Crain's Detroit Business, May 11, 2015 issue by Crain's Detroit Business

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CRAIN’S Readers first for 30 Years

MICHIGAN EDITION This monthly issue reaches 5,000 additional readers outside of metro Detroit

Could rail be the newway north? Page 15

DETROIT BUSINESS May 11-17, 2015

[ISTOCK PHOTO]

HORSE RACING: IS IT ON THE RIGHT TRACK? PAGE 3

The Bank of America building in Troy is expected to sell for as much as $150 per square foot.

[COSTAR GROUP]

Banking on a big sale BOA building could score high, brokers say, but will market comply? ing’s high occupancy rate and rental figures kpinho@crain.com are positives, going prices aren’t quite in the The Bank of America building in Troy is on upper end of that range. Even prominent, the market — and when it sells, it is expected Class A office buildings in the region aren’t to be one of the biggest suburban office supporting a $150-per-square-foot-or-highbuilding sales in recent memory. er sale price, he said. Depending on whom you ask, the For example, in downtown Detroit, Dan 450,000-square-foot building directly east of Gilbert purchased the 1 million-square-foot The Somerset Collection on West Big Beaver Kevin Kernen: Not One Detroit Center building for $100 million Road could sell for between $100 and $150 a sold on office ($100 per square foot) and, along with Meridian Health, the 1.1 million-square-foot Com square foot or $45 million to $67.5 million. building prices puware Corp. headquarters building on Some brokers predict it could be even more. But Kevin Kernen, managing director of valuation Campus Martius for $142 million ($129 per square and financial options for Southfield-based Stout Ri sius Ross Inc., said that although the landmark buildSee BANK, Page 26 By Kirk Pinho

Snyder eyes future as his profile builds Despite Prop 1 fail, guv pitches ‘comeback story’ By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

LANSING — Gov. Rick Snyder has put an end to rumors that he plans to run for president next year. But that doesn’t mean he’s not thinking about his political future. A packed national travel schedule, which is positioned as a way to tout Michigan’s “comeback story,” is viewed by political watchers as Snyder’s effort to gain name recognition on a national stage. From California in late April to a New York visit late last week, Snyder is seemingly making traction in at least

raising his profile. But why is the term-limited Republican governor traveling the country to promote Michigan’s economic recovery — and Detroit’s emergence from bankruptcy — if he doesn’t eventually aspire to a national post? Snyder offered a brief statement Thursday saying he is promoting Michigan’s economic success story to a national audience in See SNYDER, Page 27

Rick Snyder: Talking about Michigan’s future, not his

Sleep industry wakes to customer demand By Dustin Walsh dwalsh@crain.com

[REVERIE]

Sleep is a component of lifestyle,says Reverie CEO Martin Rawls-Meehan.

Sensors, biomarkers and algorithms are becoming part of everyday health technology — from the use of step trackers to connected diet plans built into smartphones. The industry of sleep isn’t lying

crainsdetroit.com Vol. 31 No 19

down on the job; even mattress and sleep system makers, such as Bloomfield Hills-based Reverie, are creating their own customizable, high-tech devices to keep up with other sectors. Reverie, a dba of Ascion LLC, is increasing its research and development spending to carve out its slice of the increasingly technologyheavy but highly competitive $14.2 billion U.S. mattress industry.

“Sleep is more than just laying on a flat surface; it’s a lifestyle component,” said Martin Rawls-Meehan, founder and CEO of Reverie. “People are demanding customization and technology from all of their products and, in the bedding category, allows us to take the sector to the next level.” Reverie, which has manufactured adjustable beds since 2003, generat-

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ed revenue of just under $100 million in 2014 and expects to surpass that this year. Rawls-Meehan relocated the company from Massachusetts to metro Detroit in late 2011. It employs 150 employees, 40 of them in Bloomfield Hills. The company’s current offerings include an adjustable bed with See REVERIE, Page 25

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MICHIGAN

BRIEFS Tesla to buy Grand Rapids auto supplier Riviera Tool Tesla Motors is acquiring one of its suppliers of stamped parts, Grand Rapids-based Riviera Tool , Automotive News reported. A Tesla spokesperson declined to provide the price or terms of the acquisition. Tesla eventually will rename the operation Tesla Tool & Die . It is expected to retain Riviera’s 100 workers while continuing to add jobs. Tesla CEO Elon Musk said at the Automotive News World Congress in January that the automaker would be interested in manufacturing in Michigan. “It’s not out of the question,” Musk said. “Maybe Michigan shouldn’t stop us from selling cars here. That would be a nice gesture.” In October, Gov. Rick Snyder signed a bill that bars Tesla from selling its vehicles directly to consumers.

Dow to cut up to 1,750 jobs after unloading chlorine unit Midland-based Dow Chemical Co. plans to cut about 3 percent of its global workforce and close some fa-

cilities after the $5 billion deal it struck last month to sell its chlorine business to Olin Corp. , Bloomberg reported. Dow will eliminate 1,500 to 1,750 jobs. The company, which had 53,000 employees at the end of last year, has been under pressure from the hedge fund Third Point LLC to split its specialty chemical and petrochemical businesses. The company also announced last fall a three-year, $1 billion “productivity drive” to cut costs and push earnings higher.

Mylan to make acquisition pitch to Perrigo shareholders Mylan N.V. remains committed to acquiring Perrigo Co. plc and plans to present its case directly to Perrigo shareholders, setting up a potential shareholder fight for control of the company, MiBiz reported. Mylan has financing in place for the acquisition, has initiated antitrust clearance and “is confident that we can close the deal by the end of the year,” CEO Heather Bresch said. “The combination with Perrigo is simply the next important, strategic step in

our evolution and builds on our strong platform. We are committed to making this combination a reality.” Perrigo Chairman and CEO Joe Papa said that while there ultimately “is a number at some point” where Perrigo directors would have to consider selling, this spring’s $4.5 billion acquisition of a Belgian company positioned it with a greater ability to grow and remain independent. A deal with Perrigo, which is domiciled in Ireland but retains headquarters in Allegan, would create a corporation with 2014 proforma revenue of $15.3 billion and 70 manufacturing sites worldwide.

Visteon to shut Holland unit, move workers to HQ Visteon Corp. will close its Holland operations by the end of the year, MLive.com reported. The auto supplier said it hopes to retain about 175 of the 240 workers affected by offering them jobs in Van Buren Township, where Visteon is headquartered. Visteon acquired its Holland technical center from Johnson Controls Inc. in July 2014 for $264 million.

MICH-CELLANEOUS 䡲 The city of Flint said only one mayoral candidate, 1st Ward Councilman Eric Mays, filed petitions before the April 21 deadline — but he didn’t have enough valid signatures to qualify for a spot on the ballot, MLive.com reported. City officials say that potentially means the mayoral election will

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be an all-write-in competition. 䡲 Hal Fitch, who, as director of the Michigan Department of Environmental Quality’s Office of Oil, Gas, and Minerals oversees regulation of oil and gas wells, said the May 2 earthquake in Kalamazoo County is unrelated to fracking or other drilling in the area, MLive.com reported. 䡲 The Michigan Court of Appeals has ordered the Michigan Public Service Commission to hold another hearing concerning the costs charged to customers who don’t want so-called smart meters from Jackson-based Consumers Energy. The meters typically allow utilities to monitor electricity without sending an employee to each address. 䡲 The Michigan State University College of Engineering received a $5 million commitment to create the Gary A. and Patricia A. Coffman Endowed Scholarship/Fellowship program. Gary Coffman graduated from MSU in 1974 and spent 31 years with Dow Corning Corp. 䡲 Jack Keller, founder of Keller Ford in Grand Rapids, died April 30 at age 88, MLive.com reported. Keller, known as a “great, great guy”

INSIDE THIS ISSUE BANKRUPTCIES . . . . . . . . . . . . . . . . . . 7 BUSINESS DIARY . . . . . . . . . . . . . . . . 22 CALENDAR . . . . . . . . . . . . . . . . . . . . . . 24 CLASSIFIED ADS . . . . . . . . . . . . . . . . 25 CRAIN’S LIST . . . . . . . . . . . . . . . . . . . . 21 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . . 8 MARY KRAMER . . . . . . . . . . . . . . . . . . 15 OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 8 OTHER VOICES . . . . . . . . . . . . . . . . . . . 9 PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . 23 RUMBLINGS . . . . . . . . . . . . . . . . . . . . 30 STAGE TWO STRATEGIES . . . . . . . . 14 WEEK ON THE WEB . . . . . . . . . . . . . . 30

COMPANY INDEX: SEE PAGE 29 in his advertising campaigns, started his career in car sales at Roy O’Brien Ford in St. Clair Shores in the 1960s, his obituary said. 䡲 Southfield-based 123Net Inc. acquired T2 Communications LLC in Holland, MiBiz reported. The deal comes as 123Net, a telecommunications and Internet service provider, looked to expand its customer base and capabilities in West Michigan.

Corrections 䡲 An article on Page 11 of the May 4 edition incorrectly stated the annual investment in Macomb County by St. John Macomb-Oakland Hospital as $100 million. The correct value is $10 million. 䡲 A story on Page 17 of the April 20 issue listed the William Davidson Foundation among local foundations that pay board members. It does not. Jonathan Aaron is paid for serving as president, the foundation said.

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BY THE NUMBERS: THE MICHIGAN ECONOMY

Lawyer pay: Any objections? By Dustin Walsh dwalsh@crain.com

ew career fields bear the brunt of as many jokes as law professionals. But are lawyers in Michigan highly paid? It’s a subjective question, but a glimpse into the median pay and billing rates, sorted by job category and by gender, of Michigan attorneys, yields some surprising results. Among them: Probate attorneys, the field of law following an individual’s death, draw the largest incomes, beating out categories intuitively linked to high pay rates like medical malpractice and employment law. The gender gap in pay also remains very wide among Michigan lawyers, both in private sector and nonprivate posts. The State Bar of Michigan releases the report every few years to provide a barometer on compensation trends.

