Crain's Detroit Business, March 23, 2015 issue by Crain's Detroit Business

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www.crainsdetroit.com Vol. 31, No. 12

MARCH 23 – 29, 2015

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Snyder hits road to push Prop 1 Plan’s perils: Complex add-ons, state chamber’s stance

Looking Back: How Detroit reached its lofty presence

BY BILL SHEA CRAIN’S DETROIT BUSINESS

With just seven weeks left before Election Day, Gov. Rick Snyder last week began making the rounds to stump for a contentious ballot proposal that would generate $1.2 billion for Michigan’s crumbling roads by increasing the state sales tax. Critics, however, say Pro-

Direct primary care: Can it contain health care costs?

posal 1 on the May 5 ballot is too complex and confusing because of the 10 other bills linked to the measure that would increase funding for schools and local governments. Snyder, who spoke with Crain’s during a visit on March 19, acknowledged the uphill struggle the “Safe Roads Yes” vote campaign faces to increase the state sales tax one percentage point to 7 percent. The measure requires a constitutional amendment approved by the voters

rather than via legislative or executive fiat. “It’s hard. It’s a tax increase,” he said. This is one reason hundreds of presentations will be made to groups by the campaign coalition in the coming weeks, and why Snyder himself is so active in making the case. He even brought a piece of a crumbled concrete bridge to his interview with Crain’s as a physical re-

Defense bill could retire Selfridge jets

UM biz school to offer DPS lessons in leadership

Finance: M&A Awards Compuware restructuring: Bob Paul to tell how, Page 11

BY CHAD HALCOM CRAIN’S DETROIT BUSINESS

DIA MIA? FORGIVE ME Crain’s Bill Shea reflects on Rivera and Kahlo and his first visit to the DIA (yes, he knows), Page 11 PHOTOS COURTESY OF THE DETROIT INSTITUTE OF ARTS

The economic impact of the Diego Rivera and Frida Kahlo exhibit has extended beyond the walls of the Detroit Institute of Arts and has become, in a sense, a new Detroit industry.

Next week: New look, same must-read

NEWSPAPER

Next week, after more than 750 issues using its current design, Crain’s Detroit Business will come to your office sporting a new look. How new, you ask? Take a look at the copy of the paper now in your hands. Now look at the picture above this blurb. Yes, that’s the exact issue as this one, using the elements of Crain’s new look. We hope to see you next week with the rest of the story.

See Roads, Page 35

DAVID HALL

Rivera-Kahlo show’s impact reaches far beyond the DIA BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

nly a week into its four-month run, the Diego Rivera and Frida Kahlo exhibit at the Detroit Institute of Arts is already drawing people from around the region, country and world. But the economic impact of the exhibit is extending well beyond the museum’s walls to other arts and cultural groups, and to area restaurants and shops. About two dozen local arts and cultural groups are hosting programs thematically tied to the exhibit, capitalizing on the opportunity to attract new audiences.

And a dozen area restaurants are offering drinks and dishes created with Rivera and Kahlo in mind, from entrées taken from Kahlo’s cookbooks and notes at El Zocalo in Detroit’s Mexican Town to Union Street’s “Ode to Detroit Industry” cocktail with Mezcal, a distilled spirit known as Tequila’s cousin, Maraschino liqueur and fresh lime as key ingredients. Then there’s Hamtramck’s Rock City Eatery with “Panzón + Friducha,” a dish featuring pan-seared beef tongue and “ash-baked beets,” among other ingredients, that hails from Rivera’s birthplace in Guanajuato, Mexico. See Kahlo, Page 37

Selfridge Air National Guard Base in Harrison Township could become a base without fighter planes for the first time in 100 years if Congress passes a 2016 defense bill that adopts a U.S. Air Force plan to retire the A-10 Thunderbolt jet. The A-10 fleet has flown largely intact through several years of budget sorties between military leaders who want to retire it and senior members of Congress who keep it in service. Most recently, a compromise version of the 2015 National Defense Authorization Act passed in December halted a plan to retire the fleet but allowed the service to put up to 36 aircraft on backup status if the federal government deems it necessary. Last month, the Air Force anSee Selfridge, Page 36

COURTESY OF NORTHROP GRUMMAN CORP.

Selfridge officials estimate that about 180 full-time and 455 part-time jobs are directly tied to flight, operation and maintenance of its A-10s.

“Double Portrait of Diego and I,” Frida Kahlo, 1944

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March 23, 2015

CRAIN’S DETROIT BUSINESS

MICHIGAN BRIEFS Huntington to open 43 branches at Meijer stores statewide Two years after announcing an agreement with Meijer Inc. to open bank branches in the Walkerbased retailer’s stores, Huntington Bank said it plans to open 43 fullservice branches in Michigan this year and will add 250 jobs statewide, The Associated Press reported. With the additions announced, Huntington Bank will employ 2,300 in Michigan. The expansion by Columbus, Ohio-based Huntington Bancshares Inc. will mean Huntington Bank has more than 220 branches in Michigan. The Huntington offices in Meijer stores will replace branches operated by Chase Bank.

Looking for apartment in GR? Good luck with that, website says The Grand Rapids-Wyoming metropolitan statistical area had a 1.6 percent apartment vacancy rate at the end of last year — the lowest in the country, according to the real estate research website Zillow.com. The national rate was 7 percent. According to the 2015 forecast released by the real estate brokerage Colliers West Michigan, downtown Grand Rapids will see “increased investor activity,” MiBiz reported. About 1,300 apartment

Talent so important, it now has its own department Last December, Crain’s reported on Gov. Rick Snyder’s executive order creating the Michigan Department of Talent and Economic Development along with the Michigan Talent Investment Agency. Both were scheduled to start operations in March. Which would be this month. And so The Associated Press confirmed that last week, Talent and Economic Development launched. Its aim: Make Michigan a national leader in talent development for skilled trades such as manufacturing, welding, electrical work and automotive production. Talent and Economic Development will bring together the Michigan Economic Development Corp., Michigan State Housing Development Authority and Michigan units will be “delivered, under construction or planned.” Factors for the apartment construction boom? Millennials and empty-nesting baby boomers are moving back into city centers and are interested in options other than owning. Developers such as John Wheeler of Grand Rapidsbased Orion Construction have pointed to the historically low interest rates as a great reason to do new construction right now.

MICH-CELLANEOUS 䡲 Midland-based Dow Chemical Co. signed a long-term agreement with a new wind farm under devel-

Strategic Fund. Steve Arwood, CEO of the MEDC, also heads Talent and Economic Development. The Talent Investment Agency will coordinate job preparedness and worker training programs. Agency head Stephanie Comai said efforts will include trying to create a pipeline for all talent in the state, from students to those already in the workforce who need new training. One area of emphasis will be on connecting the unemployed to training and job opportunities. Another focus will be promoting jobs in the skilled trades. “We need to change the conversation about these opportunities” in skilled trades, Comai said. “For too long, those jobs were maybe not looked on very favorably, but they are high paying and in demand.”

opment in south Texas to provide power to one of its plants, the Midland Daily News reported. Dow is the first company in the U.S. to power a manufacturing site with renewable energy at this scale, the paper reported, and will become the third-largest corporate purchaser of wind energy in the United States. 䡲 Holland-based JR Automation Technologies LLC was acquired by Crestview Partners, a New York City-based private equity firm. Crestview teamed with members of JR Automation’s management to buy the manufacturer of custom-automation equipment from the Grand Rapids-based Huizenga

Group. Terms were not disclosed. 䡲 Michigan State University received a $6.9 million grant from the National Science Foundation to improve science teaching in middle and high school. 䡲 FutureMark Manistique will close its paper mill in the Upper Peninsula this week, WLUC-TV reported. The mill had emerged from bankruptcy in 2012. 䡲 Midland-based Northwood University is selling its West Palm Beach, Fla., campus to Keiser University, MLive.com reported. 䡲 Three Muskegon-area manufacturers have created their own on-site health care clinics to better manage employee health, MiBiz

reported. In January, Eagle Alloy Inc., Port City Group Inc. and Fleet Engineers Inc. launched the Muskegon Manufacturers Health and Wellness Clinics. The clinics provide routine care similar to what employees would receive from a primary care physician. 䡲 Grand Rapids-based Davenport University has appointed Pamela Imperato the new dean of the Donald W. Maine College of Business, the school said in a news release. 䡲 Vermont-based Orvis Co. Inc. is opening a West Michigan store in Grand Rapids, MiBiz reported. The retailer also has a store in Royal Oak. 䡲 The newspaper Military Times recently ranked Saginaw Valley State University No. 20 nationally on its list of the best educational institutions for military-affiliated students seeking an education in business, MLive.com reported. 䡲 The U.S. Internal Revenue Service charged Fontrise Charles of Kalamazoo with filing false tax returns for others over a three-year period, along with filing her own false returns, The Associated Press reported. Charles promoted herself as the “No. 1 Tax Lady.” 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.

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CRAIN’S DETROIT BUSINESS

March 23, 2015

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Crain’s March 25, 1985, issue detailed plans for the first lofts in Eastern Market. The idea was a forerunner to a wave of loft projects throughout the city in the decades to come. Read more at crainsdetroit.com/30

LOOKING BACK

Inside

A lofty idea to build upon BY KIRK PINHO CRAIN’S DETROIT BUSINESS

Rocco “Rocky” Russo and his brother, Dominic Russo, laid the foundation for what today is a thriving residential loft market in the Eastern Market area. Three decades ago, the now-deceased brothers, who were founders of Rocky Produce Inc. and The Rocky Investment Co., developed what today are known as the Rocky Peanut Lofts at the corner of Russell Street and the Fisher Freeway. Originally planned as the A. Jacobs Lofts, the $300,000 project result-

ed in the first legal lofts in Detroit, Crain’s reported in 1985, the year the nine-unit development opened. Lofts were allowed under provisions added to the 1984 Detroit City Code, which defines a loft as “a dwelling unit in a building originally constructed for other than residential use containing one or more rooms or enclosed floor spaces arranged for living, eating, sleeping and/or a home occupation, [and] which contains bathroom and kitchen facilities.” The city’s loft ordinance became effective in June 1985, according to

Rory Bolger, zoning specialist with the city planning commission. For years, primarily artists and photographers occupied unsanctioned lofts in Detroit, living and working in space not approved by what is now the Buildings, Safety Engineering & Environmental Department. Few people thought the development would work, said Robert Heide, Rocco’s son-in-law and the project manager on Rocky Peanut Lofts. “ ‘Rocky is crazy,’ people said. ‘No one will want to live at Eastern See Lofts, Page 34

Leuliette leaves Visteon a slimmer supplier, Page 4 LARRY PEPLIN

Since the completion of the Rocky Peanut Lofts, several more loft developments have come online in Eastern Market, including FD Lofts.

UM to give DPS staff leadership training BY KIRK PINHO CRAIN’S DETROIT BUSINESS

Faculty from the University of Michigan Stephen M. Ross School of Business will provide free leadership training to Detroit Public Schools administrators and select principals, teachers and other staff. The program, scheduled to be announced Monday, is an effort to improve things like safety, academic performance, and district leadership and school principals and staff to support high-performing schools in the district, said Kim Cameron, the William Russell Kelly Professor of Management and Operations in the Ross School and a professor of higher education in the Cameron School of Education, who will be leading the effort. “We will start right away,” Cameron said. “We will start with senior leadership in the system and we will also identify some other people who we identify as positive energizers, people who have impact on the system because of their positive energy.” The first meeting between Ross School faculty and about 30-40 DPS administration, principals and staff is expected by April 1, Cameron See DPS, Page 33

GLENN TRIEST

John Blanchard, M.D., doesn’t bill health insurers for services. Instead, through his Premier Private Physicians PLC office in Troy, he sells subscriptions for primary care to patients at about $200 a month.

Push for direct primary care Backers see it as answer to rising health care costs BY JAY GREENE CRAIN’S DETROIT BUSINESS

amily physician John Blanchard, M.D., has been pushing the direct primary care service concept of concierge medicine for more than 14 years through his Premier Private Physicians PLC office in Troy. As a private physician who doesn’t bill health insurers for services, Blanchard sells subscriptions for primary care services to patients, mostly executives, at about $200 per month. The subscriptions cover a catalog of primary care services, limited diagnostic

THIS WEEK @ WWW.CRAINSDETROIT.COM

tests and extended time with a medical doctor. His patients usually carry health insurance, so if a referral to a specialist or diagnostic test is required, Blanchard helps his patient find the right provider. But Blanchard said if health insurers offer highdeductible health insurance plans that cover the concierge services or if a self-insured employer offered the service in its health benefits plan, he and other physicians could lower their monthly fees to about $100. Some practices — estimated at up to 75 in Michigan — already offer lower monthly fees, including Jeff Huotari, M.D., at BlueSky Health in Howell. Huotari charges $30 a month for comprehensive primary care services and some procedures. Last year, state Sen. Patrick Colbeck, R-Canton

Company index These companies have significant mention in this week’s Crain’s Detroit Business: Architectural Salvage Warehouse Detroit . . . . . . . . 29 Beaumont Health . . . . . . . . . . . . . . . . . . . . . . . . . 14 Beaumont Health System . . . . . . . . . . . . . . . . . . . 14 BlackEagle Partners . . . . . . . . . . . . . . . . . . . . . . . 20 BlueSky Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Botsford Hospital . . . . . . . . . . . . . . . . . . . . . . . . . 14 Butzel Long . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Compuware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Detroit Building Authority . . . . . . . . . . . . . . . . . . . 29 Detroit Institute of Arts . . . . . . . . . . . . . . . . . . . 1, 11 Detroit Public Schools . . . . . . . . . . . . . . . . . . . . . . 3 E&B Brewery Lofts . . . . . . . . . . . . . . . . . . . . . . . . 34 Eastern Market . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Esperion Therapeutics . . . . . . . . . . . . . . . . . . . . . 28 FD Lofts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Forgotten Harvest . . . . . . . . . . . . . . . . . . . . . . . . . 26 Forthright Health Management . . . . . . . . . . . . . . . 36 Frida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Garden City Hospital . . . . . . . . . . . . . . . . . . . . . . . 18 Hopeful Harvest . . . . . . . . . . . . . . . . . . . . . . . . . . 26 La Feria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Lead Head Glass . . . . . . . . . . . . . . . . . . . . . . . . . 29 Loft Warehouse . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Ludlow Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Martin Waymire . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Michigan Association of Health Plans . . . . . . . . . . 36 Michigan Chamber of Commerce . . . . . . . . . . . 25, 35 Michigan Opera Theatre . . . . . . . . . . . . . . . . . . . . 37 Michigan State Medical Society . . . . . . . . . . . . . . 36 Music Hall Center for the Performing Arts . . . . . . . 37 Nikki’s Ginger Tea . . . . . . . . . . . . . . . . . . . . . . . . 26 Oakwood Healthcare . . . . . . . . . . . . . . . . . . . . . . 14 Olympia Medical Services . . . . . . . . . . . . . . . . . . . 36 O2 Investment Partners . . . . . . . . . . . . . . . . . . . . 17 PC Treasures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Peacock Room . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Plante Moran . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Premier Private Physicians . . . . . . . . . . . . . . . . . . . 3 Priority Health . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Reclaim Detroit . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Rocky Peanut Lofts . . . . . . . . . . . . . . . . . . . . . . . . . 3 Sandwich Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Selfridge Air National Guard Base . . . . . . . . . . . . . . 1 Small Business Association of Michigan . . . . . . . . 35 Sun Communities . . . . . . . . . . . . . . . . . . . . . . . . . 16 TechTown Detroit . . . . . . . . . . . . . . . . . . . . . . . . . . 6 United Physicians . . . . . . . . . . . . . . . . . . . . . . . . . 36 University of Michigan . . . . . . . . . . . . . . . . . . . . . . 3 Visteon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Wayne State University . . . . . . . . . . . . . . . . . . . . . . 6 WWP Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Department index BANKRUPTCIES . . . . . . . . . . . . . . . . . . 4 BUSINESS DIARY . . . . . . . . . . . . . . . . 30 CALENDAR . . . . . . . . . . . . . . . . . . . . 32 CLASSIFIED ADS . . . . . . . . . . . . . . . . 33 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 8 LETTERS . . . . . . . . . . . . . . . . . . . . . . . 8 OPINION . . . . . . . . . . . . . . . . . . . . . . . 8 OTHER VOICES . . . . . . . . . . . . . . . . . . 9 PEOPLE . . . . . . . . . . . . . . . . . . . . . . 31 RUMBLINGS . . . . . . . . . . . . . . . . . . . 38

See Care, Page 36 Distill my heart The Motor City Gas microdistillery is open in Royal Oak. Go a round or two in an online photo gallery, crainsdetroit.com/whiskey TONY BARCHOCK

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Slimmer Visteon keeps focus on auto cockpit electronics BY DAVID SEDGWICK CRAIN NEWS SERVICE

When Tim Leuliette steps down as CEO of Visteon Corp. late this year, he will leave behind a company working in just one product sector: cockpit electronics. That’s a radical change for Ford Motor Co.’s former in-house parts division, which had a vast, dis-

jointed product portfolio. When Van Buren Townshipbased Visteon was spun off in 2000, the company made glass, climate control, bumpers, fuel tanks, axles, steering components, in-vehicle entertainment, navigation systems, headlights and powertrain cooling systems. Now, the company produces instrument clusters, infotainment

displays, vehicle security systems — and the software needed to run these products. Lots and lots of software. And that is where the money is these days. During a January interview with Crain’s sister publication Automotive News, Leuliette, 65, said half of Visteon’s 4,000 engineers are software developers. As if to underline that expertise, Visteon showcased its reconfigurable instrument clusters at International CES in Las Vegas in January. Car owners can create a new look for their speedometer and tachometer by downloading a software upgrade. That’s a long way from the old Visteon’s glass, bumpers and fuel tanks. At International CES, Visteon also touted its ability to integrate a vehicle’s instrument cluster, center console and head-up display into one harmonious package. Automakers value that kind of expertise, said Mike Robinet, managing director of Southfield-based IHS Automotive. Integration of a vehicle’s displays “is the secret sauce of this market,” Robinet said. “It’s really critical to integrate the hardware with the software.”

