquisition of assets of Griffiths Furniture
Capital Partners
Sale of StyleCraft Home Collection
ReCellular, Inc. (receiver)
Going concern sale of assets
Selman & Company, LLC
Acquisition of certain assets of MAI Services Corporation
Wolverine Tube, Inc.
Sale of Netherlands subsidiary Learn more here.
.D%POBME )PQLJOT 1-$ t 8PPEXBSE "WFOVF 4VJUF #MPPNĂśFME )JMMT .* t +BNFT + #PVUSPVT ** %FUSPJU .BOBHJOH .FNCFS mcdonaldhopkins.com $IJDBHP t $MFWFMBOE t $PMVNCVT t %FUSPJU t .JBNJ t 8FTU 1BMN #FBDI t 8BTIJOHUPO % $ * McDonald Hopkins Government Strategies LLC is owned by the law firm McDonald Hopkins LLC. McDonald Hopkins Government Strategies is not a law firm and does not provide legal services.
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Adell’s WFDF buy boosts reach, rates Global access for Word Network BY BILL SHEA CRAIN’S DETROIT BUSINESS
COURTESY OF WADL
Kevin Adell: “Jesus is known in the four corners of the Earth.”
For religious broadcasting entrepreneur Kevin Adell, video did not kill the radio star. Instead, radio has gone to work generating new revenue for the video broadcaster.
Adell recently paid The Walt Disney Co.’s Burbank, Calif.-based Disney Radio Group LLC $3 million for its Farmington Hills-based WFDF AM 910, and last week he began using the station’s 50,000-watt signal to simulcast audio from his global Southfield-based The Word Network Christian television programming. The switch from preteen-oriented Disney music and programming to spiritual broadcasts on what is now branded “910 AM Superstation” happened at 5 p.m. Jan. 20 with no on-air fanfare. A secondary audio license granted by the Federal Communica-
tions Commission to Adell means he can provide the 910 AM simulcast via satellite nationally and overseas, not just in Michigan, further boosting the station’s reach. What it all means for Adell is that he is able to boost airtime renewal rates for The Word Network, which is available globally via 12 satellites, by 10 percent instead of the usual 5 percent annual increase, he said. Half-hour airtime blocs on The Word Network sell starting at $3,500 and sell out around the clock every day of the year, Adell said.
Inside
Saving hammer-and-nail part of building rehab plan, Page 4
See Adell, Page 22
Free school a costly course?
Company index These companies have significant mention in this week’s Crain’s Detroit Business: Adell Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . 22 Adoba Dearborn Detroit . . . . . . . . . . . . . . . . . . . . . 4 Agree Realty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Angle Advisors-Investment Banking . . . . . . . . . . 20 Cascade Partners . . . . . . . . . . . . . . . . . . . . . . 20 Consumers Energy . . . . . . . . . . . . . . . . . . . . . 9 Deloitte Corporate Finance . . . . . . . . . . . . . . . 20 Detroit Regional Chamber . . . . . . . . . . . . . . . . . . . 19 DTE Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Honigman Miller Schwartz and Cohn . . . . . . . . . . . . 1 Macomb Community College . . . . . . . . . . . . . . . 6, 19
Local experts say devil’s in the details when trying to gauge impact of Obama’s community colleges plan
McLaren Health Care . . . . . . . . . . . . . . . . . . . . . . . 1 Michigan Community Colleges Association . . . . . . 19 Oakland Community College . . . . . . . . . . . . . . . . . 19 P&M Corporate Finance . . . . . . . . . . . . . . . . . . . . 20 Presidents Council, State Universities of Michigan . 19
Obama called on Congress to support the CRAIN’S DETROIT BUSINESS REE WOULDN T America’s College Promise initiative laid out by the White House this month. BE A FIRST ree community college, as a matThat plan calls for making two years ter of public policy, could mean a Proposed federal of community college free for up to 9 milprogram wouldn’t commitment of about $350 million be first that local lion qualifying “responsible” stua year of government funds for students could go dents, letting them earn credits for to community the students of 28 Michigan schools who the first half of a university bachecollege at no would take part in such a program. cost, Page 19 lor’s degree — or for skills needed in And that’s just for the community the workforce — at no cost. college students who are on a track to Local experts said odds are long that the complete a four-year degree or professional cerproposed Promise will be kept, since Congress tification program right now. If the lure of free needs to act either by way of legislation or support tuition as proposed by President Barack Obama a funding appropriation when the president’s draws students away from a traditional univernext budget proposal is expected in mid-Februsity freshman class enrollment, or adds promisary. Even if the Republican-dominated Coning — but at-risk — students who had been optgress gets on board, individual state participaing out of postsecondary education before, the tion is also optional. price tag could climb much higher. See College, Page 19 In his State of the Union address last week, BY CHAD HALCOM
F
Quarton Partners . . . . . . . . . . . . . . . . . . . . . . . . . 20
’
Quinn Evans Architects . . . . . . . . . . . . . . . . . . . . . . 7 Roxbury Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
F
St. Joseph Mercy Health System . . . . . . . . . . . . . . . 1 TRW Automotive Holdings . . . . . . . . . . . . . . . . . . . 10 UHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 WADL TV-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 WFDF AM 910 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Washtenaw Community College . . . . . . . . . . . . . . . 19 Wayne County Community College District . . . . . . . 19 Word Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Department index CALENDAR . . . . . . . . . . . . . . . . . . . . 17 CLASSIFIED ADS . . . . . . . . . . . . . . . . 18 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 8 ISTOCK PHOTO
OPINION . . . . . . . . . . . . . . . . . . . . . . . 8 PEOPLE . . . . . . . . . . . . . . . . . . . . . . 17 RUMBLINGS . . . . . . . . . . . . . . . . . . . 23
Agree’s winning real estate formula: Acquire, diversify BY KIRK PINHO CRAIN’S DETROIT BUSINESS
Under Joey Agree’s direction, Agree Realty Corp. has nearly tripled its retail portfolio size and more than doubled its enterprise value in the past five years, making the Bloomfield Hills-based publicly traded real estate investment trust a more formidable force in its industry. A 2010 shift in strategy pushed
by CEO Agree and approved by its board moved Agree Realty (NYSE: ADC) into a rapid acquisition mode that came around the same time as the real estate market collapse. But Agree saw opportunity, and a chance to diversify, by changing its model. That’s at the same time two of its then-key tenants, Borders Group and Kmart, were in a downward spiral and closing stores. The company, which is a land-
THIS WEEK @ WWW.CRAINSDETROIT.COM
lord to retailers in both neighborhood shopping centers and in freestanding locations, has increased its portfolio size to 209 properties from 73 and boosted its enterprise value to $805 million from $304 million in January 2010. It was a calculated risk to grow so quickly; the company launched its acquisition platform in April 2010 during a time of low interest
CEO Joey Agree says the company looks for tenants focused on recessionresistant sectors.
See Agree, Page 18 How the auto show revs up a restaurant Amy Haimerl visits the FIrebird Tavern and sees for herself the impact of the show on the local economy, crainsdetroit.com/blogs COURTESY OF FIREBIRD TAVERN
WEEK ON THE WEB . . . . . . . . . . . . . . 23
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Adoba works to settle tax bills with county, negotiate new flag BY SHERRI WELCH CRAIN’S DETROIT BUSINESS
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The Israel-based owners of the state’s second-largest hotel, the former Hyatt Regency Dearborn, are working with Wayne County officials to clear up back taxes — and separately are getting closer on negotiations with hotel brands to bring a new flag to the site. The group is negotiating a payment plan for back taxes owed to the county to keep the hotel from being foreclosed on in February. That’s after settling its more recent tax liabilities and the water bill with the city of Dearborn. Through its local attorney, Steven Z. Cohen, senior partner at Cohen, Lerner & Rabinovitz PC in Royal Oak, ownership group Royal Realties LLC is negotiating a payment plan to pay the county back more than $1.4 million in property taxes from 2012 and 2013 owed on the hotel now operating as the Adoba Dearborn Detroit. The 2012 taxes, which totaled roughly $886,000 as of last week, led the county to begin foreclosure proceedings on the 772-room hotel and conference center in October. A hearing is set for Feb. 19 on that issue, but Cohen said last week that he expected to have a payment plan worked out by early this week. Wayne County is “pursuing a strategy to try and keep the Adoba alive, open and viable because we know once it closes it (will be) very difficult to get it back into operation,� said David Szymanski, chief deputy treasurer for the county. However, it’s also to the owners’ benefit to resolve this, he said, since they are paying 18 percent interest on the outstanding taxes due. Even as it negotiates the payment plan, Royal Realties is pursuing an alternate source of financing to pay off back taxes, Cohen said. The 2014 tax liabilities with the city of Dearborn were brought current with a mid-January payment of $570,917. That followed a $335,063 payment made Oct. 31 to cover delinquent personal property taxes from 2012 and 2013 and the first installment of the 2014 taxes, which enabled the hotel to secure licenses needed to continue operating. Winter taxes to the city totaling more than $60,000 are due in midFebruary. While tidying up its financial house, Royal separately is negotiating to bring a new national or international flag to the hotel. The hotel’s new general manager, Paul Banigan, last week said the ownership group has narrowed that down to a handful of brands. He declined to disclose which ones. But in December, Kevin Hilchey, CEO of Longview, Texas-based Lodging Host Hotel Corp, the hotel’s new management company, said brands touring the hotel included Marriott International Inc.; Best Western International Inc.; Wyndham Worldwide; Choice Hotels International Inc.; and InterContinental Hotels Group PLC, which owns the Crowne Plaza and Holiday Inn brands, among others.
SHERRI WELCH
Adoba Dearborn Detroit owner Royal Realties LLC is negotiating a payment plan for more than $1.4 million in property taxes owed to Wayne County.
Nothing would be better than a new flag to let the community know the hotel is strong, Banigan said. Hotel brands require a property improvement plan as a condition of agreeing to affiliate with a property. Hospitality consultants have valued the needed improvements at the former Hyatt at somewhere between $10 million and $50 million. Cohen said he is not directly involved in negotiations with the hotel brands, but not all of those brands Royal is talking with would
require an upfront investment, other than the cost to put the brand’s reservation system in place. Required upgrades could come later, he said. An agreement with a new flag could be in place within a month, Cohen said. Lodging Host secured the right to operate the hotel under the Adoba flag until a new flag is brought in through an agreement with former management company Atmosphere Hospitality Management Services LLC. The majority of groups with future bookings at the hotel have kept their reservations, Banigan said. Things are looking up, he said, with group bookings now into 2018 and a few sellout nights recently for the hotel. The hotel hasn’t sold out in three years, but it sold out Jan. 17, Jan. 21 and 22, Banigan said, thanks to group meetings. Sherri Welch: (313) 446-1694, swelch@crain.com. Twitter: @sherriwelch
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Application period nears for Innovation Fund program BY KIRK PINHO
(Applicants) may not get an “ award of cash, but there may be a meeting, some advice given, some suggestions of modification.