Horse racing looks to track down profits So far, it has been a rough ride with long odds By Bill Shea bshea@crain.com

[PIERRETTE DAGG/CRAIN’S DETROIT BUSINESS]

Michigan’s horse racing industry is at odds with itself as it scrambles to find new revenue to survive. The state’s two remaining tracks — Hazel Park Raceway and Northville Downs — and the horse owner groups all agree something must be done to stave off extinction. But what that ultimate solution should look like remains undetermined. Until then, the industry is taking another shot at getting legislative approval for online race wagering, something that has failed to get Gov. Rick Snyder’s signature in the past. Horse racing and its revenue distribution system is complex, and the shifting alliances within the industry are “Game of Thrones”-style multifarious. But the origins of the problems are simple: People don’t bet on horses much anymore. The rise of online wagering in other states, the expansion of Michigan’s lottery and, especially, the creation of the state’s commercial and tribal casino industry dramatically sapped the dollars wagered on horses in Michigan. For years, the state’s horse racing industry has been stymied in its efforts to get legislative approval to add slot machines or other forms of gambling such as online wagering via smartphones, computers or slotlike wagering game terminals — measures blocked, in part, by the casino industry. Failure to find new money has forced seven Michigan race courses out of business since 1998. Complicating matters is disagreement among the horse racing industry’s major players about how current and future revenue should be split. Additionally, there is frustration over current financial arrangements. The tracks a few years ago added entry fees that horse owners

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[ANTHONY BARCHOCK]

Northville Downs is still running races and still making a slight profit.But since 1998, seven Michigan race courses,unable to find newrevenue,have closed. must pay to race, a measure aimed at aiding Hazel Park’s decade-plus financial losses and sustaining Northville Downs’ slight profit. The horsemen’s groups say the entry fees unfairly skew revenue splits in favor of the tracks. Legal challenges to the entry fees failed. Almost all track revenue comes from simulcast racing, with live waging accounting for a few percentage points of income. The tracks and horsemen split the simulcast income, and the horsemen split their share among the various types of horses and races — pitting horse owners against each other. The tracks say they need revenue wherever they can find it, and the horse owners face increasingly smaller race purses that often cannot cover the costly expense of maintaining horses. “It’s a very frustrating situation,” said Phil Stommen, executive director of the Okemos-based Michigan Harness Horsemen’s Association . “There’s no real incentive to come See HORSES, Page 28

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LOOKING BACK

Crain’s May 13, 1985, issue included a report on how women locally were becoming increasingly attracted to entrepreneurship. That’s still the case, if not in big numbers. More at crainsdetroit.com/30

‘Beginning of a wave’: More women become own bosses By Amy Haimerl ahaimerl@crain.com

GET IN ON THE CONVERSATION

Amy covers the city of Detroit and entrepreneurship

Keep up with Amy at crainsdetroit.com/blogs AMY HAIMERL

TWEET @HAIMERLAD

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We’ve come a short way, baby! In 1985, Crain’s reported that more women were attracted to selfemployment, with newly minted female entrepreneurs outpacing men as total self-employment in the U.S. reached 8.9 percent. In total, 30 percent of all entrepreneurs were women. “The women of the ’70s untied their apron strings to enter the workplace, but the women of the ’80s are cutting their corporate attachments,” wrote Launzy Sims in the May 13 issue. Fast forward 30 years, and women now account for 35.7 percent of all entrepreneurs — at least as of 2012, the most recent data available from the U.S. Census. In total, 10.4 percent of Americans are their own boss. In Michigan, 38.8 percent of those self-employed are women, according to the U.S. Chamber of Commerce Center for Women in Business. That places the mitten state 22nd in the union, behind such powerhouses as Oregon (No. 1 with 45.4 percent), New Mexico (43.3 percent) and Rhode Island (40.5 percent). Only about 14 percent of U.S. Small Business Administration loans in Michigan in the past five years have gone to women. But there is a bright light: Between 1997 and 2011, the number of woman-owned firms in the U.S. increased by 50 percent — a rate 1.5 times the national average — for a total of 8.1 million. “I’ve seen a real resurgence in interest in becoming your own boss,” said CarCarolyn Cassin: olyn Cassin, presWatching women ident and CEO of Michigan rise in business the Women’s Foundation. “I think we’re on the beginning of a wave.” More than a word When Carla Walker-Miller read the word “entrepreneur” in the 1980s, she thought it described good-looking men who didn’t have jobs. She would read glowing portraits of men who seemed not to have to work and never imagined that she would become an entrepreneur herself. She got her degree in engineering at Tennessee State University, near her home of Nashville, and then went to work in corporate America. “Black women of my age, we were raised to get a degree and then get a good job with a corporation,” Walker-

[AARON ECKELS]

Carla Walker-Miller didn’t always know the meaning of“entrepreneur,” but she went out on her own in 2000 by starting Walker-Miller Energy Services and facing challenges before finding success. Miller said. “That was nirvana for us. “Now entrepreneurship is considered much less risky. In our generation of independent businesses, we achieved a level of training in corporate America that was almost a template for going out on your own. You develop expertise.” She did go out on her own in 2000, starting Walker-Miller Energy Services LLC after 13 years in corporate America. It wasn’t an easy decision, but as she looked around, she accepted that no career trajectory existed for her. “There were no African-American women and maybe two AfricanAmerican men in upper management,” she said. “I had no chance of advancing. I could not see a path.” And it was the same for all of her girlfriends. There was no point trying to join one of their firms, even those in the energy industry that had openings for a black female engineer, because she felt she’d face the same ceiling. In the ensuing 15 years, WalkerMiller has grown her Detroit-based business, seen successes and struggles. She had to pivot during the recession, nearly losing the business in 2009 as clients dried up. But she refocused as an energy efficiency consultant, rather than a product distributor, and rebuilt. There were struggles along the way, as she tried to find the doors to knock on. “The old boys club,” she said, “is still alive and well. People do business with the people they know and trust. It makes it much more difficult for people you don’t know or like or

trust to gain an entrance. It can be difficult for women to even figure out what the real opportunities are.” But networking has really helped Walker-Miller grow in recent years. She particularly credits TechTown Detroit’s accelerator program as well as Inforum, a leading networking organization for women; SBA’s leadership programs; and Goldman Sachs 10,000 Small Businesses. “The quality of networking is ridiculously better than in the ’80s,” she said. Today, Walker-Miller employs 43, expects revenue of $7 million this year and was named the SBA’s Entrepreneur of the Year for Michigan last week. Targeting growth Nationally, most women entrepreneurs don’t look like Walker-Miller. They don’t have any employees. Ninety percent of woman business owners employ no one but themselves, and just 2 percent have more than 10 employees, according to the U.S. Chamber report. By comparison, 82 percent of male entrepreneurs have employees, and 4 percent have more than 10 employees. That’s a statistic of huge concern to Walker-Miller. She wants to see more women focused on growth businesses, on supporting themselves and their communities. “We face an incredibly steep incline trying to do two things; one is just to be successful, and the other is to create wealth,” she said. “Of the female colleagues I have who own their own businesses, See WAVE, Page 6

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WAVE, from Page 4: More women take corporate plunge to become their own biz bosses most of them are single-person businesses. Many of them make a great living for themselves, but they are more lifestyle businesses; they are not companies with a large number of employees. “There is a glut of woman-owned businesses who are kind of midrange. They support themselves, but they aren’t on a high-growth trajectory.” That is something Cassin is also acutely aware of. Not only does she head the Michigan Women’s Foundation, but she also is the co-founder of The Belle Michigan Fund LP, an early stage investment fund. “When we started Belle Michigan, people said there would not be

enough women entrepreneurs to invest in,” she said. “But we have 20 women in our pipeline clamoring for Belle investment. There are lots of women in technology that we didn’t see in the very beginnings.” Still, Cassin extols the importance of small so-called lifestyle businesses, such as bakeries and seamstresses, because they bring entrepreneurship to a wide spectrum of women. In fact, more than 600 women used the Michigan Women’s Foundation entrepreneurship support programs last year. “Lifestyle businesses are the easiest point of entry for women,” she said.

In 2012, the nonprofit began providing financing to these women and has made 32 investments worth $557,287. Last year, it helped form the Detroit Microloan Collabo rative, which provides technical assistance through Lifeline Business Consulting Services and loans of $5,000 to $100,000. The fund is not exclusive to women, but of the 14 loans that have closed in the first seven months, 13 were to women. One was an architect, another is opening an importexport firm, while another’s dream is opening a hot dog stand. “She works two jobs currently and wants to own her own business,”

said Ray Waters, president of the Detroit Development Fund, which partners with the Women’s Foundation on the microloan program. In recent years, the DDF also has been the lender of only resort for many Detroit retail businesses and restaurateurs, offering startup capital as well as construction loans. In the past seven years, Waters said, 43 percent of its loans were to women. “Access to technical assistance really makes a difference,” he said. “Through Lifeline, we can provide them with a lot of startup information as well as get them ready for financing and loans.” The Build Institute is another

Vision and impact. That’s something to celebrate. The EY Entrepreneur Of The Year® Ei[hi_an and Northoest Ohio 9oard Õnalists saw a different future and made it happen. Join these game changers to celebrate their achievements at this year’s awards gala. June 11, 2015 | Cobo Center Grand Ballroom | Detroit, MI For tickets, contact Janelle Jones at janelle.jones@ey.com.