Downsizing Visteon It’s not as if Leuliette suddenly woke up one morning and decided to focus on infotainment. As far back as 2001, Visteon mar-

keted rear-seat entertainment, audio systems and Bluetooth linkups for MP3 audio players. And when the company was in bankruptcy in 2010, Visteon spurned a bid by Johnson Controls to buy its electronics and interiors units for $1.25 billion. When Leuliette was named CEO in 2012, restive investors believed Visteon was moving too slowly to narrow its product lineup — a key reason for former CEO Don Stebbins’ abrupt departure. So, Visteon sold the interiLeuliette ors unit in 2014, followed by the climate control division, a $3.6 billion deal, early this year. Meanwhile, Leuliette has been expanding Visteon’s electronics division. In 2014, he purchased Johnson Controls’ electronics operation — which produced instrument clusters, head-up display units, infotainment displays and body electronics — for $265 million. With a sole focus on cockpit electronics, Leuliette has put all of Visteon’s eggs in one basket — but it looks like a sturdy basket. The 2015 revenue of the slimmed-down company is projected at about $3.3 billion — less than half of its 2013

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total of $7.4 billion. The Johnson Controls acquisition has given Visteon enough scale to compete. In his Jan. 5 interview, Leuliette said Visteon is the top global supplier of instrument clusters, and is No. 3 in cockpit electronics, behind Continental AG and Denso. Visteon and its top rivals are positioned to claim a substantial chunk of a promising growth market. Over the next five years or so, North America’s infotainment market is likely to grow 10 percent annually, predicts Praveen Chandrasekar, an analyst with Frost & Sullivan, a consulting firm based in Mountain View, Calif. “By 2020, infotainment is going to be a no-brainer,” Chandrasekar said. “The tier-one suppliers will be the enablers in this game.”

Secure future? Chandrasekar estimates that hardware will account for 60 percent of the segment’s revenue, with software generating the rest. Which explains why software plays such a big role within Visteon. “It’s pretty obvious that everything in the vehicle will be software-enabled,” Chandrasekar said. Visteon and other suppliers may find themselves outflanked by Google and Apple, as vehicles grow more dependent on the cloud for data, apps and services, Chandrasekar cautions. But during his Feb. 26 earnings call with industry analysts, Leuliette noted that Visteon’s electronics unit lined up $1.3 billion in new contracts and renewed business last year. Leuliette, who announced on March 16 that he would step down when Visteon appoints his successor, can argue that the company’s future is secure. “We’re happy with the business we’ve got,” Leuliette said. “We’re happy with the order book we’ve got. And we’re happy with the business backlog. We’ve got a lot to execute in 2015, so that’s (our) primary focus.” From Automotive News

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The following businesses filed for protection in U.S. Bankruptcy Court in Detroit March 13-20. Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation. Coliseum Bar & Grill Inc., 1109 Decker Road, Walled Lake, voluntary Chapter 11. Assets and liabilities not available. JLJ Enterprises, 1172 N. Wayne Road, Westland, voluntary Chapter 7. Assets and liabilities not available. RSG Real Estate Enterprises LLC, 1315 Lone Pine Road, Bloomfield Hills, voluntary Chapter 7. Assets and liabilities not available. A Custom Transmission Inc., 10430 Beech Daly Road, Taylor, voluntary Chapter 7. Assets and liabilities not available. — Natalie Broda

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CRAIN’S DETROIT BUSINESS

WSU’s shared-services plan aims to help TechTown run leaner BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

Too much autonomy for TechTown Detroit turned out to be too much of a good thing. Wayne State University has launched a shared-services model that plans to save more than $250,000 a year for the technology and business incubator, which was founded in 2000 with support by then-President Irvin Reid. TechTown opened its doors in 2004 on Burroughs Street in Midtown in a 135,000-square-foot building designed by Albert Kahn in 1927 and donated by General Motors. Since then, one of its ongoing problems has been how to pay for staffing and overhead, a problem that many nonprofits share, according to Ned Staebler, WSU’s vice president for economic development. In addition to that title, Staebler assumed the titles of president and CEO of TechTown on March 16, replacing Leslie Smith, who left to become president of the new Entrepreneurship-Powered Innovation Center in Memphis. Staebler said that foundations and other organizations, such as the New Economy Initiative, the Michigan Economic Development Corp., the Fisher Foundation and J.P. Morgan Chase, fund programs at TechTown but that grants typical-

light bill has to be paid at the same “We’ve got 65 building engineers time each month.” who take care of the whole camRick Nork, WSU’s CFO, said he pus. Adding one facility to that is has identified $200,000 in cost sav- not a big deal.” ings, about $120,000 of that by shiftIf a TechTown roof springs a ing TechTown’s telephone and IT leak, there is no need for Staebler services to the school to get out the and some of it by prophone book viding economies of or get online scale through either to find a conthe school’s tractor beexisting sercause somevice and one already equipment in the contracts, inschool’s emcluding a 20 ploy can percent recome take a duction in the look. cost of office “Some of supplies bethis has alcause of ready kicked WSU’s current multiin. Some of it year supply contract. will be in 30Nork said he ex60 days. Some pects to easily be able of it will be 90 Ned Staebler, TechTown to get to $250,000 in days,” said savings, and that doesn’t include Nork. the saving to TechTown by having “As someone who has to look at a president and CEO whose salary budgets at TechTown and make is already on WSU’s books. payroll, I’ll be highly motivated to WSU will also handle payroll, get that $250,000 off my books,” risk management and insurance said Staebler. and human resources and turn “Every penny I can take off the over much of the building mainte- operation’s side is a reduction in nance and repair. time I have to spend. My mission “This really doesn’t cost Wayne and the mission of TechTown isn’t State anything. It’s things we’re al- to be out fundraising to pay for ready paying for or just providing overhead, it’s to create jobs. I want economies of scale,” said Nork. to spend more of my time doing

balance the “ We budget each

TechTown opened its doors in 2004 and has since struggled with paying for staff and overhead.

ly don’t allow for money to be spent on staffing and overhead. He said that Smith spent much of her time trying to fund the incubator’s operational costs. He said one of the reasons he will be able to replace her on a part-time basis as president and CEO is that the shared-services model will eliminate a lot of her grunt work. “We balance the budget each year, but it’s not without consistent effort,” said Staebler. “Grants come in at different times, but the

year, but’s it’s not without consistent effort. Grants come in at different times.

”

that instead of trying to keep the lights on.” Staebler said one immediate benefit for employees at TechTown and tenants is the muchfaster Internet speed now available. He said when he started at TechTown earlier in the month, upload and download speeds were at 2 megabytes. With a switch over to WSU systems, he’s now got gigabyte speeds both ways, which is 500 times faster. Staebler said that reducing TechTown’s autonomy will have immediate benefits for Wayne State, too. Last October, WSU announced that James Anderson, founder of Detroit-based Urban Science Applications Inc., and his wife, Patricia, had made a $25 million gift to the College of Engineering to create the James and Patricia Anderson Engineering Ventures Institute. The goal is to help launch startup companies based on the work of engineering faculty and students. “One of the first things I said to our entrepreneurs-in-residence at TechTown when I started was, ‘OK, when are you going to start having office hours at the College of Engineering?’ ” said Staebler. “We’re starting to do that.” Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @TomHenderson2

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OPINION

Good things to note: From DIA art to M&A few notes on things that have gone right recently: The success of the Diego Rivera-Frida Kahlo exhibit at the Detroit Institute of Arts is an immediate reminder of why the “grand bargain” that saved the DIA’s art — and its ability to attract exhibitions — was so important. The exhibit, in addition to being a boon for the DIA, also has broader economic benefits. As Sherri Welch reports on Page 1, more than 20 local arts and cultural groups are hosting programs tied to the exhibit, and some local restaurants are running specials tied to Kahlo’s and Rivera’s Mexican roots. Special exhibits are important to museums because they bring in new visitors and new revenue. They’re important to the community because of the spinoff effect and because cultural institutions are an important amenity. The effect of selling off art would have been a shunning by the broader art community. It was a bullet well-dodged. On March 15, Amy Haimerl wrote in her blog at crainsdetroit.com about a newly renovated East English Village house bought at auction for $10,500 by a Plano, Texas, investor. The house sold for its full $86,499 asking price a day later, with multiple potential buyers. The auction program itself still has a lot of ground to cover to achieve success, but this transaction is important beyond the one house involved because it’s a building block of demand. One still-to-besolved problem: High property taxes that burden everyone, but low-income property owners most of all. Our M&A Awards winners this year reflect a turn in the acquisitions market. Being recognized beginning on Page 11 are deals that map a path forward for local hospitals, a large strategic acquisition by Sun Communities, and a deal that allowed company owners to realize some value from their efforts while continuing to run the company and provide further value to a new owner. Detroit’s acquisition market for several years was dominated by distress deals, and then there were very few deals at all as sellers and buyers waited out the economy. Last year, they were out in force in a strategic way.

LETTERS Enforce or eliminate wage rules Editor: Over the 20-plus years our company has been in business, we have completed numerous projects in the construction industry. Being a subcontractor to many statefunded projects, mostly educational projects, I found Mary Kramer’s column on prevailing wage somewhat difficult to comprehend (“Prevailing-wage battle could hurt jobs initiatives,” March 9, Page 15). We have worked on prevailing-wage projects for more than 10 years and have found to be at odds with many of the items in the prevailing-wage format. First, as a subcontractor, prevailing-wage work, like most construction projects, must be bid. General contractors will typically select the lowest qualified bidder. As a current employer of 20, and back in the day up to 50-100 employees, successfully bidding on projects had a very low probability due to the competitiveness, thus leaving our business to compete on multiple levels of jobs and projects to keep our workers employed. Prevailing-wage work is not normal; there are very few projects that will allow the opportunity to bid, so you are left to bid on market-rate projects where standard market labor rates dictate. We successfully navigated the larger firms, such as Barton Malow and Skanska, to create opportunities for ourselves; however, the work is limited and not full time. Much of prevailing-wage work — especially educational projects — is completed during the summer, leaving a gap for the rest of the year, which must be at market labor rates. Second, prevailing wage creates a wage difference with real market wages of more than 50 percent versus competitive open shop projects. If a typical employee was making $16 per hour, a prevailing wage increases that amount to $35 to $44 per hour or more, creating an artificial inflation in the market. If my employees could make $44 per hour full time, that would exceed $88,000 per year, making them very well paid for an unskilled position. Remember, prevailing wage covers skilled and unskilled employees. Such amounts I would think would make lawmakers wonder why they are not doing our type of work. But remember, pre-

Crain’s Detroit Business welcomes letters to the editor. All letters will be considered for publication, provided they are signed and do not defame individuals or organizations. Letters may be edited for length and clarity. Write: Editor, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 48207-2997. Email: cgoodaker@crain.com vailing-wage work is only temporary — I need to retain my workforce and keep them working yearround. There is no layoff pay, no union hall to sit at awaiting work, and workers’ compensation is not a fantastic fallback option. Other issues that prevailing wage has created for many subcontractors are competition within our own ranks, the elimination of flexibility for bidding projects to utilities’ different wage and employee classifications, and creation of a short-term gain with no long-term benefits to our employees. Remember, prevailing wage is an amount agreed to be paid to the employees; the unions receive no benefit from this — no administrative support, no funding retirements, no financial support. Finally, very few, if any, general contractors enforce or require certified payrolls to support that subcontractors are paying the necessary wages. The requirement of certified payrolls along with thirdparty verification would help eliminate many of the issues I have faced. When competing for a project, if a subcontractor knows it is not going to get caught, it will bid the amount necessary to get the job, despite knowing and agreeing to pay prevailing wage. The enforcement on behalf of the state and general contractors is a disaster. It is up to the employee to file a claim with the state; many employees are not aware of these requirements despite rules dictating the posting of wage amounts — the construction industry has turned its head to many of these rules because it doesn’t want to get involved. The notion of “if it is not broke, who are we to fix it?” is very apparent. We have found that in many of the projects we are involved in

that quality subcontractors can compete without prevailing-wage requirements and that general contractors can support and work with strong business owners and their employees. I support legislation that either puts some effort into enforcement of the prevailing-wage requirements or eliminates them, saving the taxpayers millions of dollars in high wages with no strong evidence that it furthers our economy. Steve Marszalek President, Great Lakes Construction Services Royal Oak

Kudos to Keith Crain for road tax column Editor: I am a longtime subscriber to Crain’s Detroit Business. It’s an interesting publication. However, being oriented to business, it usually takes the typical Republican stances of “cut my taxes,” “kill the unions,” “privatize everything it can including our schools.” But wonder of wonders, we can all agree with Keith Crain’s column on March 16 (“Roads tax hike: What’s a person to do?”). Quotes from the column: “magic, smoke and mirrors,” “but get those 80-ton trucks off our roads,” “legislative mumbo-jumbo,” “(Gov. Snyder) avoided the obvious user tax by raising the gas tax by, say, 20 cents,” “this proposal stinks.” Lansing Republicans come up with nothing but dirty tricks, don’t do their jobs to solve problems, and just dump the tax increases on the public under the threat of “it’s your fault if the roads don’t get fixed.” Who in God’s creation voted for these gutless cowards to “lead” our great state of Michigan? I salute Keith Crain on this one. Richard Kennedy Shelby Township

Insolvency issue must be dealt with now Editor: As a past chairman of a Taft-Hartley pension plan, I appreciated the sentiments outlined in Mary Kramer’s March 2 column (“A See Letters, Page 9

KEITH CRAIN: Begin economic development at home There is a buzz around Detroit. Lots of small investments and startups, from retail stores downtown to interesting and innovative restaurants, seem to be sprouting up daily. Yet we aren’t seeing any big investments like an auto plant or supplier plant being planned for our city. We still have to see whether or not this is a sustainable trend or it’s just a blip on the radar screen. Whatever it takes to encourage investment and expansion in our city still has to be our number-one priority.

In fact, while everyone is out chasing windmills, it might make a lot more sense for our city, county and state government to take a hard look at what’s in Detroit. Let’s see whether it might be possible for our legislators in Lansing to create some bills that would package some real incentives. And not in the hopes of attracting out-of-state companies — whether they’re from Japan or Ohio — but instead to focus time and energy on the companies already here.

Let’s spend as much time trying to understand the needs and wants of companies that have been here for decades. Some of them might deserve a break and a great big incentive not just for staying but for considering expanding instead of putting the next plant in Georgia or Mexico or China. In all the hoopla to try and attract new business from outside Detroit and Southeastern Michigan, we simply have not put forth

enough effort to help and retain existing businesses in Detroit. There is a huge amount of competition for new investment from outside Michigan. We hear anecdotes of zillions of dollars of incentives and everything else to entice companies to settle in their region. But we’ve got hundreds, no thousands, of businesses that have been here forever. They aren’t leaving anytime soon, we hope. But they may be considering putting that new plant somewhere — and we don’t even know about it. We aren’t going to get a chance to bid on it either. We

have to learn about these expansion plans earlier and then have the programs in place to allow us to be competitive on a global basis. Companies that have been in Detroit know the city and understand its assets and liabilities. They have weathered the economic storm of the recession and lived with the bankruptcy of Detroit. If they aren’t our best prospects for economic development, then I don’t know which would be better. Let’s start rooting for the hometown heroes. They have kept us alive all this time.

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OTHER VOICES: Michigan should be leading space race vate-sector space exploPresident Barack Obaration. For a state that has ma’s decision nearly five such technical prowess years ago to ground the and is always seeking NASA shuttle program and ways to diversify, staking put the future of American a claim to the still-evolvspace exploration into the ing space industry should hands of the private sector be seen as an opportunity essentially launched a new unlike any other in modrace to space. ern history. Since then, there has There is no good reaproved to be no shortage of innovators from around the John Sitkiewicz son why successful technological businesses opcountry wanting to take advantage of the revolutionary ap- erating outside of the state couldn’t make Michigan Ameriproach to American space travel. In California, Texas and Florida, ca’s go-to destination for unrivaled companies immediately began spacecraft design technology. And seeing how many people raising venture capital dollars and unleashing research and development efforts to design aerial transport vehicles capable of bringing materials, scientists and astronauts to and from the International Space Station. Not to be outdone, businesses in Wisconsin and Indiana moved ahead with plans to enter the niche market of space tourism. Inexplicably, Michigan — home to some of the world’s greatest engineering minds and seasoned manufacturers — continues to be nowhere in the conversation on pri-

LETTERS CONTINUED ■ From Page 8

warning: Watch pension plans”). When I was with the pension plan, “unfunded liabilities” used to be part and parcel of our plan, a fact that did not deter the offering of the pensions that were guaranteed. Now that the unfunded liabilities are being addressed head-on, there is great uncertainty regarding the stability of future retirement benefits. The thing that really troubles me is the much bigger picture. Not only are public pension plans under stress, but private pension plans as well. The reason I say this is the guiding statistics that pension trustees and plan managers rely on in making plan decisions are mortality reports issued by the Society of Actuaries. In its first revision since 2000, SAC estimates the average 65-year-old man today will live 86.6 years, up from the 84.6 it estimated a decade and a half ago. The average 65-year-old woman will live 88.8 years, up from 86.4. While longevity is wonderful, it will put increasing pressure on both public and private pension plans. All of these factors, in the bigger picture, could create devastating, long-term problems as available public funds will be diminishing as the national debt grows, with most of the money going to debt service. Also, just think of the pressures that will be exerted on the Pension Benefit Guaranty Corp.’s bulkhead as the debt and obligations grow. We also have the Social Security Disability Fund’s potentially imminent insolvency to deal with. We are running out of money, for pensions, infrastructure and other essential programs. This is a huge wake-up call that needs to be taken seriously and acted upon now, rather than later. Joe Neussendorfer Livonia

There is no good reason why ... “ businesses ... couldn’t make Michigan America’s go-to destination for unrivaled spacecraft design technology. are willing to pay millions for the chance to reserve spots on shuttles engineered for private space travel, the potential financial returns on investment are huge. Interestingly enough, SpaceX, which arguably is the country’s most recognized space exploration player, has no less than two dozen

”

University of Michigan School of Engineering graduates on its staff, advancing spacecraft design initiatives in California. The question is, why hasn’t someone attempted to bring some of that expertise back to Michigan to start a spacecraft design venture? Undoubtedly, the private-sector

space industry will continue to develop, given that today’s space race is about constant invention, advancing technology and risk taking that only private industry can deliver. Homegrown Michigan engineers, manufacturers, technology firms and venture capitalists have a unique chance to show the rest of the world what can be accomplished when innovation and imagination come together. Because when it comes to American space exploration, the sky is really the only limit. John Sitkiewicz is a metro Detroit freelance business writer.

