Crain's Detroit Business, March 2, 2015 issue by Crain's Detroit Business

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www.crainsdetroit.com Vol. 31, No. 9

MARCH 2 – 8, 2015

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ROCKET FIBER: PHASE 1 COVERAGE AREA

Page 3 Panasonic unit plays ‘Taps’ for apps, rethinks strategy

LOOKING BACK: ’80s office boom still rumbles in ’burbs Lions invite fans to take a hike at new fantasy football camp

Retirement Communities

Senior housing surges as population ages, Page 11

This Just In ChemicoMays becomes subsidiary of Chemico Group

NEWSPAPER

Southfield-based Chemico Group of Cos. acquired the shares previously held by Indianapolis-based Mays Chemical Co. of joint venture ChemicoMays LLC, the companies announced last week. Terms were not disclosed. The ChemicoMays name will remain, but the venture will be a wholly owned subsidiary of Chemico Group of Cos., Dave MacLeod, vice president of business development and supply chain, told Crain’s in an email. Leon Richardson, founder and CEO of Chemico, will remain CEO of ChemicoMays. The split was amicable and allows the Chemico and Mays Chemical to “focus on their own core competencies,” Chemico said in a release. Chemico, including the former joint venture, employs more than 250. ChemicoMays said its revenue was more than $100 million in 2014. — Dustin Walsh

According to figures provided by Rocket Fiber, the download times for ... “Star Wars” movie on Blu-ray: about seven hours at a typical residential Internet speed of 10 megabits per second but about 4½ minutes at gigabit speed. An album on iTunes: About one minute on residential Internet and less than a second at gigabit speed

Packard Plant owner eyes bids for historic downtown buildings BY KIRK PINHO CRAIN’S DETROIT BUSINESS

Rocket Fiber’s launch includes second stage Plans include retail electronics store, training center BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

‘To chase the animal’

here’s more than meets the eye to Rock Ventures LLC’s plans to install fiber-optic cable to provide ultrafast Internet access in downtown Detroit and Midtown. In addition to the upcoming rollout of gigabit-speed Internet, which made headlines last week, Rock Ventures’ new company, Rocket Fiber LLC, also wants to: 䡲 Open a retail electronics store in downtown Detroit. 䡲 Launch a training center to help bridge the digital divide by teaching computer and Internet literacy. 䡲 Become another provider of cable televi-

sion in the city. Rocket Fiber is preparing a proposed cable-franchise agreement for approval by the Detroit City Council. No city, state or federal approvals are needed to provide the internet service. Rocket Fiber plans in several months to move into about 5,000 square feet of space at 1505 Woodward, one of Dan Gilbert’s buildings, after the building’s reconstruction is finished. The electronics store and training center may share a location with each other or be in separate buildings, said Rocket Fiber CEO Marc Hudson, who hopes to have them open in the second half of this year. The concept of the training center is still being developed. Hudson envisions it as a community gathering space with a combination of training and meetings. It will not compete with Grand Circus, one of Gilbert’s forprofit family of companies that offers IT classes and computer-coding boot camps. Gilbert and Rock Ventures have internally financed the $30 million cost of the first phase See Rocket, Page 17

Over breakfast at the Inn on Ferry Street in Midtown, Fernando Palazuelo slides salt and pepper shakers across the table like chess pieces. They are a representation of his Detroit real estate strategy. Yes, he says, he’s getting ready to make a series of big moves. The new owner of the 3.5 million-square-foot Packard Plant on the city’s east side has much broader ambitions for his portfolio in the city, which first took notice of him in 2013 when he bought the shuttered plant — all 47 buildings, all 40 acres — for a mere $405,000 at a Wayne County tax foreclosure auction. Palazuelo is a native of Spain who has been developing historic but dilapidated sites in Peru since losing everything in the recession. He said in an interview with Crain’s last week that he plans to make offers to buy five of See Palazuelo, Page 19

LARRY PEPLIN

Packard Plant owner Fernando Palazuelo wants to make offers to buy five downtown buildings.

Rockwell Medical bets on growth of iron replacement drug BY JAY GREENE CRAIN’S DETROIT BUSINESS

After 10 years in the research and federal drug approval pipeline, Wixom-based Rockwell Medical Inc. has received the green light to market its Triferic drug, a medication for kidney disease patients who need iron replacement therapy. Triferic is expected to boost Rockwell’s annual sales by at least $200 million and

as high as $600 million over the next five years, said CEO Rob Chioini. “This is a pretty big deal for a lot of reasons — for our company and for the 400,000 patients in the U.S. that can use this drug,” Chioini said. “It is a businesschanging kind of event.” With the approval last month by the U.S. Food and Drug Administration and the recently completed marketing and distribution contract with Deerfield, Ill.-based

Baxter Healthcare, Rockwell (Nasdaq: RMTI) expects to start negotiating sales contracts and prices over the next several months to leading national dialysis companies, including DaVita Kidney Care and U.S. Renal Care. Up to 25 new clinical jobs are also planned, due to the growth plans for the drug. See Rockwell, Page 20 Chioini

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CRAIN’S DETROIT BUSINESS

MICHIGAN BRIEFS Social Kitchen to open in Grand Rapids Downtown Market

Cruise lakes from Chicago to Montreal – no, not now

Social Kitchen and Bar in Birmingham will open a West Michigan sibling this year in the Grand Rapids Downtown Market, MLive.com reported. Sklar, who opened Social Kitchen in Birmingham three years ago, said his Grand Rapids restaurant will feature a similar menu with updated décor. He said he looks forward to using the market’s vendors to stock his pantry and create new dishes. Sklar, who said he hopes to open by ArtPrize this fall, said he expects to seat around 200 in the space.

Holland table maker’s expansion promises to create 200-plus jobs OMT-Veyhl USA Corp. plans a 98,000-square-foot expansion at its Holland plant, MiBiz reported. The manufacturer of table legs and table bases plans to spend $8.8 million and create about 205 jobs. The expansion was aided by a $750,000 performance-based grant from the Michigan Strategic Fund. Holland Charter Township may offer a tax abatement. OMT began as a 14-person company in 2005 and has grown to almost 200 employees.

MICH-CELLANEOUS 䡲

Ferris State University alumnus Phil Hagerman and his wife, Jocelyn, along with the Hagerman Foun-

Think your job is a bear? Try selling tickets on a Great Lakes cruise ship in March. That’s the task awaiting the recipient of the short straw at Great Lakes Cruise Co., whose land-based headquarters is in Ann Arbor. Last week, the company announced it would start offering trips between Montreal and Chicago starting July 5 on the M.S. Saint Laurent. The company’s website describes the ship as a “4-star, intimate and charming oceangoing coastal vessel.” Along the way, the freshwater love boat will stop in Sault Ste. Marie, Mich., and Windsor. Arrival in Chicago is scheduled for July 14. So that’s nine days. Plan your Dramamine accordingly. dation, have donated $5 million to Ferris’ College of Pharmacy. The gift is the largest in the Big Rapids school’s history, The Associated Press reported. Phil Hagerman is chairman and CEO of Flint-based Diplomat Pharmacy Inc. The school will rename its pharmacy facility the Hagerman Pharmacy Building. 䡲 The Detroit Water and Sewerage Department told Flint officials that the Detroit system would be willing to provide full water service to Flint until a pipeline to Lake Huron is connected, The Flint Journal reported. Flint gets water from the Flint River, but residents have complained about the smell, taste and appearance and report health problems. Flint cut ties last year with Detroit’s system. Flint City Council President Josh Freeman said Flint isn’t interested in

The company also scheduled a July 14 cruise from Chicago back to Montreal and another trip from Chicago to Montreal departing Aug. 28. The ship has 105 state rooms, considerably smaller than the floating city blocks that cruise the Caribbean. The reason, according to The Associated Press: The Great Lakes’ lock system isn’t big enough. Now that this story has arrived at the point where a reader, in the ice grip of seasonal affective disorder, might be wondering, “What kind of idiot would cruise the Great Lakes?” it would be a good time to point out that the price for the trip will range from $4,199 to $7,999. So the answer is, one with a great deal of, uh, liquidity.

re-establishing ties with Detroit. 䡲 The state recently approved a $50 million grant to help community colleges buy equipment and train students studying skilled trades, MLive.com reported. The Community College Skilled Trades Equipment Program follows comments by state officials and the business community that manufacturers need skilled workers. 䡲 The office furniture industry ended 2014 with shipments totaling $9.77 billion, up 4.5 percent over 2013, according to the Grand Rapids-based Business and Institutional Manufacturers Association. 䡲 The Michigan Beer and Wine Wholesalers Association has named Vice President Spencer Nevins its new president, effective July 1. He succeeds Mike Lashbrook, who plans to retire.

䡲 During opening night of the annual Gilda’s LaughFest comedy festival in Grand Rapids, organizers hope to set a record for the most people wearing paper crowns. The current record: 1,324, set in India.

Past record-setting attempts have included people wearing sunglasses in the dark, fake mustaches and chicken beaks as well as tossing rubber chickens. LaughFest, which runs March 5-15, honors comedian Gilda Radner, who died of ovarian cancer in 1989. 䡲 Legislation introduced in Congress would order the U.S. Army Corps of Engineers to take steps such as placing carbon dioxide bubble screens and underwater sound cannons on the Des Plaines River near Chicago to keep Asian carp from reaching Lake Michigan about 40 miles away, The Associated Press reported. 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.

CORRECTIONS 䡲 An incorrect photo was used for a Feb. 23 People item on Page 20 about Rana Edgar of the Paint Creek Center for the Arts. A corrected item and photo appears today on Page 16. 䡲 A story on Page 9 of the Feb. 23 issue under the headline “Oakland Township faces lawsuits over proposed Moceri development” should have said that the proposed Blossom Ridge development includes 134 congregate care living units, 60 4-plex ranch units and 44 duplexes, all of which are designed for the elderly and disabled. The story incorrectly described the type of living units in the development. 䡲 A story on Page 23 of the Feb. 23 issue should have said Ascension Care Management LLC is a subsidiary of St. Louis-based Ascension, not Ascension Health.

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March 2, 2015

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On March 4, 1985, Crain’s reported on the potential glut of new ofoffice space construction planned metro Detroit and the fice space construction planned inin metro Detroit and the makings makings shift to a tenant-driven market. Read more at crainsdetroit.com/30 for a shiftfor to a tenant-driven market. Read more at crainsdetroit.com/30

LOOKING BACK

Inside

30 YEARS AGO THIS WEEK

’80s office building boom still reverberating in suburbs BY KIRK PINHO CRAIN’S DETROIT BUSINESS

Thank Ross Perot in part for the two most frenzied years of new metro Detroit office construction in the last four decades. Part of the reason 11.7 million new square feet of office space opened in 1986 and 1987 was that the 1992 billionaire presidential candidate’s company, Elec-

tronic Data Systems Corp., needed 2 million square feet in the region following its purchase by General Motors Corp. in 1984 for $2.55 billion. Developers pounced, opening 6.5 million and 5.2 million square feet of new — and mostly speculative — office space in 1986 and 1987, respectively, according to data from the Southfield office of Newmark Grubb Knight Frank. It was unprecedented. Crain’s reported in 1985 that 7.7 million

new square feet was expected to come online in 1986. Put another way? That’s the equivalent of more than one new Renaissance Center (5.5 million square feet) being built each year. “Those were the freakin’ days,” said David Friedman, president and CEO of Farmington Hills-based Friedman Integrat-

Newsmakers offer inside look at Detroit bankruptcy, Page 4 Company index

See Building, Page 21 Friedman

These companies have significant mention in this week’s Crain’s Detroit Business: American House Senior Living Communities . . . . . 11 Ann Arbor Spark . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Aupeo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Aupeo wants to be deliverer of drivers’ desires

Chris Fritzsching, the Detroit Lions’ director of youth football camps, calls the new adult fantasy camp “a natural progression” in the team’s education outreach.

Axis Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Beaumont Health System . . . . . . . . . . . . . . . . . . . 20 Bernard Financial Group . . . . . . . . . . . . . . . . . . . . 19 Beztak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Bodman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Clark Hill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Community Economic Development Assn. of Michigan. 13 Community Foundation for Southeast Michigan . 11, 13 ContentOro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Covenant Community Care . . . . . . . . . . . . . . . . . . . 6 Crain Communications . . . . . . . . . . . . . . . . . . . . . . 4 DBA Worldwide . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Detroit Lions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Detroit Pistons . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Detroit Red Wings . . . . . . . . . . . . . . . . . . . . . . . . . 18 Detroit Tigers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Detroit Soup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Etkin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 21 Friedman Integrated Real Estate Solutions . . . . . . . 3 Henry Ford Health System . . . . . . . . . . . . . . . . . . . 14

Goal is to offer driver-specific content, ads BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS COURTESY OF THE DETROIT LIONS

Lions going to camp for fans New June event adds to Detroit teams’ fantasy biz BY BILL SHEA CRAIN’S DETROIT BUSINESS

The Detroit Lions are taking fantasy football to the next level. But instead of fans drafting National Football League players for statistical games, the Lions are signing fans to compete on the field. The team is offering a threeday weekend in June that will replicate a minicamp and culmi-

nate in a two-hand touch football game at Ford Field. The price: $1,999. Anywhere from 50 to 70 participants are expected. The event is the idea of Chris Fritzsching, the team’s director of youth football camps. “Over the course of the 12 years I’ve been here, we’ve started to grow that (football education) opportunity to coaches, to high school kids,” he said. “The adult fantasy camp is a natural progression.” The event also represents the Lions joining the longtime fantasy camp industry. Locally, a popular Detroit Tigers fantasy camp has been staged

THIS WEEK @ WWW.CRAINSDETROIT.COM

See Lions, Page 18

Aupeo! GmbH, a subsidiary of Panasonic Corp. of North America, is reinventing itself as well as reinventing the way information is consumed inside vehicles. Panasonic, which operates its main automotive sales office in Farmington Hills, acquired the Berlin-based streaming audio provider in 2013 with plans for global distribution in transportation industries. But two years later, Aupeo, now co-located in Farmington Hills and Germany, continues to seek a winning business model within the

moving target of automotive infotainment. Aupeo is migrating from an appbased service to an in-car service provider based on algorithms that predict what a consumer wants to hear and when, said David Taylor, managing director of Aupeo. “We didn’t buy (Aupeo) for a music service, we bought it to get content into the car,” Taylor said. “Once we’re in the car, we can do something really interesting.” Aupeo is betting, specifically, on at-will integrated audio content that caters to a person’s behavior and extrapolates potential interests. For example, music is selected based on similar music previously chosen by the driver. Same goes for news programming. It’s the audio equivalent to custom content or ads that show up while browsing a website. Aupeo’s system is currently on See Aupeo, Page 20

HIS Automotive . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Jones Lang LaSalle . . . . . . . . . . . . . . . . . . . . . . . . 21 LC Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Mars Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Michigan Primary Care Association . . . . . . . . . . . . . 6 Michigan Venture Capital Association . . . . . . . . . . . 5 Newmark Grubb Knight Frank . . . . . . . . . . . . . . . . . 3 Oakmont Senior Living . . . . . . . . . . . . . . . . . . . . . 12 Packard Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Panasonic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Pomeroy Living . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Presbyterian Villages of Michigan . . . . . . . . . . 11, 12 Principal Associates . . . . . . . . . . . . . . . . . . . . . . . 21 Redico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Renaissance Venture Capital Fund . . . . . . . . . . . . . 9 RHP Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Rock Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Rocket Fiber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Rockwell Medical . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Roxbury Group . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 St. John Providence Health System . . . . . . . . . . . . 14 Sun Communities . . . . . . . . . . . . . . . . . . . . . . . . . 13 United Methodist Retirement Communities . . . 11, 13 University of Michigan . . . . . . . . . . . . . . . . . . . . . 18 Wayne Alumni Law Group . . . . . . . . . . . . . . . . . . . . 7

Department index BANKRUPTCIES . . . . . . . . . . . . . . . . . . 7 BUSINESS DIARY . . . . . . . . . . . . . . . . 16 CALENDAR . . . . . . . . . . . . . . . . . . . . 16 CLASSIFIED ADS . . . . . . . . . . . . . . . . 17

GLENN TRIEST

Aupeo! GmbH wants to get away from apps, said David Taylor, managing director of the Panasonic Corp. of North America subsidiary. Apps, he says, are “inefficient; drivers can’t, or shouldn’t, be fumbling through apps while driving.”

KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 8 MARY KRAMER . . . . . . . . . . . . . . . . . . 8 OPINION . . . . . . . . . . . . . . . . . . . . . . . 8 PEOPLE . . . . . . . . . . . . . . . . . . . . . . 16 RUMBLINGS . . . . . . . . . . . . . . . . . . . 22 WEEK ON THE WEB . . . . . . . . . . . . . . 22

Light a fire under your weekend Every Wednesday, Crain’s posts “10 things to do in Detroit this weekend.” Maybe you fancy music, exhibits, movies, food, starting a fire in front of the Detroit Institute of Arts. Whatever. Visit crainsdetroit.com/10things.