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source of entrepreneurship education in Detroit. In the past three years, it has graduated 535 students from its eight-week courses. Seventy percent have been women. “Our typical participant is an African-American woman,” Executive Director April Boyle said. Many of the women Boyle works with are attracted to entrepreneurship because they imagine a flexible schedule that allows them to be caregivers to children and aging parents while still earning a living. She sees others who struggle to imagine themselves as entrepreneurs because they lack confidence and devalue their product. But after eight weeks of intensive training, they come out with a business plan and understanding of what it takes to be a business owner. Boyle said about 30 percent are ready to start, 30 percent want to think about it April Boyle: Building for a while, and bosses through time 30 percent realize and training entrepreneurship is not for them. “Women are willing to take risks now,” Cassin said. “Twenty or 30 years ago, it was very risky to go out on your own. Now it doesn’t seem so risky. We have tools we didn’t have 30 years ago.” Going to school The numbers of self-employed women, particularly in high-tech and high-growth businesses, may look very different in another 30 years if the anecdotal signs coming from the universities are any indication. Interest in entrepreneurship programs is at all-time high as schools scramble to incorporate the lessons of the smallbusiness world into all disciplines. “The skill set is broader than just starting a business, said Oscar Ybarra, the newly appointed director of Innovate Blue, which oversees all entrepreneurship programs at the University of Michigan. “Being creative, thinking about other people and what their needs and problems might be and how to help, those are skills you need even if you go work for somebody else. There are just broader skills that people will be interested in.” UM just launched a minor in entrepreneurship to complement the existing master’s degree in the subject, and 44 percent of students enrolled are women. Meanwhile, more than 60 percent of students involved in the School of Public Health ’s Innovation and Social Entrepreneurship program last year were women, as were the graduate students in the School of Informa tion’s entrepreneurship program. “It’s very different than it was 30 years ago,” Cassin said. “The baby boomers have brought up a different generation of young women that have expectations that my generation didn’t have. There’s no stopping this movement for women being active and engaged in entrepreneurship.” 䡲 Amy Haimerl: (313) 446-0402 Twitter: @haimeralad

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Bills would put limits on biz tax credits LANSING — The tax credit program that unexpectedly brought on $9.4 billion in potential liability for Michigan would be limited under two bills approved nearly unanimously Thursday by the Republicanled House. Business groups including the Michigan Manufacturers Association and Detroit Regional Chamber had opposed the measures, which would prevent the Michigan Economic Growth Authority from entering into new agreements allowing tax credits for businesses. It also would be prohibited from changing existing agreements unless the change results in a reduction of the amount of the credit. In February, officials said Michigan is potentially on the hook for $9.4 billion in business tax credits over the next two decades. Gov. Rick Snyder and the Republican-led Legislature were forced to cut the budget midyear as a result. Rep. Lee Chatfield, R-Levering, and one of the bill sponsors, said in a speech on the House floor that the bills are simply about limiting liability for the state and not about harming existing deals. “I consider it important for the state of Michigan to prove to the rest of the country that we are a good state for business,” he said. That remark was echoed by Rep. Gary Glenn, R-Midland, sponsor of the other bill in the package. The statements from the bill sponsors appeared directed at concerns from business groups that said the legislation would hurt the state’s ability to attract jobs. Mike Johnston, vice president of government affairs for the Manufacturers Association, made a statement to that effect while speaking against the bills in a House committee hearing last month. The bills would announce to the world that Michigan is “unilaterally disarming” when it comes to attracting jobs, he said. Tax Policy Committee Chair Jeff Farrington took issue with that statement: “To make statements like that is inflammatory,” he said, adding that comments like Johnston’s are “exactly what other states want to hear.” The Michigan Manufacturers Association represents businesses including the Detroit automakers.

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CRAIN’S DETROIT BUSINESS

OPINION Post-Prop 1, Snyder’s Plan B I

t’s official. Michigan Gov. Rick Snyder is not running for president. His agenda at home is unfinished, as last week’s whopping defeat of the complicated sales tax ballot proposal proved. Many are second-guessing the campaign, the proposal and what the voters are saying. But in the mix, we hope the governor himself uses the experience to shape what is left of his tenure. And we have a suggestion: Use his power more forcefully to move things through the Legislature. Members of Snyder’s own party are often the obstacles on issues such as fixing roads in a straightforward way. It will require a tax increase or shift; you cannot cut $1 billion from the limited unrestricted dollars available to reinvest in roads. Lawmakers who support Snyder’s agenda should be rewarded. Raising money to support them — versus raising money for a presidential campaign — should be at the top of the governor’s agenda.

TALK ON THE WEB Re: Michigan voters reject Proposal 1 The governor needs to forget about being president, be the governor we elected him to be and present an honest piece of legislation that will provide us with safe roads. Bill Martin

Gov. Snyder has been a real disappointment when it comes to leadership. His only answer seems to be new taxes. There is enough money to fix the roads. Get rid of the pork and the overspending , including the cost of our so-called fulltime legislators.

Not to be a Debbie Downer, but the school system has to be fixed before people will start moving into the area. Faith be told

Another example of tax dollars not being used for vital taxpayer needs.

The people get the government they deserve.

Sad that there needs to be donations for the testing, investigating and prosecuting these rape kits. Our tax dollars should cover this without question.

To my state legislators and leaders, I would like a refund for the $10 million you just wasted on attempting to pass a proposal that went down 4 to 1 in an off-cycle election. That money could have fixed a few overpasses and patched some potholes. Add in the annual salaries, including benefits and perks that the legislators get, and that number now increases at least tenfold. Stano

Re: Work on $70M Brush Park development to begin this year You can get the young childless couples, artists and young professional singles first, then the families can come later. Jeff Reid

What a waste of a beautiful island. Publish actual numbers of the Grand Prix’s impact for the city balanced against the disaster it turns the island into. All I’ve ever seen are pie-in-the-sky numbers. If it’s all about bragging rights — forget it. Belle Isle sure isn’t benefiting from its presence. Smoody

Carolyn Mazurkiewicz

Jungoni

Re: Penske focus: Building Belle Isle Grand Prix

Re: $100,000 donation to Detroit rape kits campaign

WJW

Hailing a Superior move Metro Detroit was on the winning end of a headquarters move last week when Superior Industries International Inc. announced its intention to move its global executive offices from Van Nuys, Calif., to Southfield. The move makes sense because the company manufactures aluminum wheels for the automotive industry, and a metro Detroit site is closer to customers. But the fact that former Visteon CEO Donald Stebbins now heads Superior also is likely a factor. The move is subsidized by a $900,000 Michigan Strategic Fund grant. Donald Stebbins: The number of jobs is relatively small at Superior to move 75, but it’s the sort of headquarters Michigan offices to Michigan should have. Welcome to the neighborhood.

Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity.

JAK

Re: Detroit Venture Partners pushes aside rumors of trouble With a few firms being exceptions, the VC game in Michigan is as incestuous as it is bush league. Just watching their cycle of deals would be laughable if it weren’t for the fact that our local and state economies are in desperate need of more promising startups. The other limiting factor we face is the absolutely asinine incubator system the state uses to nourish startups. Investing in tech startups is like drilling for oil. If you’re not ready to mainly drill dry wells, you’re in the wrong business. GP for life

[DWIGHT BURDETTE/WIKIMEDIA COMMONS]

Re: Kroger to acquire Hiller’s Markets in metro Detroit Hiller’s has always been my go-to store for its produce, kosher meats and the finest and largest assortment of gluten-free foods. Hiller’s really stepped up for us and supported our dietary needs. Will Kroger maintain this momentum? I certainly hope so. Sara Brooks

If the Hillers ran their business better, they would not have had to sell. They have made countless bad business decisions over the past 15 years. Michael Devon

If people think that Hiller’s Markets wanted to sell, they are nuts. It was either this or go out of business. We should be thanking Kroger for at least making the investment and saving the jobs. Steve P.

[CITY OF DETROIT]

A $70 million planned development in Brush Park would include 337 residential units and retail space.

Time for the state government to do its job KEITH CRAIN he Republicans who are in

Tcharge in Lansing have done a

terrible job of leading. Unless they, like their Democratic peers, want to be voted out, they have to get busy and learn how to be competent legislators. And that must start now with funding for our roads. Our governor has to table his thoughts about some national of-

fice and get back in charge of his Legislature. The voters of Michigan sent a strong message: the mess that was delivered to them called Proposal 1 was a disaster. They rejected it by a record margin. Plan B should have always been Plan A. A simple tax on a gallon of gasoline — say, 20 cents — specifically and only for road repair should be passed by the Legislature and signed by our governor. It should

take all of a week to get done. Don’t get fancy. Just do your jobs. I think the voters of Michigan have all of a sudden realized that they are empowered. Lawmakers: if you aren’t careful, these same voters will also throw all of you out of office. With the price of gasoline at a relative low, this is the time to impose a higher gas tax, which is a user fee, to get the roads fixed. Everyone will understand what’s going on. The Legislature doesn’t need some sort of voter referendum

to get it done. Pass it and let the governor sign it and let’s get working on the roads. Do it now — not later, not next fall. Now. The voters of Michigan are mad, and they are particularly mad at everyone who tried to pull this fast one. If citizen Carl Levin was trying to make a re-entry from Washington to Michigan, then he couldn’t have done a worse job. Those ads in support of Proposal 1 will haunt him forever. Our governor has to get refo-

cused on Michigan. Let’s not worry about national politics right now. Concentrate on the urgent needs of the state residents who elected you to office. Our Legislature had better go to work quickly and spend time on the important issues. If not, they all will be looking for work. The rejection of Proposal 1 was a strong signal that this electorate is indeed empowered. It doesn’t happen very often, and it probably won’t last long, but while it is alive and well, it is a powerful force.