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REPORTER’S NOTEBOOK Bill Shea writes about media, advertising and marketing, the business of sports and transportation. Call (313) 446-1626 or write bshea@ crain.com

M&A Awards Bill Shea

Capitalism gets last laugh at DIA exhibit This is embarrassing to admit, but after 15 years living in Michigan and almost nine years working downtown, March 15 was my inaugural visit to the Detroit Institute of Arts. Shameful, I know. After the visit, I regret wasting so many years. The museum’s collection is fantastic — Picasso! Monet! Rembrandt! Cezanne! Picasso! Van Gogh! Gauguin! Degas! Van Eyck! Warhol! O’Keefe! — and it would have been an unspeakable cultural tragedy if the artwork had been peddled at auction during the city’s bankruptcy. What prompted me to finally get off my duff and get some DIA culture was the public opening of the “Diego Rivera and Frida Kahlo in Detroit” exhibit. I’m not necessarily enamored by Rivera’s and Kahlo’s artwork, but I am intrigued by them because they represent such a dichotomy: Rivera was an ardent Mexican communist hired by wealthy gringo capitalists to paint murals that certainly were going to spark ideological controversy. Kahlo was just as ardent. Critics from the right have dismissed Rivera and Kahlo’s artwork as Stalinist agitprop, and there’s some truth to that. But even a hardcore capitalist and anticommunist such as I can acknowledge that criticism of capitalism isn’t without merit. All political and economic systems are flawed, either inherently or through unsound execution — and early 20th century capitalism was certainly guilty of the exploitation memorialized within Rivera’s murals. Capitalism, however, gets the last laugh: When visitors reach the end of the exhibition, they pass through a gift shop outside the gallery — souvenirs are a common revenue stream for museums, so this is no criticism of the DIA by me. I’m all for it. But one wonders what Kahlo would make of the museum selling a doll of her for $19.95, or the $20 T-shirts. Naturally, there’s a tote bag adorned with her face ($20), along with a booklet of temporary tattoos ($1.50), paper dolls ($9.95), postcards (74-94 cents), a $16 notebook, a $1.95 bookmark and a plastic “floating” pen for $3.95. Books, movies, and Mexican art and snacks are part of the offerings. They also can be bought online. Would Kahlo be offended by her image being used to sell souvenirs? Truth is, I have no idea. She and her husband had few qualms about taking money from American oligarchs because they saw the opportunity to spread their message through art. So maybe she’d not be aghast at her face being for sale on stationery if it would inspire the proletariat, or something. One thing I am certain that would have mortified both Rivera and Kahlo: The DIA exhibition of their life and work is sponsored by Bank of America.

HONOREES Deal over $100 million Winner: Beaumont Health System/ Oakwood Healthcare/Botsford Hospital A September merger quickly created Beaumont Health, a system with eight hospitals and $3.8 billion in combined revenue, Page 14 Finalist: Sun Communities Inc./Green Courte Partners LLC Sun’s $1.32 billion purchase of Green Courte increased its portfolio value by about one-third to $5.1 billion, Page 16

Deal under $100 million Winner: O2 Investment Partners LLC/PC Treasures Why buy a bundler of software for cable TV shopping channels? It makes a lot of money, Page 17 Finalist: Prime Healthcare Services/Garden City Hospital After a two-decade search, one of the region’s last independent hospitals finds a merger partner, Page 18

Dealmaker adviser Winner: Plante Moran PLLC. Dennis Graham, partner Graham’s private-equity practice had another recordbreaking year in 2014, with revenue doubling over 2013, Page 19

Dealmaker buyer/seller Winner: BlackEagle Partners LLC. Bryan Tolles and Jason Runco Crain’s 2011 Dealmaker of the Year closed on 13 transactions last year for a total value of more than $267 million, Page 20

Life got extra interesting for Compuware Corp’s then-CEO Bob Paul in 2012 when Elliott Management Corp. launched a takeover bid. Instead of seeing the move as hostile, Paul weighed the criticisms and took steps to improve Compuware’s performance.

Right moves, right time Bob Paul to speak about Compuware’s winding path to sale BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

‘M

ay you live in interesting times” is known as the Chinese curse, though scholars have been unable to find an actual source to support the idea that it was ever hurled derisively at people there. Most likely, it is an English expression fancying itself up in apocrypha. There was nothing apocryphal, though, about the interesting life Bob Paul, CEO of Detroit-based Compuware Corp., lived in 2013 and 2014, which he will discuss in a presentation and Q&A at the annual M&A Awards event put on by Crain’s and the Detroit chapter of the Association for Corporate Growth on May 12 at the Troy Marriott. Paul’s interesting days began in December 2012 when New York City-based Elliott Management Corp. announced it was launching a $2.3 billion takeover bid for the computer services and

software company, a bid he heard about by phone from Elliott about 60 seconds before the news was officially announced. Elliott Management, a hedge fund grown legendary by its aggressive pursuit of its economic interests, wasn’t happy by what it saw as an underperforming company and a weak share price. To the surprise of at least some industry observers, Paul was eventually able to come to a peaceful resolution with Elliott, in large part because Paul didn’t act in a hostile manner to what was perceived as a hostile takeover bid. “Bob did a great job with Elliott. He could have treated it as a hostile event, but he didn’t,” said Gurminder Bedi, the former head of operations for Ford Motor Co. in Brazil and Argentina who was then chairman of Compuware’s board of directors. “Bob didn’t view them as hostile. He treated them with respect. See Paul, Page 12

M&A AWARDS Crain’s Detroit Business, in partnership with the Association for Corporate GrowthDetroit Chapter, holds its eighth annual M&A Awards 5-9 p.m. May 12 at the Troy Marriott, Troy. Tickets: $95 for ACG members or nonmembers in groups of 10 or more, $100 for individual sales to nonmembers. Preregistration closes at 9 a.m. May 11. If available, walk-in registration will be $120 a person. To register: crainsdetroit.com/events Questions: Kacey Anderson, cdbevents@crain.com, (313) 446-3000

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Paul: How Compuware hostile takeover became a bit less hostile ■ From Page 11

“Bob and the board agreed with some of Elliott’s criticisms and disagreed with others, but we gave them a fair hearing.” Paul said the offer by Elliott didn’t come out of the blue. The hedge fund had been buying Compuware stock, having to file reports with the U.S. Securities and Exchange Commission as it passed certain thresholds. After Elliott passed the 5 percent threshold, other activist hedge funds began buying stock, too. There looked to be blood in the water. When Paul got the call from El-

liott, the company owned about 8 percent of Compuware stock. The call came from Jesse Cohn, a portfolio manager with the interesting title of head of U.S. equity activism, who had recently visited Compuware’s headquarters. Paul said it wasn’t Elliott’s fearsome reputation that convinced him to play nice, it was that he agreed with many of Cohn’s criticisms. Compuware co-founder Peter Karmanos Jr. wanted Paul to resist Elliott, but after Karmanos’ retirement as executive chairman in March 2013, Paul had a free hand

to address what he thought were those legitimate criticisms, including that the board of directors was made up of too many Detroit civic leaders and not enough IT experts, and that the company needed to cut costs and shed underperforming business units and should sell its downtown headquarters. “Elliott is tough, but unlike some activist hedge funds, they’re fair. They do their homework. They do deep, deep research. They knew their facts,” Paul said. But it wasn’t just Elliott that Paul had to worry about. Word in IT cir-

cles was that Bain Capital and wouldbe private equity partners were interested in gobbling up Compuware and merging it into Houston-based BMC Software, which would have meant the loss to Detroit of an iconic company and thousands of employees. “The job at hand was for the management team to convince our institutional investors that we had much more value to them as a business here than to be sold and moved to Houston,” said Paul. “We had to convince the long-term institutional value investors and the

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short-term hedge-fund guys that if you give us the time, it’ll be better for you than selling us.” “Bob did everything possible he could do to create value at the company. He proved himself as an operator,” said Cohn. “He took an underperforming company and cut costs, changed management, IPO’d a division, sold off business units it didn’t look as if anyone wanted to buy and did all the right things to get to the right place. “It was staggering how much Compuware accomplished in a year.” Consider: In January 2014, Compuware announced it had reached an agreement that ended Elliott’s takeover bid. A few days later, Compuware sold three business units to a Los Angeles-based private equity firm for $160 million. On Sept. 2, Paul dropped the bombshell news that the company was going to be sold for $2.4 billion to Thoma Bravo LLC, a Chicago-based private equity firm. A few days later, Paul announced Compuware would be split in two, with the mainframe support business continuing to operate under the Compuware name, and the business that helps companies monitor the performance of their software applications in real time to operate as Dynatrace. In October, Compuware’s board approved Paul’s plan to distribute the 82 percent of the stock it owned in Covisint, which had spun off in an IPO in 2013, to Compuware shareholders. In November, Compuware signed a deal to sell its Detroit headquarters to Dan Gilbert’s Bedrock Real Estate Services and Meridian Health for $142 million. In December, Compuware shareholders approved the sale to Thoma Bravo. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

In November, Compuware Corp. signed a deal to sell its Detroit headquarters in Campus Martius to Dan Gilbert’s Bedrock Real Estate Services and Meridian Health for $142 million.

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180 Counsel to more than 180 corporate transactions that closed in 2014

$14 billion Total value of these 2014 transactions was nearly $14 billion

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(248) 658-1100 www.hitachibusinessďŹ nance.com A year ago, CEO Gene Michalski had tried to merge Royal Oak-based Beaumont Health System (above) with Detroit-based Henry Ford Health System, only to have negotiations break down.

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he merger last September that created Beaumont Health, the Royal Oak-based system with eight hospitals and $3.8 billion in combined revenue, was completed quickly with no potholes to slow the deal. Ironically, it took CEOs Gene Michalski of Beaumont Health System, Brian Connolly of Oakwood Healthcare Inc. and Paul LaCasse of Botsford Health Care about nine months to guide Beaumont Health through the birthing Michalski process of the health system as well as federal antitrust approval. Now the largest health system in Southeast Michigan, with an estimated 35 percent inpatient market share, the new Beaumont Health has 33,000 employees, 5,000 physicians, 153 outpatient sites and 3,500 volunteers. â&#x20AC;&#x153;Brian and I are on the Michigan Health & Hospital Association board, and we started talking about strategic partnerships,â&#x20AC;? Michalski said. â&#x20AC;&#x153;I had already talked with Paul because we (our hospitals) had many partnerships together.â&#x20AC;? At a casual dinner, the three

CEOs decided â&#x20AC;&#x153;why donâ&#x20AC;&#x2122;t we have a three-way discussion because the geography is compelling and our services, mission, clinical care, education and research are all compatible,â&#x20AC;? Michalski said. But Michalski said he wanted to avoid problems that led to the failed merger a year earlier between Beaumont and Detroitbased Henry Ford Health System. â&#x20AC;&#x153;We needed to resolve tough issues up front: headquarters location, name, what roles (executives) would have and the governance structure,â&#x20AC;? Michalski said. â&#x20AC;&#x153;You decide the gating issues up front because if you put it off, it delays the inevitable, and too many bad issues can come about.â&#x20AC;? In March, after three months of having many dinners at the Skyline Club in Southfield and rotating meetings at hospital sites, the executives of â&#x20AC;&#x153;BOBâ&#x20AC;? â&#x20AC;&#x201D; as the Beaumont-Oakwood-Botsford entity was lovingly called â&#x20AC;&#x201D; signed a letter of intent. By June, the hospital boards approved the final merger plan. During the summer, the Federal Trade Commission cleared the deal. â&#x20AC;&#x153;We didnâ&#x20AC;&#x2122;t have any triggers (outside influences that objected to the merger),â&#x20AC;? Michalski said. â&#x20AC;&#x153;You always have sticking points, but there wasnâ&#x20AC;&#x2122;t any one thing that was more difficult.â&#x20AC;? During the first six months of Beaumont Health, Michalski said, the market share for the combined entity is up, and the financial results are better than the previous year for all legacy organizations. â&#x20AC;&#x153;We had a banner year last yearâ&#x20AC;? for combined operations, Michalski said. â&#x20AC;&#x153;We just refinanced $100 million of debt and saved $13 million.â&#x20AC;? â&#x20AC;&#x201D; Jay Greene

Now the largest health system in Southeast Michigan, with an estimated 35 percent inpatient market share, the new Beaumont Health has 33,000 employees, 5,000 physicians, 153 outpatient sites and 3,500 volunteers.

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O2 Investment Partners is proud to receive Crain’s 2015 M&A Award, “Deal of the Year”, for its acquisition of PC Treasures. O2 is grateful for the support of its management partners, advisors and ﬁnancial partners in the execution of 6 transactions in the last 6 quarters.

in partnership with the founders has acquired

in partnership with management has acquired

through its O2 Specialty Mfg Platform has acquired

in partnership with management has acquired

has been acquired by

O2 Investment Partners is a Midwestern based private equity

Q Transaction Value: $5 million to $50 million

ﬁrm that seeks to acquire a majority interest in small and

Q EBITDA:$2 million to $8 million (less for add-ons)

middle market manufacturing, niche distribution, select service

Q Industries/Business Types: Industrial manufacturing, niche

and technology businesses. We will also consider opportunistic

distribution, select service businesses, select technology

acquisitions in other industries. We invest in businesses with

segments, certain special situations

earnings growth potential and a clear path to the creation of shareholder value.

Q Geographic Focus: O2 invests in companies throughout the United States and Canada with a preference for the Midwest and Great Lakes region (Michigan, Wisconsin, Minnesota,

www.o2investment.com

Iowa, Illinois, Indiana, Ohio, Kentucky, Pennsylvania, New

40900 Woodward Ave #200

York, Ontario)

Bloomﬁeld Hills, Michigan 48304

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Sun Companies, Inc. (NYSE:SUI) a Michiganbased REIT purchased 58 manufactured housing communities and related assets from Green Courte Partners in a highly complex series of transactions with an aggregate purchase price of $1.3 billion. Jaffe represented Sun Communities in the purchase. This marks the fourth consecutive year that Jaffe clients have been recognized in the Crain’s Deal of the Year issue—a tribute to both our outstanding clients and our impactful relationships.

Finance: M&A Awards F I N A L I S T: D E A L OVER $100 MILLION

Celebrating Four Consecutive Years of Best Deal Recognition

COURTESY OF SUN COMMUNITIES INC.

WIth its purchase of Green Courte Partners, Sun Communities increased its supply of manufactured housing communities geared toward older Americans. Sun’s current communities include Gulf Stream Harbor in Florida (above) and the Lost Dutchman in Arizona (below).

Congratulations to our client: SOUTHFIELD • DETROIT • ANN ARBOR • NAPLES

www.jaffelaw.com

Sun Communities Inc./ Green Courte Partners LLC ADVISERS

䡲 Sun Communities: Jaffe Raitt

Heuer & Weiss PC; Merrill Lynch, Pierce, Fenner & Smith Inc. 䡲 Green Courte: DLA Piper, Eastdil Secured LLC

Business

Computers

Engineering / Technology

Education

Health

Human Services

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ut of 80 bidders emerged one. The $1.32 billion purchase of Green Courte Partners LLC by Southfield-based real estate investment trust Sun Communities Inc. not only increased Sun’s portfolio value by about one-third to $5.1 billion but also increased the portfolio’s share of age-restricted manufactured housing from 13 percent of its roughly 89,000 residences to 24 percent. That’s important because the country’s aging population is creating more demand for such housing options. Gary Shiffman, Sun’s CEO and chairman of the board, called Green Courte’s portfolio of 59 manufactured housing communities with 19,000 residences “irreplaceable assets because of their location and their quality.” Shiffman Sun, which was represented by Jaffe, lined up a mix of cash, debt and stock issuances to finance the deal. And by increasing its market share, Sun increased its appeal to institutional investors such as pension

funds, private equity funds and high-net-worth individuals. “We were able to beat out our competition based on a rather complex structure that was negotiated by Jaffe representing us with the seller that consisted of three different financial tranches,” Shiffman said. Jaffe Chairman Arthur Weiss said that in the past two years, Sun has purchased about 85 new manufactured housing and recreational vehicle communities. And look for Sun CommuniWeiss ties to continue its portfolio expansion. In the second quarter of this year, the company expects to close on the $257.6 million purchase of seven individually owned manufactured housing communities with about 3,150 residences around Orlando, Fla. As part of the Green Courte deal, that company’s founder and chairman, Randall Rowe, and Vice Chairman and CIO James Goldman became members of the Sun Communities board. Green Courte is based in the Chicago suburb of Lake Forest, Ill. The two-phase deal — the majority of which closed in November — and other recent acquisitions also have required Sun to expand its corporate headquarters by about 20,000 square feet in the American Center building as the company has hired an additional 75 employees. — Kirk Pinho

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By increasing its market share, Sun Communities increased its appeal to institutional investors such as pension funds, private equity funds and high-net-worth individuals.