”
James Jacobs, Macomb Community College
CRAIN’S DETROIT BUSINESS
The application period for up to $100,000 in funding for startup and emerging businesses through the Innovation Fund, a partnership between Macomb Community College and J.P. Morgan Chase & Co., begins next month. MCC President James Jacobs
said it’s not yet known the exact date the application period will begin, but funding is expected to be awarded starting in the summer after a committee review. “This (application) isn’t something you mail in and then a committee meets and says ‘yes’ or ‘no’ and sends you back a ‘yes’ or ‘no’ answer,” he said. “In the process, we want to make sure everybody
M&A Experience
In Your Corner.
gets something out of this. They may not get an award of cash, but there may be a meeting, some advice given, some suggestions of modification.” Funding will be available to companies within Wayne, Oakland, Macomb, Livingston, Washtenaw, Genesee, Monroe, Shiawassee and St. Clair counties. The focus will be on companies in advanced manufacturing, information technology, alternative energy, health care, and logistics and supply chains. Grants of $25,000, which don’t have to be repaid, will be awarded to startups. In other cases, up to $100,000 will be made available to advance the progress of emerging companies toward more substantial equity funding. Those awards would have to be matched 100 percent by the company and repaid after the third year, Jacobs said. “If that doesn’t happen, we can take some kind of equity position in the company,” he said. Companies receiving funding will be required to provide employment opportunities to MCC students through internships. The fund received $1 million from the New York City-based bank’s foundation; $1 million from MCC’s Strategic Fund, approved by the board of trustees in August; and $700,000 that the community college will raise through its foundation. The fund is part of J.P. Morgan Chase’s plan to provide $100 million in investment in the Detroit area over five years, an effort announced last spring. The application will be available at macomb.edu/business-commu nity/CIE/index.html. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB
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First Tier Ranking in Corporate Law and Commercial Litigation
Contact Pete Roth at pgroth@varnumlaw.com
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CRAIN’S SEEKS NOMINEES FOR 20 IN THEIR 20S Do you know a 20-something who is someone to watch? Crain’s 20 in their 20s recognition program seeks young professionals who are making their marks in the region. Candidates are not limited to any particular field or activity but include up-and-comers who are making waves as young professionals within a company, have shown success or originality as entrepreneurs, or have made local impacts in some other demonstrable way. Besides the corporate world, candidates are considered from creative industries, nonprofits and social entrepreneurship arenas. Winners will be profiled in the June 1 edition and honored at a future awards event. Nominees must be 29 or younger before June 1. Nominations are due Feb. 13. To fill out the form, visit www.crainsdetroit.com/nominate. Questions? Contact Amy Haimerl at ahaimerl@crain.com or (313) 446-0416.
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Midtown building to be rehabbed, hammer-nail lighting will be saved BY KIRK PINHO AND AMY HAIMERL CRAIN’S DETROIT BUSINESS
In the past year, more than 300 new apartments have been announced in Midtown Detroit. The largest of the projects is the Strathmore Hotel, a $28 million rehabilitation of an eight-story building on Alexandrine Street. When completed in 2016, that will bring 129 one- and two-bedroom apartments into the district. Among the most iconic of the developments, however, is the Professional Plaza, which is known for the illuminated hammer-and-nail action atop its 12 stories. Last week, Detroit-based developer The Roxbury Group announced plans to redevelop the vacant 130,000-square-foot office building at Woodward Avenue and Selden Street into 72 apartments and 2,000 square feet of ground-floor retail space by the middle of next year. That’s a shift in plans for the building, which was slated for demolition last year. For the question on many minds — will the hammer-and-nail neon be saved? — the answer is yes. Roxbury principal David Di Rita said the lighting — which is a nod to the carpenters union that was headquartered there — will be removed from the exterior of the building but reused in the project. “We’ll find a good home for it, just not on the building,” he said. Exterior renovations will include a glass façade, masonry restoration and improvement of the grounds of the building, which was built in 1965. The interior will feature 50 one-bedroom, 20 twobedroom and two three-bedroom apartments. “The interior is going to be going off international style, so midcentury modern,” said project architect Brad Cambridge of Quinn Evans Architects Inc., which also serves as the historic consultant. “Clean lines, simple detailing, an open floor plan. For the commercial spaces on the first floor, we’ll keep ceilings high. And with the floor-to-ceiling windows, you’ll have fantastic views.” What those views will cost, however, has not yet been determined. “We are continuing to model (rental rates) based on Midtown pricing, which has been somewhat lagging behind downtown,” he said. “I still see these as being more affordable than a David Whitney (unit),” which start at $1,050 for a one-bedroom unit. Roxbury Group is under contract to buy the building from Mid-
town Project LLC, Di Rita said. That entity is registered to Gary Novara, of counsel for Novara Tesija PLLC in Southfield. Financing comes from Capital Impact Partners and Invest Detroit.
Roxbury is also working with the Michigan Economic Development Corp. on other possible funding, according to a news release. Detroit-based Walbridge Aldinger Co. will be construction manager.
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The hammer-and-nail lighting — a nod to the carpenters union that was headquartered there — will be reused in the project.
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20150126-NEWS--0008-NAT-CCI-CD_--
1/23/2015
2:40 PM
Page 1
Page 8
January 26, 2015
CRAIN’S DETROIT BUSINESS
OPINION
State, biz should work on tax credits A
s our sister publication Crain’s Chicago Business reports, the state of Illinois is anticipating a $9 billion budget deficit for the year beginning July 1 — about 25 percent of its roughly $36 billion general fund budget. Makes Michigan’s $325 million budget hole look a little better. As a matter of fact, Illinois’ deficit is about the size of Michigan’s entire general fund budget. Still, Michigan’s shortfall, compounded by a larger one looming for fiscal year 2016, looks bad for a state skippered by a CPA. Cutbacks are inevitable, but a major factor in the deficit are tax credits being exercised by companies now that the economy is better and they’re hitting the benchmarks needed to claim them. We believe the state should have the flexibility to work with companies that have rightful credits to spread them out over a period of years. If that hasn’t been tried, maybe it should be.
How to dry up water woes Suburban water customers could be looking at double-digit hikes in water rates, in part because the system needs long-delayed capital improvements, but also because usage is going down. Higher rates seem likely to motivate users to watch their water usage more closely, which would lead to lower consumption and the need to further raise rates. The answer, of course, is more users, preferably big industrial ones. So one important focus for economic development could be: What industries consume a lot of water? And are some of them in waterstarved Southwest states? Meanwhile, just as Chick-fil-A promotes its products with ads feature cows holding “Eat Mor Chikin” signs, we might need a “drink more water” campaign to help wean people off the bottled stuff. Metro Detroit not only has plenty of water, the drinking quality is good as well. Considering what’s coming out of the tap in Flint, that’s not something to take for granted.
LETTERS Coal fleet aging, but not out of date Editor: It was frustrating to read comments in Jay Greene’s Jan. 21 blog, “How to decipher Gov. Snyder’s State of the State mentions of energy policy,” by supposed experts on energy and environmental policy like Steve Frenkel’s erroneous statement that Michigan is home to among the least economic coal plant fleets in the nation. That’s just not true. Our coal fleet may be aging, but the operating performance and reliability of our coal fleet is excellent, and they are the most costcompetitive generation resources we own. These plants also comply with all current federal and state air and water quality standards. Consumers Energy is shuttering
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 by April 2016 some of our smaller, older coal plants that date back 50 years because it doesn’t make economic sense for our customers to invest additional capital to bring those plants into compliance with new air quality regulations. We
also are transitioning our fleet to cleaner sources of energy like natural gas and renewable energy, and we are reducing customer demand and lowering customer bills by offering a variety of energy efficiency programs. Does it make sense for the state’s energy providers to transition to cleaner, more sustainable energy sources? Of course. But let’s not lose sight of the fact that our coal fleet is and will continue to be central to our company’s ability to serve our customers with affordable, reliable and, yes, increasingly clean sources of energy. David Mengebier Senior vice president, governmental and public affairs, Consumers Energy
KEITH CRAIN: It is time to make a decision on jail site Our new Wayne County Executive, Warren Evans, seems to be making all the right moves. Reducing head count, lowering salaries — these are all steps in the right direction. But there is one looming decision that has to be made. And the sooner, the better. Something has to be done about the unfinished jail site on Gratiot Avenue. It is an eyesore and certainly is contributing to the blight of our city in a very visible spot.
I am told that the county has somewhere around $150 million already spent on this colossal disaster. Luckily, Evans doesn’t have to shoulder any of the responsibility for this fiasco. But someone has to take a hard look at where all this money was wasted. It would seem impossible to believe that the county already sunk so many millions of
dollars into a project that is nowhere near completion. Construction was suspended in June 2013 after a county report that the project would run $91 million over the planned cost. Evans walked into a construction and financial quagmire that isn’t going to solve itself anytime soon. Whatever the outcome, there are going to be a lot of very
unhappy citizens. And while Evans is getting a very tough look at the county’s finances, anyone interested in acquiring the site should sit down with county officials quickly to make some meaningful offers for the site. The whole situation is a mess. It is going to take some serious financial acumen to sort through all this and require a great deal of financial transparency at the same time. It’s critically important for
Evans to maintain complete transparency on all financial issues if he wants to continue to have the goodwill of his constituencies. The worst-possible scenario would be to try to hide any of the bad news from the public. Evans has a clean sheet of paper, and it is essential that he tackles this ugly mess as soon as possible. The longer he waits, the more the rumors will fly, and that’s one thing that County Executive Evans doesn’t want.
20150126-NEWS--0009-NAT-CCI-CD_--
1/23/2015
10:29 AM
Page 1
CRAIN’S DETROIT BUSINESS
January 26, 2015
Page 9
Deciphering energy proposals in State of the State During his State of the State address last week, Gov. Rick Snyder said Michigan needs a plan to eliminate energy waste and promote the conversion of coal to natural gas, which the state has in abundance. Snyder has always been a cautious leader when it comes to energy policy. Sure, he has been out front — and even sometimes led a reluctant Michigan Legislature — in promoting expensive but overdue road improvements, expanding Medicaid through Obamacare and helping Detroit achieve positive results through bankruptcy proceedings. But energy policy? In his 49-minute State of the State speech last week, Snyder spent one minute, mostly stating the obvious, when it came to energy. Snyder’s speech included these quick nuggets on energy: 䡲 Michigan needs to set its own energy policy, or far-away legislators in Washington, D.C., will do it for us. 䡲 Michigan needs a plan to eliminate energy waste and promote the conversion of coal to natural gas. I say Snyder stated the obvious here because everyone I know involved in energy policy has been saying these same things for years. But the one surprise in Snyder’s speech was his call to create a new state energy agency to coordinate an adaptable and flexible energy policy for Michigan. Snyder said the goal of the new energy agency would be “so we have the expertise we need to make decisions that are adaptable, affordable, reliable and environmentally protective.” The new energy agency would combine experts in the Michigan Public Service Commission, the state Department of Licensing and Regulatory Affairs, the Department of Environmental Quality, and the Michigan Economic Development Corp. and related state energy office. Beyond that, however, Snyder made no promises, nor did he recommend any bills that the Legislature could act upon. Snyder did say he will give a special energy speech sometime in March, one that will explain his thoughts on the new energy agency and how Michigan should “keep the lights on.” In the meantime, I am sure some state legislators will sponsor new bills on renewable energy, customer choice and energy efficiency. But wait. Snyder has previously said much more about energy policy than his latest State of the State speech, and he commissioned in 2013 a yearlong study on renewable energy, efficiency, choice and how high rates affect people and businesses.