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Time is money â&#x20AC;&#x201C; and Prop 1 spent too much of both OTHER VOICES Bob Kittle Bob Kittle is president of Auburn Hillsbased Munetrix, which is among the nationâ&#x20AC;&#x2122;s largest aggregators of municipal and school district data.

onths ago, when there was still

Mtime to change direction and

not put Proposal 1 on the ballot, the decision was made to move forward despite focus groups, polling data and man-on-the-street sentiment that showed minimal support by Michigan voters. Ten million dollars is a lot of money to spend on an issue that was widely anticipated to fail even before the official ballot language was crafted. Itâ&#x20AC;&#x2122;s more than money that was

VanHulle is Crainâ&#x20AC;&#x2122;s new reporter in Lansing Lindsay VanHulle joined Crainâ&#x20AC;&#x2122;s Detroit Business and Bridge Magazine on May 4 as the Lansing correspondent for both publications. VanHulle, 30, a Michigan State University graduate, was most recently a reporter at the Lansing State Journal. While there, she led coverage of a proposed $245 million tribal casino downtown and was a lead LindsayVanHulle: reporter covering Covers capital for the right-to-work Crainâ&#x20AC;&#x2122;s, Bridge legislation debate and associated protests, among many other stories. VanHulle previously covered education and nonprofits for the Traverse City Record-Eagle. She has won numerous awards for her work and is a member of the Society of Professional Journalists and Investigative Reporters and Editors. The agreement between Crainâ&#x20AC;&#x2122;s and Bridge is a joint venture based on a common journalistic vision of high-quality, nonpartisan news and information. With the agreement, Bridge adds in-depth business coverage to its portfolio, and Crainâ&#x20AC;&#x2122;s expands its capacity to do deeper, project-based reporting. VanHulle will work mostly from Bridgeâ&#x20AC;&#x2122;s Lansing office near the state capitol. She can be reached at lvanhulle@crain.com, lvanhulle@ bridgemi.com or 517-657-2204. VanHulleâ&#x20AC;&#x2122;s reports from Lansing will run in Crainâ&#x20AC;&#x2122;s and Bridge publications online and in print. äĄ˛

lost, however. Think of the alternative solutions that could have been explored, developed, reviewed and â&#x20AC;&#x153;road testedâ&#x20AC;? in the months when legislative efforts were instead spent on a doomed proposal. Thatâ&#x20AC;&#x2122;s time wasted from a legislative perspective, and it needs to be added to the $10 million in actual costs associated with getting Proposal 1 on the ballot and promoting it to voters. Itâ&#x20AC;&#x2122;s interesting to note that voters werenâ&#x20AC;&#x2122;t saying no to all tax increases on May 5. Witness the millage wins in multiple school districts including Farmington, Birmingham and

South Lyon. Voters were saying, â&#x20AC;&#x153;We wonâ&#x20AC;&#x2122;t vote on a tax increase with convoluted, complex language.â&#x20AC;? Such poor messaging leads to mistrust, regardless of the issue. Proposal 1 had so many tentacles that transparency â&#x20AC;&#x201D; a keyword in any government initiative these days and one that citizens increasingly demand â&#x20AC;&#x201D; was hard to find. So here we are, more than $10 million poorer in cash and opportunity costs, yet we remain a state in comeback mode. We will survive this. We always do. I truly donâ&#x20AC;&#x2122;t believe Michigan voters are opposed to paying to fix our

roads. I encourage our legislators to pick up the pieces and rededicate their efforts to creating a viable plan that solves the problem simply, and once and for all. In the meantime, schools and local governments need help, too. Under the auspices of Proposal A and the Headlee Amendment, they are not generating anywhere near the revenue they need to perform their basic functions. Most of them have already squeezed all the blood out of their rock and are one sinkhole or failed boiler away from insolvency. School funding, for example, is based on a dollar amount per

student. Yet birth rate projections are showing a continued decline in future students, while at the same time there is more competition for students via charter schools, cyberschools and schools of choice. Each one of these creates a win for somebody and a loss for somebody else. To me, schools of choice is the equivalent of Sterling Heights stealing a business from Warren and calling it economic development. Is there a true winner? Looking ahead, letâ&#x20AC;&#x2122;s see if itâ&#x20AC;&#x2122;s possible to fix the roads and the funding for schools and local governments in separate bills. Soon. äĄ˛

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Quicken bond sale capitalizes on high-yield demand By Jody Shenn and Laura Keller Bloomberg News

Quicken Loans Inc.’s successful $1.25 billion bond offering May 1 reflects the appetite of the market for higher-yielding investments with less than stellar ratings, experts say. The offering was Quicken’s first bond issue, and all but $250 million of it will flow to the parent company controlled by Dan Gilbert, Rock Holdings Inc. While junk-bond investors typically have extracted a premium from companies that borrow to pay

their owners, buyers snapped up Detroit-based Quicken’s 5.75 percent, 10-year securities at a yield that’s in line with the average for the entire market, according to data compiled by Bloomberg. Gilbert is tapping into demand for high-yielding assets that have become increasingly sparse as central banks worldwide seek to spur growth by suppressing interest rates. Buyers are demonstrating faith that Gilbert, who owns 77 percent of Rock Holdings, will use the proceeds wisely. “It’s a sign of the times,” said Jody

Lurie, an analyst at Janney Mont gomery Scott LLC, which oversees $61 billion. “While this isn’t the most attractive market for isDan Gilbert: suers we’ve seen Found buyers eager over the past few for Quicken bonds years, it’s near there. And as a result, companies are saying, ‘Let’s issue debt and give back to our shareholders.’” Lurie compared the offering to a

February issue by fast-food chain Nathan’s Famous Inc. That company raised money for a shareholder payout with its first junk bonds, selling $135 million of secured five-year debt at a 10 percent yield. The bonds have done well for investors, producing a total return of 3.6 percent since they were issued in February, more than double the return for other CCC+ rated notes with similar maturities. The Nathan’s debt now yields 8.34 percent, according to Trace, the Financial Industry Regulatory Association’s bond-price reporting system.

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Companies have paid an average 7.64 percent on securities issued since January 2014 to pay owner dividends, compared with average yields of 5.98 percent during that period for all U.S. junk bonds, Bloomberg data show. Quicken’s bonds are rated Ba2 by Moody’s Investors Service, the second-highest junk rating, and BBB- by Standard & Poor’s, its lowest investment-grade ranking. Credit Suisse Group AG and J.P. Morgan Chase & Co. were the bond’s lead underwriters. Aaron Emerson, a spokesman for Detroit-based Quicken, declined to comment on the offering. Gilbert, worth $4.4 billion as measured by Bloomberg Billionaires Index data, has been earning the confidence of debt investors as Quicken grew, which allowed his Rock Ventures LLC to build his empire of casinos, buildings in downtown Detroit and companies ranging from an online university to a mobile jukebox app. The bond sale is providing a rare glimpse of that business. Quicken quadrupled first-quarter net income to $312 million from a year ago, earning $706 million for the 12 months that ended March 30, according to an offering document obtained by Bloomberg. It had generated $1.6 billion in 2013 when more home owners were refinancing their mortgages, the document shows. With $5.7 billion of net income from August 2011 through March 30, the company has recorded an average gain-on-sale margin — or the amount it’s able to book on mortgages it makes and sells — of 3.6 percent, according to the document. It posted the same level of margin in the first quarter of 2015, compared with 2.1 percent and 0.8 percent for Wells Fargo & Co. and J.P. Morgan Chase & Co., the two biggest mortgage lenders. The company, which has $2.7 billion of shareholder equity, pays $3.3 million a year for naming rights for Cleveland’s Quicken Loans Arena. Gilbert has been winning bondholder confidence through his other ventures as well. After a firm he controls bought out a stake owned by Caesars Entertainment Corp. in a joint venture known as Rock Gaming, the equity was contributed to Gilbert’s bond-issuing entity ROC Finance LLC, according to a March regulatory filing and a research note by Jefferies Group LLC analyst John Maxwell. Another firm controlled by Gilbert this month lent ROC Finance money to refinance its most senior loan. About half of the replacement loan was made junior to debt owned by investors, Maxwell said in a report. The $915 million of gaming debt rose after news that Quicken would pay a dividend to Rock, a sign investors hope to benefit from Gilbert’s largesse, Maxwell said by telephone. “That provided some further implied support that he is unlikely to back away,” giving “bondholders comfort to continue investing,” Maxwell said. 䡲

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SPECIAL REPORT

AMY HAIMERL Reporter’s Notebook ahaimerl@crain.com TWITTER: @haimerlad

SECOND STAGE

20 in their 20s winner shows staying power When Alex Riley was inducted into the Crain’s 20 in their 20s class of 2013, his company, MeritHall Staffing, was booming, and Riley projected $4 million in revenue. But initially, he planned to build a tech company that would connect contractors with skilled tradespeople. “But I realized I wasn’t as good at software development as I thought,” he said. Instead, Riley Alex Riley: SBA’s restructured as a Young Entrepreneur construction for Michigan staffing company . The gamble paid off and gave Riley his first lesson in how to be agile to grow. His next inflection point came in late 2013 when Detroit-based MeritHall landed a few contracts with landscaping and snow removal firms. That wasn’t its expertise, but “we executed when it mattered.” Today, landscaping and snow removal is 70 percent of revenue. Now Riley faces another pivot point as MeritHall becomes a fullservice support staff for its clients. Last fall Riley recognized that this winter looked to be as long and snowy as 2013’s, when the region ran out of salt. “There was a shortage of road salt. Our contractors were running out, prices were going up, and it was putting stress on their operations,” he said. Eager to avoid that, Riley acquired bulk road salt so his contractors would be stocked for the winter. “It was an eye-opening point in our company,” he said. “We realized we were more than just staffing.” In the coming year, Riley plans to expand MeritHall’s bulk materials division as well as do more resource management for his clients. “We want to be the all-in-one source they can go to,” he said. Last week, the U.S. Small Busi ness Administration named him its Young Entrepreneur of the Year for Michigan. “Alex is a dynamic young entrepreneur who has demonstrated a significant level of success,” said Gerald Moore, district director. “He has the entrepreneurial potential for long-term success. ” 䡲 Read updates on more former Crain’s 20 in their 20s winners at crainsdetroit.com — and prepare to celebrate the 10th class of honorees in our June 1 issue.

[GLENN TRIEST]

More than just the Buffalo wings have been wild for Michael Ansley and his Diversified Restaurant Holdings.Besides the very public growth of his restaurant company, he has had to digest a menu of adversities both financial and organizational. He even had to dodge a bullet — literally.Thankfully,it wasn’t fired from a gun.