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Finance: M&A Awards WINNER: DEAL UNDER $100 MILLION O2 Investment Partners LLC/ PC Treasures ADVISERS 䡲 O2: Honigman Miller Schwartz and Cohn LLP, Plante Moran PLLC, Ducker Worldwide, Conway MacKenzie Inc., Comerica Bank 䡲 PC Treasures: UHY Advisors Corporate Finance; Howard & Howard Attorneys PLLC

ay Hansen, a managing partner at Bloomfield Hills-based O2 Investment Partners LLC, said it took a while for him to get his mind around PC Treasures Inc.’s business after a potential acquisition was brought to him by UHY Advisors Corporate Finance late in 2013. Auburn Hills-based PC Treasures sells a range of digital devices, which was easy to figure out. But it also was a bundler of software for cable TV shopping channels. What, he wondered, did a bundler of software for TV shows do exactly? As it turned out, make a lot of money with a big markup. “Any negotiation has its ups and downs,” Hansen said. “But what was unique about this deal was their business is so unique, it took us longer to understand Hansen their niche. It wasn’t confrontational in any way, but it took us longer to understand their business model. But finally the light went on.” The Home Shopping Network and QVC sell a lot of computers, tablets and laptops. They don’t make money selling the devices. They make money by bundling the devices they sell with software and product support, and that’s where PC Treasures comes in. PC Treasures buys thousands of software titles, packages them and resells them to the shopping channels — which is where the channels, in turn, make their margins. PC Treasures also provides customer support after the purchase. Due diligence taught Hansen and Todd Fink, another managing partner, that there was money to be made in bundling. It also taught them that they were compatible with Brian Austin and Les Thomas, who co-founded PC Treasures in 1998 and showed their commitment by reinvesting some

PC Treasures sells a range of digital devices but also was a bundler of software for cable TV shopping channels. What did a bundler of software for TV shows do exactly? As it turned out, make a lot of money with a big markup.

of the proceeds of the sale back into the company. “The chemistry was good. We’re on the same page,” Hansen said. Hansen said PC Treasures’ two co-founders will continue to run the company, with O2’s taking a board position. He said O2 is comfortable that it can have strong management input without impeding the founders’ entrepreneurial spirit. Hansen said a second complication two weeks before the deal closed was a quality issue with one of PC Treasure’s 30 vendors in China. Inferior products were being

delivered to the company’s secondlargest customer. O2 and PC Treasures had to placate the customer, which meant terminating the deal with the supplier. A third complication was the timing. The deal closed in November, by far PC Treasures’ busiest time of the year. “They were in the middle of a rapid increase in the need for working capital in the middle of the closing,” Hansen said. The deal was the first one at O2 that was led by Vice President Luke Plumpton. — Tom Henderson

COURTESY OF PC TREASURES INC.

PC Treasures sells digital devices such as power banks and wireless speakers. But what interested O2 Investment Partners in an acquisition was that PC Treasures bundled software for cable TV shopping channels, a lucrative business.

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Finance: M&A Awards F I N A L I S T: D E A L U N D E R $ 1 0 0 M I L L I O N

GET IN ON THE CONVERSATION Chad covers litigation and the defense industry.

Keep up with Chad at crainsdetroit.com/blogs

Garden City Hospital, one of the last independent hospitals in Southeast Michigan, looked for an appropriate merger partner for more than two decades before finding Prime Healthcare Services.

TWEET @CHADHALCOM

CHAD HALCOM

COURTESY OF GARDEN CITY HOSPITAL

broken Records record Were Made to be Broken

2014 was a record year for closings at Huron Capital, with 23 transactions totaling $300 million in deal value (total purchase price and dividends received). We are grateful to those with whom we have worked and look forward to another active year in 2015. We are currently seeking new investment opportunities in specialty manufacturing, business services, consumer goods & services, and healthcare.

We invest in PEOPLE. We build LEADERS.

Sector Focus Specialty Manufacturing Consumer Goods & Services Business Services Healthcare

Platform Criteria Buy & Build Strategies Revenues: Up to $200M EBITDA: $5M or more No Minimums for Add-ons

500 Griswold Street - Suite 2700 | Detroit, Michigan 48226 | 313-962-5800 | www.huroncapital.com

Prime Healthcare Services/ Garden City Hospital ADVISERS 䡲 Prime Healthcare Services: None 䡲 Garden City Hospital: Juniper Advisory LLC; Hall Render Killian Heath & Lyman PLLC

he board and management of Garden City Hospital, one of the last independent hospitals in Southeast Michigan, looked for an appropriate merger partner for more than two decades before finding Prime Healthcare Services, a for-profit chain based in Ontario, Calif., said Saju George, appointed Garden City’s chief administrative officer last November. While negotiations to complete the deal last year went smoothly, George said, the board sorted through three initial offers before selecting Prime. “With issues in the local marGeorge ket and changes in health care reform, (the board) knew they had to affiliate to thrive,” said George, who previously worked for Saginaw-based St. Mary’s of Michigan, a division of Ascension Health Michigan. “They primarily chose Prime because one of the objectives was to continue the legacy of the hospital established over 60 years,” he said. Under the terms of the agreement, which ultimately needed the approval of Michigan Attorney General Bill Schuette, Garden City will remain an acute-care hospital for at least five years and will continue providing the same levels of charity care to the community. The agreement, which closed for $90 million in total, also called for Prime to retire Garden City’s $55 million in debt and absorb the hos-

pital’s underfunded pension plan. Prime also has pledged to invest $35 million in capital improvements over five years. “We did restructure in many areas, including clinical,” George said. In the past six months, he said, Garden City has reduced its workforce by the equivalent of only 75 full-time employees and now has about 1,400. “The hospital never made money on operations and lost a lot the past five years,” he said. “We closed 2014 with a profit on operations.” George said Garden City has improved in every area that can be measured: quality, efficiency, patient satisfaction and financial. For example, George said, patients now wait only 24 minutes before seeing a physician, compared with 47 minutes before. The goal is less than 20 minutes, he said. “Door-to-discharge time in the ER used to be 9.2 hours,” he said. “Now it is less than seven hours.” Like many hospitals, George said, Prime uses a variation of lean process engineering techniques to improve efficiency and operations. In May, Garden City plans to begin phase one of its capital improvement plan. So far, the hospital has spent $8.5 million on a variety of patient care and diagnostic equipment, George said. “We have a lot of restructuring and capital improvements planned,” he said. “By the end of the year, we will completely redo radiology, cardiology, pharmacy and obstetrics.” Prime Healthcare was founded in 2001 by Prem Reddy, M.D., an internist who is the company’s chairman, president and CEO. Prime owns 34 hospitals in nine states with a dozen more in the pipeline. It also has a pending deal to acquire 164-bed St. Joseph Mercy Port Huron Hospital. Prime’s integration strategy is to own a number of hospitals in each market, region or state to gain economies of scale, efficiency and synergies, George said. — Jay Greene

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Finance: M&A Awards WINNER: DEALMAKER ADVISER

Last year, Plante Moran conducted due diligence on 152 prospective deals nationwide, including 17 for Detroitbased Huron Capital Partners LLC — “the gold standard for private equity companies,” says partner Dennis Graham.

Plante Moran PLLC Southfield Dennis Graham, partner

he private equity practice at Plante Moran PLLC had another record-breaking year in 2014, with revenue from the group doubling over 2013. That accounted for more than 10 percent of the top line, up from less than 3 percent in 2006, the year the practice was formed. The practice, headed by partner Dennis Graham, serves both financial companies, most of them private equity firms, and strategic buyers. It has more than 200 private-equity clients nationwide. On the buy Graham side, about 70 percent of Plante Moran revenue and about 80 percent of the duediligence engagements were on behalf of financial buyers, including some family-office clients. Last year, Plante Moran conducted due diligence on 152 prospective deals nationwide, including 17 for Detroit-based Huron Capital Partners LLC. Engagements for Huron included due diligence on two new platform companies and 13 add-ons for existing platform companies. While some of Plante Moran’s engagements were for large transactions, most were in the middlemarket deal value range of $20 million to $200 million. “I’m very humbled by this award, but it’s a team award,” said Graham, part of the founding team of three when Plante Moran put its private equity practice together in 2006. He was named national leader for the practice in 2010. Today, the practice has about 30 employees and three partners, including Matt Petrucci and Michele McHale. “We’ve got more than 200 private equity clients around the country, many of them in Chicago, New York and Boston. When it comes to Michigan, Huron is the gold standard for private equity companies,” Graham said. “Our firms work very well together. We have a common culture built around similar values.” Graham said that about 90 percent of Plante Moran’s engagements result in deals getting done, because would-be buyers and sellers already have signed term sheets when the firm is brought into the mix. “We help the company buy what they think they are buying,” Graham said. “We’re the home inspectors. We make sure there’s no black mold and that the furnace works.” The Plante Moran practice has recorded a record year every year since 2009, Graham said. “And we’re off to a great start this year,” he said. — Tom Henderson

COURTESY OF PLANTE MORAN PLLC

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Finance: M&A Awards WINNER: DEALMAKER BUYER/SELLER

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BlackEagle Partners LLC Bloomfield Hills Bryan Tolles, Jason Runco lackEagle Partners LLC spent a large chunk of its $175 million investment fund in 2014, closing on 13 transactions for a total deal value of more than $267 million. Most of the firm’s efforts — 12 acquisitions ranging from $600,000 to $87 million and totaling $256 million — were on growing a holding company, US LBM Holdings LLC, a Green Bay, Wis.-based distributor of building and construction materials to homebuilders, remodelers and specialty contractors. The company, which added $512 million in revenue and about 1,100 employees, now has 97 locations in 19 states. One of the acquisitions was a Michigan company, Standard Cos. of Grand Rapids, which has seven locations. BlackEagle made another Michigan acquisition: Novi-based Temperform Corp., a small specialty steel castings company that serves the mining, cement and aerospace

What’s the Big Deal? 2014 was another successful year for PMCF with headliner transactions across all of our key industry sectors

has been acquired by

has completed a recapitalization with

a portfolio company of

has acquired

has been acquired by has been acquired by

PMCF is a middle market investment bank providing merger and acquisition advisory services to companies globally. PMCF provides a broad range of services including sale advisory, acquisition advisory, capital raising and strategic advisory. The firm has dedicated industry teams providing services to the industrials, business and technology services, plastics and packaging and medical technology industries. PMCF, an affiliate of Plante Moran, has offices in Chicago and Detroit and globally via its Corporate Finance International affiliates. For more information, visit www.pmcf.com. Phil Gilbert

Matt Jamison

248.223.3326 248.223.3368 phil.gilbert@pmcf.com matt.jamison@pmcf.com

John Hart 248.223.3468 john.hart@pmcf.com

Most of BlackEagle’s efforts — 12 acquisitions totaling $256 million — were on growing a holding company, US LBM Holdings LLC.

Bryan Hughes

Joe Wagner

312.602.3636 312.602.3607 bryan.hughes@pmcf.com joe.wagner@pmcf.com

COURTESY OF BLACKEAGLE PARTNERS LLC

industries. Temperform will serve as the platform company for future acquisitions. Bryan Tolles, a vice president of BlackEagle, said the busy year of deal-making was the culmination of “five years of activity, of hundreds of thousands of miles flying around the country and hundreds of meetings with Tolles industry operators.” Said Jason Runco, one of BlackEagle’s founding partners, “Between Bryan and me, we’ve probably met with every company in this space of meaningful size in the country in the last five years, and that’s not an exaggeration.” In April, BlackEagle closed on another transaction for US LBM: St. Paul, Minn.-based Lampert Lumber, which has 33 stores. Runco said the firm’s fund has a little dry powder left, and the time has come to decide whether to raise another fund. “That’s to be determined,” he said. “If we do raise another fund, that means signing on to do this for another 10 years. Do the partners want to do this again? I don’t know. We’ve got investors who want us to.” Runco said that in either event, a sale of US LBM is a necessity sooner or later. At some point,

BlackEagle has to return money to the limited partners in the first fund. And if it wants to raise a second fund, the firm has to show strong returns from the first. Runco “Given US LBM’s size, someone way up the food chain needs to buy it from our little firm,” Runco said. “We’ve been invested in the company for 5½ years, so it’s about that time. We’re actively listening.” Another portfolio company possibly ready to help harvest some returns for investors is Rockford Products LLC of Rockford, Ill., a fast-growing maker of cold-formed vehicle components. Runco credited Honigman Miller Schwartz and Cohn LLP with BlackEagle’s keeping up its deal pace. “We closed four of those deals on the same day in April,” he said. “Without Honigman and what they do, a firm of our size could never have gotten that done. “I want to call out Mike DuBay in particular. He leads the effort for us there and is probably the best M&A lawyer in town.” BlackEagle, founded in 2005, was named Crain’s Dealmaker of the Year in 2011 for completing seven acquisitions in 2010, a recession year that saw few deals in general. — Tom Henderson

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

CRAIN'S LIST: LARGEST ACCOUNTING FIRMS

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Most firms changed form since 1985 Looking at the names on Crainâ&#x20AC;&#x2122;s list of largest accounting firms in 1985 and then at todayâ&#x20AC;&#x2122;s list is like watching a magic trick: Now you see them, now you donâ&#x20AC;&#x2122;t. Only two of the 15 firms on the 1985 list exist in their original form: Plante Moran and Derderian, Kann, Seyferth and Salucci. Here are the names of the original 15, their ranking then, and what happened to them: No. 1: Coopers & Lybrand merged with Price Waterhouse (then No. 7) in 1998 to create PricewaterhouseCoopers; No. 3 on todayâ&#x20AC;&#x2122;s list. No. 2: Touche Ross & Co. was acquired in 1989 by Deloitte Haskins & Sells (then No. 8) to form Deloitte & Touche and is now known as Deloitte; No. 2 on todayâ&#x20AC;&#x2122;s list. No. 3: Arthur Andersen & Co. folded after lax accounting practices that failed to show accounting deception practiced by Enron Corp. Enron filed for bankruptcy in 2001; Andersen surrendered its license to practice in 2002. No. 4: Arthur Young & Co. merged with Ernst & Whinney (then No. 6) in 1989 to form Ernst & Young; No. 4 on todayâ&#x20AC;&#x2122;s list. No. 5: Plante & Moran, now the largest accounting firm locally. No. 9: Peat, Marwick, Mitchell and Co. is now KPMG after a merger with Klynveld Main Goerdeler in 1987; No. 6 on todayâ&#x20AC;&#x2122;s list. No. 10: Alexander Grant & Co. joined 49 other firms, including the United Kingdomâ&#x20AC;&#x2122;s Thornton Baker, in 1980 to form Grant Thornton International. It changed its own name to Grant Thornton in 1986; No. 11 on todayâ&#x20AC;&#x2122;s list. No. 11: Seidman & Seidman became BDO Seidman after a series of expansions in the 1980s, then BDO USA in July 2010; now No. 10. No. 12 (tie): Jack Martin & Co. became Martin, Arrington, Desai & Meyers in 2005. No. 12 (tie): Linden, Klain, Israel & Ross was dissolved in 1987, according to state records. No. 14 (tie): Barrow, Aldridge & Co., the firm of four-time mayoral candidate Tom Barrow and former DPS CFO William Aldridge, was dissolved in 1998. No. 14 (tie): Derderian, Kann, Seyferth & Salucci; No. 16 on todayâ&#x20AC;&#x2122;s list.

New since â&#x20AC;&#x2122;85 The following companies on the current list were created after 1985: Iannuzzi, Manetta & Co.; founded in 1990 (No. 20). Mattina Kent & Gibbons; founded in 1988 as Gofrank & Mattina PC and in 2013 merged with Brown & Kent to form the current firm (No. 23, tie). ShindelRock (Shindel, Rock & Associates PC); founded in 1991 (No. 23, tie). Cole, Newton & Duran CPAs; started as Lunn, Newton & Duran in 1989 and in 2001 became the current firm (No. 25).