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PHOTOS BY AARON ECKELS

U.S. Bankruptcy Judge Steven Rhodes (left) and former Detroit Emergency Manager Kevyn Orr provided an inside look at the cityâ&#x20AC;&#x2122;s bankruptcy at Crainâ&#x20AC;&#x2122;s Newsmakers of the Year luncheon. Rhodes also warned of an unresolved problem: unfunded pensions.

Crainâ&#x20AC;&#x2122;s honors Detroit bankruptcy principals at Newsmakers luncheon

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Last week, Crainâ&#x20AC;&#x2122;s Detroit Business honored the brain trust behind Detroitâ&#x20AC;&#x2122;s speedy emergence from bankruptcy: U.S. Bankruptcy Judge Steven Rhodes, who has just retired, and former Detroit Emergency Manager Kevyn Orr. â&#x20AC;&#x153;I think the key word in that is â&#x20AC;&#x2DC;former,â&#x20AC;&#x2122; â&#x20AC;? joked Mary Kramer, Crainâ&#x20AC;&#x2122;s publisher, at a VIP reception before the main event. That set the tone for both the Wednesday reception and the larger Newsmakers of the Year luncheon at MotorCity Casino, attended by about 600, and filled with good-natured ribbing between Orr and Rhodes. Joining them on stage was Gerald Rosen, chief judge of the U.S. District Court for the Eastern District of Michigan, who was asked to moderate a conversation between the two Newsmakers. It seemed fitting because he was the lead mediator for the bankruptcy, responsible for pulling together the â&#x20AC;&#x153;grand bargainâ&#x20AC;? that preserved the Detroit Institute of Artsâ&#x20AC;&#x2122; collection and prevented draconian cuts to pensions. But Rosen was met with a surprise when Crain Communications Inc. Chairman Keith Crain called him to the stage. â&#x20AC;&#x153;We got you here under false pretenses,â&#x20AC;? Crain said to a stunned Rosen. â&#x20AC;&#x153;So sue me.â&#x20AC;? Instead, Crain had an award for Rosen: the Designated Hitter Award. Detroit Tigers great Al Kaline delivered the honor via video, telling Rosen, a die-hard Tigers fan, that the â&#x20AC;&#x153;grand bargainâ&#x20AC;? was a â&#x20AC;&#x153;grand slam for Detroit. Well done, slugger!â&#x20AC;? Rosen, however, would have liked to see the grand slam happen a little faster. Initially, he told the crowd, he had hoped the bankruptcy would be completed by July 18 â&#x20AC;&#x201D; exactly one year after the city filed for Chapter 9 protection. For Rhodes, it was critical that

Bankruptcy mediator and U.S. District Judge Gerald Rosen (right) told Crain's Editor-in-Chief Keith Crain that an expedited Chapter 9 was vital. Rosen had hoped to finish on July 18 of last year, the one-year anniversary of Detroitâ&#x20AC;&#x2122;s bankruptcy filing.

the bankruptcy be timely and that Orrâ&#x20AC;&#x2122;s plan to restructure be feasible. â&#x20AC;&#x153;I did not want to be known as the judge on Detroitâ&#x20AC;&#x2122;s first bankruptcy case,â&#x20AC;? he said. Given that, he still never saw the DIA collection as being at risk in the 16-month case. Bankruptcy law does not give creditors or the judge power to sell off assets, so attorneys would have had to convince Rhodes that selling the art was in the best interest of the city. And that was something he did not believe: â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s the one thing in the city that allows it to compete in the marketplace of municipalities around the world,â&#x20AC;? he explained. Orr emphasized at several points during a question-and-answer session led by Kramer that remaining empathetic toward the stakeholders and city residents â&#x20AC;&#x201D; and the retirees affected â&#x20AC;&#x201D; was key. â&#x20AC;&#x153;One of the operating principles we had going in was to be as compassionate as we could, given the circumstances,â&#x20AC;? he said. He also said it was important to include Detroit Mayor Mike Duggan and the Detroit City Council in managing much of restructuring efforts instead of relying on the widereaching powers of Public Act 436. â&#x20AC;&#x153;We wanted to be inclusive and have the people who have to push

it forward have a voice,â&#x20AC;? Orr said. Rhodes did use the luncheon to warn that the cost of unfunded pensions â&#x20AC;&#x201D;which he estimated to be between $1 trillion to $4 trillion nationwide â&#x20AC;&#x201D; is a looming problem. To combat that, he said, municipalities across the country need to consider switching to defined-contribution plans similar to private-sector 401(k)s. When Orr was asked at the luncheon whether not implementing such a plan was a missed opportunity, he responded by saying: â&#x20AC;&#x153;Was it a missed opportunity? I donâ&#x20AC;&#x2122;t think so in the environment we were working with.â&#x20AC;? For each of its 30 years, Crainâ&#x20AC;&#x2122;s Detroit Business has bestowed the title of â&#x20AC;&#x153;Newsmakerâ&#x20AC;? on a select someone â&#x20AC;&#x201D; or, occasionally, select someones â&#x20AC;&#x201D; who dominated the previous yearâ&#x20AC;&#x2122;s headlines. All three men highlighted in this yearâ&#x20AC;&#x2122;s program sounded a positive note for Detroitâ&#x20AC;&#x2122;s future, though Rhodes urged regional business leaders that â&#x20AC;&#x153;we have to fix the schools for families to find Detroit an attractive place to live. We have to find a way to build on the momentum for regional cooperation that was created by Cobo Hall and now by the Great Lakes Water Authority.â&#x20AC;? â&#x20AC;&#x201D; Reporting by Amy Haimerl

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Ex-Borders VP’s startup idea: Selling book content to websites BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

A former vice president at Borders Group Inc., the onetime book giant that went out of business in 2011, is convinced there is money to be made from the book industry and has been meeting with angel and venture capital investors to help launch his startup company, ContentOro LLC. Bob Chunn, who has incubator space at Ann Arbor Spark, wants to license book content from publishers and sell it to websites in need of content. At least one local veteran entrepreneur, Chuck Newman, who founded ReCellular Inc., an Ann Arbor-based company that recycles cellphones, has bought into Chunn’s vision, literally, as his first investor. Chunn’s last job at Borders was managing the digital division, overseeing the Ann Arbor company’s website, eBooks, Readers, online marketing and social media. Before that, he headed up the division that bought books that were no longer being marketed by publishers to sell at deep discounts, often on racks in the entryway into the stores. Chunn said his contacts in the publishing industry, and knowing how to commercialize content currently not generating revenue for

publishers, are key. He said he has been talking with a variety of publishers and hopes to have deals signed soon. He said seed funding will enable ContentOro to build its own online marketplace, where potential customers can use search terms or phrases to find content they want. Each customer will have sole use of purchased content, which will help search engine optimization tools direct people to their sites. “There are 130 million books, and you can only buy 70,000 of Chunn them at Barnes & Noble, so there’s plenty of material to choose from,” Chunn said. Chunn said he got the idea for ContentOro after he left Borders in 2011 to join Houston-based Retail Concepts as its chief marketing officer. “We were paying a lot of money for content for our website, but people would land on our site and we’d give them garbage,” he said. “We weren’t a source of real information.” Chunn said funding will also allow him to hire former colleagues at Borders who were part of his team that bought books from pub-

lishers that were no longer being distributed or marketed. Ethan Goodman, vice president of digital and innovation at the Mars Agency, an ad agency in Southfield, is setting up a pilot program and expects ContentOro will be able to cut the cost of creating Web content for his clients by two-thirds. He said clients often pay high fees to have content custom created that misses the mark and leaves website visitors unengaged and unlikely to return. “Content marketing is a hot-button issue for our clients. Traditional and digital media have not performed as well as they want. There’s a big opportunity here for someone who can provide better content,” said Goodman. Goodman said he was introduced to Chunn by Tony Grover, a managing partner at RPM Ventures, one of several venture capital firms that have been doing due diligence on a possible investment in ContentOro, which is still in a pre-revenue stage and making the rounds of angel and VC investors to fund a seed round of equity capital. “Chunn can tap into an untapped source of content that no one has tapped before, and we’re going to see in a pilot if he can get us rich, engaging content that our customers can use for a fraction of the cost,” said Goodman. “Can he get us a large volume of content

that is fresh and relevant? That’s what we need to prove out.” Jim Adox, chairman of the Ann Arbor-based Michigan Venture Capital Association and managing director of the Ann Arbor office of Madison, Wis.-based Venture Investors LLC, is vetting ContentOro for a possible investment and says he likes what he sees so far. “Marketers need a constant supply of good and fresh content to engage customers on the Web and mobile. This can be expensive and challenging,” he said. “ContentOro is developing a process to create a content repository marketers can easily go to and find fresh content at lower costs. It’s similar to the stock images sites, but more complicated to do.” Skip Simms is the managing member of the Ann Arbor-based Michigan Angel Fund and a senior vice president at Spark. The angel fund is in due diligence for a possible investment, said Simms. “We like the fact that Bob has extensive experience and contacts in the book business,” said Simms. “We also like the market opportunity as it meets a real need for quality content. His idea to serve any and all businesses needing content is simple but not easy.” Travis Linderman, the director of entrepreneurial operations at Spark who has been helping Chunn refine his business plan,

said he has been impressed by how fast ContentOro has evolved. “Rarely have I seen this kind of momentum at a company at this early of a stage,” he said. Part of that momentum is getting Sean Moore, the president of Moseley Road Inc., a company in Irvington, N.Y., that helps U.S. publishers sell book rights to foreign publishers, to help him sign up publishers to provide ContentOro with publishers. “All the publishers I’m talking to are ready to get on board when Bob is ready,” said Moore, who says he plans to sign on 15 publishers this year. He will also represent ContentOro at upcoming book trade fairs in New York, London and Frankfort. “When I met Bob, it only took me 60 seconds to get it. I told him, ‘I want to be your partner,’ ” said Newman, who is CFO. “The idea is brilliant. You’re taking content that exists and recycling it, which is what I did at ReCellular. “I’ve been an entrepreneur my whole life. Since college, I’ve never worked for anyone. And this is the best damn idea I’ve seen in my career. This is going to be one of the real success stories to come out of Southeast Michigan.” Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

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Approaching funding cuts threaten federally qualified health centers BY JAY GREENE CRAIN’S DETROIT BUSINESS

Federally qualified health centers in Michigan have been increasing patient access, improving services and expanding buildings, and adding new locations the past five years under funding provisions from the Patient Protection and Affordable Care Act. Since 2011, Michigan health centers have treated 21 percent more patients and have hired 873 more employees, said the Michigan Primary Care Association. Last year, health centers also saved an estimated $16 million for the state Medicaid program because of their lower per-patient treatment costs, the association told Crain’s. But all that could come to a screeching halt on Sept. 30 as $11 billion in financial support to the health centers that was part of a trust fund set up under Obamacare is scheduled to run out. At Covenant Community Care Inc., a tripling of federal funding over the past five years has enabled the five-clinic health center in Detroit to quadruple the number of patients treated to 14,000, said Paul Propson, its executive director. Since 2011, Covenant’s federal funding increased from $875,000 per year to $2.5 million, accounting for 25 percent of its budget, Propson said. Some 55 percent of Covenant’s revenue comes from Medicaid, 10 percent from other in-

surance, 5 percent from self-pay, and 5 percent from grants and donations. The federal funding, however, has enabled Covenant to grow from one dentist to seven dentists and from two physicians to 11. The health center plans to add another dentist and two physicians in the next several months, Propson said. Over the past five years, Covenant has been seen a 66 percent increase in uninsured clients to 5,500 and a 15-fold increase in Medicaid recipients to 8,200 from 544, he said. “Really, this is a ‘wow’ story,” he said. Propson “We are not that unusual for community health centers in Detroit. We are part of a trend that is to move people out of ERs into primary care. It has been a success story in making it possible for people to get care in more appropriate (and lower-cost) location.” But if the Obamacare funding runs out, Propson said, Covenant’s budget would be immediately cut by 15 percent, or about $1.5 million, and the health center would face some tough choices. “We can’t abandon our patients. It will be all or nothing. Either we continue to care for the 5,500 unin-

sured patients we have or go into a spiral that would be the end of our health centers,” Propson said. Kim Sibilsky, CEO of the Lansing-based Michigan Primary Care Association, which represents the state’s 40 health centers and 240 clinic locations, said federal funding for health centers could be reduced by 70 percent to about $1.5 billion nationally unless Congress steps in this year. “We are asking Congress to extend funding for health centers to continue to take care of the medically Sibilsky underserved in Michigan,” said Sibilsky, adding health centers could be forced to lay off employees, reduce hours, cut services and possibly close clinic locations. U.S. Sen. Debbie Stabenow, DMich., said there is bipartisan support to craft an appropriations or health policy bill this year that would extend health center trust fund support under Obamacare. “I am seeing more Republican colleagues coming forward, even those who did not support the Affordable Care Act,” said Stabenow in an interview with Crain’s. “I am very committed to get this extended. It has made a real difference for Michigan families.”

Health centers are asking for five additional years of mandatory funding in the trust fund that would maintain the $3.6 billion annual spending. Some 35 million patients could be served by health centers by 2020, up from 23 million in 2014. President Obama has proposed $2.7 billion in discretionary funds in each of his fiscal 2016, 2017 and 2018 budget proposals. “Another proposal we are looking at would add $11 billion, Stabenow the same amount in the original bill (Obamacare)” for health centers in a three-year fix,” Stabenow said. “It could be part of the (so-called Medicare reimbursement ‘doc fix’)” that will up for a vote in March. But without additional Congressional funding, the financial hit could mean Michigan could lose $40 million annually, including $8.6 million in Wayne County. Some 49,000 fewer patients would be seen by health centers, which now see about 605,000 patients per year. It also could cost the state’s health centers 600 jobs and an economic loss of $79 million, Sibilsky said.

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Because health centers provide primary and preventive care, Sibilsky said, loss of funding could increase overall costs at hospitals and emergency departments. For example, the MPCA commissioned a study last year that found Michigan’s health centers save the state Medicaid program $12 per adult Medicaid beneficiary per month, or $144 per member per year. The study by the Institute for Health Policy at Michigan State University found those annual Medicaid savings amounted to $15.9 million. Sibilsky acknowledged health centers have increased Medicaid revenue because of Healthy Michigan Medicaid expansion last year. The additional Medicaid dollars have helped with cash flow but not overall operations, she said. This is because Medicaid funding covers only the costs of the Medicaid patients, Propson said. “Medicaid cost reimbursement to health centers only provides for needs of Medicaid recipients. There is no subsidy for the uninsured,” said Propson, who notes it costs $600 per year to cover the costs of an uninsured patient with dental and medical services. Besides the health center trust fund, two other Obamacare programs, funded at more than $500 million over five years, also are scheduled to expire this year and also will affect some health centers. The National Health Service Corps provides loan repayments and scholarships to several thousand health care workers who work in underserved regions. The Teaching Health Center Program is funding training for more than 550 dental and medical residents in 60 community health centers. Stabenow said legislators are also looking at extending these programs. But if all efforts fail and health center funding is reduced this fall, Propson said, Covenant will stop growing, adding more patients, and will seek donations and grants in the community to sustain its operations. “Because community health centers are the right way to serve low-income and Medicaid recipients, we will find a way to continue growing to meet the needs,” he said. In Detroit, six federally qualified health centers operate more than 23 individual clinic locations. They are Covenant Community Care, Detroit Community Health Connections, Community Health and Social Services, Western Wayne Family Health Centers, Detroit Central City Community Mental Health and Advantage Health Centers. There also are three federally qualified ‘look-alike’ health centers — the Wellness Plan Health Centers, Health Centers Detroit Medical Group and Oakland Integrated Healthcare Network. These centers provide many of the same services as federally qualified health centers. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

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New Wayne Alumni Law Group helps new attorneys, startups BY AMY HAIMERL CRAIN’S DETROIT BUSINESS

Eric Williams is a man who does not sleep. “I get maybe four or five hours a night,” he said, laughing. That’s Williams’ sacrifice to balance all of his roles and projects at the Wayne State Law School. He’s an assistant professor there as well as the director of the program for entrepreneurship and business law, director of the business and community law clinic and director of the patent procurement clinic. And now he’s formed a new law firm dedicated to assisting Detroit startups: Wayne Alumni Law Group. Williams started the nonprofit practice in December as a way to give recent Wayne State graduates experience practicing law and teach them the technical skills needed to run a business — and help small-business owners get good legal advice at a price they can afford. “There is a national conversation about the lack of practiceready lawyers,” said Williams. Williams “In the wake of the financial crisis, one of the things that happened is that large companies that employed large law firms decided they didn’t want to pay to train first-year associates to do the work. Some of the traditional on-the-job training lawyers received was no longer available.” So Williams began considering how to get recent graduates training and experience while also helping the flood of startups forming and needing legal advice. Students in his business law clinic already work with about 10 firms a semester, so he concocted a way to scale that program. Now students who go through his business law clinic can apply for 18-month positions at WALG after graduation. They spend their first six months in an incubation phase, which teaches them business skills, and the next year building their own client list. Wayne State underwrites the incubation, but the rest of the program is self-sufficient, run on the fees generated by the attorneys. For this first cohort, lawyers Rula Aoun, Christopher Banerian, Henry Ibe and Bonnie Smith are running the practice, which is based at TechTown Detroit in the New Center area. The four, who charge discounted rates of $75 to $125 per hour, already have a dozen paying clients. “This is especially important

BANKRUPTCIES The following business filed for protection in U.S. Bankruptcy Court in Detroit Feb. 20-27. Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation. Empire Doors Windows and More Inc., 21500 Telegraph Road, Southfield, voluntary Chapter 7. Assets and liabilities not available. — Natalie Broda

with the governor and the mayor both talking about small business and entrepreneurship taking a greater role than it traditionally has,” Williams said. Supporting the program is Detroit-based Bodman PLC, a partnership that came together thanks to one of Williams’ former students, Apollo Upshaw. Upshaw was interviewing for a position with Bodman member Jonathan Burleigh and told him about Williams’ plans for WALG. Burleigh was intrigued. He hired Upshaw and decided he wanted to be involved with Williams’ efforts. Within three months the two

men hammered out an agreement that allows Bodman attorneys to serve as pro bono mentors to WALG lawyers as well as students in the business clinics. So far Burleigh more than two dozen attorneys have agreed to serve. Its investment is especially rewarding, Burleigh said, because more than four dozen Bodman lawyers are Wayne law alumni. In addition to mentoring, Bod-

man attorneys will offer assistance — at discounted rates — if legal issues are too complex for the WALG attorneys. That ensures new firms can feel confident they are getting the best legal advice while also getting new lawyers the on-the-job training they need, Williams said. For Burleigh, the connection offers a pipeline of talent, a chance for young lawyers to learn mentoring skills, and a way for Bodman to impact the future of Detroit. “Bodman grew up in the city,” he said. “It was spun off from Henry Ford. We’ve been in the city since 1929 … and anything we can

do to help the economic reemergence of the city is a high priority for the firm. This gives us the opportunity to support Wayne State and it gives us the opportunity to support the city. It’s win-win-win.” For Williams, it’s worth the lost sleep because he sees a path to success for his students — and for Detroit, which is his hometown. “A lot of nonprofit and government agencies’ goals are to make it easier for small business to succeed. WALG wants to be an entry point for small business ... We really deserve to see small business in Detroit thrive and thus Detroit thrive.”