On a wing and a scare Hot wings and burgers can lead to indigestion — ask the guy behind 2 restaurant chains By Gary Anglebrandt Special to Crain’s Detroit Business

ichael Ansley knows how hard it is to manage growth. His company owns 42 Buffalo Wild Wings franchise restaurants in the region, and Ansley is the founder of the booming Bagger Dave’s Burger Tavern chain. The holding company for the two chains, Southfield-based Diversified Restaurant Holdings Inc., now has 3,500 employees, compared with 2,000 three years ago. Revenue, too, has skyrocketed, from $77 million in 2012 to $128 million last year. That’s a lot of business to absorb — and the path hasn’t always been easy. Ansley, Diversified’s president and CEO, got his first taste of the restaurant business in 1995 when he and a partner

opened a Buffalo Wild Wings in Ypsilanti. The franchise was a new brand to most Michigan residents. It didn’t help that the spot he and his partner chose wasn’t very visible. It was behind the main drag downtown, away from the campus of Eastern Michigan University — which was a problem for a restaurant theme based on wooing college students with wings and beer. The neighborhood landmark was the nearby Deja Vu strip club. Workers at General Motors Corp.’s Willow Run factory provided business but formed a rowdy crowd, as did people from the bus station across the street. Fights broke out, customers were surly. Ansley once walked in on a crack deal in his bathroom. On other occasions, he got jumped and chased with a pipe wrench.

“We had federal agents dressed in Buffalo Wild Wings uniforms for a while, it got so bad,” Ansley said. “That was three years of hell.” One night a guy threw a bullet at him. This isn’t a figurative way of saying he was shot at. “Some guy one night at close range took a bullet out of his pocket and flipped it at me and said, ‘This is my ’hood and I’m coming back for you,’ ” Ansley said. “It was just a bad neighborhood.” Bearing a newfound lesson on the importance of location, Ansley left the partnership with plans to open Buffalo Wild Wings restaurants elsewhere. His first was in Sterling Heights, followed by Fenton and Novi. See ANSLEY, Page 12

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SPECIAL REPORT: SECOND STAGE

GROUP MEDICAL COVERAGE

ANSLEY,from Page 11: Growth isn’t for faint of heart The pace quickened from there, then accelerated with the 2008 launch of Bagger Dave’s in Berkley. Later that year, Diversified went public by selling shares over the counter. Into the frying pan

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At points along the growth curve, the company was out on a limb, forced to use whatever resources were available to get through the situation. One of the more stark examples came when Diversified was putting together Buffalo Wild Wings restaurants in Flint and Port Huron and a Bagger Dave’s in Novi at the same time. That time happened to be the second half of 2008, the onset of the Great Recession. The bank called while Ansley was in Florida at one of his restaurants and said it was pulling the financing. The restaurants already were under construction. Diversified was able to finance the completion of the restaurants using cash from its regular business, $800,000 raised through privateplacement sales of shares and $735,000 raised from selling shares publicly. But it didn’t have enough to cover much of the costs of the equipment that would be needed, such as kitchen gear. Those costs amounted to 25 percent of construction costs. At the last minute, Ansley turned to the costlier method of leasing equipment to get the restaurants what they needed in time for opening. “That Bagger Dave’s didn’t get an equipment lease until the day we opened,” Ansley said. He prayed that the restaurants would do well enough right off the bat to cover the leasing costs, not to mention payroll, because the company had just burned through its remaining cash. Other times were similarly awkward. The Buffalo Wild Wings corporation went public in November 2003. Seeking to boost its numbers after that IPO, the corporate office pushed Ansley to open as soon as possible a Clinton Township location he had under construction. To advance the schedule, he held staff training inside the building as it was being built, putting plastic over the windows in December and taking time out to power wash the parking lots as needed. When the downtown Detroit Buffalo Wild Wings had a few days to go before its opening in December 2012, the city demanded structural changes that would have been impossible to complete in the remaining time. “We weren’t going to get it open, and we had a VIP party and we had $5 million in this restaurant,” Ansley said. Diversified got past the problem in time for opening. But the expense of meeting the city’s demands, coupled with half of the company’s staff expressing no interest in moving downtown, put the brakes on previously announced plans to move its headquarters into

the building. Diversified ran into deeper headwinds in 2012 and 2013 as it juggled several large efforts at once. The company started 2012 with 28 restaurants and ended with 44, taxing its infrastructure. Diversified bought eight Buffalo Wild Wings restaurants and opened three others and also opened five Bagger Dave’s. At the same time, Diversified was gearing up to hit the public markets again through a listing on Nasdaq. Registering with the U.S. Securities and Exchange Commission and promoting the offering sent Ansley on tour in April 2013, giving 109 presentations in 19 cities in 16 states over two weeks. “Where do you have time to focus on the restaurants?” Ansley said. “And not only that, we have this baby brand, Bagger Dave’s, that wasn’t getting the attention it needed. And then we were hiring managers and acquiring managers, and we didn’t have the proper training in place.” These situations are to be expected when growing aggressively, said Duane Marshall, part owner of the Livonia-based consultancy EOS Worldwide, which has been working with Diversified. Entrepreneurs tend to be control freaks who might not react well to Duane Marshall: these moments, 20 percent of the he said. Accepttime, you’ll lose ing that they will happen is all part of the game. “Don’t go down without a fight, but there’s that 20 percent of the time where things won’t go your way,” Marshall said. Mark Sellers owns Grand Rapidsbased BarFly Ventures LLC, the parent company behind HopCat , a young, beer-emphasizing chain that also is adding locations at a fast pace. Two are under construction, and six are planned for next year. There currently are five HopCats. Buffalo Wild Wings is considered the “gold standard” of sports bar chains in the restaurant industry, and both Buffalo Wild Wings and Diversified are known for their aggressive growth, Sellers said. HopCat, he said, caters to a different crowd.

Sellers can relate to expansionary frustrations. The opening of his Detroit location last year was delayed from October to November, then to December after he ran into steel and elevator supply shortages, then permitting issues with the city, then a vendor dispute that developed into a lawsuit. Also, the contractor hired to make the wooden bars for the new restaurant took a $60,000 deposit and never did any work, Sellers claimed. The frustrations grew with each new problem. It didn’t help that he’d publicly announced each opening, only to have to announce delays later. “It was kind of embarrassing,” Sellers said. Marshall’s point about entrepreneurs’ need for control is true, Sellers said. “It’s been very difficult for me to accept.” Tweaking the sauce The impact of this flurry of activity could be seen in the numbers: Same-store sales growth at Diversified’s Buffalo Wild Wings locations fell to 1 percent, and some Bagger Dave’s locations were losing money. “Net promoter” scores — which tracks customer feedback — were falling, while employee turnover was increasing. New stores were not opening at target numbers. “I hadn’t been in this position before,” Ansley said. He and his COO, Jason Curtis, asked for advice from fellow restaurateurs, franchisees and the Michi gan Restaurant Association. Once the dust settled on the Nasdaq offering, Ansley and his team began instituting new practices that they hope will keep them out of the weeds during future busy periods. Instead of big monthly meetings of all the managers covering all topics, Ansley, Curtis and CFO David Burke split corporate duties and began holding one-on-one meetings every week with a limited number of direct reports. Ansley handles human resources, construction, real estate and marketing and holds weekly one-onone meetings with five people. This had the effect of getting people to open up more and improving overall communication. See Next Page

[ROBERT MATHEWS]

Mark Sellers,ownerofthe Grand Rapids-based chain ofHopCatbars,knows all about the challenges ofexpansion.The opening ofhis Detroit location last yearwas delayed bysupplyshortages,then permitting issues with the city,then a vendorlawsuit.

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SPECIAL REPORT: SECOND STAGE From Previous Page

At the big monthly meetings, â&#x20AC;&#x153;it was really hard to get people to talk in front of their peers,â&#x20AC;? Ansley said. â&#x20AC;&#x153;No one wants to admit theyâ&#x20AC;&#x2122;re doing something wrong. This is a lot more intimate, a lot more focused.â&#x20AC;? The company revamped its benefits and compensation policies, launched a corporate training program, hired a third party to manage employee assessments and began hiring industry professionals with experience at larger organizations, such as a food and beverage manager from the Red Robin chain. Consultants from the Disney Institute currently work with Diversified on its employee retention and recruitment. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;ve started taking (human resources) a lot more seriously,â&#x20AC;? Ansley said. He also takes more time to hire managers and asks trusted people outside the company to interview candidates, injecting a fresh set of eyes into the process. Outsourcing has been another tool for Diversified. Most accounting, IT and HR functions are handled by professional service companies. Marketing gets support from the budget of the Buffalo Wild Wings Inc. franchisor company. Diversified has had to change providers of these services, so itâ&#x20AC;&#x2122;s not without its management demands. But Ansley said outsourcing has made things a lot easier. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re a restaurant company, No.

1,â&#x20AC;? he said. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re not necessarily an IT company, weâ&#x20AC;&#x2122;re not necessarily an HR company, weâ&#x20AC;&#x2122;re not necessarily an accounting company. ... Our HR department currently only has three people there.â&#x20AC;? EOS Worldwide advises Diversified to work on no more than seven goals for the next 90 days. That way, only the most important priorities rise to the top, and they continually shuffle as they are addressed. Another is creating specific accountability charts â&#x20AC;&#x201D; perhaps not the most heart-racing task at a rapidly growing company. But when a crisis develops, the first order of business shouldnâ&#x20AC;&#x2122;t be figuring out whoâ&#x20AC;&#x2122;s responsible for doing what. Spreading wings The growth didnâ&#x20AC;&#x2122;t stop during this adjustment period. The Bagger Daveâ&#x20AC;&#x2122;s store count increased by six last year; on the Buffalo Wild Wings side, Diversified bought three restaurants and opened another three. All these new restaurants require capital, and Diversified has relied on a number of tactics to keep the funds flowing. One is the public markets. The Nasdaq offering raised $31.9 million, which the company used to service debt and bolster its cash reserves to $20 million. Another is debt, which Diversified has used throughout its growth. The company maintains a $20 million to $25 million line of credit for development. Up to 70 percent of the fund-