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Ludlow Ventures forms joint venture to fund product videos for startups lions of views in several days, and and smartphone apps on the windsoon after, Coin was able to hit its shield and allows hands-free opercrowdfunding goal of $50,000 in 40 ation by voice. Detroit-based Ludlow Ventures minutes. After two weeks, 6 milLast August, using Lisagor’s LLC has formed a joint venture lion had seen the video. promotional video, Navdy hit with an in-demand Los AngelesCoin, which is still in beta test- $1 million in orders the week it based video producer to create ing, hopes to have a launched an product videos for cash-strapped formal product online sales startups in exchange for equity. launch this spring. campaign. It The joint venture, Sandwich Fund Lisagor has been soon closed LLC, launched earlier this month. listed on Ludon a seed Ludlow will fund the cost of mak- low’s website round of ing the videos, generally about as entrepre$6.5 million, $100,000, according to Jonathon neur-out-ofwhich includTriest, founder of the seed-stage residence, a ed Ludlow, venture capital firm, which oper- play on the and the comates a national practice out of the more company is reMadison Building. mon title ported to be Triest said the investment will of entrepreraising anothcome out of a $15 million fund, Lud- neur-in-resier round of low Ventures II LP, that he finished dence, and he $20 million. raising last September. He said he was made a partner Earlier this will split equity equally with Adam in the firm in exmonth, a proLisagor, the founder of Sandwich change for tips on file in Forbes Video Inc., which has made demon- possible investments. said that “Lisstration videos for some of the As startups apagor’s compahottest recent tech startups, includ- proach Lisagor about ny makes aring Square Inc., Groupon Inc., Airbnb, doing videos, he guably the Uber and Lyft Inc. alerts Triest to those best and most In November 2013, Sandwich he considers the most sought-after Jonathon Triest, Ludlow Ventures had its biggest success with a promising for seedproduct video for San Francisco-based Coin stage investments. launch videos Inc., which makes a digital credit One example is Navdy Inc., a San in tech, ones that you’ve probably card that combines all your cards Francisco company that has media seen, though you might not have into one piece of plastic. buzz for its dashboard-mounted de- noticed they were all made by the The company’s video got mil- vice that displays text messages same guy.” Triest said Sandwich Fund has closed on its first deal for a company he declined to name because the video has not been made yet. “We’ll do five to 10 videos in the next year,” he said. “We’ll do it from the current fund to test the model, and if it works well, we’ll raise a dedicated fund, as well. “We’ll get the best and earliest deal flow. Adam hears of deals ahead of the guys on Sand Hill Road at better valuations,” said Triest, referring to a street in Menlo Park, Calif., known for its cluster of venture capital firms. Triest said about a third of his second fund has been invested in 32 portfolio companies, with much of the rest of the money reserved for follow-on investments in those funds and for footing the bill for upcoming Sandwich Fund videos. He said he plans to start raising a new fund of at least $35 million in the next few months. That will be in addition to a possible dedicated fund for video production. Triest, a member of the Crain’s 20 in their 20s class of 2011, Join Dave MaƩson, CEO of Sandler Training and launched Ludlow Ventures in 2009 Gerry Weinberg & Associates as they lead as an investment vehicle for family members, and prior to raising top area sales execuƟves in this the current fund, he raised money leadership summit that will from them as needed to do deals. He has co-invested in two DeRevoluƟonize Your Sales OrganizaƟon! troit companies with Detroit Venture Partners — Chalkfly, an online office supply company that was reSeaƟng is Limited | Reserve Your Spot Today cently sold, and UpTo Inc., which makes calendar apps. Although based in the Madison Building, most of Ludlow’s investments have been elsewhere, including companies based in California, New York, Nevada, Nebraska, Ohio, Pennsylvania and Colorado. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @TomHenderson2

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CRAIN’S DETROIT BUSINESS

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House bill would ban noncompetes; local attorney defends covenants BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS

Noncompete agreements are under attack in Michigan. State Rep. Peter Lucido, R-Shelby Township, has introduced House Bill 4198, which, if approved, would ban all noncompete agreements between employers and employees in the state. Lucido introduced the bill in February amid a highly publiLucido cized debate about noncompetes stemming from the use of the agreements by Champaign, Ill.-based Jimmy John’s Franchise LLC. Employees at Jimmy John’s stores, sandwich makers, were forced to sign noncompete agreements contractually banning them from leaving to work with a competitor, such as Subway. The freshman state representative calls noncompete agreements oppressive to workers, but local attorneys call the covenants necessary and say that amending a 30year-old law would make protecting intellectual property nearly impossible. Lucido’s legislation would alter an existing law that allows noncompetes during the sale of a business, limiting the former business owner from directly competing with their former company. He said forcing laborers to sign noncompetes is wrong and arguably against the law, citing a section of the 1984 Michigan Antitrust Reform Act, which states, “Labor of a human being is not a commodity or an article of commerce.” “Asking employees to sign a noncompete is just another form we layer (on top of employment) to prevent them from working,” Lucido said during an interview with Crain’s. “There comes a time when you have to protect a business, but that protection goes away when you take away a man’s or woman’s right to a livelihood.” Lucido said the use of nondisclosure and proprietary confidentiality agreements are adequate in protecting trade secrets without limiting a person’s right to employment. But Bernard Fuhs, partner and commercial litigator at Detroitbased Butzel Long PC, said those types of agreements simply aren’t enough to protect trade secrets. “If every human being abided by the honor system and could compartmentalize confidential or trade-secret information and not draw on it or use it in any way, maybe it would work — but that’s not reality,” Fuhs said. “Nondisclosures standing by themselves are extremely difficult to monitor and police. (Noncompetes) are easier to police, and they simply work better by ensuring that a person is not in a position to wrongfully use or disclose the company’s relationships and secret information.”

Fuhs cited a 1987 amendment to the Michigan Antitrust Reform Act in 1987, stemming from a Michigan Supreme Court decision in 1985 — which Crain’s reported on last week. Language from the ruling, which involved cases Follmer, Rudzewicz & Co. v. Kosco and Nolta-QuailSauer and Associates v. Roche, laid the groundwork for a provision to include noncompete clauses in the Michigan Antitrust Reform Act, protections in the Michigan Uniform Trade Secrets Act in 1998 and federal rules as well. Fuhs said the Supreme Court ruling explicitly states a noncompete agreement must be reasonable, unlike the Jimmy John’s agreements. “Any attorney who practices in this area knows that they need to properly advise their clients on what is reasonable and what is not reasonable,” Fuhs said. A class-action lawsuit has been filed in U.S. District Court in Illinois against Jimmy John’s for its use of noncompete agreements. Jimmy John’s did not respond to an inquiry from Crain’s on the issue. It remains unclear whether Lucido’s proposed Michigan legislation, which has been referred to the House Committee on Com-

merce and Trade, has enough political backing to become law. “This is Lansing,” Lucido said. You simply don’t know what has legs and what doesn’t.” Lucido is the bill’s only sponsor, which doesn’t help it get passed, said John Truscott, president of Lansing-based public relations and nonpartisan political consulting firm Truscott Rossman LLC. “If you don’t have co-sponsors, it would hard to have wide-ranging support,” Truscott said. The Michigan Chamber of Commerce told Crain’s it would lobby against the bill if it gains momentum in the House. “There is over 30 years of case law directed at Michigan’s current law, and the courts have consistently penalized employers who develop overly broad noncompete agreements,” Wendy Block, the chamber’s director of health policy and human resources, via email. “We believe the courts generally work to strike a fair balance when a noncompete is challenged, weighing the interest of the employer and the employee. We believe the legislation is an overreaction to extreme examples.” Dustin Walsh: (313) 446-6042, dwalsh@crain.com. Twitter: @dustinpwalsh

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Nikki’s Ginger Tea to move into Forgotten Harvest kitchen BY GARY ANGLEBRANDT SPECIAL TO CRAIN’S DETROIT BUSINESS

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Nikki’s Ginger Tea LLC, which had been operating out of an east side Detroit church basement for 18 years, plans to move into a new commercial kitchen at Forgotten Harvest’s Oak Park headquarters by the end of the month. The move gives Nikki’s access to better equipment and increased storage space that allows the company to double or triple its current sales volume of about 60 cases a week, said Monique Sasser, owner of Nikki’s and a 2011 Crain’s Salute to Entrepreneurs awardee. Nikki’s had been based at the Church of the Messiah in Detroit, but practical limitations pinched growth, causing the business to more slowly pace its acceptance of new customers. Besides space and equipment limitations, the kitchen was open to people passing through and was unavailable at times since a church must continue its work of being a church. “If there’s a funeral, we can’t make tea at all,” Sasser said. Sasser said the church’s low rent and help were invaluable in getting her business off the ground. Nikki’s employs eight people and provides work to local youths to give them valuable early job skills. She will maintain a wholesale sales office at the church. Forgotten Harvest’s kitchen actually belongs to Hopeful Harvest Foods Inc., a business launched last fall by the nonprofit to offer services to food entrepreneurs. All profits feed back to the charity. Besides commercial kitchen use, Hopeful Harvest offers a combination of kitchen, manufacturing, processing, co-packing, ingredient sourcing and business consulting services, depending on the customer’s needs, said its president, Chris Nemeth. The facility comprises 3,000 square feet of commercial kitchen space and 12,000 square feet of refrigeration and freezer storage. The business invested $250,000 to build the facility. Nikki’s pays a monthly fee that covers the services it needs. The business gets access to machines that bottle, cap and label the teas, tasks that previously had been done by hand. A loading dock opens up possibilities for deals with distributors. Hopeful Harvest’s staff workers are available to work at times when Nikki’s need extra hands. The ginger-based teas have appeared in a growing number of stores over the past three years, following the introduction of its products into a Whole Foods Market store in late 2011. The teas are in 77 stores and are being introduced into another 10 by way of Plum Market and The Better Health Store outlets. Sasser expects her products to be in at least 120 stores by year’s end.

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Esperion plans $150M stock offering after positive drug trial Final studies to begin this year BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

COURTESY OF ESPERION

Esperion Therapeutics Chief Scientific Officer Roger Newton (center) rings the Nasdaq opening bell soon after the Ann Arbor company's IPO in June 2013.

Following the release of positive results from human trials of its cholesterol drug last week, which sent its stock price rocketing in two days, Ann Arbor-based Esperion Therapeutics Inc. (Nasdaq: ESPR) has announced it intends a public offering of $150 million. Shares in the company opened Tuesday at $75.55 and closed on the good news at $99.60. They hit a 52week high of $104.24 on Wednesday

and were trading at $118.62 Thursday afternoon. All of that is a far cry from the $15 shares commanded a year ago. The company hasn’t set any timing for the offering, saying it will be based on the market and other conditions. This offering follows a secondary offering of $98 million last October. The company went public in an offering of $73 million in June 2013. The company has had a series of positive results from its drug,

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which carries the working name of ETC-1002 and which treats high cholesterol and other cardiovascular risk markers for those who are intolerant to the statin class of drugs, such as Lipitor and Torvastat, that are normally used to treat such conditions. Esperion said in a statement Tuesday that results from one of the drug’s ongoing trials showed an average reduction of low-density lipoprotein, the socalled bad cholesterol known as LDL, of 17. A higher dose increased the effect, cutting cholesterol by 24 percent. The market also reacted to news from company CEO Tim Mayleben that Mayleben based on those results the company plans to begin Phase 3 studies — the last phase needed before getting approval to go to market — later this year and that it expects to get approval from the U.S. Food and Drug Administration to begin using the drug by the second half of 2018. Credit Suisse Securities LLC is acting as lead book-running manager for the proposed offering, with RBC Capital Markets LLC and UBS Securities LLC acting as joint book-running managers. Esperion said it expects to grant the underwriters a 30-day option to purchase up to $22.5 million of additional shares of stock. The company said in a filing with the U.S. Securities and Exchange Commission that it intends to use the net proceeds from the offering to complete the clinical development of ETC-1002 and for working capital and general corporate and administrative expenses. A year ago, Esperion stock was trading at a little more than $15, and the analysts who covered the company predicted an average 12-month target price of about $30. In February, Esperion’s share price jumped $14 to $55.53 on results of a different human trial, which showed that when used in combination with ezetimibe, a drug marketed as Zetia by Merck, ETC-1002 lowered LDL levels by 48 percent. This iteration of Esperion was founded in 2008, when as part of closing its Michigan operations, Pfizer Inc. sold the name “Esperion” to Roger Newton, along with as some small molecules he wanted to develop into drugs. Newton, one of the team members that discovered Lipitor, founded the first iteration of Esperion in 1998, took it public in 2000 and sold it to Pfizer for $1.3 billion in 2004. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @TomHenderson2

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Recyclers sift rubble of Detroit homes to find, create treasures BY CHRIS CHRISTOFF AND ALEXANDRA MONDALEK BLOOMBERG NEWS

Detroit’s 70,000 abandoned homes are proving to be a treasure trove for entrepreneurs who recycle century-old lumber, glass and brick into everything from terrariums to $4,500 guitars. “It’s like a treasure hunt,” said Craig Varterian, executive director of Reclaim Detroit, a nonprofit group that has stripped and sold materials from almost 70 demolished homes. Floorboards and joists of early 20th century maple, walnut, hickory, fir and even chestnut are prized for their density and fine grain. As Detroit ramps up demolitions of vacant dwellings, Mayor Mike Duggan plans a reclamation center in a city-owned building to keep tons of rubble out of landfills and create jobs and merchandise. Recycling would become a centerpiece of the city’s blight-removal effort, which is struggling to maintain funding. A typical house and basement yields 400 tons of debris, meaning material from all of Detroit’s vacant residential buildings would weigh about 28 million tons — roughly equal to 280 of the largest U.S. aircraft carriers, fully loaded. The city’s 139 square miles (360 square kilometers) were scarred by abandonment as its population

BLOOMBERG NEWS

It takes as long as three days to remove resalable materials before wrecking crews level a structure, but the process saves about 400 tons of debris per typical house and basement demolished from landfills.

fell below 700,000 from 1.8 million in the 1950s. While decrepit buildings are being stripped of reusable materials in other U.S. cities, the magnitude of Detroit’s decay holds limitless bounty for entrepreneurs, businesses and home-improvement devotees who see the Motor City’s rich history in ripped-out floors and walls. “Detroit debris as a marketing tool is in vogue,” said Varterian, 55, whose products include cutting boards and tables fashioned in a sprawling former automotive warehouse.

Bankruptcy exit Detroit, which emerged from its record $18 billion municipal bankruptcy in December, had more than 78,000 vacant buildings last year, according to a blight task force survey. It would cost $850 million to re-

move all neighborhood blight, the task force concluded. By April, the city will have used half its $100 million in federal aid to tear down almost 4,000 buildings, and it plans to raze another 3,300 by later this year, according to Brian Farkas, projects director for the Detroit Building Authority. Beyond that, Duggan is searching for more money to continue demolitions, which have left swaths of vacant land. Reusing materials from a fraction of demolished homes would create jobs and feed new, local industries, proponents say. Reclaim Detroit is one of several nonprofits that are deconstructing homes. It takes as long as three days to remove resalable materials before demolition.

Sunglasses, guitars “When I got here in 2013, our sales were near $9,000 a month; now we exceed $90,000 a month,” said Chris Rutherford, executive director of Architectural Salvage Warehouse Detroit, a nonprofit that also recycles wood. He said he has 15 to 18 full-time employees, plus subcontractors and part-time labor. There are plans to deconstruct 100 structures in the coming year, Rutherford said. While reclaimed lumber has furnished many Detroit restaurants and businesses, remnants of the city’s decay have found their way to

unlikely products as well. One entrepreneur uses wood from vacant Detroit homes to create sunglasses. Gary Zimnicki and Mark Wallace make guitars. Zimnicki also makes ukuleles and mandolins from old lumber that he says produces a richer sound. While most of his acoustic instruments use conventional wood, some buyers want an instrument made from a 100-yearold house, said Zimnicki, 57, whose home workshop is in Allen Park. “It’s a cool thing to be involved with preserving some of the past, part of our heritage,” said Zimnicki, showing a $4,500 guitar made of wood from a house built in 1910. The top is made of Douglas fir from ceiling joists, rather than spruce. The back and sides are made from maple floorboards. Wallace’s Detroit-based company makes solid-body electric guitars from two-by-fours torn from homes, which create a butcherblock appearance. “Wood from these homes came from old-growth forests; the grain pattern is more dense, more beautiful,” said Wallace, 37, who also heads the Detroit RiverFront Conservancy. Glass and wood from Detroit homes become terrariums in the hands of Derek Smiertka and Chad Ackley, who started Lead Head Glass LLC in 2013. Last year, they sold 1,500 in the U.S. for between $40 and $190, at a 50 percent margin. Smiertka, 40, is an ex-lobbyist and

Ackley, 30, a former financial planner. They work from their 800square-foot basement in Ferndale. Hanging tarps divide a glass-cutting station from their washing machine. “Having the Detroit connection has definitely helped us grow faster because you get so much interest,” Ackley said.

Creating a hub To tap demand, the city is offering to lease a 37,500-square-foot vacant warehouse it owns, plus surrounding land, for $1 a year to a private operator who would create a regional hub to recycle tons of materials from demolitions. The center would create “critical mass” that would generate more demand and more jobs, said Farkas. The plan is more ambitious than reclamation centers in other cities, said Anne Nicklin, executive director of the Building Materials Reuse Association, a Chicagobased nonprofit. She reviewed Detroit’s request for proposals. The city wants to deconstruct at least 10 homes a month, with all reusable materials going to the reclamation hub, Farkas said. Stripping a house adds about 15 percent to the $12,500 average cost of demolition, he said. Home deconstruction also teaches skills that can be transferred to the construction trade, according to Reclaim Detroit.

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March 23, 2015

CRAIN’S DETROIT BUSINESS

BUSINESS DIARY

Want to become one of the healthiest workplaces in Michigan and improve your bottom line as well?

ACQUISITIONS & MERGERS Agree Realty Corp., Bloomfield Hills, announced it has closed on the acquisition of 15 retail properties for an aggregate purchase price of approximately $42.1 million. The properties are net leased to 12 different tenants operating in nine retail sectors in 10 states. Website: agreerealty.com. Engineered Cooling Systems LLC, Brighton, a provider of oil coolers, radiators and heater cores, acquired the assets of Vista Pro Automotive LLC, Nashville, Tenn., and its Nuevo Laredo, Mexico, manufacturing facility through bankruptcy in December 2014. ECS has combined with its affiliate Tube Wright Inc., Brighton, to form United Systems Group. Website: usgmfg.com. Paramount Precision Products Inc., Oak Park, a precision machine tooling company, has acquired Numerical Productions Inc., Indianapolis, a CNC machining company. The minority-owned supplier intends to expand its precision machining services to Midwest manufacturing companies. Website: pppcnc.com. Whitlock Business Systems Inc., Madison Heights, a print house serving local, regional, national and international clients over a broad base of industries, has acquired BRD Printing Inc., Lansing. Sales, customer service and production will remain in both locations. Website: wbsusa.com.

Join us for breakfast at metro Detroit’s most unique hospital

WED.| APRIL 22 Henry Ford West Bloomfield Hospital 7:30 - 9:30 a.m. Hear from a panel of 2015 Healthiest Employers who are using wellness as a strategy to drive workplace productivity, employee health and community well-being. Panelists will share their success strategies so your business (of any size) can create these same programs and turn your employees into happier and healthier individuals – resulting in stronger bottom lines and increased productivity. HAP’s wellness experts will be on hand to share tips for your success.