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OPINION

Northland closing reflects retail trend t was the largest shopping center in the world when it opened in 1954. And to many, it eventually signaled the end of retail in downtown Detroit. Northland Center’s closure, approved by an Oakland County judge last week, has been a long time coming. The demise was signaled when anchors — J.C. Penney, Target and Macy’s — closed or announced intentions to do so. But 50 years ago, with a Hudson’s store as an anchor for 110 other retailers, Northland was a global wonder. It was the first mall designed by Victor Gruen, an Austrian-born architect based in Los Angeles. At the time — with an auditorium, grocery store and an outdoor space that was later removed — it was considered a kind of new urbanism, a new kind of mixeduse “downtown.” Northland was totally enclosed in 1974. In later years, Gruen resented what became standard in totally enclosed shopping mall design, saying in a 1978 speech: “I refuse to pay alimony for those bastard developments.” He died two years later. Ironically, as Northland is shuttered, retail in other downtowns — Rochester, Birmingham and Ferndale among them — is on the upswing. “Walkability” is the watchword. Even downtown Detroit is showing new signs of retail — and residential — life. We think Victor Gruen would approve.

MARY KRAMER A warning: Watch pension plans Last week, the judge presiding over Detroit’s historic bankruptcy repeated his warning: Other cities need to heed the Detroit lesson and transition to defined-contribution pension plans. Pension obligations nearly buried Detroit. “It flies largely under the radar,” now-retired U.S. Bankruptcy Judge Steven Rhodes said of municipal pension liabilities at our Newsmaker of the Year luncheon, where Crain’s honored Rhodes and former Emergency Manager Kevyn Orr. As the emergency manager for the Downriver suburb of Lincoln Park, Brad Coulter sees what happens when people ignore Rhodes’ warning. Coulter is trying to unravel the mess of a general employee system funded at 22 percent and a police and fire fund at 31 percent (see chart below). In 2004, both funds were almost fully funded. Then the city created a large early retirement program. The assets of the funds have gone down for the past 10 years. This, despite the city never missing its

Actuarially Required Contribution to its two pension systems. Coulter says most people would think the ARC is the amount required to keep the pension fund healthy. In reality, it’s the minimum contribution required using assumptions for investment returns or payroll growth “that may or may not match reality.” The police and fire pension fund, for example, had growth of 4 percent over the past 15 years; the S&P for that same time was 6 percent. But the actuarial assumptions provided by the city’s actuary? Eight percent. That’s an “in your dreams” assumption. But the folks in Lincoln Park in charge, the watchdogs, gave it a pass. It was in the city’s short-term interests to have a low ARC; in a budget crunch, it couldn’t afford to pay more into the pension funds. Members of pension boards knew that if the city had to pay more into the funds, layoffs of current employees could follow. “Nobody did their fiduciary

More words to come on roads It’s official. On May 5, voters statewide will be asked to decide “yes” or “no” to Proposal 1, summarized in just 76 words: “A proposal to amend the state constitution to increase the sales/use tax from 6% to 7%. To replace and supplement reduced revenue to the school aid fund and local units of government caused by the elimination of the sales/use tax on gasoline and diesel fuel for vehicles operating on public roads and to give effect to laws that provide additional money for roads and other transportation purposes by increasing the gas tax and vehicle registration fees.” Of course, the devil is in the details, and between now and May 5, prepare for vociferous claims from anti-tax advocates as well as those who support the proposal as the best means on the table to increase funds to fix roads. Proposal 1 is the result of lawmakers abdicating their role in finding a way to invest in crumbling infrastructure. They punted to voters with a grab bag intended to have benefits for several constituencies (aka to the anti-tax crowd, “special interests”). It isn’t pretty. But neither are our roads.

COURTESY OF LINCOLN PARK

duty to protect the pension systems,” Newsmaker Coulter says. honorees offer Lincoln insight into the Park and DeDetroit troit have the bankruptcy -- and Judge Gerald same actuary, Rosen gets a Gabriel, Roedsurprise, Page 4. er, Smith & Co. And last fall, Detroit retirees filed a classaction suit in Wayne County Circuit Court against the actuary, alleging that it provided erroneous or downright fraudulent information about the deteriorating state of the fund. How many other Lincoln Parks are lurking in Michigan? And the state has no automatic trigger of actions that occur if a retirement fund hits, say, 50 percent. (Maybe a governor who’s also a CPA is the right guy to fix that.) Back in Lincoln Park, Coulter is trying to help fix that city’s pension funds, a process he says will take 20 or 30 years. Meanwhile, the costs of 300 retirees now dwarf the city’s ability to deliver services with its 83 active employees. Coulter eliminated retiree health care and instead is offering retirees a stipend to buy their own. That’s what Detroit did, too. He’s hoping property values will rise — bringing in more tax revenue — because Lincoln Park has many positives — good, affordable housing and proximity to regional assets, like downtown, Metro Airport and recreational activities like kayaking. Coulter’s experience was largely in for-profit turnarounds as a consultant for Bloomfield Hills-based O’Keefe & Associates. “Corporations would never be able to do what cities have been able to do,” Coulter says. “Municipal funds have been able to deteriorate so cities could balance their budget by not funding pensions.”

INSIDE SCOOP

Mary Kramer is publisher of Crain's Detroit Business. Catch her take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760 and in her blog at www.crainsdetroit.com/kramer. E-mail her at mkramer@crain.com.

KEITH CRAIN: Newsmaker tribute was a fitting event Last week, Crain’s celebrated the 30th Newsmaker of the Year. Our first was the late Peter Stroh. This year, when it came to top honors for those who made headlines, it was important to recognize two worthy individuals. They were Kevyn Orr and now-retired U.S. Bankruptcy Judge Steven Rhodes, both of whom were part of the team responsible for managing the Detroit bankruptcy. Getting the city through bankruptcy was a team effort that included many important individuals, including mediator U.S. District Judge Gerald Rosen. And

he helped us participate in the great event we held last Wednesday. But what our Newsmakers did, without a doubt, was critically important to the Detroit community — and important to the Detroit business community. We felt it only fitting that we honor these gentlemen at the Newsmaker luncheon last week. It was fascinating to hear them both talk about their experiences over the last couple of years. Kevyn Orr has left Detroit and is

back home in Washington. He’s also part of a team working on fixing Atlantic City’s financial emergency. Judge Rhodes retired just a couple of weeks ago. So it is interesting that these two individuals, key players in the bankruptcy, have both moved on to new chapters of their lives. There will be books written about this episode of Detroit history. Probably many books — although it looks unlikely that either of these two gentlemen will

write one, which is too bad. There will be plenty written and discussed about what happened during the last couple of years. But this community was very fortunate that, somehow, these two men were picked to do the lion’s share of the work. Gov. Rick Snyder picked the right guy for Detroit emergency manager. And the judicial system, with Judge Rosen’s suggestion, picked Judge Rhodes. Somehow, they were the right choices and Detroit was the beneficiary. Along with a cast of people too long to mention, it was a team that knew what had to be done and did it.

The journey is far from over. But they have put into place the right foundation that will be so important in the years ahead. Detroit now has a historic legacy that it must protect and build on for the future. With a clean balance sheet, it is time for the city to look for economic development to complete the promise that was begun by Orr and Rhodes. It is, indeed, the end of an important chapter in the history of Detroit. And now we are starting a brand-new and very exciting chapter.

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Renaissance Venture adds $14M from new investors, closes 2nd fund BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

The Ann Arbor-based Renaissance Venture Capital Fund has received almost $14 million in commitments from three new corporate and institutional investors and has closed its second fund at $79 million. The new investors are Benton Harbor-based Whirlpool Corp., the East Lansingbased MSU Foundation and Livonia-based Roush Industries Inc., according to fund manager and CEO Chris Rizik. “We’d closed the fund, but we Rizik were asked by a few investors if we’d consider opening the fund to new investment, and we did briefly and quietly,” said Rizik.

New parking system to roll out in Detroit Detroit COO Gary Brown unveiled concepts for changes to the city’s parking system last week. Among the big changes: The parking payment stations won’t take cash bills. Here’s a look at some of the changes Brown discussed: 䡲 The city will adopt a “parking by plate” technology. That means parking meters will be gone in most locations. Instead, users will pay at a kiosk and payment will be attached to their license plate rather than spot number, allowing drivers to pay for a segment of time and use it at any spot. 䡲 There will be a mobile app that will accept payment and identify open spots. The vendor has yet to be determined. The city is negotiating with a vendor that Brown said has experience in cold-weather Northern cities. 䡲 Payment will be made by coin or credit card. Cash dollars will no longer be accepted. Cash, Brown said, is one of the top reasons the existing pay kiosks jam and are out of service. 䡲 Brown intends to roll out a pilot of the new system by the end of March. It will span two blocks along Seven Mile Road and Livernois Avenue. 䡲 The entire system is expected to be rolled out by June. 䡲 Brown told attendees at last week’s Downtown Detroit Partnership stakeholder meeting that the new system will reduce the number of city employees dealing with parking violations from 50 to five. But, he said, no layoffs are coming; instead, the 45 employees would be sent to other departments. 䡲 Brown said he hopes to reintroduce a reduced parking fine for those who pay within a certain period of time. — Amy Haimerl

“Our goal is to connect major corporations and institutions in the state with startup companies, so it was important for us to bring on these major new investors,” he said. Renaissance Venture was launched in 2008 by the organization then known as Detroit Renaissance, now called Business Leaders for Michigan. It raised a first fund of $45 million and had a first close of $60 million on the second fund in 2012. It later raised $5 million more. Both funds are what are termed funds of funds, which invest in other venture capital funds rather than make direct investments in companies. The goals were to invest in out-

of-state VC firms that would in turn invest in Michigan companies, and to raise money from corporate limited partners who would help vet and improve technologies those firms invested in and eventually be customers for their products. Other investors in Renaissance’s two funds include DTE Energy Co., Blue Cross Blue Shield of Michigan, Ford Motor Co., the Dow Foundation, Meijer Inc., Wolverine World Wide Inc., the Kellogg Foundation, the Michigan Employees’ Retirement System and CMS Energy Corp. Rizik said about half the second fund has been committed. The latest, in a deal just concluded, was an investment of $5 million in

Boston-based Flagship Ventures. In December, it was announced that Renaissance Venture, Detroit Venture Partners and Detroit-based Fontinalis Partners will provide investment capital for a new Techstars program coming to Detroit later this year. The program is called Techstars Mobility, Driven by Detroit and is the latest of a series of tech-incubation programs put on nationally by Boulder, Colo.-based Techstars, an organization that provides seed money and mentoring for promising tech startups. Applications will be accepted for the program through March 15 at techstars.com/program/locations/

mobility, with 10 companies starting an entrepreneurial boot camp early in the summer and finishing on Sept. 10. Last October, Renaissance held its first speed-dating event at TechTown, the Midtown incubator affiliated with Wayne State University, with 20 of the area’s emerging tech companies meeting with representatives of 12 venture capital firms and 20 corporations and nonprofits. Rizik said the second Renaissance Connect event will be held this October, which details still being worked out. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

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Detroit Soup, TechTown, others to join Tunisia trade mission merce about the importance of diaspora communities in global markets, trade and economic growth. Rivkin said he opted to meet with smaller groups and businesses rather than the automakers or large manufacturers. “I wanted to meet a different sector of the economy in Detroit,” he Rivkin said, adding that he meets regularly with large industries in Washington, D.C. Rivkin’s trade mission next week includes what is billed as the “Detroit Delegation” for the Tunisia Investment and Entrepreneurship Conference in Tunisia. That delegation is Detroit Soup, TechTown, Wayne State University, Loveland Technologies and the Detroit Creative Corridor Center. The trip will include showing conference participants how Detroit Soup’s model works: People come together once a month to mi-

BY BILL SHEA CRAIN’S DETROIT BUSINESS

The Obama administration will employ several Detroit organizations — including crowdfunding pioneers Detroit Soup and incubator TechTown — in a foreign trade mission to North Africa next week. Leading the mission to Tunisia on March 5 will be Charles Rivkin, the assistant secretary of state for economic and business affairs. He visited Detroit last week to pitch the White House’s key trade initiatives. Rivkin was meeting with Detroit Mayor Mike Duggan Thursday to pitch the U.S. State Department’s overseas economic development capabilities, and Thursday afternoon spoke to roundtables at TechTown Detroit and the Detroit Creative Corridor Center on best practices for innovation and entrepreneurship. Rivkin, a former U.S. ambassador to France, spoke Wednesday evening at the Detroit Marriott at the Renaissance Center to the Council of Ethnic Chambers of Commerce and the American Arab Chamber of Com-

cro-crowdfund an idea. Participants pay $5 to share bowls of potluck soup — or whatever volunteers bring — and then listen to pitches from individuals about what they would like to accomplish in their community. At the end, the attendees vote on the winner. That project gets the kitty plus a matching grant from Detroit Soup. Detroit Soup this year is celebrating five years of work: It has done 95 dinners and seen more than $85,000 doled out to 108 projects. It’s also raised $300,000 in grants that allows it to match the dollars raised at each soup, fund the organization and pay neighborhood leaders to host soups. “To be able to go to Tunisia and export some of our knowledge to them, it builds a future trading partner with the United States. To do that, we’re utilizing Detroit,” Rivkin said.

Controversial initiatives Rivkin’s mission to Detroit also includes championing President Barack Obama’s key trade initia-

tives to the chambers and roundtables, and local media. There are two specific trade agreements that Rivkin said he and other administration officials have been called upon to advocate domestically. The president referenced the agreements in his State of the Union address last month. One is the Trans-Pacific Partnership, a sprawling free-trade agreement that’s been under negotiation for more than a decade. It would eliminate tariffs and other trade barriers, and includes legal and regulatory provisions beyond traditional trade deals that are limited to regulating the goods themselves. The other is the Transatlantic Trade and Investment Partnership with the 28-nation European Union. Both are controversial, and backers say both will boost trade. Most political and media attention has been on the TPP, a key element of the “pivot” the president announced in 2010 that shifted, in theory, American foreign policy attention from the Middle East and Europe to Asia — specifically to deal with the economic and military competition from China. Some analysts have said that TPP is intended as a counterbalance to China’s emerging economic might. It doesn’t include Beijing. Instead, the nations involved in the TPP are Canada, Australia, Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. South Korea may join the initiative. A Congressional Research Service report from January includes data, culled from 2013, that shows $852.7 billion in total U.S. imports from TPP nations versus $699 billion in total American exports to those same nations. That’s a $153.6 billion trade value deficit for the U.S.