ing for each new restaurant comes from this line and the rest from cash. Right now Diversified has $62 million in debt, which Ansley said is in line with the companyâ&#x20AC;&#x2122;s self-imposed limits on the ratio of debt to earnings before interest, taxes, depreciation and amortization. In December, the company picked up $25 million in cash through the sale of 11 properties that house its restaurants. The restaurants will stay and Diversified will pay rent. The company took a $500,000 loss because of the sale, which crimped last yearâ&#x20AC;&#x2122;s profits. But Ansley said it was worth it to get the cash needed for further expansion. â&#x20AC;&#x153;Too many times we have been in no-cash situations. I donâ&#x20AC;&#x2122;t ever want to be there again,â&#x20AC;? he said. â&#x20AC;&#x153;Cash is king. If a recession hits, we always have cash.â&#x20AC;? Diversified ended last year with $18.7 million in cash, up from $9.6 million when the year began. At times Diversified has come across what it thought were great locations to build a restaurant but found the price too expensive. So it has built three small strip malls, allowing it to cover costs through leases to other businesses. This move alleviates construction cost pressure but adds the job of landlord to the companyâ&#x20AC;&#x2122;s list of tasks and speaks to the balancing acts companies sometimes must perform when growing quickly. The work doesnâ&#x20AC;&#x2122;t end when a restaurant is built. Each undergoes a â&#x20AC;&#x153;refreshâ&#x20AC;? every five years and a full remodeling every 10. All told, the heavy real estate costs led to $36 million in capital expenditures last year, and Diversified has budgeted $40 million for this year. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re probably going to have to learn to manage that a lot better because we really donâ&#x20AC;&#x2122;t want to go back to the market,â&#x20AC;? Ansley said. â&#x20AC;&#x153;Because when you go back to the market, you dilute your shareholders.â&#x20AC;? Real estate expenses contributed to a $1.3 million net loss last year, compared with profits of $134,000 in 2013 and $275,000 in 2012. Ansley predicts profitability this year, saying last yearâ&#x20AC;&#x2122;s expenses that led to the loss were one-time costs. Diversified plans to keep its expansion train rolling at a clip of five or six Bagger Daveâ&#x20AC;&#x2122;s and three or four Buffalo Wild Wings a year. The company expects to have 52 Buffalo Wild Wings locations and up to 51 Bagger Daveâ&#x20AC;&#x2122;s locations by the end of 2017. Bagger Daveâ&#x20AC;&#x2122;s, which took the biggest hit when things got busy, underwent a marketing facelift and a new menu that came out in early 2014. Same-store sales figures rose 8 percent during the first quarter of this year, compared with 1.2 percent during the same quarter last year and 5.8 percent for the fourth quarter of 2014. Financing, real estate and staffing remain the top priorities. Ansley said his company hasnâ&#x20AC;&#x2122;t always done everything right, but it continues to improve along the way. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re just trying to get better at it.â&#x20AC;? äĄ˛

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SPECIAL REPORT: SECOND STAGE

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Ecotelligent Homes LLC uses testing equipment to detect energy and temperature flows in homes. Homeowners use the Farmington Hills company’s services to better understand why certain parts of their homes are too hot, too cold or too drafty. The diagnostics then help people decide whether to replace windows or a furnace. In 2013, Ecotelligent branched into commercial buildings. The residential side of the business peaks in summer and winter, so adding commercial work would even out the workload. Problem: The company was taken aback by the long waits to get paid on commercial accounts. Some took more than 100 days to pay up. “Those projects take a lot longer to mature and even longer Amanda to pay,” said Godward: Tested Ecotelligent’s new revenue source owner, Amanda Godward.

Ecotelligent Homes LLC Location: Farmington Hills Description: Home energy efficiency services Owner: Amanda Godward Employees: 9 Revenue: $500,000 in 2014

Most worrisome was that the residential side of the business was taking a dip. Godward had been so busy dealing with the commercial business that she hadn’t had time to generate new sales leads. As a result, the overall quality and efficiency of the residential business was suffering. Losses on the residential side offset gains on the commercial side, making the endeavor a wash. What started as a plan to get busier during slow times was now damaging the company’s core peak-season work. Solution: By mid-2014, Ecotelligent had to quash the commercial work and get back to square one. “Instead

of fighting the cash flow battle, we decided to get back to our roots on the residential side,” said Godward, who founded the company in 2009. Ecotelligent wrapped up the existing commercial work and started referring potential clients to companies Godward trusted. Within two months, Ecotelligent received all outstanding payments and closed the accounts — fortunately, just before another busy residential season began. The commercial effort wasn’t a total waste of energy, though. Ecotelligent has used its commercial contacts to grow its residential business by offering home energy audit programs to employees of those companies. Godward hasn’t ruled out making another attempt at commercial work down the road. Risks and considerations: “For me, the risk was employee morale,” Godward said. After getting the team excited and on board with the expansion into commercial work, Godward had to walk everyone back and admit defeat. Two or three employees had to be let go. “Laying them off can have a bad impact,” she said. Godward had shared numbers for the project throughout its life span, a decision that helped lessen the blow. “They knew targets weren’t being met,” she said. Expert opinion: Almost all entrepreneurs get distracted by what Gino Wickman, founder of EOS Worldwide in Livonia and author of books on entrepreneurship, calls “shiny stuff” that appears lucrative Gino Wickman: but ultimately Max out core biz detracts from the before “shiny stuff” core business. “Most of the time, it is a mistake,” Wickman said. He advises companies to exhaust all opportunities in their core business before looking elsewhere for growth. When the rare piece of “good shiny stuff” comes along that makes sense to pursue, the business has to be prepared to commit new resources — people and money — toward that pursuit. If the goal is to reach $20 million in revenue and that can be reached through the core business, then that’s what should be done. When an attempt fails, it’s good to do as Ecotelligent did and pull back as gracefully, honestly and quickly as possible, avoiding burning bridges on the way out. Then, Wickman said, “do an autopsy” to see what could have been done better and what drove the decision in the first place. 䡲

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MARY KRAMER Publisher’s Notebook mkramer@crain.com

Tesla spotlights state’s tool-and-die heritage So what does it mean that Elon Musk bought a Grand Rapids tooland-die shop? For starters, Riviera Tool will be renamed Tesla Tool & Die. Talk about bringing a bit of Silicon Valley cachet to a city whose national reputation should rightly be the hub of the innovative and designcentric office furniture universe. Second, as our sister publication Automotive News noted last week, by owning a piece of its production process, Musk can accelerate production of Tesla’s electric vehicles. It also may be a nod that Silicon Valley is gaining a greater appreciation of how complicated the supply chain is for the hightech machinery we call cars. Every product launch takes new tooling. “It’s a strategic move,” says Glenn Stevens, vice president of MICHauto, a statewide industry advocacy group founded by the Detroit Regional Chamber. “There are 1,000 tool-anddie facilities in Michigan. That does not exist on the West Coast.” In fact, Stevens says, Tesla has a reported 56 suppliers in Michigan and bought $170 million worth of components in 2014. “Tesla is one of the most innovative and disruptive companies out there, and to build a world-class car, they need to come to Michigan,” Stevens said. Asked by a reporter whether he would consider setting up an assembly plant in Michigan, Teslafounder Musk responded: “It’s not out of the question. Maybe Michigan shouldn’t stop us from selling cars here. That would be a nice gesture.” Musk was referring to a 2014 law that bars Tesla from selling vehicles directly to consumers. Riviera Tool now has global auto customers — Ford, GM, Fiat Chrysler, Nissan, Daimler and BMW. Its largescale custom metal stamping die systems are used in the production of sheet metal parts and assemblies. Big picture? Maybe Musk’s appreciation for what it takes to make things — the art of design and manufacturing — could introduce other tech entrepreneurs to the strengths that Michigan has built. Those strengths were created by entrepreneurs like Clare Jarecki, whose Jarecki Machine and Tool Co. in Grand Rapids was once the largest independent tool-and-die manufacturer in the world. Jarecki died in 2004, but you can trace a kind of family tree among tooling companies in Grand Rapids; in many cases, founders either worked for Jarecki or companies founded by former Jarecki employees.

With that spring ritual — the weekend slog up and down I-75 — about to rev up, you’d be excused for thinking there has to be a better way to get up north. Could that way be a railway?

[NATHAN SKID/CDB]

[ISTOCK PHOTO]

They think it can … they think it can … By Amy Lane Special to Crain’s Michigan Business

t’s an idea with appeal: Riding the rails north from Ann Arbor to Traverse City, maybe for a summer weekend — and no highway congestion to contend with, there or back. The Michigan Land Use Institute hopes to make that a reality. The Traverse City-based nonprofit is spearheading a campaign to explore passenger rail service on an approximately 240-mile stretch of track between the two cities — an “A2TC” initiative that’s generated interest and

discussion as well as about $18,700 raised in a Land Use Institute crowdfunding campaign in March. “There’s a lot of work to be done and questions to be answered, and our goal is just to keep moving this forward to get the questions answered,” said Jim Bruckbauer, a policy specialist at the Land Use Institute. It’s a 10-year vision to provide a new and more environmentally friendly option to travel the state and boost the downtown economies of communities along the route, while speaking to public sentiment for passenger rail

connecting Traverse City and Southeast Michigan. At statewide community forums in 2010 while the Michigan Department of Transportation was developing a state rail plan, a consistent and top theme that emerged was that Michigan’s passenger rail system should include a Traverse City-to-southern Michigan connection, said Liz Treutel, a policy associate at the Michigan Environmental Council — which, with the Michigan Association of Railroad Passengers, convened the meetings. See TRAIN, Page 16

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CRAIN’S MICHIGAN BUSINESS

TRAIN, from Page 15: Is rail to Traverse City a sight for slow I’s?