CONTRACTS Inc., Ann Arbor, a provider of a private cloud-based health care analytics platform, announced that the Michigan Health & Hospital Association Keystone Center, Okemos, has begun using a customized version of ArborMetrix’s RegistryMetrix to monitor obstetrics

care. Websites: arbormetrix.com, mhakeystonecenter.org. Toggled, Troy, developer and producer of next-generation solid-state lighting technology and a subsidiary of Altair Engineering Inc., announced that Koninklijke Philips N.V., Netherlands, is now a licensee to its patent portfolio primarily related to LED replacements for fluorescent tubes. The agreement resolves all patent litigation between Toggled and Philips. Website: toggled.com.

EXPANSIONS BorgWarner Inc., Auburn Hills, is expanding capacity in Ningbo, China, with a new production line for its latest exhaust gas recirculation valves engineered to reduce nitrogen oxide emissions for passenger cars and commercial vehicles. BorgWarner expects to supply its latest EGR technology to a large Chinese automaker beginning in May. Website: borgwarner.com.

NEW PRODUCTS Art Van Furniture Inc., Warren, announced that Paul’s TV inside Art Van Furniture locations has added an exclusive line of ProForm treadmills, elliptical machines, exercise bikes and rower equipment to its array of televisions, home audio and in-home theater products. The fitness line is available at stores in Warren, Shelby Township, Royal Oak, Westland, Taylor, Novi, Grand Rapids and Lansing. Websites: artvan.com, paulstv.com/fitness.

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DETROIT BUSINESS

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PEOPLE CONSULTING James Sallee to senior regulatory specialist, King &

MacGregor Environmental Inc.,

Sallee

Canton Township, from land and water resources specialist, Stantec Consulting Michigan Inc., Ann Arbor.

management supervisor, Berline Group Inc., Royal Oak, from field marketing manager, The Wendy’s Co., LaSalle.

NONPROFITS Christopher Patten to associate director of design thinking for K-12 innovation, Henry Ford Learning Institute, Dearborn, from faculty member, Parsons The New School for Design, New York, and consultant for Thriving, the school’s design research lab.

SERVICES

HEALTH CARE

Virginia Juncker

Jeff Smith, D.O., to president, Anesthesia Staffing Consultants Inc., Bing-

to executive director, programs and member services, Original

ham Farms, from anesthesia medical director, Anesthesia Staffing Consultants Inc., Flint.

Equipment Suppliers Association,

MANUFACTURING John Lenga Jr. to head business group North America, Au-

toneum America

Lenga

North Inc.,

Farmington Hills, from CFO, business group North America.

MARKETING Nancy Crawford to vice president,

Juncker

Troy, from manager, organizational optimization, Devon Facility Manage-

ment LLC, Detroit.

Jeff Krupp to senior vice president of OEM services, FordDirect, Dearborn, from vice president of OEM services. Also, Chris Johnson to vice president of consumer acquisition, from senior director of advertising, and Greg McLaurin to vice president of dealer operations, from senior director of dealer operations.

IN THE SPOTLIGHT The Barbara Ann Karmanos Cancer Institute has named Brian Gamble as executive vice president and CFO. Gamble brings more than 30 years of business experience in treasury operations, investment Gamble management, debt management, financial analysis, and mergers and acquisitions. Most recently, he was vice president and assistant treasurer for Henry Ford Health System and vice president of finance and CFO of Henry Ford West Bloomfield Hospital. He replaces Michael Grisdela, who left the Detroit institute last summer for St. Joseph Mercy Hospital in Ann Arbor. Gamble, 54, holds bachelor’s degrees in accounting and finance from Ferris State University, and he is an MBA candidate at Walsh College of accountancy.

GET IN ON THE CONVERSATION

Jay covers health care, insurance, energy, utilities and the environment.

JAY GREENE

Keep up with Jay at crainsdetroit.com/blogs TWEET @JAYBGREENE

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CALENDAR WEDNESDAY MARCH 25 Inside the CEO Mind. 3 p.m. Detroit Regional Chamber. Frank Venegas Jr. of The Ideal Group will speak; a tour follows the presentation and questionand-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.

Ram: Redefining a Brand. 6-8 p.m. Marketing and Sales Executives of Detroit. Joe Benson, head of the Ram brand, FCA US LLC, speaks. Golling Chrysler Dodge Jeep Ram, Bloomfield Hills. $45 MSED members, $60 nonmembers. Registration closes at 10 a.m. the day of the event. Contact: (248) 643-6590; website: msedetroit.org.

THURSDAY MARCH 26 Business Leaders for Michigan Leadership Summit. 8 a.m.-noon. Speakers and panelists include Doug Rothwell, president and CEO, Business Leaders for Michigan; Hans-Werner Kaas, senior partner and director, McKinsey & Co.; Ray Leach, CEO, JumpStart Inc.; Brian Hicks,

Luxury suites available: Tue, Mar. 31 – Pistons vs Hawks at 7:30 p.m. Sat, Apr. 4 – Pistons vs Heat at 7:30 p.m. Wed, June 10 – Bette Midler at 6:30 p.m. Sun, June 14 – Rush at 6 p.m.

president and CEO, Hicks Partners, and chief architect of Ohio Third Frontier; Steve Arwood, CEO, Michigan

Economic Development Corp.; Michael Jander- Pierce noa, board of directors, Perrigo Co.; Charles “Chip” McClure, managing director, Michigan Capital Partners LLC; and Sandra Pierce, chairman and CEO, FirstMerit Michigan. Lansing Center, Lansing. Walk-ins allowed. Free. Contact: Jennifer Hayes, (313) 259-5400, email: jenniferh@businessleadersformichi gan.com; website: businessleaders formichigan.com/events.

2015 Great Lakes Business Intelligence and Big Data Summit. 8 a.m.-5 p.m. WIT Inc. Summit is a cross-industry educational and networking event for IT and business executives interested in big data topics and trends. Keynote speakers include Boris Evelson, vice president, Forrester Research, and Don Farmer, vice president of innovation and design, Qlik. Somerset Inn Hotel, Troy. $149. No walk-ins. Contact: Amanda Man-

SUITES START AT $999 Including: VIP parking, private restrooms, and up to $600 in catering credits!

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(248) 377-8477

HEALTHIEST EMPLOYERS BREAKFAST AND HOW-TO Join Crain’s and Health Alliance Plan for breakfast and discover how to make your business one of the healthiest workplaces in Michigan. The Healthiest Employers breakfast and awards presentation takes place 7:30-9:30 a.m. April 22. A panel of 2015 Healthiest Employers who are adding wellness strategies to drive workplace productivity, employee health and community well-being will share their success stories so your business (no matter the size) can create these same programs and turn your employees into happier and healthier individuals. HAP’s wellness experts also will be on hand to share tips. The event will be held at Henry Ford West Bloomfield Hospital, 6777 W. Maple Road, West Bloomfield Township. Tickets are $25 for individuals, or $20 for Detroit Society of Human Resource Management members. Registration closes April 20 at 9 a.m. If available, walk-in registration will be $25 per person. To register or learn more, contact Kacey Anderson at cdbevents@crain.com or (313) 446-0300, or visit crainsdetroit.com/event/crains/ 3235005/healthiest-employers. sour, bisummit@witinc.com or (248) 641-5900, ext. 244; website: greatlakes bisummit.com.

Business Leaders of the Year. 6-9 p.m. Harvard Business School Club of Michigan. Dinner and awards ceremony honoring Gordon Krater, managing partner, Plante Moran; and Sandra Pierce, chairman and CEO, FirstMerit Michigan. MSU Management Education Center, Troy. Private reception for sponsors, 5:30 p.m. Tickets $150 and up, available at hbsmi.org/store.html? event_id=258. Contact: Amanda Schubeck, (248) 930-4614 or amanda. schubeck@gmail.com. Website: hbs mi.org.

FRIDAY MARCH 27 Women Leaders: Driving Our Future. 11 a.m.-1:30 p.m. Henry Ford College. HFC’s 42nd annual Women’s Recogni-

tion Luncheon, supporting student outreach and student emergency fund, features panel including Lila Lazarus, president of Kids Kicking Cancer and former reporter/anchor for WDIVChannel 4; Jackie Lovejoy, president, Dearborn Area Chamber of Commerce; Haifa Fakhouri, president and CEO,

Arab American and Chaldean Council; and Beth Chappell, president and CEO, Detroit Economic Club. Student and Culinary Arts Center, Henry Ford College, Dearborn. $15 luncheon ticket. Walk-ins allowed. Contact: Kathy Dimitriou, kdimitriou@hfcc.edu or (313) 845-9620, or donate online at my.hfcc.edu/RegForms/donation.asp.

UPCOMING EVENTS Health Care Leaders Forum. 7:30 a.m. March 31. Detroit Regional Chamber. Forum focuses on the Patient Protection and Affordable Care Act’s wins, losses and consequences for patients and the business community, as well as offering 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: detroit chamber.com/events.

Lunch With the Governor. 11 a.m.-1:30 p.m. March 31. Sterling Heights Regional Chamber of Commerce & Industry. Gov. Rick Snyder will speak on reinventing Michigan, followed by a Q&A. MacRay Banquet Center, Harrison Township. $40 for members of the Snyder Sterling Heights Regional, Romeo/Washington, Eastpointe/Roseville, Anchor Bay Area and Macomb County chambers; $55 nonmembers. Contact: (586) 731-5400, ext. 11; email: events@shrcci.com; website: shrcci.com. Beyond Traffic. 11:30 a.m.-1:30 p.m. March 31. Detroit Economic Club. Anthony Foxx, U.S. secretary of transportation, is the keynote speaker. Westin Book Cadillac, Detroit. $45 DEC members, $55 guests of members, and $75 nonmembers. Ticket sales end at noon March 30. Contact: (313) 9638547; email: info@econclub.org; website: econclub.org.

Social Security Workshop. 6:30-8 p.m. March 31. Bridgeriver Advisors LLC. Dan Casey, financial adviser and author of The Coming Inflation Crisis and the 4-Step Action Plan for Retirees, addresses five factors to consider when applying for benefits. A seminar is also planned April 2 at the same time and location. Warren Community Center, Warren. Contact: (800) 353-6730; website: socialsecuritycon fidence.com.

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.

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DPS: UM faculty to teach leadership ■ From Page 3

HelloWorld to relocate HQ to Southfield BY BILL SHEA

said. The effort will continue over Earley pointed to improvement the remainder of Emergency Man- in graduation rates, which went up ager Darnell Earley’s term, which 6.5 percentage points from 2012-13 to began in January after the former 2013-14, as a sign of progress but Flint emergency manager replaced said plenty of work remains. Jack Martin as the fourth EM in the “We must re-engineer the serdistrict, which vices that the disfaces a nearly $170 trict provides to million budget schools and famideficit. lies to focus on “Our objective is academic success, to make major first and forechange within 18 most, and to enmonths because sure that this Darnell Earley will progress not only be gone, but that continues, but acdoesn’t mean our celerates,” he said work stops in 18 in a statement. months,” Cameron “We must also said. “We are prettake successful ty serious about programs and having this be a continue to replikind of ‘Holy cow, cate them.” how did they pull The program, that off?’ kind of the district and system.” Ross School said, Eventually, the Darnell Earley, emergency manager will complement UM commitment work being done could include facby the Coalition for ulty from other UM schools offer- the Future of Detroit Schoolchildren, ing insight into building mainte- which was announced in December nance, curriculum and other and expects to unveil its education areas, Cameron said. system reform recommendations

We must “ re-engineer the

services that the district provides to schools and families to focus on academic success, first and foremost.

”

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Page 33

BLOOMFIELD HILLS MONEY MANAGER

for DPS, the Education Achievement Authority and Detroit’s charter schools on March 31. The coalition includes a broad spectrum of interests, including the nonprofit, business, education and labor communities. It is co-chaired by Tonya Allen, president and CEO of the Detroitbased Skillman Foundation; the Rev. Wendell Anthony of Fellowship Chapel and the Detroit branch of the NAACP; David Hecker, president of AFT Michigan/AFL-CIO; John Rakolta Jr., CEO of Detroit-based Walbridge Aldinger Co.; and Angela Reyes, executive director of the Detroit Hispanic Development Corp. The Ross School and DPS effort is expected to help guide the implementation of Earley’s 10-point management plan announced earlier this month. It focuses on addressing academic competitiveness, cash flow stability, higher education/collaboration, governance, staff development, organizational development, special education, transportation, customer service and a long-term funding strategy. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

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Pleasant Ridge-based digital marketing and customer loyalty program management firm HelloWorld Inc. — the former ePrize Inc. — said it has signed an 11year lease for a new corporate headquarters in Southfield. The company is taking 43,000 square feet over 2½ floors of the Southfield Town Center, it said in a statement. HelloWorld said it will relocate to the new space in the fourth quarter. The new office allows it to add 20 percent more to its current staff of 300. “The new office space is not only necessary on a practical level as our team continues to grow, but it also represents the incredible success HelloWorld has had over the last 10 years,” said Peter DeNunzio, who was hired as HelloWorld’s CEO last year. The company’s 10-year lease at the 46,000-square-foot former Voigt-Pros’t brewery east of Woodward Avenue near I-696 in Pleasant Ridge ends at the end of 2015. HelloWorld is taking space in the 32-story 3000 Town Center

tower. Its lease will run through September 2026. The firm’s broker was Brian Piergentili, managing principal of the Southfield office of Chicago real estate firm DTZ. The space will be designed by architect Timothy Gawel of Southfield-based Harley Ellis Devereaux Corp. The 2.2 million-square-foot Southfield Town Center is owned by New York City-based 601W Cos. Transwestern handles leasing and management. HelloWorld was bought by Connecticut-based private equity firm Catterton Partners Corp. for an estimated $100 million in August 2012. HelloWorld revenue in 2012 was $75 million, the most recent numbers available for the privately-held company. EPrize was launched as an online promotions and loyalty rewards management firm in 1999 by Josh Linkner, who sold the firm in 2012. Catterton changed the name last year to HelloWorld. The company has offices in New York; Chicago; Los Angeles; Phoenix; Seattle; and Nashville, Tenn.

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Lofts: ‘The market here has filled whatever has been available’ ■ From Page 3

Market,’ and that turned out not to be true,” Heide said. Rocky Peanut Lofts sits above the building that houses Supino’s, Russell Street Deli and others. Thirty years ago, the building needed things like new electrical and water systems, and wall and window replacements. However, the five retail tenants on the first floor didn’t generate enough revenue for the brothers to complete them. So the 10,000 square feet of unused second-floor space was converted into the lofts. “We doubled the rentable square footage,” Heide said. The Rocky Peanut Lofts, ranging from 800 square feet to 1,700 square feet, rented in 1985 for $600 to $1,200 per month (about 70 to 75 cents per square foot). The average loft rents for $1.25 to $1.50 per square foot today, Heide said. Since the project’s completion, several more loft developments have come online in Eastern Market, including E&B Brewery Lofts, Leland Lofts, FD Lofts, Detroit Candy Co. Lofts and 14-34 Howrani. Dan Carmody, president of Eastern Market Corp., said the district has about 120 loft units and that there is opportunity for another 400 to 500 residential units, including lofts, in the area along Gratiot and the Dequindre Cut. “The market here has filled whatever has been available, re-

LARRY PEPLIN

Of the 34 units in Robert Heide’s FD Lofts, 22 have been sold, and the remainder are under contract.

gardless of the state of the economy,” he said. One example: As soon as a ten-

ant moves out of the 26-unit E&B Brewery Lofts at Winder and Orleans streets, another is ready to

take up occupancy, said Jim Pellerito, owner of the lofts and Detroit-based Pellerito Foods Inc.

Demand for for-sale loft space in Eastern Market has increased in recent years as the central business district and Midtown continue to see occupancy rates around 98 percent, said Sabra Sanzotta, founder and broker of The Loft Warehouse, which primarily sells and leases lofts, condominiums and apartments from its office in FD Lofts at Russell Street and Mack Avenue. “There is almost nothing to buy downtown,” she said. “This is about the closest real estate to downtown that you can actually buy.” Heide’s 34-unit FD Lofts is an example of that. Heide, owner of Urban Life Development LLC and Yorkshire Construction Co., is turning the rental units into loft-style condominiums, 22 of which have been sold and the remainder of which are under contract. Rocco, who died in 2011, and Dominic, who died last year, left a lasting impression on Eastern Market, said Heide, who also managed the Rocky Peanut Lofts until around 2001. “It was a catalyst for change in that it was the beginning of the change at Eastern Market from strictly wholesale food and a little bit of restaurants and introducing the residential component,” he said. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

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NATHAN SKID

Proponents of Proposal 1 are stressing road repair funding and “safer roads” and not the complex state budget changes that would result if the measure passes in May. .

Roads: A bumpy ride to the ballot ■ From Page 1

minder. The state Legislature punted on the issue, but Snyder said he believes the ballot measure would finally resolve the systemic issue of pothole-pocked, unsafe roads in Michigan — and also build adequate funds to maintain them. “It’s a whole lot better than doing nothing,” he said, noting that replacing or rebuilding a road is six times more expensive than repairs.