Detroit’s role

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The single-largest U.S. trade partner among the TPP nations is Canada at $332.6 billion in imports and $301.6 billion in exports. About $130 billion of that amount moves through the Detroit-Windsor corridor annually. The $2.1 billion New International Trade Crossing, soon to be built across the Detroit River, is expected to bolster U.S.-Canadian trade, but that project is outside of Rivkin’s portfolio, so he did not address it. Statistics provided by Rivkin’s staff show that in 2013 the DetroitWarren-Dearborn region reported almost $54 billion in merchandise exports, which supported an estimated 289,000 Michigan jobs. The majority of these exporters employ fewer than 500. Eliminating trade barriers will boost overseas trade by small- and medium-size Michigan companies, he said, or allow those size firms to begin trade that wasn’t possible before. Michigan exports over the past decade to nations with freetrade agreements have grown 53 percent, Rivkin said, and would grow even more with Pacific and European trade agreements.

Fast-track legislation For the Trans-Pacific Partnership and Transatlantic Trade and

Investment Partnership to work, Congress must authorize implementing fast-track legislation known as trade promotion authority (TPA). This allows a president to enter into reciprocal trade agreements governing tariff and nontariff barriers. The last TPA expired in 2007. Fueling opposition to the trade agreements is a provision that would allow foreign corporations operating within the U.S. to appeal key American legal or regulatory rulings to an international tribunal, according to a 2012 Huffington Post analysis. The proposed agreement has alarmed progressive Democrats (and some Republicans) along with conservative sovereignty advocates who insist the U.S. is surrendering some of its autonomy under TPP. Organized labor also is critical. Advocating for the TPP and its enabling legislation is the Trade Benefits America Coalition, which includes the Business Roundtable and U.S. Chamber of Commerce. Five TPP nations do not have free-trade deals with the U.S. and could be opened to additional Michigan goods, including cars. They are Brunei, Japan, Malaysia, New Zealand and Vietnam.

Michigan support Michigan backers listed include Novi-based ITC Holdings Corp., Benton Harbor-based Whirlpool Corp. and Ada-based Amway. Foreign automakers are behind the initiative, but the Detroit 3 so far are not listed. Negotiations among the TPP nations are not public, but leaked documents have shown that sticking points include Japan’s reluctance to import American-made vehicles — and long-standing U.S. pressure for better intellectual property rights protections. The Transatlantic Trade and Investment Partnership, which economically would be about the same size as the Asian trade deal, has drawn criticism and protests in Europe. The idea was hatched in 2011 and negotiations among the member nations began in 2013. Like the TPP, it would eliminate tariffs and tackle a massive amount of regulatory and legal entanglements. Rivkin is again navigating global politics after an ambassador role, and stints in fundraising and entertainment media management. Rivkin was a fundraiser for John Kerry’s 2004 campaign and was Obama’s financial co-chairman for California in 2008. He served as U.S. ambassador to France in 2009-13, and took his current job in February 2014. Rivkin now works for Kerry, who became secretary of state in February 2013. Rivkin is former president and CEO of the Los Angeles-based The Jim Henson Co., and in 2000 he orchestrated the Henson family’s deal to sell the company to Germany’s EM.TV & Merchandising Co. (now Constantin Medien AG) for $680 million. After that, he was CEO of L.A.based animation studio Wild Brain Inc., which produces the popular children’s show “Yo Gabba Gabba!” Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19

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REPORTER’S NOTEBOOK Sherri Welch writes about nonprofits, services, retail and hospitality. Call (313) 446-1694 or write swelch@crain.com

Retirement COmmunities

Sherri Welch

Nonprofits work to keep seniors home What about the seniors who want to stay in their homes instead of move to retirement communities? Over the past several years, the state has increased Medicaid waivers for home- and community-based care, enabling low-income seniors to receive health care at home instead of having to move to a nursing home, said John Thorhauer, president and CEO of Chelsea-based United Methodist Retirement Communities. This is good news to nonprofits and businesses that provide home-based services. For its part, UMRC is a part owner in three Program of All-Inclusive Care for the Elderly — or PACE — centers in Jackson, Ypsilanti and Lansing. The centers provide nonresidential services and care for up to 675 seniors living in 11 surrounding counties, Thorhauer said. In January, UMRC also closed on a 50 percent stake in Glacier Hills Home Care Inc. for $1.3 million. The move enabled UMRC to extend its services beyond the walls of its current senior living communities, Thorhauer said. Southfield-based Presbyterian Villages of Michigan, another nonprofit developer of senior living communities, included a second PACE center in Detroit as part of the Edward N. and Della L. Thome Rivertown Neighborhood, an affordable senior living community on Detroit’s east riverfront that Presbyterian Villages developed with UMRC. The PACE center, owned with Henry Ford Health System, picks up seniors in Wayne, Macomb and Oakland counties and brings them on-site for health care and social services, meals and adult day programs before returning them to their homes, PVM President and CEO Roger Myers said. There’s a role for nonprofits to play in the landscape of a significant aging demographic, too little affordable housing for low-income seniors and seniors’ desire to continue living in the homes where they raised their families, said Katie Brisson, vice president, program at the Community Foundation for Southeast Michigan. With a $22,500 planning grant from the foundation, PVM, Jewish Family Services and Southwest Solutions Inc. as fiduciary are looking at how they can help provide adaptive remodeling of seniors’ homes to make them safer and more usable for those with limitations. Advising the efforts is the Detroit-based Luella Hannan Memorial Foundation, which provides social work services to more than 4,000 seniors living in apartment buildings around the state, Myers said. The organizations could provide referrals to seniors for reliable contractors and trades workers, for example. Myers believes payers increasingly will look at the benefits of supporting home- and communitybased options for seniors. “It’s much more economical and the outcomes, in most cases, will be preferable,” he said.

LARRY PEPLIN

A “development-friendly environment” exists for senior housing, said Dietrich Knoer, chief investment officer at Redico LLC, a part owner of American House Senior Living Communities. American House is converting the former Cottage Hospital in Grosse Pointe Farms into a senior living community.

Home coming Senior housing development surges as population ages, but low-income projects lag BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

here’s a surge of senior housing development in Southeast Michigan as developers look to meet rising demand and take advantage of available capital. Projects ranging from high-end and market-rate senior living communities and expansions to a handful of affordable or low-income housing projects are in the works. While demand for affordable housing has risen post-recession, those projects are comparatively few, given the lack of federal dollars to support them and the complexities of putting them together, developers said. For this report, Crain’s identified nearly two dozen senior living developments underway or planned in South-

east Michigan. The projects total about $500 million in planned investment. Spurring the construction are retiring baby boomers and the aging population in general, said Dietrich Knoer, chief investment officer at Redico LLC, part owner of Bloomfield Hills-based

American House Senior Living Communities. That, along with the need to renew existing senior housing, is creating a “development-friendly environment,” he said. Also fueling the projects is an abundance of debt and equity capital for senior housing, Knoer said.

High-end senior living Rather than remain in their own homes, many seniors are looking to move to age-restricted residential com-

munities because of the active and more connected lifestyle, said Sam Beznos, CEO and partner of Farmington Hills-based Beztak Cos. The definitions of each type of housing and care have also Beznos blurred to some degree, he said. For example, independent living communities, such as one Beztak is developing with Southfield-based Etkin LLC in Birmingham, are incorporating third-party health care as an amenity for their residents. That means people can continue to live there even as they need additional health care, rather than moving into assisted living, Beznos said. See Housing, Page 12

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CRAIN’S DETROIT BUSINESS

Focus: Retirement Communities SENIOR HOUSING PROJECTS UNDERWAY OR PLANNED IN SOUTHEAST MICHIGAN Developer

Development name

Planned investment

Location

New/rehab expansion

No. units

Pomeroy Living Development LLC

Pomeroy Living Rochester

Rochester

Expansion

68-120

Pomeroy Living Development LLC Pomeroy Living Development LLC Pomeroy Living Development LLC Presbyterian Villages of Michigan, United Methodist Retirement Communities Cedarbrook Senior Living Cedarbrook Senior Living Granger Group LC Consultants LLC Beztak Cos. Beztak Cos., Etkin LLC Beztak Cos. Edward Rose & Sons

Beacon Square of Northville Beacon Square of Orion Pomeroy Living Plymouth Twp. Edward N. and Della L. Thome Rivertown Neighborhood Cedarbrook of Bloomfield Hills Cedarbrook of Northville First & Main of Commerce Twp. Wellington Square All Seasons of Ann Arbor All Seasons of Birmingham All Seasons of Canton Rose Senior Living at Providence Park Chelsea Retirement Community Hartford Village

$150 million (with projects below, 2014 Sterling Heights expansion) (See above) (See above) (See above) $45.3 million

Northville Township Orion Township Plymouth Township Detroit

New New New New

63 180 230 150-154

$45 million $45 million $30 million-$32 million $29 million $27 million $26 million $25 million $25 million

Bloomfield Hills Northville Commerce Township Detroit Ann Arbor Birmingham Canton Township Novi

New New New, rehab New, rehab New New New New

144 195 170 98 125 131 145 182

$25 million $14 million-$16 million

Chelsea Detroit

Expansion New

53 84

N/A Spring 2016

N/A

Grosse Pointe

New

Spring 2015

N/A N/A N/A N/A N/A

Rochester Roseville Dearborn Detroit Pontiac-Bloomfield Twp.

Expansion Expansion New New New

40 40 60 N/A 100

Spring 2016 Spring 2016 Fall 2016 N/A N/A

United Methodist Retirement Communities Presbyterian Villages of Michigan, Hartford Memorial Baptist Church American House Senior Living Communities American House Senior Living Communities American House Senior Living Communities American House Senior Living Communities Redico LLC Redico LLC ** Two phases of development Source: Crain’s research

American House Grosse Pointe at Cottage American House Rochester American House Roseville American House Dearborn State Fairgrounds Bloomfield Park

Planned opening April 2015/ fall 2015** Fall 2015 N/A N/A Last phase by summer 2016 Late 2015 Q1 2017 Q2 2016 Fall 2016** N/A May 2015 N/A Spring 2017

For additional information, including monthly rental rates, see a version of this chart at crainsdetroit.com/retirement.

Housing: Seniors’ needs run the gamut ■ From Page 11

“Everybody has their own take on how they’re operating,” he said. Beztak and Etkin are co-developing the $26 million All Seasons of Birmingham along Maple Road, east of Woodward Avenue, with 131 independent living apartments and two to three meals per day offered. The development is expected to be completed in May, with prices ranging from $2,800-$5,500 per month, Beznos said. It will include eight “live-work” apartments on the ground floor, geared for the retired architect, tax preparer or attorney who practices from time to time and “wants to live in a facility like ours,” Beznos said. Beztak came up with the livework concept, a new approach for senior communities, because Birmingham was looking for mixed-use on that site, he said. And “a lot of

the people who are moving to these communities ... don’t want to just stay home and play cards.” Beztak also has independent senior housing planned for the Cherry Hill mixed-use development in downtown Canton Township and another 125 units slated for an undisclosed location in Ann Arbor. The two projects will comprise an investment of more than $52 million. Troy-based Pomeroy Living LLC also sees opportunity in high-end senior living. It’s in the midst of doubling its local portfolio from 600 senior residences to 1,200, President Stefan Stration said. Last spring, Pomeroy added assisted living and memory care to its Sterling Heights campus, collaborating with Oakmont Senior Living. In April, the developers plan to open the same types of housing on

Pomeroy’s Rochester Hills campus along with 120 units of independent living by fall, Stration said. Also on tap for Pomeroy: development of new assisted living Stration and memory care senior housing in Northville Township and construction of agein-place communities in Orion Township and Plymouth Township. Pomeroy’s communities, similar to other retirement community operators, allow residents to pay for care-related services as needed, Stration said. Villas start at $2,500 per month, apartments start at $3,500 per month and assisted living starts at $4,500 per month. Pomeroy plans to invest a total of about $150 million in the expansions and new developments between 2013 and 2017, Stration said. The time is right for Pomeroy’s approach to senior communities, which incorporate personal choice, are integrated with the surrounding community and promote ongoing contributions through mentoring and volunteering, Stration said.

Hybrid developments In the middle market, Southfieldbased Presbyterian Villages of Michigan and Hartford Baptist Memorial Church are developing 84 units of independent living, with a combination of market-rate and affordable housing, in northwest Detroit. Construction on the $14 million-$15.5 million project, which will be open to those age 55 and above, is expected to start in the spring and be completed within 10-12 months, said PVM President and CEO Roger Myers. Hartford Village will include 34 See Next Page

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Focus: Retirement Communities From Previous Page

detached cottages and an apartment building with 50 one- and two-bedroom units. Twenty of the units will be below market rate, a factor that helped attract support from the U.S. Department of Housing and Urban Development, the Troybased Kresge Foundation and the Detroit-based Community Foundation for Southeast Michigan. “Up until now, everything we’ve been involved with in the city of Detroit has been serving low-income seniors,” Myers said. With affordable senior living communities, if renters are even $1 over the income limit, they couldn’t Myers live in those buildings according to the parameters of the government funding for such projects, he said. The community will serve people at moderate to higher incomes and won’t restrict anyone based on income. “It’s a product that doesn’t exist in Detroit,” aimed at meeting a demand for market-rate housing for people who had moderate income, have been lifelong Detroiters and want to stay or come back to the city, he said. There’s already a waiting list for the 64 market-rate apartments in the development, Myers said. Many seniors are drawn to downtown settings or apartment living. National trends are showing more people — seniors as well as millennials — are moving back into cities and into multifamily homes, said Jamie Schriner-Hooper, executive director of the Lansing-based Community Economic Development Association of Michigan. There’s not an abundance of senior living complexes in those areas, so many seniors are just moving into general apartment buildings, she said. “I think more developers are beginning to realize this is a niche in which they could and should be working,” she said. In the suburbs, American House Senior Living Communities has several market-rate options in the works. It plans this spring to open 84 units of independent senior living on the second and third floors of the former Cottage Hospital in Grosse Pointe in 92,000 square feet of space purchased from Henry Ford Health System. It’s also adding memory care at both its Rochester and Roseville campuses, and plans a new senior residential community with assisted and memory care at its Dearborn Town Center medical office building campus, said Dale Watchowski, president and CEO of American House and president, COO and CEO of Redico, part owner of the senior community operator. Senior communities of a projected 100 units each are also planned as part of two high-profile developments Redico is working on: the $160 million mixed-use development planned at the former Michigan State Fairgrounds in Detroit, under development with an investment group that includes Earvin “Magic” Johnson, and the Bloomfield Park mixed-use development at Square Lake and Telegraph roads.