Renewables Over the past three years, as Michigan’s renewable energy portfolio standard sunset date of Dec. 31, 2015, has drawn closer and closer, Snyder has hinted at what he favors. For example, in his last major energy speech, in December 2013,
Snyder suggested he could be in favor of doubling the current mandate that utilities produce 10 percent of their electricity production portfolio from renewJay Greene able energy, primarily wind, solar and biomass. While he declined to state a specific percentage target as a goal, the governor said a future energy poli-
Energy to earn
cy should cover at least 10 years. In late 2013, a 90-page Michigan Public Service Commission report concluded there are no technical problems to increasing the renewable standard to as much as 30 percent of electricity production in the state by 2035. Based on the governor’s own words, Michigan could safely add 1 percent of renewable energy per year from 2015-2025 to generate 20 percent of renewable energy by 2025.
Utility reaction Consumers Energy Co. spokesman Dan Bishop said the Jackson-based
utility has met the existing renewable energy portfolio standard “one year ahead with our second wind farm in Tuscola County.” Renewable energy “is part of the energy mix.” DTE Energy Co. CEO Gerry Anderson complimented Snyder on recognizing there are major energy issues facing the state. Anderson said state utilities are planning to retire at least 33 percent of generating capacity because the power comes from older coal plants that must be shut down because of Environmental Protection Agency rules. “That is a huge part of produc-
tion,” he said. “We need a plan for the next 15 years, and we need a process to revise that plan as demand and prices change, new technology becomes available,” he said. Steve Frenkel, Union of Concerned Scientists’ Midwest office director, said he hopes the state Legislature passes a bill this year to increase the state’s renewable energy standard, a move that could drive more than $9.5 billion in new capital investments in Michigan. This column originally appeared as a Jay Greene blog at crainsdetroit.com
20150126-NEWS--0010-NAT-CCI-CD_--
1/23/2015
10:28 AM
Page 1
Page 10
January 26, 2015
CRAIN’S DETROIT BUSINESS
Big Deals of 2014
ZF CEO: TRW acquisition gives access to ‘brain of the chassis’ ZF Friedrichshafen AG’s pending $12.4 billion acquisition of Livonia-based TRW Automotive Holdings Corp. is the largest M&A deal in Southeast Michigan in 2014. The deal, expected to close by mid-year, will make Germanybased ZF a key player in collision avoidance and driverless cars. ZF wants to combine TRW’s sensing and software expertise — cameras, radar and controllers — with ZF’s chassis systems. ZF CEO Stefan Sommer, 52, spelled out his strategy for the two
companies during a Jan. 13 interview with Automotive News correspondent David Sedgwick. What key technology does TRW offer for collision avoidance? We want to have access to software expertise from TRW for brake controls and other areas of autonomous driving. Because the brake controller is the brain of the chassis. And that was our main strategic motivation, to gain access to the brain of the chassis, for the deal with TRW.
So TRW’s stability control is a key technology? All functions like collision avoidance and active cruise control — everything starts from stability control. To get access to that technology was one of our main rationales for the acquisition. Rearwheel steering (a product introduced by ZF at the Detroit auto show) is something that you can use with stability control. This will be the story of the future. ZF had its own chassis control hardware that would be useful for driver-
less cars. Why does ZF need TRW? We have things like active body control systems and sophisticated shock absorbers. All this is useful for ride and handling. But we would have been mainly a tier-two supplier. What’s wrong with that? The suppliers (of collision-avoidance systems) would specify what the axle would look like and the type of shock absorber. We felt we wouldn’t be competitive as a tier-two company. So we needed to (acquire) key technologies like electric steering,
brake controls, assist systems and sensors. Do automakers want suppliers to develop complete collision-avoidance systems? Some automakers need it because they don’t have the expertise. Oth- Stefan Sommer, ers will not ZF Friedrichshafen buy a (complete) system from us — they just want components. In the end, we need the (systems) competence to design the right components for the next generation of vehicles.
Q&A
How long will it take to develop collision-avoidance systems that combine TRW’s technology with ZF components? To integrate our rear-axle steering into TRW’s vehicle stability system, it would typically be two or three years. But if you want to integrate electric (powertrains) or torque vectoring, it might take another two, three or five years. How long will TRW CEO John Plant remain with the company? For a certain time after the merger, John will support the integration. With all his experience and support, he will give TRW management confidence during Plant the transition.
92 is the new cool. It’s true. Crain’s Detroit Business and Best Companies Group recently named Greenleaf Trust “The Number One Cool Place to Work in Michigan.” Among the many contending, medium-sized companies (50 to 249 U.S. employees), we rose to the top thanks to high measurements in our workplace policies, business practices, philosophy, systems and demographics, and employee experience. Being told that we’re cool by a nationally prominent media company doesn’t give us a big head, of course, but it does give us a big incentive to continue doing things we’ve long believed are in the best interests of our clients. Which they acknowledge, in turn, by awarding us nearly perfect marks in client satisfaction.* And really, at the heart of it all, what could be cooler than that?
*2104 Greenleaf Trust wealth management & personal trust client satisfaction survey
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Will it be difficult to harmonize the two companies’ corporate cultures? There isn’t a single ZF culture and a single TRW culture. If you look at TRW’s management teams, they also have people from France, Belgium and Germany. Your markets really form your culture. If you look at the chassis area of ZF, they are competing in the same business environment as TRW. Daimler had trouble absorbing Chrysler’s culture after the acquisition in 1998. I think we can deal with this much better. DaimlerChrysler was under pressure. Everybody expected them to create common vehicle platforms. We don’t have a task like this. Will ZF maintain TRW as a standalone operation? We will keep TRW as a company, as a legal entity, as it is today. There will be a TRW with its own board, and they will be responsible for their own business in the world markets. What activities will the companies share? We will collaborate on projects. It’s a technology story. We will look into electronics, for example. TRW has huge and very efficient electronics plants, and we have big demand within ZF for electroniccontrol units for transmissions.
20150126-NEWS--0011-NAT-CCI-CD_--
1/23/2015
11:40 AM
Page 1
CRAIN’S DETROIT BUSINESS
January 26, 2015
Page 11
CRAIN'S LIST: LARGEST MERGERS & ACQUISITIONS OF 2014 Rank
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DBpageAD_DBpageAD.qxd 1/22/2015 2:15 PM Page 1
20150126-NEWS--0013-NAT-CCI-CD_--
1/23/2015
11:40 AM
Page 1
CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS
January 26, 2015
Page 13
CRAIN'S LIST: LARGEST MERGERS & ACQUISITIONS OF 2014
Continued from Page 11 Rank
Acquirer name
Target
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Target advisers
Date effective
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:B :F
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20150126-NEWS--0014-NAT-CCI-CD_--
1/23/2015
11:41 AM
Page 1
Page 14
January 26, 2015
CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS
CRAIN'S LIST: LARGEST MERGERS & ACQUISITIONS OF 2014
Continued from Page 13 Rank
Acquirer name
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LIST RESEARCHED BY
Huron Capital Partners
FRIDAY, FEBRUARY 6 | 11 AM - 4 PM 11 AM | DESIGNER PRESENTATION Mid-America Room, Suite 86 $10 Admission to benefit BBAC We challenged twelve top designers to create two very different spaces, each starting with the same three items. See their fabulous rooms and learn how they put it all together. All ticket proceeds beneďŹ t Birmingham BloomďŹ eld Art Center.
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12 PM - 4 PM | OPEN HOUSE Participating Showrooms Tour the room vignettes and meet the designers who created them. Register by February 4th at michigandesign.com/news-events or call 248.649.4772.
Platform Criteria Buy & Build Strategies Revenues: Up to $200M EBITDA: $5M or more No Minimums for Add-ons
Sector Focus Specialty Manufacturing Consumer Goods & Services Business Services Healthcare
1700 Stutz Drive | Troy, MI 48084 | 248.649.4772 M - F | 9AM - 5PM | Open to the public michigandesign.com
EXECUTIVE CALENDAR Detroit Office: 313.962.5800
|
www.huroncapital.com
|
Toronto Office: 416.234.0313
Regional event dates, locations and contacts, all in one place.
crainsdetroit.com/executivecalendar
20150126-NEWS--0015-NAT-CCI-CD_--
1/23/2015
11:41 AM
Page 1
CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS
January 26, 2015
Page 15
CRAIN'S LIST: LARGEST MERGERS & ACQUISITIONS OF 2014
Continued from Page 14 Rank
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20150126-NEWS--0016-NAT-CCI-CD_--
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11:42 AM
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January 26, 2015
CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS
CRAIN'S LIST: LARGEST MERGERS & ACQUISITIONS OF 2014
Continued from Page 15 Rank
Description
Value of transaction ($000,000)
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Acquirer advisers
Date effective
Acquirer name
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Source: Company submissions, Crain's research and Bloomberg News. Many transactions had multiple sources of information. In some cases, more than one estimated value of a transaction exists. In those cases, Crain's has chosen the value it believes to be most accurate. The list does not include all 2014 transactions; only transactions valued at $10 million or more are included. LIST RESEARCHED BY CRAIN'S STAFF
Align your personal and professional plans today. For a stronger tomorrow.
FirstMerit PrivateBank and Commercial Banking For Jeff, managing personal and business ďŹ nances on his own was challenging. But with the support of his FirstMerit Bank team of advisors, he was able to use their Treasury Management services to optimize his cash ďŹ&#x201A;ow, Retirement Planning services* to beneďŹ t his employees, and Succession Planning services to ensure his companyâ&#x20AC;&#x2122;s future. So now, Jeff has the support he needs to reach his maximum potential â&#x20AC;&#x201D; both personally and professionally.