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Feedback ran both ways, Treutel said. People in northern Michigan wanted easier access to downstate, and tourists were interested in rail service heading north. Conducting a feasibility study for a new route to Traverse City, among other destinations, became a recommendation of the 2011 state rail plan. “If it’s done, we would want to do it in partnership with others that are looking at it,” like the Land Use Institute, said Tim Hoeffner, director of MDOT’s Office of Rail. The Land Use Institute has been discussing A2TC with MDOT and other organizations and potential stakeholders and is looking at how a feasibility study could proceed next year to answer many unknowns — such as potential ridership, cost of track improvements, operating costs and structure, and travel time between communities. Track is ready … almost The track, predominantly stateowned and used for freight, is operated by the Great Lakes Central Railroad. About 95 percent of the tracks are in condition for passenger service. Small sections, like one outside Traverse City, only meet Federal Railroad Administration standards for freight use and would need to be improved. In addition, controls that would allow freight operations and passenger trains to run at the same time would be federally required, said Chris Bagwell, Great Lakes Central’s executive vice president and general manager. He did not have a cost estimate but said installing what are known as positive train controls would involve “a full GPS system of the railroad” and improving locomotives and grade crossings so that if two trains are approaching each other, they would be able to communicate and brake. The railroad is working with the Land Use Institute and providing

information, Bagwell said. With MDOT and the institute, Great Lakes Central could run a test ride from Ann Arbor to Traverse City next summer, assessing the track and the time it would take. MDOT’s Hoeffner said additional questions include how much people would pay for tickets. “Most passenger service does not cover the operating cost from what the passengers pay,” he said, “so where would the operating subsidy come from? “That said, it’s an interesting idea, and it is the type of thing that we work with the local communities on. If they have a vision or a concept, then we’re here to work with them on it.” The Michigan Environmental Council is project manager on a $100,000 study examining another passenger rail route — connecting Detroit, Lansing, Grand Rapids and Holland. The council has been discussing A2TC with the Land Use Institute and hopes to be involved, perhaps contributing staff time or knowledge from the “Coast to Coast” study, Treutel said. Also offering to share information is the Ann Arbor Area Transportation Authority, which is conducting a feasibility study on a host of brick-andmortar issues associated with a nearly 27-mile proposed commuter service connecting Howell and Ann Arbor, said Michael Benham, a strategic planner for the authority. That stretch of track is part of the line that goes north to Traverse City. The A2TC route envisions several community stops between Ann Arbor and Traverse City and a possible jog up to Petoskey. One stop could be Mount Pleasant. That city’s community services and economic development director, William Mrdeza, sees many possible benefits, including a new way for students to commute to Central See Next Page

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CRAIN’S MICHIGAN BUSINESS From Previous Page

Michigan University, an asset to downtown development and a selling point to attract residents and tourism.

Up north by rail: The train of thought The Michigan Land Use Institute is behind a campaign for a 240-mile rail line that would link Southeast Michigan to Traverse City and possibly Petoskey.

“And obviously all of that brings in some economic impact to the community as well,” Mrdeza said. “I think we’re really interested in seeing where this might go and if we can be a part of determining the feasibility.” With some of its crowdfunding money, the Land Use Institute expects this summer to create videos showing the impact the service might have on communities.

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In Traverse City, community transportation advocate Kimberly Pontius, executive vice president of the Traverse Area Association of Realtors, said A2TC service could help attract clients such as second-home buyers and cater to executives who opt to live in the Traverse region and commute to Southeast Michigan. The rail line could benefit economies on both ends of the route, he said. That includes a boost to tourism. Southeast Michigan is the Traverse City area’s biggest market, other than the state as a whole. Connecting Southeast Michigan populations to northern destinations via rail is worth looking at, said Brad Van Dommelen, president and CEO of Traverse City Tourism. Train travel, Van Dommelen said, “is so much more leisurely and enjoyable … instead of a grind on the highways” and would add to the experience of coming north.

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“Normally, your enjoyment of the weekend doesn’t begin until you get to your destination,” Van Dommelen said. “Traveling by

train, your experience, your enjoyment begins the moment you step on the train. It becomes part of the adventure.” 䡲

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CRAIN’S MICHIGAN BUSINESS

Backers to launch GR ‘waterfront metropolis’ plan By Rod Kackley Special to Crain’s Michigan Business

A coalition calling itself GR Forward is less than 30 days away from laying out its strategy for “a collection of big, bold ideas to turn Grand Rapids into a waterfront metropolis.” The Grand River “is our best asset, and we want to make sure we are maximizing the opportunities along it by looking at ways to integrate not only development but recreation activities along the banks of the river and in the river itself,” said Tim Kelly,

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Grand Rapids leaders have a grand ambition for the Grand River. planning manager for Downtown Grand Rapids Inc. GR Forward’s vision of a new

Grand Rapids would be tied to and anchored by about four miles of the Grand River, Michigan’s longest river. Kristopher Larson, president of Downtown Grand Rapids, said GR Forward is a “comprehensive planning process” led by his own organization — an alliance of downtown business owners — the city of Grand Rapids, the Grand Rapids Public Schools and resident organizations such as Grand Rapids Whitewater, the group pushing to re-create the rapids in the Grand River.

GR Forward’s official agenda includes bringing more retail, services and diversity to downtown; implementing a transportation system in which motorized vehicles would share space with bicycles and pedestrians; expanding job opportunities; encouraging the creation of more businesses while retaining the current ones; and creating parks and public spaces in downtown. “In some ways, this is our way of telling the development community where our priorities are so their

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investments can more logically align with what the public sector is doing,” Kelly said. Jay Steffen, the city’s assistant planning director, said the GR Forward plan should be released by the end of May. Final approval by the Grand Rapids City Commission is expected in mid-October. The plan must answer two key questions: Where the money for the action plan would come from and who “is going to push this forward,” Larson said. Some developers, architects and bankers already are answering the second question. “There is a huge level of commitment to move this forward,” said Monica Steimie, the development director of 616 Development, an urban real estate development firm based downtown. “Many of those conversations have already started.” Grand Rapids officials have begun working on the GR Forward plan, too, by planning to buy a major parcel of riverfront property. An early adopter of GR Forward is Sam Cummings, managing partner of CWD Real Estate Investment. “This is what we were dreaming about 20-some years ago when we had an eight-hour city max,” Cummings said. “My friend (former Grand Rapids Mayor) John Logie used to say after 5 o’clock in downtown Grand Rapids, you could roll a bowling ball down the sidewalk, secure in the knowledge you wouldn’t knock anybody over.” Cummings said downtown’s population needs to grow by 12,000 to attract the retailers and other businesses that would attract more residents. Larson said GR Forward has heard ideas such as creating space for “adventure programs”; a continuous river trail on both sides of the Grand; creating a landscape gallery of public art; improving access for boaters, kayakers and others who want to get into the water; and designing space for “multiseasonal activities.” Grand Rapids is hardly the first city in Michigan to look at reclaiming its waterfront. Reclaiming the Detroit River has been on the Motor City’s agenda for some time; the Southwest Michigan community of Allegan is creating a new downtown urban development on the banks of the Kalamazoo River; and Muskegon economic developers are working on recreational and residential improvements along their Lake Michigan shoreline. But he said Grand Rapids is doing more than coming in at the tail end of an economic developer’s version of follow the leader. Steffen said GR Forward is looking at 15-20 sites that could be opened up to people who wanted to recreate on the river’s banks. Larson of Downtown Grand Rapids said the city’s recognition of the importance of the Grand River is long overdue. “We spend years with our backs to the river,” he said. “This is a complete retrofit.” 䡲

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sales of Cadillac, Chevrolet, ACDelco products; parts imports and sales, and aftersales Top executive: Sumito Ishii, managing director

JAPAN

[ALTAIR ENGINEERING INC.]

Altair Engineering employs 85 in three offices in Japan,including one in Tokyo.

Altair Engineering Inc. Based: Troy Operations: Offices in Tokyo, Nagoya and Osaka Employees: 85 Products/Services: Proprietary software and services, which include engineering simulation software, software for on-demand computing, software for industrial design, and engineering services Top executive: Masatomo Ayame, country manager Clients: Toyota, Honda, Nissan, Mazda, Subaru, Mitsubishi Heavy Industries, Canon, Sony, ClassNK, Suzuki, Toshiba

Autoliv Inc. Based: Auburn Hills Operations: Headquarters in Yokohama and technical centers in Nagoya, Atsugi, Hiroshima, Taketoyo and Kasumigaura Employees: 1,500 Products: Airbags, seatbelts, steering wheels and inflators Top executive: Brad Murray, president of Autoliv Japan Clients: Toyota, Honda, Nissan, Mazda, Mitsubishi, Suzuki, Subaru, Daihatsu, Isuzu

Belfor Holdings Inc. Based: Birmingham Operations: Headquarters in Tokyo with branch offices in Nagoya, Osaka and Fukuoka Employees: 35 Products: Commercial and industrial fire, smoke and waterrestoration services; document and data recovery; mold remediation; electronics and machinery restoration; and environmental services Top executive: Naoto Takigawa, managing director More information: Belfor Japan recently restored a saké manufacturer, Nishiyama Syuzojyo

ith a 2014 gross domestic product of $4.7 trillion, Japan was the world’s fourth-largest economy last year. The country’s manufacturing sector suffered a devastating blow when the 9.0 magnitude earthquake and the resulting tsunami hit in 2011. A continuing challenge for Japan is its dependence on imported raw materials and fuels, but the government’s decision to postpone a further increase to the county’s consumption tax has helped with economic recovery; sales of luxury goods are up 20 percent since 2012, Bloomberg reported. Japan’s major exports include motor vehicles, semiconductors, plastic materials, auto parts, iron and steel products, and powergenerating machinery. Its major export partners are the United States (18.8 percent), China (18.1 percent), South Korea (7.9 percent) and Hong Kong (5.2 percent). The country’s major imports include liquid natural gas, clothing, coal, audio and visual apparatus and petroleum.

Lear Corp.

Tokyo Crain’s World Watch report showcases companies that are leaders in global markets and those that are expanding. Each World Watch features a different country. If you know of a Michigan company that exports, manufactures abroad or has facilities abroad, email Jennette Smith, managing editor, at jhsmith@crain.com.