Manufactured-home companies look to senior market for growth As traditional developers amp up construction projects catering to senior living, manufacturedhome companies are making moves to capitalize on some of that rising demand. Sun Communities Inc. (NYSE: SUI) is turning more of its focus to age-restricted communities to build its profile among institutional investors and buyers of manufactured homes. In January, the Southfieldbased real estate investment trust closed on the second phase of a $1.32 billion deal announced last year with Green Courte Partners LLC. The deal increased Sun’s share of age-restricted manufactured housing from 13 percent of its roughly 89,000 residences to 24 percent. Sun is also acquiring three more age-restricted communities near Orlando, Fla., as part of a $257.6 million deal expected to

Affordable senior living Despite an acknowledged need for affordable or low-income senior housing, new local projects on that end of the market are few and far between. “If you look at the people who retired 20 years ago, a large number had pensions,” said John Thorhauer, president and CEO of Chelsea-based United Methodist Retirement Communities. “The people we’re starting to see (retire) now, ... frankly, have less pension programs available, or their pension programs have been cut.” The percentage of the population entering retirement and its need for affordable housing has grown faster than the availability of senior housing options, he said. And federal policy has not kept pace with that growth. The U.S. Department of Housing and Urban Development’s primary funding program for affordable independent senior living construction and operating subsidies, Section 202, has not been funded by Congress for the past two years, said Michael Polsinelli, director of HUD’s Detroit field office. The program provided nonprofit developers with grant funds to construct affordable senior housing and also provided operating subsidies. The last local project to receive the funding was the $43.5 million, affordable senior living community on Detroit’s east riverfront developed over the past few years by United Methodist Retirement Communities and Presbyterian Villages of Michigan. The two nonprofit developers took on the project in 2010-11 because “we were aware of this desperate need in the city for a broader array and expanded services,” Myers said. The Edward N. and Della L. Thome Rivertown Neighborhood was one of two projects statewide spurred by the state’s request for proposals for affordable assisted living projects in 2006. The other

close in the second quarter. “Everyone discusses the aging population and the advancements in health care and longevity,” Sun Chairman and CEO Gary Shiffman said in January. “We’ve really focused on strategically diversifying the portfolio so we can better serve that growing population of residents.” Farmington Hills-based RHP Properties Inc., which has 17 agerestricted communities across its 23-state portfolio, is also looking to the senior market for growth. Age-restricted manufacturedhousing communities are generally considered higher quality than all-age ones because the properties overall are better maintained, CEO Ross Partrich told Crain’s in January. “We’ll seek to acquire more,” he said. “We think it’s a very good strategy.” — Sherri Welch was developed by Genesis Non-Profit Housing Corp. in Grand Rapids, Thorhauer said. The Rivertown project also drew funding from the Michigan State Housing Development Authority and a $2 million grant from the Community Foundation. “We certainly know there is a need for high-quality housing for seniors, particularily for Detroit when we’re trying to attract new residents,” said Katie Brisson, vice president, program for the foundation. Rivertown inBrisson cludes an affordable assisted living complex in one of two former Parke-Davis manufacturing facilities on the Detroit campus, opened in the spring of 2013, and a $7.5 million independent senior apartment building with 50 apartments. The apartment building leases were filled within three hours of opening last October, Thorhauer said. Renovations to an existing building on the property to convert it to 24-hour care senior apartments, and development of a community center and café and the RiverGarden community park adjacent to the building, should be completed by summer 2016. The community also includes PACE (Program of All-Inclusive Care for the Elderly) Southeast Michigan, a nationally recognized, comprehensive adult day care and health services program for seniors living in the surrounding community, co-owned with Henry Ford Health System. Rivertown is just scratching the surface of the real need in the city of Detroit for affordable assisted living and other higher levels of care for seniors, Myers said. But few developers are looking at them, given the minimal government funding to back affordSee Housing, Page 14

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Focus: Retirement Communities

Projects put retirement communities near hospital campuses The intersection of health care systems and retirement communities is expected to grow as systems review long-term plans to serve an aging segment of the population. A few local projects already illustrate the interest in retirement communities near hospital campuses. After attracting an American House community to the former Cottage Hospital site in Grosse Pointe Farms, Detroit-based Henry Ford Health System is encouraging developers to look at building a new senior living center south of West Grand Boulevard in Detroit as part of mixed use planned for the system’s south campus. The center could provide living quarters for Henry Ford Hospital retirees and long-term residents of the neighborhood, William Schramm, Henry Ford’s senior vice president of strategic business development, told Crain’s in November. Plans are also underway for the first senior community on a St. John Providence Health System campus. This summer, Bloomfield Hills-based Edward Rose & Sons plans to begin construction on a 182-unit, $25 million senior living facility offering independent, assisted and memory care living on the campus of St. John Providence Park Hospital in Novi. — Sherri Welch

LARRY PEPLIN

After attracting American House to the former Cottage Hospital, Henry Ford Health System would like developers to build a senior living center near its Detroit campus.

Housing: Affordable units needed ■ From Page 13

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able senior living projects and the complexity of coordinating funding, Thorhauer said. Developers looking to build a building can get tax credits for that, “but if you are going to do assisted (living), on top of building the building, you have to coordinate the personal care or Medicaid waiver services, work with Area Agency on Aging and coordinate (HUD’s) Section 8 for rent and a meal program,” he said, for each resident. UMRC and PVM raised just under $1 million to fund the startup costs of coordinating those pieces,

Thorhauer said. And UMRC is bearing the roughly $150,000 each year to coordinate the benefits annually for residents. The need for affordable housing is one of the things attracting developers Bob Jacobson and his father, Michael Jacobson, to Detroit, as well. Through Ann Arbor-based LC Consultants LLC, the Jacobsons — who own Leelanau Wine Cellars Ltd. in northern Michigan — plan to develop a building in Detroit’s Midtown area into 98 units of affordable housing. “We think there’s a need for it,”

Bob Jacobson said. And “we think it’s a great part of Detroit to be investing in.” LC Consultants has a purchase agreement on the building at 59 Seward St. between Second and Woodward avenues for an undisclosed amount. Jacobson expects the deal to close by August, and the building to open roughly a year later, in fall 2016. The Michigan State Housing Development Authority awarded the project $2.46 million in low-income housing tax credits. It’s one of only a handful of new senior living developments to receive the credit in recent years. MSHDA is directing the majority of its available funding for affordable senior housing to efforts aimed at preserving housing built during the 1970s and 1980s, said Chris LaGrand, the state agency’s chief housing investment officer. Since 2011, MSHDA has provided a total of $5.87 million in low-income housing tax credits to help fund affordable senior living projects in metro Detroit and nearly double that, or over $11 million, toward renovation of existing senior housing in the region. “From our perspective, what we’re doing is making sure we don’t lose the (units) we’ve got,” LaGrand said. “If we don’t go in and finance (those), then potentially that becomes sub-standard housing or it stops being affordable housing — someone comes in and makes it market.” Sherri Welch: (313) 446-1694, swelch@crain.com. Twitter: @sherriwelch

Page 1

March 2, 2015

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CRAIN'S LIST: LARGEST SE MICHIGAN EMPLOYERS Rank

Page 15

CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

19,900 29,866 34,403 18,255 30,580

11:38 AM

38,000 44,000

2/27/2015

77,663 77,164

20150302-NEWS--0015-NAT-CCI-CD_--

FCA/Chrysler Chrysler

Detroit 3 job numbers up since recession Employee counts for the Detroit 3 in metro Detroit are finally nearing what they had been before the Great Recession â&#x20AC;&#x201D; but the biggest of the two companies, Ford Motor Co. and General Motors, will likely never reach the highs they hit when Crainâ&#x20AC;&#x2122;s started surveying all counties in the region in 1990. Back then, Ford employed more than 77,000 workers here, and GM had more than 73,000. But overseas automakers and two recessions since 1990 have taken a toll on the â&#x20AC;&#x153;Big 2.â&#x20AC;? Chrysler has actually grown slightly in local employment from 24,450 after the opening of the Jefferson North Assembly plant in 1991 to its current 30,580. The first recession to buffet the Detroit 3 followed Iraqâ&#x20AC;&#x2122;s invasion of Kuwait in 1990, and while each of the companies bled red ink, GM bled the hardest, exacerbated by financial underperformance by Saturn and the result of earlier acquisitions â&#x20AC;&#x201D; Electronic Data Systems and Hughes Aircraft â&#x20AC;&#x201D; that diverted focus and cash from the core business. GMâ&#x20AC;&#x2122;s North American operations lost $7.9 billion in 1991 and $4.5 billion in 1992, forcing it to cut costs, shed workers and close plants, including the Willow Run plant. GMâ&#x20AC;&#x2122;s goal was to eliminate 74,000 jobs by 1995. Locally, GMâ&#x20AC;&#x2122;s numbers fell from 73,146 in 1990 to 47,400 by 1994. Then came the second recession. In 2006, the year before its start, Ford, GM and Chrysler tallied 59,088, 46,399 and 34,403 employees in the region, respectively. As the recession deepened in 2008, sales fell and car and truck production volumes followed suit. In July 2008, GM said it had cut 19,000 hourly workers since the first of the year. Chrysler announced 9,200 job cuts in 2008, on top of 19,500 hourly and 3,000 salaried cuts announced in 2007. Ford made buyout offers to an estimated 8,000 United Auto Workers-represented workers. Congressional bailout hearings resulted in a $17.4 billion loan for GM and Chrysler. But things got worse in 2009, and both Chrysler and GM filed for bankruptcy. By January 2010, Ford had dropped 36 percent since 2006, GM had dropped 44 percent, and Chrysler had fallen 47 percent. That was then. The economy is recovering, and automakers are hiring locally again. For 2015, Ford is up 16 percent from 2010, GM is up 20 percent, and FCA US LLC is up 67 percent.

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11:09 AM

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Page 16

March 2, 2015

CRAIN’S DETROIT BUSINESS

CALENDAR THURSDAY MARCH 5 People, Profit, Progress Conference and Workshops. 7:15 a.m.-4:15 p.m. American Society of Employers. Event equips HR professionals and leaders to develop their organizations’ people. Keynote speakers are John O’Leary, president, Rising Above; and Greg McKeown, CEO, This Inc.; 12 breakout sessions are planned. Suburban Collection Showplace, Novi. $235 members, $295 nonmembers. Registration ends 2 p.m. March 4. Contact: (248) 353-4500; website: aseonline.org. Fundraising in Your Own Backyard. 8:3010:30 a.m. New Solutions for Nonprofits. Learn five tactics for board, staff and volunteers to raise money, and discover how to launch a successful giving campaign. Hannan House, Detroit. $25. Walk-ins are accepted, but advance registration is preferred. Contact: (734) 998-0160 or new@new.org; website: new.org.

UPCOMING EVENTS Capital Raise Meetup. 9:30-11 a.m. March 10. Macomb-OU Incubator. Capital strategist Mike Brennan of Macomb-OU Incubator discusses capital sources in Michigan and how a company can qualify for private and public funding Macomb-OU Incubator at Velocity Center, Sterling Heights. Free. Walk-ins allowed. Contact: Joan Carleton, (586) 884-9324; email: macinc@oakland.edu; website: oakland.edu/macombouinc. Taste of Leadership Oakland. 4:30-7 p.m. March 19. Leadership Oakland. Event features an address by L. Brooks Patterson, presentation of “Leader of Leaders” awards, a silent auction, strolling hors d’oeuvres and a cash bar. Troy Marriott, Troy. $25 members, $40 nonmembers. Contact: (248) 952.6880; email: info@leadershipoakland.com; website:

leadershipoakland.com. DEC Presents. 11:30 a.m.-1:30 p.m. March 24. Detroit Economic Club. Stuart Hoffman, senior vice president and chief economist, PNC Financial Services Group, is the featured speaker. Westin Book Cadillac Detroit. $45 DEC members, $55 guests of DEC members, $75 nonmembers. Ticket sales end at noon March 23. Contact: (313) 963-8547; email: info@econclub.org; website: econclub.org. Inside the CEO Mind. 3 p.m. March 25. Detroit Regional Chamber. Frank Venegas Jr. of The Ideal Group will speak; a tour follows the presentation and question-and-answer session. The Ideal Group Inc., Detroit. $25 chamber members, $50 nonmembers (cost goes toward membership). Contact: Maggie Oldenburg, (313) 596-0482; email: moldenburg@detroitchamber.com; website: detroitchamber.com/events. 2015 Great Lakes Business Intelligence and Big Data Summit. 8 a.m.-5 p.m. March 26. WIT Inc. Summit is a crossindustry educational and networking event for IT and business executives interested in big data topics and trends. Keynote speakers include Boris Evelson, vice president at Forrester Research, and Don Farmer, vice president of innovation and design at Qlik. Somerset Inn Hotel, Troy. $149. Contact: Amanda Mansour, bisummit@witinc.com or (248) 641-5900, ext. 244; website: greatlakes bisummit.com. Women Leaders: Driving Our Future. 11 a.m.-1:30 p.m. March 27. Henry Ford College. HFC’s 42nd annual Women’s Recognition Luncheon, supporting student outreach and student emergency fund, features panel including Lila Lazarus, president of Kids Kicking Cancer and former reporter/anchor for WDIV-Channel 4; Jackie Lovejoy, president, Dearborn Area Chamber of Commerce; Haifa Fakhouri, president and CEO, Arab American and Chaldean Council; and Beth Chappell, president

PEOPLE and CEO, Detroit Economic Club. Student and Culinary Arts Center, Henry Ford College, Dearborn. $15 luncheon ticket; sponsorships range from $100 to $2,500. Donation deadline is March 20. Contact: Kathy Dimitriou, kdimitriou@hfcc.edu or (313) 845-9620, or donate online at https://my.hfcc.edu/RegForms/ donation.asp. Health Care Leaders Forum. 7:30 a.m. March 31. Detroit Regional Chamber. Forum focusing on the Patient Protection and Affordable Care Act’s wins, losses and consequences for patients and the business community, as well as offer a five-year forecast of the health care industry. Federal Reserve Bank of Chicago-Detroit Branch, Detroit. $129 chamber members, $179 nonmembers (fee includes membership). Contact: Janelle Arbuckle, (313) 596-0340; email: jarbuckle@ detroitchamber.com; website: detroitchamber.com/events.

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

ENGINEERING Thomas LaCross and Robert DeFrain to senior associate, Hubbell, Roth & Clark Inc., Bloomfield Hills, from associate. Also, Bradley Shepler and Karyn Stickel to associate, from senior project engineer; Colleen Hill-Stramsak to associate and continues as manager, transportation department.

FINANCE

Landschulz

Levites

Mark Landschulz to executive vice president and director of performing servicing, Flagstar Bank, Troy, from vice president of mortgage servicing, Quicken Loans Inc., Detroit. Also, Jim Levites to executive vice president and director of default servicing, from executive vice president of mergers and acquisitions, Freedom Mortgage Partner Group, Mount Laurel, N.J.

IN THE SPOTLIGHT The Southeast Michigan Community Alliance has named Sonya Grant as COO. Before joining the Taylorbased nonprofit, Grant was project manager for a University of Michigan public health Grant program in Detroit, where she oversaw data collection, participant recruitment and grant writing, fiscal oversight and policy creation. Grant replaces Ruth Sebaly, now project manager for healthy communities at Oakwood Hospital. Grant, 48, holds a bachelor’s degree in communications/public relations from the University of Michigan-Dearborn and a master’s in social work with a focus on community practice/social advocacy from Wayne State University.

REAL ESTATE

LAW

Adam Gould to vice president, Bellwether Enterprise Real Estate Capital LLC, Bloomfield Hills, from associate director of originations, Marcus & Millichap Capital Corporation Inc., Southfield.

SERVICES

Huntzicker

Simoni

Sam Del Mar to vice president and CFO, MSX International Inc., Detroit, from vice president of finance and treasury, MSX International Inc. Warren. Melissa Cox to IT director, back office, DTE Energy Co., Detroit, from vice president of technology, Comerica Bank, Auburn Hills. Also, Olagunju Oyeleye to IT director, plant and field, from manager, IT enterprise programs, Delphi Automotive plc, Troy.

TECHNOLOGY

BUSINESS DIARY CONTRACTS Better Business Bureau of Detroit & Eastern Michigan, Southfield, announced that BBB information, including ratings and accreditation status, for professionals is now available in search results at the website Porch.com. Seattle-based Porch.com offers consumers information on home improvement and maintenance professionals in their local areas. Websites: porch.com, bbb.org/ detroit. SVS Vision Optical Centers, Mt. Clemens, has been named the official optical provider of the Detroit Lions. Websites: svsvision.com, detroitlions.com. U.S. Army TACOM Lifecycle Management Command, Warren, has awarded General Dynamics Land Systems, Sterling Heights, $49.7 million under an existing contract to upgrade M1A1 Abrams tanks to the M1A2 Systems Enhancement Package V2 configuration. General Dynamics is continuing the conversion of the tanks in the Army’s active component to the M1A2 SEP V2 configuration. Production will be performed by existing employees in Sterling Heights, as well as Anniston, Ala.; Tallahassee, Fla.; Lima, Ohio; and Scranton, Pa. Expected completion is by January 2017. Website: general dynamics.com.

EXPANSIONS BorgWarner Inc., Auburn Hills, has begun research and development at its new engineering center in Itatiba City, Brazil. The 21,500-square-foot center provides capabilities for appli-

cation engineering and research and development to create new technologies for the growing Brazilian auto market. The campus also includes a facility to manufacture environmentally friendly technologies for passenger cars and commercial vehicles. Website: borgwarner.com. Lucky’s Market LLC, Niwot, Colo., opened Lucky’s Market Ann Arbor, 1919 S. Industrial Highway, Ann Arbor. Telephone: (734) 368-7137. Website: luckysmarket.com.

NEW SERVICES Assure360, Farmington Hills, a fullservice technology and outsourcing solutions company, has launched ProMatters 2.0, the first turnkey public cloud-based, Web-accessible and mobile-aware case management system built exclusively for the mortgage default servicing industry. Website: assure360.com. Crestmark Bank, Troy, has launched its new company website that takes advantage of responsive design technology. The technology allows for a consistent experience on any device. The faster site will showcase the industries Crestmark serves and its expanded financial services. Website: crestmark.com. Gale Group Inc., Farmington Hills, part of Cengage Learning Inc. and a publisher of research and reference resources, announced several Gale digital collections for academic and special libraries around the world, including the next three installments of Associated Press Collections Online as well as Brazilian and Portuguese History and Culture: The

Oliveira Lima Library. These new collections are available on the Gale Artemis: Primary Sources platform. Gale has also completed the migration of several historical newspaper and periodical collections onto the Gale Artemis: Primary Sources platform, which has more than 125 million pages of content. Website: gale.cengage.com. PTI Engineered Plastics Inc., Macomb Township, a custom plastic injection molder and manufacturer serving the medical, aerospace, defense, automotive, electronics and consumer products industries, is expanding into the additive manufacturing/3-D world with the procurement of Lumex Avance-25, a product of Masuura Machinery USA Inc., St. Paul, Minn. Lumex can manufacture complex molds and parts by direct metal laser sintering without the need for secondary finishing. Website: teampti.com.

DIARY GUIDELINES Email news releases for Business Diary to cdbdepartments@ crain.com or mail to Departments, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 48207-2997. Use any Business Diary item as a model for your release, and look for the appropriate category. Without complete information, your item will not run. Photos are welcome, but we cannot guarantee they will be used.