TO L E A R N MOR E, C O N T A C T :
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ďŹ rstmerit.com
Deposit and loan products are offered through FirstMerit Bank, N.A. Loans are subject to credit approval. *Non-deposit trust products are not insured by the FDIC, are not deposits or other obligations of FirstMerit Bank, N.A. or any of its afďŹ liates, are not guaranteed by FirstMerit Bank or any of its afďŹ liates, and are subject to investment risks, including possible loss of the principal invested.
2423_FM15
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2:41 PM
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CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS
January 26, 2015
PEOPLE FINANCE Robert Wilson to senior vice president and business development officer, Citizens Financial Group Inc., Southfield, from vice president and director of the private equity group, Huntington National Bank, Troy.
MANUFACTURING
Evans
Eldridge
Bob Evans to president and general counsel for North America, Freudenberg North America LP, Plymouth Township, and regional representative, Freudenberg Group, from general counsel Americas. Melissa Eldridge to director of new product development and sourcing, McKeon Products Inc., Warren, from new product development manager-innovations, HoMedics Inc., Commerce Township.
CALENDAR
IN THE SPOTLIGHT Central Processing Services has named Kevin Bopp as CEO and chief communications officer for sister company Associated Community Services. Bopp has been with Southfieldbased ACS for more than five years. Before that, he worked for Diversified Construction and Larson Realty. Bopp As CEO, he occupies a new position that covers and expands the role held by the recently retired Ted Wildman, former vice president of operations. Bopp also will provide counsel to executive leadership on communications strategy, public relations and client outreach. Bopp, 43, attended Michigan State University, where he studied public affairs. and education, Engineering Society of Detroit, Southfield.
REAL ESTATE Jake Olsman to vice president, Bloomfield Capital Partners LP, Birmingham, from associate.
TELECOMMUNICATIONS Douglas Black to vice president of operations, BullsEye Telecom Inc.,
SERVICES Stephen Koons to senior vice president, automotive, ANXeBusiness Corp., Southfield, from founder/presi-
Page 17
Southfield, from senior vice president, network services, Grid4 Communications Inc., Troy.
dent, Trumble Park Partners, Durand.
TRANSPORTATION
Tim Walker to senior meetings and events manager, Special D Events,
Jeff Rogers to CEO, Universal Truckload Services Inc., Warren, from exec-
Ferndale, from director of programs
utive vice president.
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WEDNESDAY JAN. 28 Executive to Executive Series No. 2: Achieving Outcomes Through Continuous Improvement. 8-10 a.m. Plante Moran PLLC. The speaker is Samuel Flanders, M.D., executive vice president of quality, safety and clinical efHealth. fectiveness, Beaumont Lawrence Technological University science building atrium, Southfield. $30, or free for LTU students, faculty and alumni. Contact: Donna Kress, (248) 204-3054; email: dkress@ltu.edu; website: ltu.edu/management/exec utivetoexecutive.asp. Detroit Economic Club Presents.11:30 a.m.-1:30 p.m. With Mike Petters, president and CEO, Huntington Ingalls Industries. Westin Book Cadillac Detroit. $45 DEC members, $55 guests of members, $75 others. Ticket sales end at noon Jan. 27. Contact: (313) 963-8547; email: info@econ club.org; website: econclub.org.
THURSDAY JAN. 29 Inside the CEO Mind. 8-10 a.m. Detroit Regional Chamber. Cynthia Pasky, CEO of Strategic Staffing Solutions, speaks at breakfast event. $25 chamber members, $50 nonmembers. Contact: Maggie Oldenburg, (313) 596-0482; email: molden burg@detroitchamber.com; website: detroitchamber.com/events.
Automotive Industry Outlook: Opportunities & Risks. 5-8 p.m. Marketing & Sales Executives of Detroit. Mike Wall, director of automotive analysis for IHS Automotive, speaks on IHSâ&#x20AC;&#x2122; outlook for 2015 and beyond at dinner and networking event. Management Education Center, Troy. $45 members, $65 nonmembers. Contact: (248) 6436590; website: msedetroit.org. Preview of M1 Concourse. 6-8:30 p.m. Asian Pacific American Chamber of Commerce. This networking event includes a behind-the-scenes
DETROIT POLICY CONFERENCE
MAPPING MAYâ&#x20AC;&#x2122;S ROAD VOTE
The Detroit Regional Chamber focuses on â&#x20AC;&#x153;Power Perspectivesâ&#x20AC;? at its Detroit Policy Conference, set for 7:30 a.m. to 4 p.m. Feb. 26. Rodrick Miller, Detroit Economic Growth Corp. president and CEO, and Paul Pastorek, education adviser to Gov. Rick Snyder, will discuss the future of economic development in the Detroit region and the importance of education in a changing world. The event will be at MotorCity Casino Hotel, 2901 Grand River Ave., Detroit. The cost is $99 for chamber members or $165 for nonmembers (cost includes membership). For information or to register, contact Janelle Arbuckle at (313) 596-0340 or jarbuckle@detroit chamber.com or visit detroitchamber.com/events.
The Ann Arbor/Ypsilanti Regional Chamber of Commerce hosts a lunch-and-learn program with Kirk Steudle, director of the Michigan Department of Transportation, from 11:30 a.m. to 1 p.m. Jan. 29. Steudle will talk about the legislative package that Michigan lawmakers recently passed, and on which voters must make a decision in May. Itâ&#x20AC;&#x2122;s designed to increase road funding by shifting from a flat tax to a tax on fuel at the wholesale level. It would also ease the 6 percent sales tax now levied on fuel, which does not go toward road funding. Another bill asks voters to raise the sales tax from 6 percent to 7 percent; the additional money would go to schools and local government. The luncheon will be held at Ann Arbor City Club, 1830 Washtenaw Ave., Ann Arbor. The cost is $40 for members, $45 for walk-in members and $55 for nonmembers. For more information or to register, visit a2ychamber.org or contact Robin Lawrence at (734) 214-0113 or robin@a2ychamber.org.
preview of the $40 million private car garage, 1.5-mile race track and autothemed retail destination. Suburban Exotic Motor Cars of Michigan Showroom, Troy. $20 for members and strategic partners, or $35 to join and attend. Contact: Erin Mclin, (248) 4305855; email: erin@apacc.net; website: apacc.net.
UPCOMING EVENTS SphinxCon. 3-9 p.m. Jan. 30, 9 a.m.-6 p.m. Jan. 31, 9 a.m.-noon Feb. 1. More than 40 arts leaders, including National Endowment for the Arts Chairman Jane Chu, plus hundreds of art professionals and educators are slated to attend. Westin Book Cadillac Detroit. $35 for students, $50 for day pass or $150 for full pass. Contact: (313) 877-9100; email: abigayl@sphinxmusic.org; website: sphinxcon.org. 12th Annual Open Your Heart Gala. 5:30-9 p.m. Feb. 5. Lighthouse of Oakland County. Event benefits northern Oakland County families in need, and
features Mojo from Q95.5 Mojo in the Morning. Rochester Mills Production Brewery, Auburn Hills. $50 â&#x20AC;&#x153;Friendâ&#x20AC;? tickets, $100 VIP tickets. Contact: (248) 972-1487; email: pperkins@light houseoakland.org; website: light houseoakland.org. 3rd Annual Hardcore THAW. 8-11 p.m. Feb. 7. WWJ Newsradio 950 and The Heat and Warmth Fund. Les, Seth and Ashley Gold, stars of TruTVâ&#x20AC;&#x2122;s â&#x20AC;&#x153;Hardcore Pawn,â&#x20AC;? host event with food, drink, music and appraisals. American Jewelry & Loan, Detroit. $125 VIP, $60 general admission. To buy tickets or learn more about this event or others, including the Feb. 6 radiothon or the Feb. 5 Celebrity Coneys for a Cause, call (800) 866-8429, email info@thawfund.org or visit thawfund.org.
Possible is everything. Today, more than ever, global competition, new technologies, and corporate streamlining require innovative thinking and leadership abilities. Continuing your education can be key to your success. From Project Management and Entrepreneurial Skills to Workplace Technology
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January 26, 2015
CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS
Agree: At the time of a market collapse, CEO saw opportunity â&#x2013; From Page 3
Financial management Joey Agree, a graduate of the University of Michigan and the Wayne State University Law School, grew up in a real estate family, becoming the fourth generation to enter the field. He started working for the company full time in 2006 after four years as director of acquisitions for Farmington Hills-based Grand Sakwa Properties LLC.
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EXECUTIVE DIRECTOR The Presidents Council, State Universities of Michigan (PCSUM) seeks nominations and applications for the position of Executive Director. PCSUM serves as a forum for the presidents and chancellors of Michiganâ&#x20AC;&#x2122;s fifteen public universities to discuss and frame positions on key higher education finance and public policy issues. The executive director will manage the daily activities of the Council and be the principal advocacy voice for public higher education in Michigan with state policy makers and public opinion leaders. Nominations and applications may be mailed to Patricia Farrell at PCSUM, 101 S. Washington Square, Suite 600, Lansing MI 48933. PCSUM is an equal opportunity employer.
Crainâ&#x20AC;&#x2122;s Classifieds Gets Results
PROCEDURE: Your bid is to be placed in a large manila envelope and must be sealed securely; and addressed to RIVER HOUSE CO-OP, ATTN: Board of Directors/RFP, 8900 E. Jefferson, Detroit, MI 48214. Bids will remain sealed and placed in a lock box until a subcommittee of the board opens them on Monday February 2nd. They will read, evaluate and make its recommendation to the entire board. The full board will score each proposal and award the contract.