Uphill push The challenge is selling to voters and business groups a solution that is complex and so far has only lukewarm support in polling. The polling support also evaporates when pollsters elaborate on the series of pulley and lever-like bills that go into law if Prop 1 is approved. Further complicating the matter is that the initial pro-Prop 1 team of consultants quit at the end of January over undisclosed “philosophical differences.” The new team, led by Lansingbased public relations firm Martin Waymire and Lansing-based GOP advertising agency WWP Strategies, is organizing the Prop 1 vote campaign called “Safe Roads Yes.” The effort concentrates on the road repair funding aspect of the ballot measure rather than explaining the complex related package of changes. “The message that resonates with everyone is safer roads,” Snyder said. That’s a slight departure from the original campaign, led by Lansingbased public relations and nonpartisan political consulting firm Truscott Rossman LLC, which had a two-pronged strategy of selling the referendum to voters as both a roads and schools measure. A series of bills attached to the measure would drop the sales tax on fuel and ensure that school aid fund revenue goes only to K-12 districts or community colleges — not universities. Transportation funding would rise by about $1.2 billion a year, giving a big boost to the $2 billion now collected through fuel taxes and license plate fees. And $11.8 billion in annual school funding would jump by at least $300 million, the equivalent of $200 per student. The proposal would also yield an additional $95 million from yearly registration fees on cars and heavy trucks, with fees for heavy trucks making up about half of that total. There are a number of anti-ballot

measure efforts organized around the state, but none have spent much money to combat the referendum. One group, Citizens Against Middle Class Tax Increases, is organized by former Snyder adviser John Yob, now CEO of Strategic National Consulting in Grand Rapids. Yob’s anti-Prop 1 petition calls the ballot measure “an unaffordable tax increase on struggling families.” And a multimedia campaign opposing the proposal created by the Coalition Against Higher Taxes and Special Interest Deals is backed by Saginaw Township businessman Paul Mitchell. The pro-Prop 1 initiative, meanwhile, has enough cash to run statewide broadcast ads. The “Safe Roads Yes” effort had more than $3 million on hand at the last campaign finance reporting mile marker, on Feb. 10, according to an analysis by MLive.com. Roger Martin, partner at Martin Waymire, said the campaign is running three different 30-second pro-Prop 1 TV commercials on cable and network television in all state markets, along with radio spots in some markets. He declined to disclose current campaign financials, but said spending has been on research, campaign consulting services, ad production and placement. As for Snyder’s road tour, he met with metro Detroit news outlets last week, and made speeches to different groups, in support of Prop 1. “I just have a bigger soapbox,” he said. “I may go fill a few potholes myself.” When questioned about the complexity of the plan, the governor said a simple increase in Michigan’s 19-cent gasoline tax is impractical because it would make the state out of line with the rest of the nation’s fuel prices. The coalition also has an ally in Mother Nature, Snyder said, because the spring pothole season has the roads on voters’ minds.

Seeking supporters The two-term Republican governor is looking for help from a nontraditional ally: organized labor. Spring votes in nonpresidential election years traditionally have low voter turnout, which Snyder acknowledged means that a relatively small percentage of voters will swing the vote. Labor support is critical for that reason, he said,

because unions traditionally have established get-out-the-vote apparatus available — something the business sector is less adept. One ally absent from the proproposal campaign is the Michigan Chamber of Commerce. While the odd bedfellows of Detroit Chamber of Commerce, Business Leaders for Michigan and Michigan AFL-CIO have endorsed Prop 1, the Michigan Chamber of Commerce earlier this month said it will remain neutral on the referendum. The state chamber polled its 6,700 members for their views about the ballot issue in January and February. The results forced the organization, usually a Snyder ally, to sit on the fence. “We realized we were in a position where there was not the level of consensus within our membership to support or oppose the proposal,” said Chamber CEO and President Richard Studley. “The construction industry, especially those in transportation infrastructure, tended to be more supporting but not unanimous,” he said. Largely in opposition was retail, especially those who sell expensive items such as vehicles, boats, jewelry and appliances, which expressed worry about the sales tax increase on their businesses, Studley said. The state’s last sales tax increase was from 4 percent to 6 percent in 1994. The state chamber’s neutral stance is significant not only in philosophical discussions but because it represents a potential financial loss for the pro-Prop 1 coalition. “Historically, when the chamber takes a position, it committed a significant amount of human and financial resources to that effort,” Studley said. For Prop 1, he said, the chamber will only answer questions its members have. The issue does have some retail support: The Small Business Association of Michigan has endorsed it. “It represents a bipartisan compromise by lawmakers, and given the urgency of our road funding needs, it’s not prudent to go back to the drawing table for other options,” SBAM Board Chair Bonnie Fowler said in a Feb. 9 statement. “Michigan needs to fix its roads and bridges, and Prop 1 will do the job.” Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @Bill_Shea19

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CRAIN’S DETROIT BUSINESS

Care : A more direct approach – an Obamacare alternative? ■ From Page 3

Township, heard about Blanchard and Huotari and the concept of direct primary care, and lightblubs went on for the former health care IT executive who said he ran for office in 2010 because of his opposition to the Affordable Care Act. “This is the free-market solution and the replacement for Obamacare,” said Colbeck, who also voted against Healthy Michigan Medicaid, which narrowly was approved in 2013 and covers more than 550,000 mostly formerly uninsured Michiganders. Late last fall, Colbeck won passage of Senate Bill 1033 — and in January, Gov. Rick Snyder signed it — that gives the green light for doctors to offer direct primary care without fear of state insurance department regulation. Some Colbeck states have accused doctors who sell monthly primary care plans as selling insurance without a license. “Passing the bill was the first step,” he said. “I want patients, doctors and insurance companies to know about (direct primary care) and get on board.” Blanchard, who also views direct primary care as an alternative to Obamacare and traditional health insurance, said direct primary care has the promise to lower health care costs. For example, a recent study by Seattle-based Qliance Medical Management LLC found a 20 percent reduction in health care costs by employer-sponsored health plans that also adopted direct physician care. Hundreds of physicians who practice direct primary care are in some 24 states, according to the American Academy of Private Physicians. But for Colbeck and Blanchard’s dream of direct primary care to be-

come mainstream in Michigan — and meet the insurance mandate in the Affordable Care Act — at least one of two things are needed. One, either a health insurance company needs to offer a high-deductible, wraparound policy with a direct primary care provision. Or two, self-insured employers in Michigan offer direct primary care in their health benefits package and also offer the insurance coverage. Under Section 1301 of Obamacare, direct primary care is allowed to compete on health insurance exchanges when combined with a qualified high-deductible plan and a “qualified direct primary care medical home plan.” The insurance plan could work with direct primary care like this: A health insurer would offer a high deductible policy with direct primary care. A member would then select a direct primary care provider for the patient to exclusively see for primary care. Then the insurer would reimburse the direct primary care provider for a negotiated monthly payment. But Rick Murdock, executive director of Michigan Association of Health Plans, said the type of highdeductible, or wraparound, insurance plan envisioned by direct primary care supporters doesn’t exist. “The bill (SB 1033) by itself will not permit individuals to be compliant with ACA and the requirement for insurance coverage,” Murdock said. “There may be one in the future.” Murdock said negotiations are ongoing with the Michigan Department of Financial and Insurance Services that may “allow development of wraparound packages” and other currently prohibited products for HMOs. One source said Blue Cross Blue Shield of Michigan will likely not offer such an insurance package because direct primary care does not fit well with its efforts to encourage primary care physicians to develop patient-centered med-

ical homes. Blue Cross officials declined to comment specifically but said it doesn’t offer this type of plan, but it continues to evaluate it. Joan Budden, chief marketing officer with Priority Health, said the Grand Rapids-based insurer also has no plans to offer a wraparound policy for direct primary care, but it continues to evaluate it. “We are concerned that consumers are misled into the type of coverage they have” if they just purchase a direct primary care package “when they need a comprehensive policy,” Budden said. Budden said direct primary care is not insurance. “What if they need surgery or something outside of primary care office?” she said. “Why mislead the members about that? We are trying to make health care easier; not more complicated.” Mike Williams, M.D., president of Bingham-based United Physicians Inc., said direct primary care has a place in the market but is expensive for most people at $1,200 to $2,400 per year unless a high-deductible policy is affordable. “It is nice for physicians if they only see 500 patients a year,” Williams said. “The normal panel is 2,000 to 2,500 patients per physician.” Williams said it makes more sense for a self-insured employer to offer a high-deductible policy to its employees and strike a contract with a direct primary care provider for a monthly fee. “Companies are trying to reduce their overall health care spend, and maybe by partnering with an insurer this can work,” he said. But Williams said he is not sure physicians in Southeast Michigan are ready. He said there would be major resistance from hospitals and insurers. “It does free you from the chains of regulations, but the insurance model is very strong,” he said. Randy Bickle, D.O., CEO of

Olympia Medical Services in Livonia, said he expects some physicians to try direct primary care, especially if insurers offer a wraparound policy with it. “My brother in Scottsdale is developing a hybrid practice where he is going to concierge medicine,” Bickle said. “For those who want to drop $2,000, we will be available to you.” Matt McCord, M.D., an anesthesiologist in Ann Arbor and secretary with Docs4PatientCare.org, said he supports the direct primary care model because it eases the administrative burden on physicians while decreasing costs and increasing patients’ access to medical care. “It correctly aligns the incentives for care because it engages the patient more in the care model,” McCord said. “We have a very fragmented model now. The primary care doctor can organize care and do it in the most efficient way.” McCord said many physicians are worried about dropping their insurance-based primary care model because they also want to continue care of Medicare and Medicaid patients. Jack Billi, M.D., chair of quality, efficiency and economics with the Michigan State Medical Society, said the medical society doesn’t have a position on direct primary care other than it has determined it is not insurance. “We have disBilli cussed it. I am personally skeptical,” said Billi, who also is associate vice president for medical affairs at the University of Michigan Health System in Ann Arbor. “If many of our primary care physicians switch to concierge medicine or direct primary care, this will cause a huge worsening of the

shortfall of primary care physicians that currently exist,” Billi said. For example, Billi said, the average internist treats up to 3,000 patients a year. But concierge doctors advertise themselves as treating 300 to 500 per year, he said. “Who is going to care for the other 90 percent of patients?” said Billi, noting he knows of physicians in Florida who have switched to concierge medicine and have notified dozens of their patients they must pay the extra fee or find a new primary care doctor. “While this solves a lot of problems for the individual doctor (low reimbursement for valuable faceto-face extended contact and care coordination) it is not a scalable model for the nation given the current shortage of primary care.” Tom Valenti, founding partner of Detroit-based Forthright Health Management LLC, a consulting firm that advocates for direct primary care, said telehealth services and other practice efficiencies could increase the number of patients handled by direct primary care practitioners. Over time, Valenti said, the number of physicians choosing primary care could increase because they might like the direct primary care practice style. “As new technology comes on board, (direct primary care) physicians could take care of 5,000 patients each and manage a team of dietitians, nutritionists” and advanced practice nurses, Valenti said. But Billi said improving electronic health records, office efficiencies and reimbursement can alleviate more problems for primary care physicians. “I am not opposed to trying things, studying them and modifying them,” he said. “The best strategy going forward is population health and the efforts we are making to coordinate care.” Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

Selfridge: Plan to move A-10s puts base in a holding pattern ■ From Page 1

nounced a plan to move 18 A-10s to backup inventory on bases in other states (Arizona, Nevada and Georgia) and said it would consider converting another 18 later this year. Backup inventory aircraft act as replacements for others in use that become unserviceable — freeing up some accompanying personnel to be retrained or reassigned elsewhere. But the president’s proposed defense budget for fiscal 2016, which begins in October, adopts a plan to divest more than 250 A-10s in nine states and overseas between next year and 2019, including all 18 fighters at Selfridge in fiscal 2017. That would be offset the same year by adding eight new aerial refueling tankers, KC-135s, bringing Selfridge’s total fleet to 16. Selfridge officials estimate about 180 full-time jobs and 455 part-time positions are directly tied to flight, operation and maintenance of its A10s. But the proposed swap of A-10s

for new KC-135s would likely mean a net loss of about 300 jobs, including 100 full time and 200 part time. “Our number one mission at Selfridge is to provide trained airmen and properly maintained aircraft to serve our state and nation. We hope to be able to continue doing that with the A-10 for the foreseeable future,” Brig. Gen. John Slocum, commander of the 127th Wing of the Michigan Air National Guard at Selfridge, said in a statement to Crain’s. “The bottom line is, however, that we have the people … who are ready to take on any flying mission that our national leaders need. Give us a mission and we will excel at it. The 127th Wing is committed to our airmen and will work tirelessly to minimize impacts to our hometown … workforce.” Selfridge was first commissioned as an aerial training camp when the United States entered World War I,

and fighter aircraft have been stationed at the facility since the base’s inaugural flight in July 1917. The move to an all-refueler fleet will put Selfridge and the Wing in the company of McConnell Air Force Base near Wichita, Kan., which flies only KC-135s. The 171st Aerial Refueling Wing is also KC-135s only at Columbus Air Force Base in Ohio. But Congress still needs to approve the proposed change, when a 2016 version of the NDAA Act gets introduced. In the meantime, base officials are waiting on direction from Washington, said Selfridge public affairs chief Penelope Carroll. “Currently we’re not doing anything administratively with that proposal yet, because we’re preparing for (an overseas) deployment of the A-10 later this year,” she said. “And we would have to wait for the NDAA for 2016 to become law before we know if we need to act adminis-

tratively on it.” The base’s fleet of A-10s and their airmen were last deployed overseas to Kandahar, Afghanistan, in 2011 and 2012. The unit and the current KC-135 fleet at Selfridge have also been placed on notice for an overseas deployment later in 2015, but Carroll declined to elaborate on where or when that would be. Military leaders have previously said preserving the A-10 fleet could delay initial operating capability for the F-35, currently scheduled for December 2016 for the Air Force. That’s because the new aircraft needs 1,100 “maintainers” and expects to find them largely by reallocating personnel from older planes like A-10. Lockheed Martin Corp., the prime contractor on the F-35, has said previously to Crain’s the F-35 supports at least 22 companies and more than 2,000 “direct and indirect” jobs in Michigan. Loren Thompson, COO of the Lex-

ington Institute in Arlington, Va., and a defense industry analyst, is convinced that when a defense authorization bill for fiscal 2016 gets introduced, it will include another measure from Congress that saves the A-10 from retirement, just as in years past. “You’ve got two things that you can count on here in the defense bill,” Thompson said. “One is at least until a new debt limit measure is considered, we are stuck within Budget (Control Act of 2011) caps. “The other is, we are not going to really be retiring the A-10. Most of the legislators don’t care greatly one way or another about A-10, but those who do, care a whole lot. “So it’s like a number of debates ranging from abortion to gun control — a minority cares deeply, and the energy is on their side.” Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom

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Kahlo: Exhibit buzz keeps businesses humming ■ From Page 1

Shops near the museum in Detroit’s Midtown neighborhood are also seeing an uptick in business, as visitors take to the streets to explore the neighborhood Rivera and Kahlo called home during their time in Detroit in 1932-1933. “Throughout our planning process, we knew this exhibition ... was an opportunity for us to engage our community in a way we’ve never done before,” said Kathryn Dimond, director, community relations at the DIA. “The buzz for this has been something we have not heard before.”

COURTESY OF DETROIT INSTITUTE OF ARTS

Clockwise from left: “Frida and Diego Rivera,” Kahlo, 1931, oil on canvas; “Self Portrait with Monkey,” Kahlo, 1945; “Window Display on a Street in Detroit,” Kahlo, 1932, oil on metal; “The Making of a Motor,” Rivera, 1932, charcoal on paper

Broad interest The DIA has set attendance projections for the Rivera and Kahlo exhibit at 200,000 visitors, Dimond said. Exhibit tickets are $12-$19 apiece. But it’s too early to estimate the projected revenue the exhibition will bring the DIA during its 17week run that launched last week and runs through July 12. If early attendance during its first week is any indication, it could outpace figures for the last two major exhibits at the museum in recent years, the DIA said. Four days into the exhibit’s run last week, the DIA was seeing double the number of people who came the first week to see its last two blockbuster exhibits: “Rembrandt and the Face of Jesus,” which ran November 2011 to February 2012 and drew a total of 116,392 people; and “Fabergé: The Rise and Fall,” an exhibit that showcased imperial Russian treasures made by the House of Fabergé, which ran from October 2012 to January 2013 and attracted just shy of 87,000 people. The DIA is marketing the Rivera and Kahlo exhibition in other Michigan markets, including Grand Rapids and Flint, and it’s running print and radio ads in outof-state markets like Chicago and Toronto, said Jill Proctor, marketing manager for special exhibitions. The campaign is among the largest the museum has ever done and also includes national media outreach, she said. Prior to the exhibition’s opening,the DIA hosted national reporters and art critics, which spurred stories in national publications including The Boston Globe, The Washington Post, the online ArtNet and Conde Nast Traveler, Proctor said. Last year, as it was planning the exhibition, the DIA invited local arts and cultural groups to come hear about the upcoming exhibit and to create related programming. The idea, DIA Director Graham Beal said at the time, was to help attract people from other parts of the country to Detroit by providing complementary programming they could attend, in addition to the exhibit. But local arts groups say the opportunity to appeal to new audiences brings a value of its own.

Ancillary events Nearly two dozen local arts and cultural groups are offering programs related to the Rivera and Kahlo exhibit. They range from the Michigan Opera Theatre’s “Frida” performed

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

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at three area venues — the Macomb Center for the Performing Arts in Clinton Township, the Berman Center for Performing Arts in West Bloomfield Township and the DIA’s Detroit Film Theatre — to the N’Namdi Center for Contemporary Art’s contemporary American art exhibition; lectures at the Ford Resource and Engagement Center in Detroit’s Mexican Town; Detroit Experience Factory tours of the city highlighting the artists’ time here; a special Detroit Symphony Orchestra performance; the creation of a giant puppet of Rivera with Matrix Puppet Theater; and a Michigan Science Center exhibit on the scientific discoveries that inspired the Detroit industry murals. “This really drives people to look at things to do and resources we have in our community already,” Dimond said. “They may already go to the (Ford) River Rouge plant, but they may not know Diego Rivera did his sketches there. It’s another entry point for them.” “If our cultural organizations work together, we touch 92 percent of Michigan families on a regular basis,” said Vincent Paul, artistic director and president of the Music Hall Center for the Performing Arts. Carlos Santana will perform at Music Hall April 4 as that venue’s tie-in to the Latino theme. And getting the patrons of each art form to explore other art forms is inherent to each organization’s mission to break down cultural barriers, Paul said. “Frida” the opera had nearly sold out for all six performances as of late last week, Wayne Brown, president and CEO of the Michigan Opera Theatre, said. MOT recently added a sixth performance of the opera to meet demand. About 4,371 tickets had been sold to the opera performances as of late last week, bringing in just under $235,000, surpassing MOT’s $200,000 revenue goal, Brown said. The fact that MOT’s founder and music director David Dichiera has wanted to mount that opera for some time tied in extraordinarily with the DIA’s exhibit, Brown said. MOT is also performing over-

tures of the opera at various community locations. Those have also helped to fuel interest and curiosity in the opera and the exhibit, he said. MOT put packages together to transport people from Ann Arbor and Flint areas to the exhibit, a local restaurant and a performance of the opera, and all of the tickets — a busload from each city — sold out, Brown said. By focusing on the broader themes, in this case Kahlo, “it’s a way to introduce new people to the art form, to whet the appetite and encourage them to take notice of other things happening in the opera house,” he said. A large number of the people who’ve come to see “Frida” at the Macomb Center for the Performing Arts said it was their first time attending an opera. “And several have expressed interest in coming to the opera house to experience the full scale of what MOT has to offer,” Brown said.