Clark

Battersby

Joseph Huntzicker to principal, Miller Canfield Paddock and Stone PLC, Ann Arbor, from senior attorney. Also to principal from senior attorney: Michael Simoni, Detroit; and Alexander Clark, Troy. And Colin Battersby to principal, from associate, Detroit. Kim Shierk to shareholder, Williams Williams Rattner & Plunkett PC, Birmingham, from shareholder/ member, Myers Shierk & LaBelle PLLC, Bloomfield Hills.

MARKETING

Warner

Brad Warner to senior director, automotive practice, Lambert, Edwards & Associates, Detroit, from regional communications manager, Valeo North America Inc., Troy.

Edgar

Rana Edgar to director of exhibitions/art market, Paint Creek Center for the Arts, Rochester, from exhibitions coordinator, Savannah College of Art and Design, Savannah, Ga.

NONPROFITS

Jacobsen

Kountouriotis

Ken Jacobsen Jr. to vice president of business development, TM Group Inc., Farmington Hills, from director of sales and marketing. Also, Perry Kountouriotis to vice president of client services, from director of client services.

TRANSPORTATION Jeff Thomas to sales director, Frisbie Moving & Storage Co., Detroit, from regional sales director, Stevens Worldwide Van Lines, Waterford Township.

PEOPLE GUIDELINES Announcements are limited to management positions. Email them to cdbdepartments@crain.com or mail notices to Departments, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 482072997. Releases must contain the person’s name, new title, company, city in which the person will work, former title, former company (if not promoted from within) and former city in which the person worked. Photos are welcome, but we cannot guarantee they will be used.

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CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

March 2, 2015

Page 17

Rocket: High-speed cable aims to help â&#x20AC;&#x2DC;infrastructure crazinessâ&#x20AC;&#x2122; â&#x2013; From Page 1

of Rocket Fiberâ&#x20AC;&#x2122;s plans, the heart of which is the underground installation of 5.5 miles of fiber-optic cable around the central business district, which is nearly complete. The area that will be served by that cable, which will provide data at a gigabit per second, about 100 times faster than traditional residential Internet, is bounded by the Lodge Freeway to the west, I-75 to the north, I-375 to the east and the Detroit River to the south. Shorter fiber cables will run from the main cable into both residential and commercial buildings of property owners who enter into an easement agreement. Deb Dansby, a Rock Venturesâ&#x20AC;&#x2122; vice president, said Rock Ventures welcomes investment by venture capitalists or private equity firms to help pay for the continued rollout. â&#x20AC;&#x153;The total dollar figures continue to morph,â&#x20AC;? she said. â&#x20AC;&#x153;On the investment piece, weâ&#x20AC;&#x2122;re absolutely looking to get folks participating, but we havenâ&#x20AC;&#x2122;t yet reached out to anyone.â&#x20AC;? Rocket Fiber hopes to begin offering residential Internet and online high-definition TV in the central business district in the fourth quarter this year for $70 a month. Carolyn Artman, senior public relations manager for Rock Ventures, said prices for businesses and institutions are still to be determined. In 2016, the next phase will extend the fiber-optic cable through Midtown, with a combination of underground installation and aboveground installation on telephone poles, according to Hudson.

CODY ROSS/QUICKEN LOANS INC.

From left: Rocket Fiber co-founders Marc Hudson, the CEO; Randy Foster, the chief technology officer; and COO Edi Demaj.

Expansion into the neighborhoods is scheduled to start in 2017. According to a report last August by Cambridge, Mass.-based Akamai Technologies Inc., Virginia had the highest average Internet speed at 13.7 megabits a second, with Michigan No. 9 at 11.8 a second and Alaska last at seven a second. According to figures provided by Rocket Fiber, the download time for a â&#x20AC;&#x153;Star Warsâ&#x20AC;? movie on Blu-ray is about seven hours at a typical residential Internet speed of 10 megabits per second. It will take about four and a half minutes at gigabit speed. Using a smaller file-size example, a user can download an album on iTunes in about one minute with traditional service â&#x20AC;&#x201D; and in less than a second at gigabit speed.

A differentiator â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s a lot of rebuilding that needs to be done in the city of Detroit,â&#x20AC;? Danby said. â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s an infrastructure craziness that has to be addressed, and this helps address it. It provides a framework for downtown. â&#x20AC;&#x153;This is something that will help

REAL ESTATE

with economic development. It will help attract companies here, and it will help attract entrepreneurial talent. Talent wants to go where it can move its ideas faster,â&#x20AC;? she said. She said the availability of highspeed Internet downtown and in Midtown will also help with residential development projects. The faster the Internet, the more young people will want to live there. â&#x20AC;&#x153;This is a differentiator,â&#x20AC;? said Matt Cullen, Rock Venturesâ&#x20AC;&#x2122; president and CEO. â&#x20AC;&#x153;When youâ&#x20AC;&#x2122;re doing big real estate projects, this sets you apart.â&#x20AC;? Dansby said that fast Internet will serve the needs of Rock Venturesâ&#x20AC;&#x2122; for-profit companies, but also serves its mission of being involved in private-public partnerships for civic good. She said faster Internet will serve private companies as well as such institutions as the Detroit Medical Center and Wayne State University. Dansby said one civic project Rocket Fiber is looking at is setting up line-of-site rooftop-based systems that would use antennas to deliver wireless gigabit-paced Internet to community centers and schools in the city in advance of any citywide

rollout out of fiber-optic service. Currently AT&T and Comcast provide Internet service to Detroit residents. According to Teresa Mask, media relations manager for AT&T in Michigan, the company currently offers gigabit service in six markets and has announced plans to expand the service to 11 more. Detroit is not included in that total of 17 markets. As part of its upcoming merger with Time Warner Cable, Comcast is required to leave the Detroit market and turn over its business here to GreatLand Connections. According to Michelle Gilbert, vice president of what Comcast describes as its Heartland Region, the deal with Time Warner is expected to close early this year, with the divestiture of local operations to take place within 60-90 days after that. â&#x20AC;&#x153;Competition feeds innovation for everyone. Comcast will continue to invest in our network here and across the nation to bring the latest and most reliable technology to our residential and business customers,â&#x20AC;? she said.

Beating Google to the punch Rocket Fiber was founded last June by Hudson, COO Edi Demaj and chief technology officer Randy Foster. Cullen said the three pitched the idea for the company and it was quickly approved. Previously, Hudson had been an engineer working on intuitive interfaces for Quicken Loans; Foster helped develop a platform for Quicken that automated the process of

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loan pricing; and Demaj was a leasing and project coordinator for Gilbertâ&#x20AC;&#x2122;s Bedrock Real Estate Services. Hudson said the company employs eight now and plans to add 40 over the next two years. Rocket Fiberâ&#x20AC;&#x2122;s plans to provide basic cable TV as well as gigabit Internet access are similar to a project Google launched in 2010, when cities were asked to submit bids to have the search giant install fiber-optic cable to one winner. Kansas City, Kansas, was selected in 2011 and service began rolling out there in 2012. In 2013, it was announced that Austin, Texas, would be the next city to get its gigabit service and last December, it began signing up customers there. In January, Google announced that later this year it will begin construction on fiber-optic projects in Atlanta, Charlotte, Nashville and Raleigh-Durham, N.C., and said it is considering future expansion into Phoenix; Salt Lake City, Utah; San Antonio, Texas; San Jose, Calif.; and Portland, Ore. â&#x20AC;&#x153;Google Fiber was definitely an inspiration for Rocket Fiber. We werenâ&#x20AC;&#x2122;t going to sit around and wait for them to come,â&#x20AC;? said Hudson. â&#x20AC;&#x153;This is Detroit solving Detroitâ&#x20AC;&#x2122;s problems,â&#x20AC;? said Dansby. â&#x20AC;&#x153;If at some point Google wants to come here and play in this space, that will be great for Detroit. But Google missed the boat, man. They should have wanted to be here.â&#x20AC;? Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

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Lions: Now pro football fans can live their fantasy at camp ■ From Page 1

every January since 1984, and the Detroit Red Wings have recently begun a weekend fantasy camp at Joe Louis Arena. Nationally, about a dozen Major League Baseball teams offer such camps, some run in-house and some via licensed companies. There are hockey and basketball camps, too, and all of the camps are largely perks rather than significant sources of revenue for teams. The Lions appear to be one of only a few NFL teams offering a camp. The Kansas City Chiefs do a $2,000-per-person camp at the team’s Arrowhead Stadium, and the Pittsburgh Steelers have had a camp ($729 per person) for more than a decade at their training camp site, Saint Vincent College.

Lions camp Participants in the Lions camp will stay two nights at a local hotel and be shuttled to the team headquarters and training camp facility in Allen Park, and to the stadium. During the weekend, they’ll get tours and go through coaching meetings, film study and practice drills. They’ll also get meals and interact with Lions alumni working the camp. One of those ex-players is Brett Perriman, a wide receiver for the Lions from 1991-96 who caught 428 passes for 5,244 yards and 25 touchdowns with the team. Detroit made the playoffs in four of his six seasons. He works in Miami real estate, and the camp will be his first activity with the Lions since he left. “I look forward to seeing all the guys,” he said. “Any time I can help out, I’ll be there.” Other ex-players scheduled to participate include Lomas Brown, Herman Moore, Eric Hipple, Ron Rice, Bennie Blades, Chris Spielman, Doug English, Luther Elliss and Dre Bly. For the game, participants will follow a routine similar to the team: They’ll arrive early at Ford Field, have a pregame meal, do drills and stretching, and come out of the same entrance tunnel as the real Lions. Campers also will do tests of measurables such as their 40-yard dash times, and broad and vertical jumps. The two-hand touch game will include officials. Campers will wear a Lions jersey customized with their name and number. The camp will use the stadium scoreboard for the game, along with public address announcements, and the entire weekend will be videotaped. Families of the participants will be able to watch at Ford Field. Fritzsching said he’s been pitching the idea of an adult fantasy camp for seven or eight years, and finally got the green light to do it this season. “It fits in with our vision of our organization in trying to provide quality experiences,” he said. The Lions in the past couple of years have put an emphasis on perks and game-day experience for season ticket holders and club seat buyers — the main revenue drivers when it comes to ticket sales. Fritzsching, who also worked with the old Detroit Fury of the Arena

COURTESY OF CHUCK HELPPIE

Chuck Helppie, president of Echelon Wealth Management in Ann Arbor, attended the first Tigers camp and has missed just two since. Along the way, he has become friends with many of the former players.

The thing that struck me the most about “ it was how much we bonded in such a short time. ... That’s what keeps bringing me back every year. You’re getting back together with someone who is your best friend for life.

”

Chuck Helppie, Echelon Wealth Management

Football League and the NFL’s Chicago Bears and Green Bay Packers, isn’t sure what sort of demographic the camp will draw. Because the player alumni are from the 1970s through the mid1990s, fans who grew up watching those Lions are likely to attend, he said. “I would anticipate guys from around that era,” he said. All proceeds will be funneled back into the camp program, Fritzsching said. Corporate backing is a possibility to help offset costs, as is one day using the camp to aid a charity or cause. “Those are some of the things we are looking at,” he said. The University of Michigan offers a fantasy camp with a charity aspect. The two-day football June camp, launched in 2006, is $2,500 per person and proceeds benefit the university’s “Men of Michigan” Prostate Cancer Research Fund. The camp is limited to 116 participants at least age 18. The itinerary is a team meeting in Schembechler Hall, a film session, meals, use of the Michigan Stadium team locker room, and a scrimmage in the Big House. Participants get a UM Adidas jersey, a practice T-shirt, shorts and welcome packet. Instruction is

by the coaching staff, and this year’s camp is still awaiting approval by head coach Jim Harbaugh’s new staff. Michigan offers a one-day women’s football academy and fundraiser, which is run by the football players.

The granddaddy of ’em all The granddaddy of fantasy camps locally is the Tigers’ extensive offering at their spring training complex in Lakeland, Fla., each January. Jerry Lewis and Jim Price organized the first Tigers fantasy camp before the 1984 season — lucking into timing it before the club’s World Series championship. They hatched the idea after seeing a write-up on a Chicago Cubs fantasy camp. The Tigers camp was a private company then, but had the blessing of the team and didn’t have to pay a licensing fee. Some camps are licensed by baseball clubs rather than run in-house. That first Tigers fantasy camp attracted 85 participants, who each paid $2,495, Lewis said. “We were trying to see, from a business standpoint, would it work,” Lewis said. Price, a former Tigers catcher, went on to become radio voice of

the team, and Lewis ran the camp privately until hired by the team in 1996 to make it an in-house operation. “How wonderful it is to give the fans the opportunity to feel like a professional player, to put them in the uniform, to put them around former or current players,” Lewis said. January’s camps were the 53rd and 54th he’s done. They drew 180 campers at a cost of $3,595 each (which includes flights and seven hotel nights), generating nearly $650,000. The revenue is used for camp expenses, such as paying the alumni participants. Thirty former Tigers participated, with pitcher Jack Morris featured. The price will increase to $3,650 in 2016, and former Tigers manager Jim Leyland will be the featured personality. The theme will be honoring the 10-year anniversary of the 2006 World Series club. Campers play games against each other, sometimes against teams from other fantasy camps — it was the New York Yankees campers this year — and night games under the lights. Former Tigers players and coaches provide instruction. They get meals, tours, use of the team locker room and clubhouse, and authentic customized home and road uniforms. “We’re official. We’re 100 percent giving them the best camp we can give them, a tremendously authentic package,” Lewis said. Lewis also does smaller fantasy events, such as $220 to bat against ex-Tigers pitchers, such as Dave Rozema, at Comerica Park; road trips to watch games; and watching home games with former players. A $1,600 weekend summer fantasy camp, a shorter version of the Florida camp, includes a halfdozen former Tigers and a fantasy game at Comerica Park. That camp has sold out for the past 10 years, Lewis said. The typical fantasy camper for the Tigers is a 50-year-old man, and about 35 percent of participants live outside of Michigan, Lewis said. The Tigers fantasy camp has built a loyal following: Nearly 80 participants have done it 10 times, and about 15 have done 20 or more camps. One of those loyalists is Chuck Helppie. Helppie, 63, president of Echelon Wealth Management in Ann Arbor, attended the first Tigers camp and has missed just two since then — and has become close friends with many of the ex-players. “The thing that struck me the most about it was how much we bonded in such a short time,” he said. “Everybody just got along phenomenally well. That’s what keeps bringing me back every year. You’re getting back together with someone who is your best friend for life.” One of the most popular aspects of fantasy camps isn’t playing, but chatting with other participants, Lewis said. “One of the biggest parts of fantasy camp is the guys at the hotel around the bar at night, when we don’t have an activity. Oh, the stories. It’s an incredible part of the

camp,” he said. The camp is co-ed, and this year two participants were honeymooners, he said. The Tigers also offer fantasy experiences as part of corporate sponsorship deals, and a dozen companies have used the smaller offerings, such as batting at Comerica Park, for team-building events or rewards, Lewis said.

Other camps About a dozen other baseball teams still do fantasy camps, Lewis said. It used to be most of baseball. He’s unsure why some have fallen off. “I talk to a good number of them. They call us. They know we’ve been around over 30 years,” he said. After the first Tigers camp, the Lions, Red Wings and Detroit Pistons each called Lewis to set up a camp. It didn’t happen with the Lions, but Lewis did a few camps for the hockey and basketball teams. The Red Wings run a weekend co-ed fantasy camp in August, now in its third year. Cost last year was $2,500, and this year’s price hasn’t been set, said Phil Pierce, who runs the camp as the Red Wings’ fan development and youth hockey manager. The inaugural camp drew 24 participants and last year’s camp had 30 players — only three of which were from Michigan, Pierce said. “We find it’s best to try to keep it small,” he said. Campers get a jersey, meals, golf outing, tours, use of the locker room, and two games on the ice at Joe Louis Arena. They stay at MotorCity Casino Hotel. The Pistons may get into the fantasy business. Team spokesman Kevin Grigg said the team does fantasy campstyle experiences for corporate partners and selected VIP season ticket and club members. “While we don’t currently market fantasy camps to the general public, it’s an experiential offering that we’ve explored and are open to exploring more broadly in the future,” he said. Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19

WHO ARE MICHIGAN’S BEST CFOS? Crain’s seeks nominations for the CFO of the Year Awards, a program that recognizes the state’s top CFOs. Winners will be selected by a panel of CFOs and other executives, evaluating the accomplishments of the candidates. In addition to a CFO of the Year honoree, a risingstar award will be presented. Profiles of the winners will run in the May 25 issue of Crain’s. The winners and finalists will be gathered together for a summer event to celebrate their accomplishments. To put yourself — or a colleague — in the running, go to crainsdetroit.com/nominate. The deadline for nominations is March 23.