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A U C T I O N
Auction: Tues.,, Feb. 17th at 2pm p Open House: Tues. Feb. 10th 2-4pm Â&#x152;Â&#x160; Â&#x160;Â&#x2021; Â&#x2021;Â&#x2021; ÂŁ Â&#x2021;Â&#x2021; Â&#x2021;ÂŁ ÂŁĂ&#x201E;Ă&#x2021; Ă&#x201E; Ă&#x201E;Ă&#x2021;Ă&#x2021;Ă&#x2030;Ă&#x2030;½ Ă&#x2030;½Ă&#x152;ÂşĂ&#x2C6;Ă&#x2030; Ă&#x2030;½Ă&#x152; ½Ă&#x152;Âş ÂşĂ&#x2C6;Ă&#x2030;ÂşĂ&#x2021;Ă&#x192; Ă&#x2C6;Ă&#x2030;ÂşĂ&#x2021;Ă&#x192; Ă&#x2C6;Ă&#x2030; Ă&#x2030;Âş ÂşĂ&#x2021;Ă&#x192; Ă&#x2021;Ă&#x192; Â?Ă&#x152;Ă&#x17D; Â?Ă&#x152;Ă&#x17D;Â&#x192; Â?Ă&#x152; Â? Ă&#x152;Ă&#x17D;Â&#x192;Â&#x192; ¨Ă&#x201E;Ă&#x160; ¨Ă&#x201E;Ă&#x160;Ă&#x2030;½IJ ¨Ă&#x201E; ¨ Ă&#x201E;Ă&#x160;Ă&#x2030;Ă&#x2030;½IJ Ă&#x2030;½IJºà š ½IJº ºà š ¢ ºà š à à š š ¢Â&#x17E; Â&#x2021;Â&#x152;Â&#x160;Â&#x2021;Â&#x2021; ÂŁĂ&#x201E;Ă&#x2021;Ă&#x2030;½Ă&#x152;ÂşĂ&#x2C6;Ă&#x2030;ÂşĂ&#x2021;Ă&#x192; Â?Ă&#x152;Ă&#x17D;Â&#x192; ¨Ă&#x201E;Ă&#x160;Ă&#x2030;½IJºà š ¢Â&#x17E;
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8 Acres on 16 Mi ~ $360K ~ poss Apts, Senior Housing or Mini-Storage
&
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The Crainâ&#x20AC;&#x2122;s reader:
Qualified bidders are to submit: 1. A professional vita sheet which should include sales data (20%) 2. Active member or resident of RH (10%) 3. A written sales and marketing plan (40%) 4. Appear before the Board of Directors for 5 minute presentation and 5 minutes question/ answer session (30%)
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10,000 sq. ft. Bldg, Blt 2001, Like New, Fully ACâ&#x20AC;&#x2122;d, on 2 Acres w/56 Pking Spaces ~ $580K
OBJECTIVE: River House Co-op wishes to engage the services of a sales person who will be responsible for the sale of all RH owned units in inventory at any given time. This will be an exclusive contract between RH and the sales agent and/or the broker. QUALIFICATIONS: 1. Minimum of five (5) years of successful real state sales experience 2. Current real estate license, insurance and any required bond(s). If held by your broker, please provide a copy that indicates that you are covered under the policy(s). 3. Real estate sales is your full time employment or business enterprise 4. Availability to show property at prospective purchaser(s) convenience 5. No pending litigation or outstanding judgments against sales person. 6. Preference may be given a River House member in good standing
AUCTIONS
JEFFERSON AVE - N. of 16 MILE RD
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Things didnâ&#x20AC;&#x2122;t always look as rosy for the company. Agree owns power centers, freestanding drugstores, big box stores like Samâ&#x20AC;&#x2122;s Club and Loweâ&#x20AC;&#x2122;s and restaurant buildings, among others. Up until its recent acquisitions streak, Borders, the former Ann Arbor bookseller that filed for bankruptcy protection in 2011 and later liquidated its assets and closed its stores; and Kmart, the troubled Illinois-based subsidiary of Sears Holdings Corp., were two of Agree Realtyâ&#x20AC;&#x2122;s top sources of tenant income. At the beginning of 2010, 29 percent of Agree Realtyâ&#x20AC;&#x2122;s rental income came from Borders. Today, Borders is no more and Kmart, formerly based in Troy, is Agreeâ&#x20AC;&#x2122;s eighth-largest tenant instead of its second-largest, currently accounting for just $1.6 million in annual rent. Since January 2010, the companyâ&#x20AC;&#x2122;s exposure to its top three ten-
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Retail roller coasters
â&#x20AC;&#x153;Joey has transformed the company into what is becoming a bigger and more important player in the REIT market,â&#x20AC;? Donlan said. The company now owns properties in 37 states, compared to 16 in January 2010, and has tenants in more than 23 retail sectors. The company looks particularly for tenants that are â&#x20AC;&#x153;recession-resistant,â&#x20AC;? Agree said. Agree Realty continues to develop properties across the U.S., including $18 million in projects last year in Ann Arbor, Washington, Illinois and Florida. All told, the company owns and manages 4.3 million square feet of space. Still, conservative financial management is a priority. â&#x20AC;&#x153;The balance sheet (today) is less than 30 percent debt-to-enterprise value, which is one of the most conservative,â&#x20AC;? said Agree. â&#x20AC;&#x153;While weâ&#x20AC;&#x2122;ve grown pretty dynamically, we have not sacrificed the core foundation on which this company was established.â&#x20AC;? Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB
ants â&#x20AC;&#x201D; Deerfield, Ill.-based Walgreen Co.; Wawa, Pa.-based convenience store chain Wawa Inc.; and Rhode Island-based pharmacy CVS Caremark Corp. â&#x20AC;&#x201D; has gone from 70 percent to just 30 percent, and its exposure to the Michigan market has gone from 54 percent to 25 percent, according to Agree. â&#x20AC;&#x153;While Walgreens and CVS are still their two largest tenants, they are significantly less than what they were, and those are about two of the best you can be overexposed to,â&#x20AC;? said Daniel Donlan, managing director of REIT equity research for Miami-based Ladenburg Thalmann & Co.
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$35.45 as of Friday afternoon.
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Agree Realty reported $43.52 million in total revenue to the U.S. Securities and Exchange Commission for the fiscal year ending Dec. 31, 2013. That is up 80 percent from $24.46 million in the fiscal year ending Dec. 31, 2009. Revenue for 2014 is expected to climb another $10 million or more. According to Bloomberg LP, analysts project that the company will report $53.2 million in 2014 revenue next month. And Agree said last week those estimates might be too conservative as the company projects about $56 million in revenue for 2014. Funds from operations, a measure of profitability, in 2013 was $28.37 million, or $2.10 per share. â&#x20AC;&#x153;Among all the REITs I cover, they (Agree) have some of the strongest (earnings) spreads,â&#x20AC;? said Craig Kucera, senior research analyst with Memphis, Tenn.-based Wunderlich Securities Inc. The shift to acquisitions has been good for Agree Realty shareholders, too, as its stock price has increased 53 percent in the past five years from $23.29 per share to
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rates and property values after being almost exclusively a developer. The company went public in 1994 under the leadership of Joeyâ&#x20AC;&#x2122;s father, Richard Agree, who remains on the board. But in 2010, Joey Agree pushed the board of directors for a stock offering to raise $31 million and to pair that money with new lending to purchase $40 million in real estate in 2010 alone. Itâ&#x20AC;&#x2122;s continued the buying trend since then; 2014 was a banner year for the company, too. Last year, it spent $147.5 million acquiring 77 leased properties in 22 states. There are 28 different tenants in the properties across 15 different retail sectors, with an average lease term remaining of 14.1 years. Funding for the deals came primarily from a $75 million stock offering in December, a $65 million unsecured term loan in July 2014 and the sale of about $12 million in assets, said CFO Brian Dickman. The credit for the companyâ&#x20AC;&#x2122;s growth during a challenging market has been attributed to Agree, 36, the president, CEO and director, and his 15 employees.
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20150126-NEWS--0019-NAT-CCI-CD_--
1/23/2015
4:52 PM
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CRAIN’S DETROIT BUSINESS
January 26, 2015
Page 19
College: For promise of free tuition, ‘the devil’s in the details’ ■ From Page 1
“The devil’s in the details. No one knows what this really means yet for funding, and that’s the conversation to have next,” said Curtis Ivery, chancellor of the Wayne County Community College District. “But at the end of the day, it’s got to be a good thing, to put Ivery more students into the educational cycle.” If the program draws new students to community college who weren’t previously planning on college at all, then institutions may compete with each other for that new market, based on programs they offer or their number of transfer or articulation agreements with four-year colleges. It’s not clear yet, college administrators said, if the new assistance could even travel with students across community borders and increase out-of-district enrollment. And if the promise causes fouryear schools to compete more directly with community colleges for firsttime students, that scenario could have winners and losers, too. As envisioned, the program would cost about $60 billion over 10 years in federal funds, and up to another $20 billion in matching funds from the states if all participate. Michigan’s exact piece of that pie is hard to compute without more specifics. But the state’s 28 community colleges together derived $671.1 million revenue from student tuition and fees in the 2011-12 academic year, or 45 percent of all revenue in their yearly operating budgets, according to a report from the Michigan Community College Network. Most of the nontuition revenue comes from state budget funding and local property tax collection. At the same time, the state estimates 52 percent of the more than 400,000 community college students statewide managed to complete a degree or certification or transfer into a university or other institution within six years of enrollment. That’s according to the state’s Education Dashboard report for the 2011-12 and 2012-13 academic years. That’s up from the 44 percent sixyear completion during the 2007-08 year. These figures could be significant because the White House is calling for eligible students under the Promise program to meet several requirements to have tuition eliminated. They must be enrolled at least half time, maintain a 2.5 GPA, and have a coherent schedule of courses that builds credits toward a specific degree or program certification. Every school would be affected differently, due to local demographics. Washtenaw Community College, for example, reports 58.3 percent of students from 2008 reached completion or credit transfer in six years, while Macomb Community College President Jim Jacobs said 53 percent of students enrolled in 2007 had done so, including 45 percent who transferred to a four-year college. Washtenaw reports in the 201213 academic year some 6,028 students, or 29.3 percent of total head
Other routes to higher ed America’s College Promise, the proposed federal program to fund two years of community college tuition, wouldn’t be the first opportunity for local students to gain higher education at no cost. Other local programs include: The Detroit Regional Chamber administers the Detroit Scholarship Fund program, drawing some private funds raised through the Michigan Education Excellence Foundation, to help graduates of 60 high schools enroll in tuition-free community college courses. The program is open to students who are Detroit residents, attend any public or private high school or charter school in the city at least two years and graduate. The fund has helped place more than 600 students, often filling gaps between financial aid via Pell grants and total costs. Macomb Community College offers the three-year Early College of Macomb program in collaboration with Macomb Intermecount, received the federal Pell grant. In Macomb, where Jacobs said the county has seen income decline and a rise in new residents moving from Detroit and overseas, the college receives 52 percent of its revenue from Pell and more than twothirds of its 23,000-plus students are eligible. The grant, capped at $5,730 for the
diate School District and the 21 public school districts in Macomb County. Public high school students who meet testing and other criteria can enroll concurrently in MCC courses starting their junior year, earning at least 36 college credit hours before graduating high school. They then attend a third year of community college after high school to qualify for an associate degree and skill certificate a year after obtaining their high school diplomas, at no cost. Oakland Community College hosts an early college program in collaboration with West Bloomfield School District, which pays for area high school students to dual-enroll at OCC, allowing students to obtain a diploma and associate’s degree around the same time. Henry Ford Community College and Washtenaw Community College have similar dual enrollment programs with K-12 districts, many of which cover a student’s tuition and fees. 2014-15 year, generally is enough to cover all community college costs for any eligible student. So the more highly engaged degree-program students a specific college has, and the lower its Pell student head count is, then the more that specific school could stand to gain by way of new federal/state revenue under a Promise program. “There could be these winners
and losers created, but the total business model impact is still hard to tell,” said Michael Hansen, president of the Michigan Community Colleges Association. “Opening the front door is good and important, but we also need to make sure that this has value in the labor market,” Hansen said. The Promise initiative also requires the colleges themselves to have trans- Boulus ferable credit courses and programs that four-year colleges accept, and occupational training programs with high grad rates. Hansen said the Promise program would likely draw in a sizable portion of the roughly 30 percent of high school graduates each year who don’t begin any postsecondary education, expanding both student head counts for the colleges and educational attainment rates for the state as a whole. But he and others also said a national Promise program would likely accelerate the growing trend of students opting to start out at a community college and transfer later to a four-year school. “At the margin, there could be some impact on other postsecondary enrollMiller ment like that,” he said. “But I think the universities ultimately make that up with transfers, of new and very successful upperclassmen.” Michael Boulus, executive director of the Presidents Council, State Universities of Michigan, said
the policy may attract more nonparticipants in higher education, but that could also bring new challenges for community colleges. The council hasn’t taken a position yet on the Promise proposal, he said, but may do so if it gains more traction in Washington. “If you add more students to your head count who aren’t college-ready, or proficient in certain subjects — but might take advantage of a free community college education — you’re going to have more need for (developmental) education courses for those students,” he said. Jacobs said the Promise might also help community colleges compete for a different student market. “The emphasis may be on students who come out of high school, but it can be used by older working people, too,” Jacobs said. Sharon Miller, vice chancellor of external affairs for Oakland Community College, said it’s difficult to gauge how much traction the Promise plan has in Washington — but the discussion at a national level is still helpful. “Community colleges win in this debate, regardless of the outcome, because there’s more visibility for the schools — and what we do and how we help,” Miller said. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom
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20150126-NEWS--0020-NAT-CCI-CD_--
1/23/2015
6:26 PM
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January 26, 2015
CRAIN’S DETROIT BUSINESS
Big deals: ‘I’ve never seen a better time to sell or buy’ ■ From Page 1
M&A: LOOK BACK IN ANGST
2014
2013
2012
the best totals since the recession started in 2008. The record for deals, 152, was set in 1998. And 2009’s record deal volume was driven largely by nearly $68 billion related to the U.S. government bailout of General Motors and Chrysler.