Food and drink Spurred by an invitation from the DIA to do so, a dozen area restaurants created special drinks and menu items inspired by Rivera and Kahlo, their Mexican heritage and art. “Our goal was to weave (the exhibition) into the rest of life here in the city,” Proctor said. “It helps us to get the word out of the exhibition and helps these restaurants get recognized.” Located five blocks from the DIA, La Feria is featuring a dish comprised of red-skinned potatoes, red bell pepper and garlic salsa. And a featured cocktail is the “La Pasión De Frida” cocktail with Corralejo Añejo tequila, tamarind, freshly squeezed lime and lemon juice and maraschino water. The two pay homage to red, the color of passion, communism and love — and a color equally revered in Spain. Just a week into the exhibit, the restaurant has served guests from Grand Haven, Flint, Port Huron, Lansing and Ann Arbor, in town to see the DIA exhibition, said coowner Elias Khalil.

La Feria has also seen an uptick in high school groups coming for lunch in tandem with field trips to the DIA to see the new exhibition, he said, and it’s created some fixed menus for student groups in response. “It’s refreshing and neat for us to see that the exhibit brings people from all over the state and we see that ripple effect,” Khalil said. “Hopefully, we’re creating a lot of return customers.” The new patrons coming in tandem with the DIA exhibit, along with a new patio the restaurant plans to debut in the spring “could really blow up our Khalil business in the most positive way,” he said.

Retail tie-ins Just across Kirby from the DIA is the Park Shelton building. Formerly known as the Wardell Apartment Hotel, it was home to Rivera and Kahlo during their time in Detroit. Two of the building’s tenants, the Peacock Room, featuring special occasion apparel for women, and Frida, offering everyday and special occasion clothing for women in bright colors reminiscent of Kahlo’s own style, saw a very noticeable bump in foot traffic last week and even in the week or so before the exhibition opened, said owner Rachel Lutz Lutz. “Customers have been talking about this for weeks and months,” she said. Among the customers coming in last week were visitors from England, Italy, France, Germany and Mexico and all over the U.S., Lutz said. Despite Woodward Avenue being under construction, year to date, the Peacock Room and Frida — which in October replaced Emerald, a popup gift store in the same location — have seen a nearly 50percent increase in revenue vs. the same period of last year, she said. Everyone who knows of the famous artist couple “loves them, and everyone who doesn’t know are intrigued once they hear more,” Lutz said. Sherri Welch: (313) 446-1694, swelch@crain.com. Twitter: @SherriWelch

Jay Greene, senior reporter: Covers health care, insurance, energy utilities and the environment. (313) 446-0325 or jgreene@crain.com Amy Haimerl, entrepreneurship editor: Covers entrepreneurship and city of Detroit. (313) 4460416 or ahaimerl@crain.com Chad Halcom: Covers litigation and the defense industry. (313) 446-6796 or chalcom@crain.com Tom Henderson: Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho: Covers real estate, higher education, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor: Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Dustin Walsh: Covers the business of law, auto suppliers, manufacturing and steel. (313) 4466042 or dwalsh@crain.com Sherri Welch, senior reporter: Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com

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FSD hires ex-News writer to cover Tigers on Web Tom Gage, the longtime Detroit Tigers writer for The Detroit News who recently retired after being removed from the Gage beat, is now covering the club for FoxSportsDetroit.com, the regional sports network said Friday. Gage, who covered the Tigers for The News for 36 years, was elected 2015 winner of the annual J.G. Taylor Spink Award, the Baseball Writers’ Association of America’s top honor. He’ll receive it in July, during the National Baseball Hall of Fame and Museum’s induction weekend in Cooperstown, N.Y.

March 23, 2015

CRAIN’S DETROIT BUSINESS

RUMBLINGS Jewish center wants folks to go green ome Clean, Go Green! No, that’s not some new cheer for Michigan State. It’s a year-round community recycling program that the Jewish Community Center of Metropolitan Detroit has launched to raise money for various community center projects through the recycling of electronic devices and components. Devices that will be accepted and recycled for cash by Livonia-based ElectroCycle include computers, cellphones, LCD monitors, speakers, VCRs and DVD players, microwaves, hard drives, docking stations, coffee machines, laptops, keyboards, cables, printers, fax machines, copiers, servers, modems and routers. The program will not accept refrigerators, alkaline batteries, tube or projection TVs, air conditioners or lightbulbs. Items may be dropped off at the D. Dan & Betty Kahn Building at the Applebaum Jewish Community Campus at 6600 W. Maple Road in West Bloomfield Township, or at the Jimmy Prentis Morris Building at the Taubman Jewish Community Campus at 15110 W. 10 Mile Road in Oak Park.

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The network said Gage will write for its website “throughout the summer and hopefully well into October.”

State Senate plan would revive school bake sales Brownies and doughnuts could be back in school bake sales under a measure the Michigan Senate approved last week that would let districts raise money by holding events currently banned because they don’t meet federal nutrition guidelines, The Associated Press reports. Advocates for the change say the guidelines have created a confusing list of what can and can’t be sold during school, and the lack of bake sales has hurt students’ ability to raise funds for extracurricular activities. Bill sponsor Sen. Patrick Colbeck, R-Canton Township, said the bill allows for more local control. School districts would be able to allow their schools up to three fundraisers per week that don’t meet federal nutrition guidelines, but they also could choose to keep the number at zero. “This is a common-sense approach to it,” he said. Senate Bill 109 now goes to the House for consideration.

New on Comerica menu: Bacon topped with eggs Comerica Park, blissfully unencumbered by federal nutrition guidelines, is rolling out a number of new calorie-filled items this spring during the Detroit Tigers season.

WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF MARCH 14-20

Among the items: a strip of thick-cut bacon topped with three deviled eggs and fried jalapenos and pork rinds with cheese dip. Others include the Chips-n-Dip Dog, a hot dog topped with Lay’s potato chips and a house-made onion dip, and the Coney Quesadilla, a coney dog, sauce and onions in a grilled tortilla. The new items are creations of the Tigers’ concessionaire, Sportservice, a unit of Buffalo-based Delaware North Cos.

Tavis Smiley show visits Detroit this week Late-night PBS talk host Tavis Smiley will be in Detroit this week to film five episodes of his show. Confirmed guests for the program include Mayor Mike Duggan, U.S. Bankruptcy Judge Steven Rhodes and Skillman Foundation CEO Tonya Allen. The show will be Smiley filmed at the Community Arts Auditorium at Wayne State University. To check ticket availability, see dptv.org. The focus of the week will include examining the city’s downtown resurgence, the challenges facing long-time residents of the city, the Arab-American community in Dearborn, the arts community and education.

BITS & PIECES 䡲 The Michigan Hispanic

Chamber of Commerce has elected JoAnn Chavez, vice president and chief tax officer at Detroitbased DTE Chavez Energy Co., as chairman of its board of directors.

COURTESY OF SPORTSERVICE

The Detroit Tigers will sell a calorie-heavy bacon and deviled eggs concession item this season in one of the new menu items at Comerica Park.

Denso to add 100 jobs in $53.6M expansion enso Manufacturing Michigan Inc. will add 100 jobs in a $53.6 million expansion of its auto components manufacturing operations in Battle Creek, the Battle Creek Enquirer reported. The Michigan Economic Development Corp. announced the expansion plans, saying the company has been awarded $640,000 in state funding through a business development performancebased grant.

RONALD’S NEW HOME FOR KIDS

ON THE MOVE 䡲 Brian Whiston, superintendent of Dearborn Public Schools since 2008, was named Michigan’s top education official. Whiston, 53, a former legislative aide and lobbyist, will succeed Mike Flanagan, retiring as state superintendent this summer after nine years. 䡲 Nick Khouri, senior vice president of corporate affairs at Detroit-based DTE Energy Co., was named Michigan treasurer by Gov. Rick Snyder. Khouri, 57, succeeds Kevin Clinton, leaving for an expected job in the insurance industry. 䡲 Deputy legal counsel Valerie Brader was named to head the new Michigan Agency for Energy. Brader, 38, is a former chief energy policy officer at the Michigan Economic Development Corp. 䡲 Aaron Dworkin plans to leave Detroit-based Sphinx Organization, the music education organization he founded 19 years ago, in July to become dean of the University of Michigan School of Music, Theatre & Dance. Dworkin, 44, will leave Sphinx in the hands of his wife, Afa Sadykhly Dworkin, who is executive and artistic director and will become president and artistic director. 䡲 Barbara Yastine, 55, is stepping down in June as CEO of the banking unit at Ally Financial Inc., said the Detroit-based auto lender, Bloomberg reported. 䡲 Darrious Hilmon, a Chicago Urban League executive and Detroit native, will join Ferndale-based Affirmations Lesbian and Gay Community Center this week as executive director. Hilmon, 46, succeeds interim executive director Jon Fitzgerald, chief administrative officer. 䡲 Karla Hall, who helped direct DTE Energy Co.’s corporate giving through the DTE Energy Foundation for several years before becoming civic affairs manager in 2013, has left the Detroit-

COURTESY OF RONALD MCDONALD HOUSE CHARITIES OF SOUTHEASTERN MICHIGAN

Ronald McDonald House Charities of Southeastern Michigan has a new home. The facility moved from the DMC Children’s Hospital of Michigan into new, larger space on the second floor of the former Hutzel Hospital in Detroit; it opens this week. The new site is designed with bright colors and natural light throughout. For a sneak peek at the space, see crainsdetroit.com/photo.

based company. DTE has not replaced Hall, 55, but said it is dividing up her work within its public affairs organization. 䡲 Ken Marblestone, former president of Charter One’s Ohio and Michigan operations for Rhode Island-based RBS Citizens Financial Group, joined Southfield-based Cascade Partners LLC as a managing director and will run its new Cleveland office.

COMPANY NEWS 䡲 Detroit-based Henry

Ford Health System returned to a net surplus in its fiscal 2014 thanks to rising patient revenue, despite a decline in inpatient days, and rising premium revenue from insurance operations. The not-for-profit six-hospital system reported a net surplus of $27.8 million on $4.7 billion in revenue, an improvement from a deficit of $12 million on 2013 revenue of $4.5 billion. Revenue was up 3 percent for the 12 months ended Dec. 31. 䡲 Taylor-based Masco Corp. expects to launch TopBuild Corp., a spinout public company, by midyear. TopBuild, to comprise Masco’s current installation companies Masco Contractor Services of Daytona Beach, Fla., and Service Partners LLC of Glen Allen, Va., will be headquartered in Florida. 䡲 Bloomfield Hills-based Taubman Centers Inc. is preparing to open a mall in Puerto Rico March 26. Nordstrom and Saks Fifth Avenue will anchor the $475 million San Juan project. 䡲 Detroit’s Dan Gilbert is among the investors in Bruin Sports Capital, the New York-based media, sports and marketing company founded last year by former IMG Sports and Entertainment executive George Pyne, Bloomberg reported. 䡲 Tom LaSorda, former CEO of Chrysler Corp. and Fisker Automotive Inc., said his venture capital fund IncWell has invested in Tower-

Sec, an Ann Arbor auto cybersecurity supplier, Automotive News reported. Terms were not disclosed. 䡲 Detroit Medical Center could go to trial this fall in a class-action lawsuit on behalf of metro Detroit hospital nurses over alleged wage collusion after the hospital lost an appeals court request in the court case. Attorneys for more than 20,000 nurses plan to ask a U.S. District Court judge to set a trial date. 䡲 The Motor City Gas microdistillery opened in Royal Oak. Meanwhile, Texasbased Twin Peaks Restaurant opened its first Michigan location, in Madison Heights, and the first Kate Spade New York outlet store in Michigan debuted at Great Lakes Crossing Outlets in Auburn Hills.

OTHER NEWS 䡲 Site plans for the redevelopment of the former Michigan State Fairgrounds could be submitted to the Detroit Planning Commission this week. Developers behind the $160 million mixed-use project met with the Fairgrounds Advisory Committee to discuss plans for the 157-acre site. 䡲 The Henry Ford has acquired “Mathematica,” which conveys the world of numbers and mathematics through interactivity, as a permanent exhibition set for display at the Dearborn museum in 2016. 䡲 The day after Crain’s reported on the 5811 Grayton St. house that was the first home purchased in the Detroit Land Bank Authority’s auction to be rehabbed and put up for sale, the dwelling sold for its $86,500 asking price, its owner said.

OBITUARIES 䡲 Edith Kaufman, longtime owner of The Poster Gallery in Detroit’s Fisher Building, died March 12. She was 80.

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Don’t buy this phone. The math is so simple. Either you buy 10 Samsung Galaxy S5s from Verizon and spend $14,959 over 2 years.*

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Device leasing from Sprint Business gives your people the devices they want in a simple, flexible, incredibly affordable way. • Reduce your up-front device costs • Drive down the cost of your mobile network services • Turn big, fat lumps of capital into predictable operating expenses • And get the latest tech Do the math. And you’ll never buy a device again.

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*Savings based on well qualified customer with new-line activation or eligible upgrade. Comparison based on publicly-available information as of 02/13/15 between Sprint Lease 24 mo. contract to 2-year contract and device pricing on Verizon More Everything Plan for 10 lines using Samsung Galaxy S5. Upfront device cost: ($0/ Sprint vs. $1,999.90/Verizon. Monthly phone cost: $200/ Sprint vs. $0/Verizon excluding taxes and Sprint surcharges. Limited time offer $5 / mo. service credit x 10 lines: ($50) month Sprint vs. N/A Verizon for new-line or activation or eligible upgrade up to 24 months of lease term, provided the device remains active. 20 GB Shared Data: $90/Sprint vs. $140/Verizon. Monthly access with Unlimited talk + Text While on network: $150/Sprint vs $400/Verizon. Monthly Total 10 lines:$390/Sprint vs $540/Verizon. 24 Month total 10 lines: $9,360/Sprint vs $14,959.90/Verizon resulting in $5,599.90 savings over 24 months. Comparison does not include optional device purchase at the end Other monthly charges apply. See below. Monthly lease payments exclude taxes (varies by area). Monthly services charges exclude taxes and Sprint Surcharges [incl. USF charge of up to 16.8% (varies quarterly), up to $2.50 Admin. & 40¢ Reg. /line/mo. & fees by area (approx. 5 -20%)]. Surcharges are not taxes. See sprint.com/taxesandfees. Plan: Activ. Fee: $36/line. Credit approval req. Plan Details: Plans only available to Corporate-Liable business subscribers. CL discounts may apply only to monthly shared data charges. Includes unlimited domestic Long Distance calling and texting while on the Sprint Network. Data allowance as specified. Third-party content/downloads are add’l charge. Int’l svcs are not included. Data: Includes shared data across all subs. Depending on plans selected, includes 20GB of on-network data usage and 100MB off-network data usage. Add’l on-network data usage: 1.5¢/MB. Additional off-network data can be added by opt in only for 25¢/MB for tablets/MBBs. If conflicting share data allowances are applied to an account, the majority on account or most recent change may be applied for all lines. Mobile Hotspot usage pulls from your shared data and off-network allowances. Add-ons: Good for Enterprise™ or BlackBerry Enterprise Service 10 can be added to select data plans for an additional $15/mo. per line. Other BlackBerry smartphones can add BlackBerry Enterprise Server for $20/mo. per line. Messaging: Includes sending/receiving domestic texts (SMS) and pics/videos thru texts (MMS).Discounts: Discount of up to $20/mo./line will be applied within 3 invoices for customers that have chosen Lease. The discount will remain until a new device transaction. Discounts do not apply to basic/feature phone transactions. Usage Limitations: Other plans may receive prioritized bandwidth availability. To improve data experience for a majority of users, throughput may be limited, varied or reduced on the network. Sprint may terminate service if off network roaming usage in a month exceeds (1) 800 min. or a majority of min.; or (2) 100MB or a majority of KB. Prohibited network use rules apply-see sprint. com/termsandconditions. Lease:Terms for all other customers will vary including amount due at signing and taxes/fees. Req. qualifying device and service plan. No equipment security deposit required. Upon completion of 24 mo. term, customer can continue to pay monthly lease amount, purchase or return the device. Customer is responsible for insurance and repairs. Early termination of lease/service: Remaining lease payments will be due immediately, and requires device return or payment of purchase option device price in lease. $5/Mo. Lease Service Credit: Offer ends 04/09/15. CL only. Req. eligible device on 24 mo. Sprint Lease and new-line activ. or eligible upgrade on Sprint Business Share plan. Receive $5/mo service credit for 24 months with eligible device with Sprint Lease. No cash back. Account must remain in good standing to receive svc credits. Allow up to 3 billing periods for 1st svc credit to appear following activ. Avail. from Sprint Business Rep. only. No discounts apply. May not be combined with other offers. Other Terms: Offers and coverage not available everywhere or for all devices/networks. May not be combined with other offers. Restrictions apply. See sprint.com for details ©2015 Sprint. All rights reserved. Sprint and the logo are trademarks of Sprint.

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