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Palazuelo: Investor sees strategy as one to transform Detroit ■ From Page 1

greater downtown’s most storied buildings: the 255,000-square-foot Book Tower and adjoining 260,000square-foot Book Building; the 996,000-square-foot Penobscot Building; and the Albert Kahn Building and Fisher Building in the New Center Area, which total 925,000 square feet. But whether he’s actually successful in buying them is anybody’s guess. While Palazuelo said he has private equity money available to him as investment partners, he’s publicly pursuing properties that are mostly not actually for sale. Only the Kahn and Fisher are on the market. Miami Beach, Fla.based LNR Properties Inc. took title of the buildings following a default on a $27 million mortgage by the previous owner. The registered agent of the previous owner, FK Acquisition LLC, is Farbman Group CEO Andy Farbman. Farbman Group had handled property management and leasing, but that contract was awarded to Farmington Hills-based Friedman Integrated Real Estate Solutions LLC last month after the ownership change. The Book Tower, at 1265 Washington Blvd., and the Book Building, at 1249 Washington, are owned by Milan, Italy-based Akno Enterprises, which purchased them in 2006 for $4 million, according to CoStar Group Inc., a Washington, D.C.-based real estate information service. Attempts to reach Akno through attorneys with ties to the company were unsuccessful last week. Toronto-based Triple Properties Inc. bought the Penobscot, at 645 Griswold St., for $4.8 million. Palazuelo acknowledges a difficult journey ahead. And he has both selling points and some marks against him in his developer résumé, including a corporate bankruptcy in Spain. “I’m sure that our first offers will not be accepted,” he said. “But we are going to chase the animal.” That hunt will be tough for the Penobscot, whose owner says the building is not for sale. Steve Apostolopoulos, co-founder and managing partner of Triple Properties, said the Penobscot is being marketed for leases only. “We are not considering offers at this time. If he’d like to rent an office from us, he’s more than welcome to rent an office,” Apos-

forced to contend with reluctant or unwilling sellers like Triple Properties, or stiff competition, as is expected to be the case with the Fisher and Kahn buildings.

Fernando Palazuelo envisions a mixed-use development of the Packard Plant over the next 10-15 years with up to a dozen projects.

International interest

GARY ANGLEBRANDT

tolopoulos said. Palazuelo said financing for the greater downtown purchases would come in part from a large Limabased private equity firm. He declined to name the firm but said it has more than $500 million in assets.

Packard Plant vision At the Packard Plant, Palazuelo envisions a mixed-use development unfolding over the next 10 to 15 years with as many as a dozen individual projects. Rough project cost estimates are $120 per square foot, or $420 million, he said. The first project is slated to include the 150,000-square-foot former administrative building. Palazuelo expects the financing sources to be identified, and licenses and approvals will be received by August, and that construction could begin shortly thereafter. Detroit-based Alfred Kahn Associates Inc. is the architecture firm on the project; Troy-based O’Brien Construction Co. is the general contractor. Joseph Kopietz, a member in the Detroit office of Clark Hill PLC who is advising Palazuelo on the project, said the redevelopment financing will include a mix of debt, equity, state and federal grants. It will also include federal historic tax credits and New Markets tax credits, he said. Kopietz said discussions of establishment of Kopietz an Obsolete Property Rehabilitation Act district for the Packard are continuing with the city, and that he and Palazuelo have had regular communication with the Detroit Economic Growth Corp., the Michigan Economic Development Corp. and the Wayne County Eco-

nomic Development Growth Engine. A variety of zoning variances will be needed, and it hasn’t been determined whether a planned unit development designation will be pursued. “There will be various city-level approvals related to zoning and use,” Kopietz said.

Connecting the dots Palazuelo sees his strategy as one that could transform Detroit, should it be successful. It’s about bringing a mix of uses like retail, light industrial, multifamily and senior housing, office space, recreation and art to a large chunk of the city, from the east side to downtown. “One building, even if it’s the Packard, which is a big project of buildings, does not change a whole town,” he said. “You need a certain impact in several different places. “We were able to change Lima with 22 (developments),” he said. “One building was helping the other.” Palazuelo began his real estate career in Madrid in the early 1980s on a scale much smaller than that. A veteran of the Spanish Foreign Legion — the Spanish Army’s elite special forces — who served four years in North Africa, he first bought a small, historic and inexpensive space in Madrid for his art gallery and renovated it into “something quite spectacular.” Decades later, his real estate company, Arte Express, takes its name from the gallery that kickstarted a real estate career that eventually took him to Lima after the 2008 global recession. That downturn and resulting financial fallout led him to file for bankruptcy for his company and to liquidate his assets. “I had to start from scratch in South America,” he said. Now, Palazuelo is in a new continent in a new city with a new set of challenges. But one thing has remained constant in his investment

choices. “I always do cities with historical significance,” Palazuelo said. “That’s premium for me. It’s a question of history. They need a track record of history, low prices,” and to be on the upswing after a long stretch of decline. Detroit seems to fit that bill. Still, investment in each one of the downtown buildings, particularly the Book buildings, have to be in the hundreds of millions of dollars given their condition, said David Di Rita, principal of Detroitbased developer The Roxbury Group. “That’d be quite a bit for anyone to chew off, including people who know how to chew off really big things,” Di Rita said. “The Book Tower is a full-out rehab. It is the David Whitney Building with the Broderick Tower attached to it.” The David Whitney, a Roxbury Group project, opened late last year following a $94.5 million renovation into 108 apartments, the 136-room Aloft Detroit hotel and Grand Cirque Brasserie, the building’s signature restaurant. The Broderick Tower was a $53 million redevelopment of the 35story building into a 127-unit apartment building. Both projects required complex financing structures.

Challenging road Palazuelo’s time in Detroit with the Packard Plant hasn’t been without its setbacks, including a more than six-month process to get property tax issues resolved and a clean title to the plant. He received a clear title in mid-2014. More recently, he was a member of a consortium that submitted a proposal to the city to redevelop the vacant 526,000-square-foot Herman Kiefer Health Complex site off Taylor Street west of the Lodge Freeway. The consortium, led by Eric Larson, founder, president and CEO of Bloomfield Hills-based Larson Realty Group LLC, was not chosen to redevelop the site. Larson said in January that the city has been in discussions with another developer, an unknown New York Citybased investment group. And if Palazuelo wants to buy the downtown office properties, he’ll be

Palazuelo is just one of the foreign investors currently purchasing property in the city. For example, Shanghai-based DDI Group purchased the David Stott Building and the former Detroit Free Press headquarters at auction in 2013 for more than $13 million combined. Penobscot owner Triple Properties owned the State Savings Bank building at 151 W. Fort St. until December, when it was bought by Dan Gilbert’s Bedrock Real Estate Services LLC. And Gabriel Ruiz, a Mexican developer and hotel investor, bought the former Pontchartrain Hotel in 2012 for $8.5 million, according to CoStar. It reopened a year and a half ago as the Crowne Plaza Detroit Downtown Convention Center. The amount of international money coming into Detroit has gone from “almost zero to 15 to 20 percent of overall investment in real estate,” said Dennis Bernard, founder and president of Southfieldbased Bernard Financial Group Inc. “Chinese, Israelis, South Americans, Europeans,” he said. That’s because capitalization rates, which measure returns on investment in real estate, are 2.5 to 3.5 percent higher in Detroit than in other markets like on the East and West coasts and in cities like DalBernard las, Houston and Chicago, Bernard said. “Your cost of debt is going to be the same, so why not get a little more return on your money?” he said. Palazuelo, who plans to build an apartment in the administrative building for his personal use, said foreign investment in Detroit is increasing because real estate is considerably less expensive than in foreign markets. “The cheapest town all over the world,” he said. He pointed to One Detroit Center, the 957,000-square-foot skyscraper downtown that Crain’s reported last month is expected to sell for about $100 million to one of three local investors. Palazuelo said similar real estate would fetch between four and 10 times as much in some leading European and Asian cities. “There is a lot of equity out there looking for opportunities. Detroit has become very much in favor recently, with everything that’s gone on in downtown and Midtown,” he said. “We are seeing a significant increase in foreign equity coming in and buying assets or supporting local players.” Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB Not content with the Packard Plant, Fernando Palazuelo says he’s interested in Detroit landmarks including (from left) the Book Tower, Penobscot, Fisher and Albert Kahn buildings.

COSTAR GROUP INC.

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Rockwell: A promising prescription for growth and profit ■ From Page 1

“There are no competing products for this,” Chioini said. “There are eight or nine dialysis customers that control 85 percent of the market.” Chioini said Rockwell also sells various dialysis therapy products and supplies to hospital customers, including Beaumont Health System in Southeast Michigan, that conduct dialysis. Jim Molloy, an analyst and managing director of specialty pharmacy and biotechnology with Bostonbased Summer Street Research Partners, said he believes the FDA approval of Triferic will take the company’s earnings per share from a negative to a positive. Over the past two years, Molloy said, Rockwell’s earnings per share have steadily increased from a loss of $1.48 per share in 2013 to a loss of 45 cents a share last year to a projected gain of 35 cents a share this year. “With Triferic on board, Rockwell starts to make a profit with top-line growth,” said Molloy. In 2012, Summer Street co-managed Rockwell’s $58 million, 6.5 million share common stock offering. At deadline, Rockwell’s shares were trading at $10.95, up from about $10.59 just before the FDA approved Triferic but down from a five-year high of $16 in 2011. Rockwell’s Triferic sales are projected to total $34.5 million this year and increase to $272 million by 2018, Molloy said. Overall, Rock-

well’s revenue is projected to increase to $348.7 million by 2018, up from $54 million in 2014, he said. “They can capture 25 percent of the (estimated $1 billion) market by 2018, just for Triferic,” Molloy said.

Next up: Clinical testing Ling Wang, senior biotech analyst with New York City-based Oppenheimer & Co., said sales of Triferic depend on how Rockwell prices the drug. She said it may take several months to know how quickly the drug will be integrated into dialysis centers’ clinical operations. “Triferic has advantages over IV iron and really is the only iron replacement therapy,” Wang said. “It is pretty logical for dialysis centers to try Triferic because there really isn’t anything like it.” But Paul Kellerman, M.D., head of nephrology at Royal Oak-based Beaumont Health System, said he hasn’t seen enough clinical data on the potential for lower mortality and infection rates to make a purchasing decision on Triferic. Kellerman “Usually you need to see results from a largescale study, and I haven’t seen that yet from the data available,” said Kellerman, who also is director of

Beaumont’s Berkley Dialysis Center. “Does (Triferic) translate to clinical improvements?” Kellerman said. “The theoretical advantage is kind of neat. But is it more effective? More safe (than current therapy)? I don’t know.” In a statement, Rockwell said a peer-reviewed study on the clinical trial of Triferic will be published later this year. Kellerman said previous studies have indicated there is a potential for higher mortality and infections from elevated levels of iron in the bloodstream from current drugs used during dialysis treatments. “The data is very soft. There aren’t a lot of studies that show free iron is bad for you,” said Kellerman, noting a 1999 paper published by physicians at Henry Ford Health System. “This drug has only theoretical benefits given the lack of data. It indeed has potential if this prevents iron storage issues in inflammation, but that has yet to be proven,” Kellerman said. Chioini, who said Triferic will go on the market in several months, said he expects most national dialysis centers will purchase Triferic and test it in a handful of clinics over a three-month period to develop a clinical protocol before they use it widely. Officials for U.S. Renal and DaVita declined to comment for this story.

“They (dialysis centers) will use it on all their dialysis patients and find it saves them money and improves quality because they won’t have to use IV iron (treatment) on all but a small (percentage) of patients,” Chioini said. Molloy said he and several other analysts have cautioned that Rockwell’s Triferic sales growth projections also depend on the clinical experience dialysis centers have with the drug.

How it works The main purpose for Triferic is to serve as an iron replacement to maintain hemoglobin in adult patients with chronic kidney disease. Each time patients go in for dialysis, they lose iron. “This drug replaces that iron in real time while they are in the chair,” Chioini said. It works like this. During hemodialysis treatment, Triferic is introduced into a bicarbonate concentrate and mixed into a dialysate solution. The drug enters the bloodstream and into the bone marrow where it ultimately boosts hemoglobin levels. In clinical trials of more than 1,400 patients and 100,000 administrations, Triferic was found to be an effective iron delivery therapy, said Raymond Pratt, Rockwell’s chief medical officer. “We see Triferic as a paradigm shift in the treatment of anemia,”

Pratt said in a statement. Iron administered intravenously doesn’t work as well because it is encased in a shell and goes into the liver before being delivered; Triferic allows the patients to maintain hemoglobin safely, Pratt said. Founded in 1995, Rockwell has grown to a company with 300 employees at plants in Michigan, Texas and South Carolina, Chioini said. A fourth plant is planned for Las Vegas in partnership with Baxter, he said. Over the next several months, Chioini said, Rockwell plans to add up to 25 clinical jobs to support its research and development team in Wixom. Rockwell produces more than a dozen other products, including hemodialysis concentrates and such ancillary products as blood tubing, fistula needles, dressings and cleaning agents. Last year, Rockwell received FDA approval for its generic drug Calcitriol, an active vitamin D injection that treats secondary hyperparathyroidism (overactivity of the parathyroid glands) in renal dialysis patients. The drug is eventually expected to boost sales about $50 million annually, the company said. Molloy said Calcitriol is expected to generate sales of $16.7 million this year and $27.1 million by 2018. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

Aupeo: Panasonic unit offers drivers an alternative to apps ■ From Page 3

roughly 2 million cars in the U.S., including models from Ford Motor Co., Mercedes-Benz AG, Jaguar-Land Rover, BMW AG and others. Taylor said the supplier’s goal is to reach 50 million vehicles by 2020. Panasonic Automotive reported worldwide revenue of $8.3 billion in its 2013 fiscal year. The company supplies a variety of automotive components, such as premium audio equipment, navigation systems, batteries and sensors.

Moving away from apps Overall, the current Aupeo app performs as advertised: pushing traffic reports, weather and news in a timely manner through a car’s audio system when the driver is expected to want to hear them. Music fills in during other listening times. It’s similar to Google Now, which pushes notifications to your phone based on your search, travel and other actions. Traffic updates currently operate much like those from traditional outlets, and Aupeo plans to roll out specified traffic updates based on user destinations by the end of the year, Taylor said. But Aupeo aims to get away from the app-based experience as more and more cars become connected to the Internet without the assistance from a mobile device, Taylor said. Apps “are not a good idea for the core experience in a car,” he said. “The app framework is inefficient; drivers can’t, or shouldn’t, be fumbling through apps while driving.” By 2020, as many as 220 million cars, globally, will be connected to

the Internet, according to a 2014 re- subject to reduced market share or port by BI Intelligence, a research margin on their projects.” service from Business Insider, an Taylor said Aupeo is “hardwareAmerican business agnostic” and is availand technology news able across several website. Hardware competitors’ systems. and software related Stamford, Conn.to the connected car based audio and infowill represent a martainment supplier Harket of $152 billion by man International 2020, the report said. Industries Inc. is makWhile driver assising similar headway tance and safety feawith Aha Radio softtures, such as semiware. The service also autonomous driving, offers access to more will lead the bulk of than 30,000 radio staDavid Taylor, Aupeo connectivity, infotions, real-time traffic tainment is expected and weather, and acto grow market share, too. cess to Twitter and Facebook feeds. Of consumers surveyed for the Harman executives were unBI Intelligence study, 69 percent available for comment in time for said they desire streaming audio deadline for this article. in the car, compared to just 45 perBoyadjis also said systems like cent desiring a system that warns Aupeo open up revenue streams. of a front or rear collision. “The data coming from the car is Mark Boyadjis, senior analyst going to be exorbitant,” he said. and manager of infotainment and “Somebody is going to be managing human machine interface for South- how these assets are being used to field-based research firm IHS Auto- create new revenue streams or remotive Inc., said Panasonic is using duce warranty.” Aupeo to bolster its market share of existing components, but other revenue streams will open up through In 2013, 345 terabytes of informathe service. “Panasonic has a vested interest tion was collected from vehicles, in maintaining their current (au- according to IHS data. By 2020, IHS dio component) business by build- predicts that figure to hit 545 ing an end-to-end solution with petabytes (or 545,000 terabytes.) Aupeo plans to gain traction on their hardware,” Boyadjis said. “Entering this market is shrewd its service by collecting data and offor tier-one suppliers to future fering automakers, and partners, proof their business. Those auto personalized advertising to drivers. Current ad revenue supports its supplier companies that don’t do this or delay doing this could be audio service, which has licenses

(Apps) are “ not a good idea

for the core experience in a car.