In love with autos again The story of 2014 was the display of health by the automotive industry and manufacturing generally. The largest deal, by far, was the pending acquisition of Livonia-
2011
2010
46
$80.9
64
$18.1
$19.3
95
$27.5
77
$29.8
113
Number of deals
70
Yes, the $80.9 billion value of deals in 2009 is higher than other years since. But all except $4.3 billion of that was from acquisitions related to bankruptcy or government bailouts.
Value in billions
$43.7
Private equity was a particularly strong force. PE firms raise funds from limited partners with time constraints for deploying the funds and harvesting portfolio companies. Funds that were raised during or immediately after the recession tended to hold off on doing deals, meaning they have an added incentive to do them now, said Aaron Witalec, director of UHY Corporate Finance in Detroit. Witalec The result is, he said, PE firms now are happy to do deals for companies at the lower end of the middle market that they once have viewed as too down-market. “In the past, they might only have done deals for companies with $10 million in EBITDA (earnings before interest, taxes, depreciation and amortization). Now, we’re seeing private equity companies focusing on companies with EBITDA of $1 (million), $2 (million) or $3 million. And that lower end of the middle market is the bread and butter of Michigan companies,” Witalec said. Crain’s has been tracking big deals since 1996, and neither the deal nor dollar numbers in 2014 were a record, but they were by far
2009
based TRW Holdings Group Inc. for $12.4 billion by ZF Friedrichshafen AG, with the second-largest the $4.35 billion deal by Fiat SpA of Italy for FCA US LLC of Auburn Hills, better known as Chrysler. “Auto is back with a vengeance,” said Phil Gilbert, managing director of P&M Corporate Finance LLC, an affiliate of the accounting firm of Southfieldbased Plante & Moran PLLC. “It was a very robust market last year, and the pipeline remains Gilbert full,” said Tony Blanchard, managing director of the Detroit office of Deloitte Corporate Finance LLC. He heads the firm’s auto and industrial M&A practice. He credited the supply chain Blanchard for “the leaningout of costs and operational improvements” during and after the last down cycle, as well as “great financial performance in general” for helping drive deal flow in 2014. It was a deal flow also helped in large measure by the eager return by private equity to a sector left for dead in 2009. They had questions about future down cycles but were impressed by the answers. “Every deal we took to market, buyers asked about down-cycle performance, but companies had the ability to show they were able
to turn off costs, improve balance sheets and ride out the storm,” said Blanchard. He predicted the 2015 pipeline would be helped by acquiring companies in 2014 now looking to carve out nonessential assets, and by cross-border activity, particularly Asian companies eager to get into what is again one of the world’s best auto markets and best economies. “The deep flush in 2009 wiped out all the excess capacity in auto. An unbalanced relationship between suppliers and customers that had existed for 20 years got back in balance in one flush,” said Cliff Roesler, a partner in Birmingham-based Angle Advisors-Investment Banking LLC. Angle had a record year with 17 deals out of the Birmingham office worth $1.4 billion last year, and another eight deals for about $540 million out of the German office. It did four deals for more than $100 million, including its two biggest deals since being founded in 2010, said Roesler.
Another banner year in 2015? There is broad consensus that 2015 will continue to be part of an era M&A professionals will long remember as the good old days. “The pace in 2015 will be as strong as or stronger than it was in 2014,” said Rajesh Kothari, managing director of Southfieldbased investment banking Kothari and venturecapital firm Cascade Partners LLC. “We’re very positive for 2015. I’ve been in this business for 27 years, and I’ve never seen a better time to sell or buy,” said Andre Augier, managing director of Birmingham-based investment banking firm Quarton Partners Augier LLC. Local M&A professionals think any interest rate increases by the U.S. Federal Reserve Bank will be late enough in the year and small enough to have little impact on deal flow, and despite the high level of activity in 2014, they don’t see the signs of irrational exuberance they were seeing in 2006 and 2007 that could lead to a bursting bubble. “Valuations are higher than I’ve
WHY 2014 WAS SUCH A BIG DEAL Here are the factors that converged to make 2014 a good year for dealmaking: Growing confidence in the U.S. economy. Near record-low interest rates. The eager return to deal-making by banks. Strategic buyers with strong balance sheets who wanted to grow top and bottom lines faster than they can organically. Private-equity firms had cash that needed to be invested to meet timelines for returning profits to limited partners. A lot of healthy companies that survived the recession by cutting costs. A booming U.S. auto market, with sales of new cars and trucks totaling 16.5 million in 2014. Willing sellers who had waited for business values to rise. Continued cheap energy costs, led by gasoline. Stable labor and commodity costs. ever seen them, and I’ve been doing this for 18 years,” said Kothari. Deals that would have gone for a multiple of five or six times EBITDA two or three years ago are now fetching multiples of seven, eight or more. Despite high valuations, Kothari sees little chance of things overheating in 2015. “People are more measured and far more methodical. There isn’t the frenzy there was then in 2006 and 2007,” he said. “You couldn’t identify the thought process behind a lot of deals, then. People were doing crazy things. Now, you understand why people are doing deals.” “We’re projecting pretty favorable tail winds for the next 24-36 months. I don’t see anything major happening before 2017,” said Gilbert. “The only thing that can cool this white-hot market is a significant increase in interest rates, and there’s little chance of that,” said Augier. Interestingly enough, Augier credited a long, mediocre national economic recovery for making his industry so dynamic last year. He said clients who survived the recession rebuilt their profit margins and their cash reserves but nonetheless found stalled organic growth, which led to growth through acquisition. “There’s a lot of money still chasing deals,” said DuBay. “If you have a good company, someone will buy it.” Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2
HOW THE DEALS BROKE DOWN
56 7 12
Number of deals related to automotive or manufacturing, totaling $28.5 billion.
Number of top 12 deals that were auto/ manufacturing, all of them for $700 million or more.
Number of deals in the financial sector, totaling $5.6 billion. The fourth-largest deal overall was a private placement of Ally Financial Inc. stock in January for $3 billion, with the eighth-largest deal another private placement of Ally stock of more than $1.2 billion in December.
Number of deals in services, totaling $2.5 billion, led by the estimated $675 million sale in May of Novi-based Learning Care Group Inc. to its management team and American Securities Capital Partners LP of New York City.
19 8
deals in medical or biotech, totaling $377 million. ISTOCK PHOTO
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McLaren: New vision for ‘hospital of the future’ ■ From Page 1
Health Analytics in Ann Arbor will conduct a health needs assessment for outpatient services in the Clarkston-Independence Township area and examine reimbursement levels for those services, said Greg Lane, McLaren’s chief administrative officer. The consultant report will help guide McLaren’s future investment in the outpatient center complex, Lane said. On top of building a 30-bed shortstay unit for patients who need less than 24 hours of care on an outpatient basis, Lane said, McLaren would also like to expand its outpatient cancer care center and build a second medical office building at its Clarkston Health Care Village site. Unlike acute-care medical-surgical beds, which require a certificate of need, short-stay beds don’t require CON approval, said Casalou, who is chairman-elect of the Michigan Health and Hospital Association. Casalou should know. St. Joseph Mercy is proposing to add 28 shortstay beds at St. Joseph Mercy Brighton as it converts the traditional outpatient center into a short-stay hospital.
The $25 million proposal, which includes refurbishing and adding private rooms at nearby St. Joseph Mercy Livingston Hospital in Howell, is pending approval by St. Joseph’s corporate parent, Livonia-based Trinity Health. If approved, work on the Brighton center could beCasalou gin this July with opening set for mid-2016, Casalou said. Casalou said the short-stay service fills a gap for patients who fall between outpatient care and the full-service needs of inpatient care. “You can keep outpatients in the (short-stay) bed as long as you want, longer than 23 hours, but you only get paid the outpatient rate,” Casalou said. “It is on your nickel if it lasts longer than 23 hours.” Jackson said he has no objections to McLaren or any other hospital that wants to build a short-
stay hospital or add a unit to an existing outpatient center. “As long as they conform to (CON) law, we have no objections,” said Jackson, who opposed McLaren’s plan to transfer 200 unused beds from the company’s Pontiac hospital to the new Clarkson site because the alliance believes duplicative services would drive up health care costs for employers. Lane said McLaren was deeply disappointed the 11-hospital nonprofit company failed to get approval for a new hospital. But he said executives still believe a hospital will eventually be built there because of increasing population. “The site we have in mind in Clarkston is perfect for a (200Lane bed) hospital,” said Lane, noting that the new short-stay hospital will be built based with inpatient specifications. In the meantime, Lane said, McLaren wants to expand the McLaren Health Care Village — off exit 89 on I-75 — as an interim measure because health care needs are expanding as the community grows. The McLaren Health Care Village already offers several services, including a 24-hour emergency department with board-certified emergency medicine physicians, the Clarkston Medical Group with primary and specialty physicians, a three-operating room ambulatory surgery center and an outpatient cancer center. Besides a short-stay unit and expanded cancer center operations, future use could also include senior housing, assisted living, continuing care, restaurants, banking, retail, restaurants, specialty grocery, and joint ventures with medical device manufacturers and pharmaceutical companies, Lane said. For example, Lane said, McLaren could expand its cancer center to do outpatient surgery services. The McLaren Cancer Institute in Clarkston already does medical oncology and radiation treatment, he said. “Our philosophy is, only put technology in the hospital that is needed,” he said. “We already have one CT scanner in the emergency department and other diagnostics in the surgery center and cancer center. We won’t replicate that.”