”

Use data to push ads

in 60 countries, Taylor said, but moving to personalized advertising opens a path to entice automakers. “We have the capabilities to use this as an audio channel with full in-car integration where we can target individual VIN numbers,” Taylor said. “If there’s a maintenance issue for the car, automakers can target drivers of that car through the audio channel directly. That sure beats sending out a letter.” Dealers also could use the service to inform particular drivers they could be due for an oil change and offer a deal, he said. The advertising, specific to data retrieved from the vehicle, will be controlled by the automaker, and Aupeo will receive a per-user fee, Taylor said. Daniel Cobb, CEO of the Rochester-based advertising agency DBA Worldwide, said targeted advertising is the future. “We call these ‘Big Brother ads’ because we want to know where customers are and what they are doing,” Cobb said. “We’re tracking for all our clients, but this is the year our clients are upping their budgets to spend on this sort of thing.” Cobb said this sort of advertising is cheaper and more effective than traditional TV and radio spots. For example, a video ad gets a 400 percent greater return than an ad on TV, he said. “We used to market to individuals on a mass level, but the narrowing, or specificity, of digital technologies makes the game much more effective,” Cobb said. “In the past, we’d run tampon commercials in mass

media where half the audience was men. Now, I know the name of the woman and where she shops. The idea of targeting is real. This is an exciting space to be in right now.” The lucrative market space is also attracting tech giants Apple Inc. and Google Inc. Both Silicon Valleybased companies are developing their own infotainment systems. However, Boyadjis said companies like Panasonic and Harman have one major advantage over California’s big players. “These potential suppliers (Google and Apple) are a lot more powerful than the automakers they want to work with,” Boyadjis said. “One advantage in this area — auto services — Panasonic or Harman have is they are looking to partner with automakers, align with an automaker’s strategy, where Apple and Google are more interested in maintaining their own platforms.” Apple’s market cap is more than three times larger than that of the world’s largest automaker, Toyota Motor Corp. Taylor said suppliers are fearful of Apple’s and Google’s entry into the market, but rapid technology change presents a larger risk. “Autonomous vehicles can change everything, the entire driver experience,” Taylor said. “We’re in a space filled with potential technology disruptors, so I can’t argue it’s not a risky business. But we’re confident in what we’re trying to achieve.” Dustin Walsh: (313) 446-6042, dwalsh@crain.com. Twitter: @dustinpwalsh

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Building: Mid-’80s space race came crashing down ■ From Page 3

ed Real Estate Solutions LLC. “It was great.” But was it too much, too fast? Is the region still paying the consequences? Opinions differ. Friedman said there was significant demand for new office construction following a comparative lull in new buildings in the suburbs due to the economic recession of the early 1980s. Steve Morris, principal of Farmington Hills-based Axis Advisors LLC, a tenant representative firm, also said an economy improving from the recession, generous federal tax incentives for developers, and companies being willing to Morris build larger offices for their employees were contributing factors. The onslaught of new space had a lasting impact on the suburban office markets, said Levi Smith, the principal of Southfield-based Principal Associates LLC, who developed a small speculative medical office building in Southfield during that period. “The market that was built for EDS soon was overbuilt,” he said. Even today, the 17.2 millionsquare-foot Southfield market and the 13.3 million-square-foot Troy market have felt the consequences, in part because of too much space built over the years and not consistently enough tenants to fill it, Smith said. The vacancy rate was 25.7 percent in Southfield in the fourth quarter last year and 24.8 percent in Troy, according to Newmark Grubb. And while the markets have improved in recent years, supply and demand still aren’t equalized for many large available spaces. As for EDS, that company occupied a significant portion of what is now the North Troy Corporate Park, formerly the Bellmead, and Travelers Tower II in Southfield. The company eventually vacated that space, as well as space in Auburn Hills and Farmington Hills, and took space in the RenCen. But the company was spun off from GM and then purchased by Hewlett-Packard Co. in 2008 for $13.9 billion. The former EDS, as part of HP, now occupies a 638,000-squarefoot former GM building in Pontiac. Time has shown developers that the ebbs and flows of corporate business moves are hard to predict. “Picture this: If Quicken Loans (Inc.) would have stayed in the suburbs and not moved downtown, downtown wouldn’t be doing as well right now,” Friedman said. “Because they moved downtown, downtown started booming. That was the effect of EDS in the suburbs.” Doug Etkin, principal of South-

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During a mid-’80s building boom triggered by General Motors Corp.’s purchase of Electronic Data Systems Corp., Levi Smith developed a small speculative medical office building in Southfield. In retrospect, “the market that was built for EDS soon was overbuilt,” he said.

field-based developer Etkin LLC, said the boom of 1986 and 1987 was particularly beneficial for the northern Troy area, which hadn’t had the amount of office development as the southern part of the city. Etkin “If it had 1 million square feet before that era, after it, it had 3 million,” he said. Real estate experts say an office construction boom like there was three decades ago just isn’t in the cards, and wouldn’t be responsible. Just 68,000 square feet of new office space was constructed last year, according to Newmark Grubb, the lowest figure in 40 years worth of data provided by the company. The next lowest totals were in 2010 (77,000 square feet) and 1995 (74,000). A.J. Weiner, executive vice president in the Detroit office of Jones Lang LaSalle, said the local office market doesn’t generate the type of new tenant prospects and rental rates to accommodate that level of new office construction. “The cost involved in building that much square footage would require an entirely new tenant base,” he said. “It just wouldn’t be a viable project.” Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

BIG ’80S BOOM Southfield

Southfield Town Center Tower 2000: 557,000 square feet, 1986 Galleria Officentre Building 300: 300,000 square feet, 1987 Maccabees Center: 251,000 square feet, 1986 Silver Triangle Building: 154,000 square feet, 1986 Metro Office Complex Tower 300: 151,000 square feet, 1987 Troy

2600 W. Big Beaver Road: 450,000 square feet, 1987 Troy Officentre, Buildings B and D&E: 438,000 square feet, 1986-87 North Troy Corporate Park: three towers, 632,000 square feet, 1986-87 Somerset Place Tower I: 215,000 square feet, 1986 Wilshire Plaza West and North: 351,000 square feet, 1986 Farmington Hills

27777 Inkster Road: 274,000 square feet, 1987 Triatria Office Building: 237,000 square feet, 1986 Brookfield Office Park building: 235,000 square feet, 1987 The Gateway Building: 165,000 square feet, 1986 The Arboretum, two buildings: 253,000 square feet, 1986 Orchard Ridge Office Park: 120,000 square feet, 1986 Livonia

Laurel Office Park: 130,000 square feet, 1986 Powerscourt: 125,000 square feet, 1987 Cambridge Center: 116,000 square feet, 1986 Seven Mile Crossing I: 114,000 square feet, 1987 Auburn Hills

Cambridge Court Phase I: 118,000 square feet, 1987 Bloomfield Hills

Pulte Building: 225,000 square feet, 1987 Source: CoStar Group Inc.

“If Quicken Loans would have stayed in the suburbs, ... downtown wouldn’t be doing as well right now. Because they moved downtown, downtown started booming. That was the effect of EDS in the suburbs.” David Friedman, Friedman Integrated Real Estate Solutions LLC

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CRAIN’S DETROIT BUSINESS

RUMBLINGS

WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF FEB. 21-27

Crain’s story flies high with Michael Bolton ere’s a little humblebrag from us to you: Michael Bolton reads Crain’s! The singer, not the twitchy geek character from “Office Space.” Bolton was spotted by Washington Post features writer Ben Terris reading a copy of our Detroit 2.0 issue on a recent flight, and he tweeted a picture of the crooner and Crain’s at @bterris. What caught the fancy of a man who has sold 50 million albums — including a 2013 tribute to Motown? An article by Ron Fournier, editorial director of the National Journal and a former Detroiter. Fournier wrote an essay for Crain’s about his connection to Detroit and his mother’s reaction to the resurgence narrative about her hometown. But Bolton wasn’t reading Fournier just for edification. He’s been in town producing a documentary about a resurgent Detroit, featuring all the major names, including Mayor Mike Duggan, Dan Gilbert, Chris Ilitch and others. No release date has been set for the film, which has been in the works for two years.

Hamtramck restaurateur to compete on CNBC show Hamtramck’s Rock City Eatery owner and chef Nikita Sanches will compete on this week’s episode of CNBC’s “Restaurant Startup” for the opportunity to open a pop-up restaurant in Los Angeles and, ultimately, win the financial backing of wealthy investors. Sanches and partner Jessica Imbronone named their team Rock City Pies, after his

former pie shop at Rust Belt Market in Ferndale, for the “Pie vs. Pie” episode. The “rock ’n’ roll” couple will face Sanches Sixpence Pie Co., owned by “two suburban soccer moms” from Southington, Conn., according to a news reImbronone lease. In what’s being billed as “the ultimate pastry showdown,” restaurateurs and investors Joe Bastianich and Tim Love will hear pitches from the companies. Rock City Pies wants to take its handcrafted delights and turn them into a nationwide sensation, while Sixpence Pie has been so successful that it’s outgrown its tiny space within two years of opening, the release said. The chosen team is given the keys to a working restaurant in Los Angeles. The team gets 36 hours and $7,500 to create a business plan, come up with a branding campaign and launch a pop-up restaurant. Based on reaction of diners, the quality of the branding and the viability of the business plan, Bastianich and Love decide whether or not they will put their own money on the line. Sanches was among the final four contestants in Hatch Detroit’s small-business funding contest in 2012. Restaurant Startup “Pie vs. Pie” premieres at 10 p.m. Tuesday on CNBC.

Singer Michael Bolton is noticed looking at the Detroit 2.0 issue of Crain’s Detroit Business during a recent plane trip. COURTESY OF BEN TERRIS

Group raising money to create Rochester theater A community group wants to raise $7.5 million to bring movies back to downtown Rochester. The city once had two theaters: The Hills Theatre closed in 1984 after more than 40 years in operation; the Avon Theatre operated from the early 1900s until 1954. Now, the Theater Group of Rochester Co., formed as an offshoot of the RochesterAvon Historical Society, intends to revive that part of the city’s past. Money raised will pay for a building downtown, renovations and operations. The theater would be staffed by volunteers. A site has not yet been finalized. “It will be a family-oriented theater,” said Rod Wilson, the group’s secretary/treasurer. “We’re not going to be in competition with the big boxes.” The theater would show documentaries, foreign films and vintage cartoons. The committee will begin fundraising in the spring, holding pop-up cinema screenings to start, and the goal is to open by Christmas 2016. Details are at TheatreGroupRC.org.

State wealth study irks Oakland County Mirror, mirror, which county is the wealthiest of them all? In February, Livingston County was named the richest of Michigan’s 83 counties, by online news and aggregation site 24/7WallSt.com — in a position long held by Oakland County. According to the report, Livingston County has a median household income of $72,359, well above the state average of $48,411. But the study is not without controversy. A Feb. 24 article from the Oakland Press questioned the calculation choices from the study, which used five-year median household income data from the U.S. Census Bureau. Ronald Tracy, an associate professor of economics at Oakland University, told the newspaper that the study didn’t calculate the information at a per capita basis, providing smaller Livingston County with a notable advantage. Livingston County had a population of 184,443 in 2013, compared to Oakland County’s 1.23 million, according to the Census Bureau. Calculating per capita income, Oakland retakes the throne at $57,035 and Livingston drops to $44,880.

Adoba owner averts hotel’s foreclosure he Israel-based ownership group of Adoba Dearborn Detroit, the state’s second-largest hotel, has paid the back property taxes owed on the hotel, saving it from foreclosure. Royal Realties LLC paid the nearly $1.43 million in property taxes that was owed to Wayne County for 2012 and 2013 via wire transfer on Friday, said David Szymanski, the county’s chief deputy treasurer.

ON THE MOVE 䡲 Daniel Hurley will be the

new CEO of the Presidents Council, State Universities of Michigan, effective July 1. Hurley, associate vice president for government relations and state policy at the Washington, D.C.-based American Association of State Colleges and Universities, will replace Mike Boulus, who is retiring after 14 years as CEO. Hurley, 47, is a previous director of university relations and administrative services at the Lansingbased council, a forum for the presidents and chancellors of the state’s 15 public universities. 䡲 After five years as president and CEO of business accelerator TechTown Detroit, Leslie Lynn Smith is moving to Memphis to lead its Entrepreneurship Powered Innovation Center, a publicprivate partnership. 䡲 Mike Heneka was to retire March 1 as president of Faurecia North America Inc., the Auburn Hills-based seating and emissions systems supplier said. Mark Stidham, 58, president of Faurecia North America’s emissions control technologies division, replaces Heneka, 67, at the subsidiary of Francebased Faurecia SA. 䡲 Patricia Little will step down as executive vice president and CFO of Troybased staffing firm Kelly Services Inc., effective March 13, to join Pennsylvania-based The Hershey Co., Staffing Industry Analysts reported. Olivier Thirot, Kelly’s senior vice president, corporate controller and chief accounting officer, will be acting CFO. 䡲 Ronna Romney McDaniel was elected leader of the Michigan Republican Party at its convention in Lansing. McDaniel, a niece of former Massachusetts Gov. and presidential candidate Mitt Romney, succeeded Bobby Schostak, who didn’t seek a third two-year term.

COMPANY NEWS 䡲 Federal-Mogul Corp. said it will delay a plan to split into two separate public companies during the first half of 2015. After reporting a net loss of $185 million on revenue of $1.8 billion in the fourth quarter of 2014, the Southfieldbased supplier delayed the split to allow for integration of recent acquisitions. 䡲 Livonia-based Team Schostak Family Restaurants announced it expects to open Detroit’s first Applebee’s restaurant by year’s end at Gateway Marketplace at Eight Mile Road and Woodward Avenue. 䡲 Southfield-based Chassix Inc. is exploring a sale of some of its U.S. plants after a plunge in earnings and two missed interest payments. Bloomberg News reported that the auto parts maker has entered into confidentiality agreements with potential buyers of the assets. 䡲 Tenants of Northland Center will receive 30-day eviction notices this week following an Oakland County Circuit judge’s approval of a plan to close the Southfield mall. 䡲 Upscale menswear designer John Varvatos’ Detroit store is set to open March 13. Varvatos is returning to his native metro Detroit with a store in the former Wright Kay Building at 1500 Woodward Ave., owned by Bedrock Real Estate Services. His John Varvatos Apparel Corp. is joining local gastro pub Wright & Co. in the building. 䡲 Columbus, Ohio-based Huntington Bancshares Inc. signed an agreement to purchase Bloomfield Hillsbased Macquarie Equipment Finance Inc. from its parent, Australia-based Macquarie Group Ltd., in a deal expected to close by March 31. 䡲 Companion, a student startup that offers an app that allows friends and family to keep an eye on you, won the $25,000 top prize at the 32nd annual Michigan Business Challenge put on by the Zell Lurie Institute at the University of Michigan School of Business. 䡲 More than six decades after going on the air for the first time from the Maccabees Building in Detroit, WXYZ-Channel 7 went on the air again downtown. The ABC affiliate broadcast its “7 Action News at Noon With Joanne Purtan” from the location, in a new studio inside the Qube building at 611 Woodward Ave. The station will keep its main studio in Southfield. 䡲 Caesars Entertainment Corp. entered into an agreement to sell its 20 percent share in Rock Ohio Caesars LLC, the holding company for two Ohio Horseshoe casi-

nos and other assets, to coowner Rock Ohio Ventures LLC. The deal gives Rock Ohio, an affiliate of Detroitbased Rock Gaming LLC, sole ownership of Horseshoe Cincinnati, the Horseshoe Cleveland and Higbee Building it’s housed in, the RitzCarlton in Cleveland and nearby ThistleDown Racino. 䡲 Flint-based Diplomat Pharmacy Inc. signed a final agreement to acquire BioRx LLC, a Cincinnati specialty pharmacy and infusion services company, for $210 million in cash and $105 million in Diplomat common stock. The deal is expected to close this month. 䡲 Good Shepherd Credit Union of Lincoln Park, which has $93 million in assets, plans to merge into the $860 million Ferndalebased Credit Union One, pending approval by the GSCU membership.

OTHER NEWS 䡲 Joe Barbat, CEO and

chairman of Southfieldbased Wireless Toyz and chairman of West Bloomfield Township real estate company Barbat Holdings LLC, closed on the purchase of the Gabriel Richard Building in downtown Detroit for $3.2 million. The 96,000square-foot building, expected to be renamed The Gabriel House, had been owned by GRB New Detroit LLC. 䡲 Organizers of Detroit’s M-1 Rail streetcar line said they have issued a request for proposal for a third-party firm to operate and maintain the system. 䡲 The Ann Arbor Area Transportation Authority governing board voted to authorize a $100,000 contract for a rail ridership and cost estimate study for passenger rail in the Detroit-toGrand Rapids/Holland corridor, AP reported. 䡲 A new powerboat race event may be in the works for this summer on the Detroit River. Steve David, chairman of the Washington, D.C.-based hydroplane racing league H1 Unlimited, said he is coordinating with Detroit Yacht Club past commodore Fred Carr to put a new Detroit event back on its summer schedule. 䡲 Challenge Detroit, which gives up-and-coming leaders from Detroit and around the U.S. an opportunity to live, work, play and give back in the city, is accepting applications for its fourth class of fellows through March 8 at www.challengedetroit.org/ application. 䡲 Dallas-based Southwest Airlines Co. said it has added nonstop service between Detroit Metropolitan Airport and Dallas Love Field. Service begins Aug. 9.

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