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Casalou said that over the past decade he has advocated for lowercost, short-stay hospitals that are rich in diagnostic technology and diverse in specialty medical care. The inpatient hospital of the future, he said, may well be large intensive care units for a range of chronic health conditions, advanced surgery suites for complex operations and massive emergency departments for traumatic injuries. Short-stay hospitals, designed for lower-acuity patients, could become more plentiful, said Casalou, who added that St. Joseph Mercy is considering a similar facility in Canton Township. The primary difference between a full-service and short-stay hospi-
tal could be services — open heart surgery, organ transplants, neo-natal and other intensive care services — that support inpatient stays longer than 24 hours, Casalou and Lane agreed. “We have more people in fullservice hospitals that are considered outpatients but are in inpatient facilities” because hospitals don’t have any places to put them, Casalou said. “If you have someone who needs overnight care, why put them in the most complicated, most stressful environment?” that is a fullservice hospital, he said. “It doesn’t aid efficiency and comfort.” Before Casalou joined St. Joseph Mercy in late 2008, he was the founding CEO of Providence Park Hospital in Novi. In 2002, Casalou said, St. John looked at building a short-stay hospital in Novi instead of Providence Park, which opened in 2008 under the sponsorship of Warren-based St. John Providence Health System. “There weren’t enough outpatients classified that way, so we eventually built (full-service) Providence Park,” he said. But last year, Casalou said, St. Joseph commissioned a study of patients and physicians in the Brighton and Canton Township communities that clearly showed demand for a short-stay hospital. “You have to make sure you have access to a full-service hospital nearby” to transfer patients in emergency situations, Casalou said. Casalou and Lane agreed that short-stay hospitals can help stabilize patients before they are transported by ambulance or helicopter — extending life-saving emergency care at level-one trauma hospitals. In transporting patients from Brighton, Casalou said, St. Joseph has a full-service hospital about 20 minutes away by ambulance at St. Joseph Mercy Livingston Hospital in Howell. “We were going to build a $250 million replacement hospital in Howell,” he said, but decided to create a short-stay unit and 24hour emergency department in Brighton and upgrade the full-service hospital in Howell. “We will build a short-stay unit for much less and save the community nearly a quarter billion dollars,” Casalou said. While short-stay units are common in inpatient hospitals, Casalou said, Brighton’s short-stay unit could become the first as part of an outpatient center in Michigan. It also would be a pilot project for 86hospital Trinity. The Brighton center also may add two operating rooms to its existing six, he said. “This new delivery approach is the future of health care.” Lane said McLaren’s short-stay hospital also could be the first in the nation that is built and designed from scratch specifically for short stays. “We want (our short-stay facility) to fit in for the future,” Lane said. “You have inpatient declining, and outpatient increasing. We want the facility to accommodate these services and changes going forward.” Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene
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REPORTERS Jay Greene, senior reporter: Covers health care, insurance, energy utilities and the environment. (313) 446-0325 or jgreene@crain.com Amy Haimerl, entrepreneurship editor: Covers entrepreneurship and city of Detroit. (313) 4460416 or ahaimerl@crain.com Chad Halcom: Covers litigation and the defense industry. (313) 446-6796 or chalcom@crain.com Tom Henderson: Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho: Covers real estate, higher education, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor: Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Dustin Walsh: Covers the business of law, auto suppliers, manufacturing and steel. (313) 4466042 or dwalsh@crain.com Sherri Welch, senior reporter: Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com
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Adell: Getting The Word Network out to 3 billion households ■ From Page 3
Up to 20 contracts come up for renewal every month, he said, and he expects to realize up to $30 million in new revenue by adding the radio station. “Any time I add distribution, I increase rates. It’s just a part of the normal increases,” Adell said. “I’m bringing them more households.” Neither the TV network nor radio station sells commercial advertising. “I don’t need to sell spots to pay for it,” Adell said. Adell, 48, said he has a product that reaches all demographics globally. “Jesus is known in the four corners of the Earth,” he said. Adell makes The Word Network, which is primarily aimed at black audiences, available to cable and satellite companies at no charge. “It takes away the competition,” he said.
Low overhead The radio station isn’t much of an expense, Adell said. He’s hired a single employee, an engineer, to handle 910 AM. He’s spending about $100,000 on new radio equipment and a small master control room, along with 30 billboards across Detroit and commercial airtime on Detroit TV channels 7 and 20 for about six weeks to market the reformatted radio station. Plugs for 910 AM also are appearing on The Word Network, which also does some live programming of its own three days a week, and is adding a fourth. Adell and his late father, Franklin, launched The Word Network in 2000. The 501(c)(3) nonprofit religious network has 200 full- and part-time employees and three prayer call centers, Adell said.
Global reach Why the 200-some pastors write checks to Adell to get on his network is evident: The Word Network is available to more than 3 billion households in 200 countries via 12 satellites, including 87 million domestically, according to data provided by the broadcaster. It’s also available on airlines including Continental, Jet Blue and United Airlines. Specific viewership numbers are unavailable. The network’s airtime rates reflect a wide reach, and Adell’s staff uses other methods to push content. For example, the network has a 76,000-subscriber monthly newsletter. On the new-media side, the network claims 1 million live-streaming users of its app, and it’s actively pushing content via social media. Adell is also considering broadcasting to Cuba now that the U.S. sanctions are in the process of being lifted. “That’s an easy signal. It’s just 90 miles to Florida,” he said.
Getting on the air The newly acquired radio station aired preteen-oriented Disney music and programming from a group of five transmitter towers built on 50 acres in Monroe County. Adell got the towers and land in
the deal, too. A temporary satellite dish and other equipment was installed at the transmitter site so there would be no gap in broadcasting while the station changed hands, Adell said. A 150,000-kilowatt generator is being built for 910 AM, he said. He’s putting in a master control room at his Southfield broadcast complex, including a hallway and walls emblazoned with the radio station’s new logo that Adell said he designed. The yellow circular logo is interchangeable with Adell’s Clinton Township-based WADL TV-38, which is displayed as part of marketing deals at Comerica Park, Joe Louis Arena and the Palace of Auburn Hills. He said he may switch some of the WADL signs at those venues with the 910 AM logo so that it airs during games, or buy more signs. “I see my logo every game,” he said.
Radio days Owning a radio station fulfills a dream for Adell, who personally gets involved in buying and setting up equipment. “I always wanted to get into radio, but the timing was never right, the price wasn’t right,” he said. He got into broadcasting as an amateur radio operator as a teenager, and today his Hummer has a pair of radio aerial antennas for his ham radio. The 910 AM deal was the ideal opportunity for Adell. It would have cost about $15 million to build such a station as 910 AM from the ground up, Adell said. “They don’t make 50,000-watt stations anymore,” he said. Radio observers say there is a trend of niche broadcasters gobbling up stations for such use. “You see deals popping up like this in certain parts of the country, and the numbers seem to make sense for them,” Rood said Hal Rood, partner and executive vice president at Lancaster, Pa.-based analysts Strategic Radio Solutions. “There are entrepreneurs using these transmitters that broadcasters are shedding and making nice little businesses out of it. It’s a win for Disney, (Adell) and listeners seeking this sort of content.” A business decision by Disney several years ago laid the foundation for Adell’s interest in the station: It paid to technically reorient the station’s signal from Flint-focused to aimed at the metro Detroit market, a move that required the purchase of two other stations to take off the air so the signal space was cleared for WFDF. Once Adell began the process of acquiring the station, he went into overdrive. It took him and his father 120 days to launch WADL, and 45 days to start Word, Adell said. He got the radio station running as a Word simulcaster in 72 hours. “I did this in a weekend,” he said. The deal with Disney took
The radio station isn’t much of an expense, Adell said. He’s hired a single employee, an engineer. about two weeks, and he paid the asking price rather than haggling. Adell said he looked in the recent past at buying WGPR 107.5 FM and WXYT 1270 AM, but deals never happened. CBS Radio turned down his $7 million offer for WXYT, he said. Debbie Kenyon, CBS Radio market manager and senior vice president, said the company fields “all sorts of queries about our stations all the time” but didn’t address Adell’s interest in WXYT. Adell paid ABC $750,000 in 1994 for the building that now is home to The Word Network and 910 AM. It’s next to WXYZ-Channel 7. “I pretty much have bought everything I ever wanted — if the price was fair,” he said. “I never put a price on something I’m passionate about.” Adell Broadcasting Co.’s broker, Elkridge, Md.-based Patrick Communications, announced the $3 million WFDF sale on its website Nov. 18. Radio Disney, which used Williamsburg, Va.-based media brokerage firm Schutz & Co., said in August that it intended to sell 22 AM and one FM station as part of its effort to move to a digital con-
tent business. WFDF went on the air in 1922 under the call letters WEAA, and changed to its current letters in 1925. The station’s format over the years has been adult contemporary, Top 40, news-talk, and adult standards. Adell said a researcher traced the broadcasting career of the station’s founder, Frank Fallain, to 1909 — possibly making 910 AM Michigan’s oldest radio station.
Profitable nonprofit Adell has an unusual business arrangement for The Word Network, which is a nonprofit as a religious broadcaster. He derives revenue from The Word Network’s contractual payments to STN.com Inc., the satellite TV uplinking business that he owns. The Word Network pays STN to uplink its signal, creating the revenue stream for Adell. He also owns Birmingham Properties, a real estate company that owns the WADL and Word Network office/studio properties. Adell also owns the site of the former Novi Expo Center at I-96 and Novi Road — a water tower there has been emblazoned with “ADELL” — and Bingham Farms-based BurtonKatzman Development Co. has planned a $100 million, 500,000square-foot mixed-use project on the site anchored by either two eight-story office buildings or an office building and a hotel.
Signing off Adell’s foray into radio comes at a time when he’s exiting the terrestrial television industry.
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Adell told Crain’s in October that he plans to sell WADL in the FCC’s auction this year of the UHF over-the-air broadcast spectrum. Mobile wireless providers need more airwave bandwidth to satisfy customer demand, and the 600MHz spectrum used by stations such as WADL is coveted because it penetrates obstacles such as walls and basements. Based on estimates provided by the FCC, which Adell shared with Crain’s, he expects to get $170 million for WADL’s portion of the local UHF airwaves. The station, which he and his father launched in 1989, would go off the air three months after the auction sale is finalized. Adell’s parents applied for a television license in 1978, and it was awarded 10 years later, he said. He said his father borrowed $3 million to build the station, and it went on the air in May 1989. Franklin Adell, who had established himself with a family-owned auto supplier of doorjambs decades before, hired Kevin after his graduation from Arizona State University in 1988 to help him run WADL. It initially broadcast infomercials and home-shopping programming before adding religious content, along with children’s shows, music videos and classic movies. It airs a mixture of older and newer syndicated shows, many aimed at an urban African-American audience. The Word Network is a separate company from WADL, which broadcasts in eight Southeast Michigan counties. Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19
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CRAIN’S DETROIT BUSINESS
January 26, 2015
RUMBLINGS Jack White’s pitch now on baseball card etroit native Jack White, the former White Stripes frontman often captured in photos looking grim, was in the news last summer when he threw out the ceremonial first pitch before a Detroit Tigers game. The moment is now immortalized in a baseball card. New York City-based trading card company Topps has included White, smiling while wearing a Detroit Stars jersey from the Negro Leagues during his appearance before the Tigers’ July 29 game with the Chicago White Sox, in a 15-card special set within the 350-card 2015 Topps Series 1 baseball card set. The set will be released Feb. 4. It will be sold in 10card packs (MSRP of $1.99). Among the others in the “First Pitch” set are actor Jeff Bridges (Los Angeles Dodgers), Olympic gymnast McKayla Maroney (White Sox), Pearl Jam rocker Eddie Vedder (Chicago Cubs), rapper Biz Markie (Oakland Athletics), Rage Against the Machine guitarist Tom Morello (Cubs) and singer Macklemore (Seattle Mariners). Perhaps the highlight card is rapper 50 Cent’s epically off-target pitch for the New York Mets last spring, which has been billed as possibly the worst ceremonial pitch in human history.
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The Series 1 regular set includes 14 individual Detroit Tigers, including rookie cards for James McCann, Buck Farmer, Steven Moya and Kyle Lobstein.
Nardone’s next venture: Bulletproof hats
Tom Nardone has a new idea: bulletproof baseball caps. And, well, Nardone has never had a shortage of ideas. He’s the founder of the Detroit Mower Gang, the crew of volunteers who mow Detroit’s abandoned lots. He’s also the president and founder of PriveCo Inc., a collection of websites that sell items you want to buy in private. He’s a best-selling author known for his books on pumpkin carving, and he’s the man behind BulletSafe.com, which sells bulletproof vests. So when Nardone heard from his customers that they wanted a sleeker, less militaristic option for protecting their melons, he started researching options. When he discovered there wasn’t really a product on the market, Nardone decided to invent it. And then developed a Kickstarter campaign to help fund the $19,000 he estimates it will take for production tooling. “People in dangerous jobs need protection, and dangerous situations need less aggression,” he posted on the site. “The BulletSafe Bulletproof Baseball Cap offers discreet protection while looking professional and approachable. It’s a great way for people to stay safe.” People agreed. Nardone originally set his fundraising goal at $3,500, but he has raised more than $10,000. COURTESY OF TOPPS Production Jack White looks uncharacteristically cheery in of the hats is his new baseball card, which shows him in an expected to appearance at Comerica Park last July.
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WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF JAN. 17-23
start next fall after a rigorous ballistic testing this summer. Nardone will also be showing off the hat at trade shows. “The real challenge of this product is acceptance,” he wrote. “Will cops accept our hat as a new piece of equipment? Do regular people want their police officers to be safe and friendly? The success of this Kickstarter will let us know.” The campaign closes Monday, but the cap details will live here: www.kickstarter.com/ projects/CalmTom/the-bulletsafe-bulletproof-baseball-cap
Ranking: Detroit is an unhealthy city It’s probably not a surprise that Detroit is at the bottom when it comes to health. The latest health ranking scorecard of 50 cities from BetterDoctor.com ranks Detroit 40th-healthiest in the nation, slightly ahead of Indianapolis. A high number of uninsured residents and a poor American Fitness Index score contributed to Detroit’s dismal health rating. The data-driven ranking looked at exercise rates, the number of residents with health insurance and the percentage of highly rated doctors on BetterDoctor.com, a consumer tool for finding regional doctors. The study found 88 percent of Detroit residents have health insurance, which was lower than the majority of cities examined. Other key findings: Detroit has 1.92 doctors per 1,000 residents. Detroit’s American Fitness Index score of 47.3 placed it in the bottom half of cities. The healthiest city is Boston, and the worst on the list was Memphis.
Detroit gets its first First Merit Bank branch Akron, Ohio-based First Merit Bank will open its first branch office in Detroit on Wednesday with an open house and noon ribbon cutting at the Orchestra Place branch at 3663 Woodward Ave. The bank’s parent company, FirstMerit Corp., has about $24.6 billion in assets. In 2013, it bought Flintbased Citizens Republic Bancorp and later brought on Sandy Pierce, a longtime veteran of the local banking scene, as chairman and CEO of FirstMerit Michigan. It has 140 branches in the state.
3 tech startups win chance to pitch to Google
Clark Durant, co-founder and former CEO of Cornerstone Schools; and Faye Nelson, president, DTE Energy Foundation, and vice president of public affairs, DTE Energy Co.
nn Arbor-based AdAdapted Inc. and Genomenon and Detroit-based LevelEleven earned a chance at pitching their business plans at the annual Google Demo Day in Silicon Valley in April. They were judged to have the best business plans of the 11 local tech startups that made pitches in the Detroit-area finals last week. Google officials will choose one or possibly two of them to go to California for the national finals. AdAdapted helps companies build ads designed for mobile devices; Genomenon makes software that allows data analysis from human genome sequencing; and LevelEleven, a portfolio company of Detroit Venture Partners, makes salemotivation software.
Fifth Third Bank Eastern Michigan will delay the start of its move into Dan Gilbert’s One Woodward building until late spring. The regional office of Fifth Third Bank, which announced in October it would relocate more than 150 employees from Southfield into the downtown Detroit building, had planned to begin the move in March. An official said the delay is because the new space will be the pilot for a new buildout concept Fifth Third will implement companywide; it still expects to have its move complete by summer 2016. Cerberus Capital Management LP is in talks to acquire Digital First Media Inc. from New York City hedge fund Alden Global Capital LLC, Bloomberg reported. Among Digital First’s properties are the Oakland Press and Macomb Daily; The Detroit News also is owned by Alden. Warren-based food distributor Lipari Foods Inc. entered an agreement to purchase Bridgeville, Pa.-based Clover Mountain Foods LLC for $16 million. Last month, Lipari entered an agreement to purchase Sun Prairie, Wis.-based Soderholm Wholesale Foods Inc. for $4 million. Aviation Industry Corp., China’s biggest aerospace company, is among bidders to acquire Auburn Hillsbased parts maker Henniges Automotive Holdings Inc., Bloomberg reported. Stateowned AVIC, based in Beijing, could pay about $1 billion for Henniges, and other Asian companies have looked at a purchase. Cadillac plans to ask about 700 of its dealerships to invest in small “boutique” stores that would offer “high-technology showrooms” and a higher level of service, Cadillac President Johan de Nysschen said at the Washington, D.C., auto show, according to Automotive News. Detroit-based law firm Clark Hill PLC added three attorneys and four other employees of the former Rayndon Law Group PLC of Scottsdale, Ariz., at the firm’s Phoenix office, growing its presence there to 26 attorneys.
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ON THE MOVE Former Detroit Emergency Manager Kevyn Orr was named by New Jersey Gov. Chris Christie as special counsel to Atlantic City’s new emergency Orr manager, Kevin Lavin, to aid the struggling seaside gambling resort, AP reported. State officials formally promoted Steve Arwood, the Michigan Economic Development Corp.’s executive vice president and COO, to CEO. He replaced Michael Finney, who joined Gov. Rick Snyder’s executive staff as senior adviser for economic growth. Max Scherzer left the Detroit Tigers to become the highest-paid right-handed pitcher in Major League Baseball after agreeing to a $210 million, seven-year contract with the Washington Nationals that includes a record $50 million signing bonus. Scherzer, 30, will receive the money over the next 14 years. The Coalition for the Future of Detroit Schoolchildren, the independent council set to make recommendations on improving city schools, named to its steering committee Charlie Beckham, who heads the city Department of Neighborhoods; David Carroll, vice president, Quicken Loans; Richard DeVore, regional president of Detroit and Southeast Michigan, PNC Financial Services Group;
COMPANY NEWS
OTHER NEWS Livonia Chrysler Jeep Inc.,
Fox Hills Chrysler Jeep in Plymouth and Village Chrysler Jeep in Royal Oak could reopen more than five years after a Chrysler Group LLC decision to close them. The
dealerships gained a key victory when the 6th U.S. Circuit Court of Appeals found that a federal law creating the arbitration process where those dealers prevailed trumps state laws that would allow nearby competitors to legally challenge their return. The charity preview of the North American International Auto Show at Cobo Center in Detroit raised $5.3 million, outpacing the 2014 event by about $800,000 and bringing the total raised for local children’s charities to more than $100 million since the show’s 1976 launch, the Detroit Auto Dealers Association said. The Meridian Winter Blast festival at Campus Martius Park in Detroit Feb. 6-8 will feature a new 300-foot zip line. The 11th annual event is presented by Quicken Loans Inc. Former Florida Gov. Jeb Bush , who has said he is contemplating a presidential bid, is set to speak at a Detroit Economic Club meeting Feb. 4 at Cobo Center, AP reported. Response times to 911 calls in Detroit are expected to improve with the academy graduation last week of 31 new emergency medical technicians. They will be assigned to ambulances, AP reported. A derailment of the Detroit People Mover shut down the 2.9-mile downtown elevated rail service Thursday, and the Detroit Transportation Corp. offered free rides on Friday. A car jumped the rail and hit the Times Square station platform. Michigan union membership was 14.5 percent last year, a drop of 1.8 percentage points from 2013, the U.S. Labor Department reported. Last year was the first full year in which employees could opt out of union fees under the state’s rightto-work law. The Michigan appeals court says emergency managers running school districts have the power to fill vacancies on a school board, AP reported. The court ruled in the case of Jonathan Kinloch, appointed to the Detroit school board in 2013 by Emergency Manager Roy Roberts but not acknowledged by other board members because the board had chosen its own member. Michigan’s seasonally adjusted unemployment rate continued its rapid decline in December, falling 0.4 percentage points to 6.3 percent and its lowest level in 12 years. Last month’s rate compares with 6.7 percent in November, 7.1 percent in October and 8.3 percent in December 2013, said the Department of Technology, Management & Budget.
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