Chrysler Group LLC (corporate entity in Japan is FCA Japan Ltd.) Based: Auburn Hills Operations: Headquarters in Tokyo, vehicle preparation center in Toyohashi and a parts distribution center in Yokohama Employees: 100 Products/Services: Sales of Alfa Romeo, Chrysler, Fiat, and Jeep models Top executive: Pontus Häggstrõm, president and CEO

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Products/Services: Performance plastics, water products and services, agriculture, electronic materials and building products and services Top executive: Peter Jennings, president of Dow Chemical Japan and Korea

Federal-Mogul Corp. Based: Southfield Operations: One manufacturing facility and one administrative and

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sales office in Yokohama Employees: 200 Top executive: Tomoyuki Okubo, vice president of Sales for Japan, Federal-Mogul Powertrain

General Motors Co. Based: Detroit Operations: One office in Tokyo and a vehicle processing center in Zama Employees: 40 Products/Services: Import and

Domino’s Pizza Inc. Based: Ann Arbor Operations: Headquarters in Tokyo and 300 stores throughout the country Employees: 1,000 Products/Services: Pizza; chicken; bread sides; specialty items such as soups, fried chicken, popcorn shrimp and risotto Top executive: Scott Oelkers, president of Domino’s Pizza Japan Other information: There is no Japanese word for “pepperoni”; unique Japan pizza toppings include zucchini, eggplant, corn, mayonnaise, snow crab and shrimp.

MSX International Inc. Based: Detroit Operations: One office in Tokyo Employees: 40 Services: Serving its automotive Retail Network Solutions customers, including dealer sales, aftersales, technical training, training academy management, dealer competencies assessment, dealer mystery shopping, standard audits, process improvement coaching and warranty services Top executives: Soichiro Nagai, operations manager for MSXI Japan; Nick Coyle, general manager for MSXI Japan; Xavier Vandame, vice president for MSXI Asia-Pacific Clients: Audi, BMW, Citroën, Jaguar Land Rover, Peugeot, Renault

TI Automotive Ltd. Based: Auburn Hills Employment: 160 Operations: One manufacturing plant in Gunma and sales offices in Nagoya and Yokohama Products/Services: Fuel delivery systems and sales operations Top executive: Michiaki Sasaki, president of TI Automotive Japan Clients: Nissan, Honda, Toyota, Mitsubishi, Mazda, Suzuki

Ziebart International Corp.

Dow Chemical Co. Based: Midland Operations: Headquarters in Tokyo, one development center in Yokohama, one laboratory in Ogori and six manufacturing plants in Soma, Niigata, Nagoya, Kanuma, Sapporo and Kasaoka Employees: 700

Based: Southfield Operations: Three administrative/ technical facilities primarily for sales, engineering and customer support in Hiroshima, Kariya and Yokohama Employees: 75 Services: Engineering and sales support for electrical and seating businesses Top executive: Jay Kunkel, president of Asia Pacific Operations Clients: Mitsubishi, Nissan, Honda, Mazda, Toyota

[BELFOR HOLDINGS INC.]

A BelforJapan technical specialist spray-cleans electronics in the Tokyo facility to restore them after a fire.

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CRAIN'S LIST: MICHIGAN DEFENSE CONTRACTORS Ranked by 2014 value of new contracts Rank

Company Address Phone; website

Top executive

Value of new Dept. of Defense contracts 2014 ($000,000) Contracting agency

Principal place of work

Products or services provided

General Dynamics Land Systems 38500 Mound Road, Sterling Heights 48310 (586) 825-4000; www.gdls.com

Gary Whited president

$989.4

Defense Contract Management Agency, Canadian government

Sterling Heights

Military armored vehicles, tank and tank component manufacturing, combat assault and tactical vehicles

Department of the Army

Sterling Heights

Development of a Future Fighting Vehicle (FFV) system.

MTU America Inc. 39525 MacKenzie Drive, Novi 48188 (248) 560-8888; www.mtu-online.com

Mark Signorelli VP and general manager, combat vehicles Matthias Vogel president and CEO

607.0

BAE Systems Inc. 34201 Van Dyke Ave., Sterling Heights 48312 (586) 795-2220; www.baesystems.com

180.0

Department of the Army, Navy and Department of the Coast Guard

Loc Performance Products Inc. 13505 N. Haggerty Road, Plymouth 48170 (734) 453-2300; www.locperformance.com

Louis Burr president

170.0

Tacom

AAR Manufacturing Inc. 201 Haynes St., Cadillac 49601 (231) 779-4928; www.aarcorp.com

Lee Krantz general manager

133.0

Department of the Air Force

FutureNet Group Inc. 12801 Auburn St., Detroit 48223 (313) 544-7117; www.futurenetgroup.com

Perry Mehta president and CEO

94.3

Multiple government agencies

Lowe Campbell Ewald 2000 Brush St., Suite 601, Detroit 48226 (586) 574-3400; www.lowe-ce.com

Jim Palmer CEO

85.0

Department of the Navy

Gregg Williams chairman, president and CEO

45.0

Department of the Air Force

Williams International Co. LLC 2280 E. West Maple Road, Commerce Township 48390 (248) 624-5200; www.williams-int.com

John Rakolta Jr. chairman and CEO

41.3

Walbridge Aldinger Co. 777 Woodward Ave., Suite 300, Detroit 48226 (313) 963-8000; www.walbridge.com

U.S. Army Corps of Engineers, Naval Facilities Engineering Command

General Electric Aviation Systems LLC 3290 Patterson Ave. SE, Grand Rapids 49512 (877) 432-3272; www.geaviation.com

David Joyce president and CEO

29.3

Department of the Navy

Manufactures large diesel engines, propulsion and drive systems.

Plymouth

Machining and assembly of driveline, suspension and engine components for military and off-road vehicles

Cadillac

The repair and production of 463L cargo pallets.

Continental U.S.

Facility repair, renovation, conversion, construction and maintenance services; environmental and IT services

Detroit

Advertising services

Walled Lake; Ogden, Utah Develop turbine engines

Virginia Beach, Va.; Construction of federal facilities, automotive Jacksonville, N.C.; Ft. Bragg, manufacturing plants, higher education N.C. facilities, airport terminals, hospitals and industrial buildings Clearwater, Fla. Support for the stores management system and control system converter for the F/A-18 aircraft

This list of leading defense contractors is an approximate compilation of companies headquartered in Michigan with new contracts with the U.S. Department of Defense. Information was provided by the companies, U.S. Federal Procurement Data System and U.S. Department of Defense. Awards may be greater than annual revenue because of disbursement over a number of years. It is not a complete listing but the most comprehensive available. Actual revenue figures may vary. NA = not available.

For an expanded list, go to crainsdetroit.com/section/data_lists

LIST RESEARCHED BY SONYA D. HILL

Spotlight: Significant defense contract wins and losses over past 30 years 1985 䡲 AM General LLC, then

headquartered in Livonia, rolls out the first production units of the High Mobility Multi-Purpose Wheeled Vehicle, or Humvee, under a $1.2 billion contract awarded in 1983. The company relocates its headquarters to South Bend, Ind., in 1986 but maintains its engineering and product development center in metro Detroit.

1987 䡲 Bruce Burton founds the former

Burtek Inc. as a startup consulting and engineering services contracting firm in Grosse Pointe Park. The company, which later moved to Chesterfield Township, develops an expertise in modifying and equipping trucks.

1990 䡲 The former Electric Fuel Corp.,

now Arotech Corp. (Nasdaq: ARTX) is founded and becomes public under its original name in 1992. Arotech, based in New York City for many years, acquired First Ann Arbor Corp. or FAAC Inc. in 2004 and relocated its headquarters to Ann Arbor.

1991 䡲 Operation Desert Storm, Jan. 17-Feb.

28: The Persian Gulf War to liberate occupied Kuwait from Iraqi forces creates a minor uptick in wartime equipment purchases through the U.S. Army Tank Automotive Command in Warren. Desert Storm also leads to

some contracts for postwar military and civilian vehicles in Kuwait and Saudi Arabia for Sterling Heights-based General Dynamics Land Systems and the Detroit 3. But these are not enough to offset a slump in U.S. defense spending during much of the 1990s.

1997 䡲 Tacom in Warren formally closes

the Detroit Arsenal Tank Plant and relocates some command functions off-site. The plant, designed by Albert Kahn, was in use from 1940 to 1996 and had been operated by Chrysler Defense and later General Dynamics. The city of Warren takes over the shuttered property in 2001 and redevelops it for private use.

2000 䡲 The Army awards a joint venture of General Dynamics and General Motors Corp. a contract estimated to be worth $4 billion for what will become the Stryker family of eightwheel combat vehicles. It is the first new major armored vehicle contract award since BAE Systems Inc.’s Bradley armored vehicle in the early 1980s and represents a priority shift from tracked to wheeled vehicles for a more agile force.

䡲 Adaptive Materials Inc., a

producer of portable fuel cells, is founded in Ann Arbor by CEO Michelle

Crumm, husband Aaron Crumm and John Holloran, who was Aaron Crumm’s adviser while Crumm pursued a Ph.D. at the University of Michigan. The company was later acquired by U. K.based Ultra Electronics Holdings.

2001 Sept. 11 terrorist attacks redefine U.S. foreign policy and defense procurement. Army contracts awarded through Tacom climb from under $6 billion in fiscal 2000 to $8.2 billion by fiscal 2003 and increase almost every year afterward to a peak of $30.5 billion in fiscal 2008.

2003 䡲 Arlington, Va.-based BAE Systems,

which has maintained a modest metro Detroit presence since 1979, moves its local offices from Chicago Road in Warren to Sterling Heights.

䡲 Formal launch of Future Combat

Systems, a 12-year Army weapons technology modernization program, with Chicago-based Boeing Co. as lead systems integrator and General Dynamics and BAE splitting the $87 billion Manned Ground Vehicles program, to field a family of new tracked armored vehicles sometime after 2015.

2006 䡲 The Michigan Economic

Development Corp. launches a

predecessor version of what is now the Michigan Defense Center to coordinate defense contracting for small and midsize businesses. The nonprofit Michigan Homeland Security Consortium is also formed as a business development organization for Michigan companies.

2008 䡲 General Dynamics and BAE win

incentives worth more than $40 million to invest more than $60 million and add more than 950 jobs over the next 12 years; both companies later report meeting most of their benchmarks through job additions but later have layoffs that reverse much of those gains amid the federal government’s sequestration and the withdrawal of coalition forces from Iraq.

䡲 The Macomb-Oakland University Incubator, aiding mainly defense- and homeland-securitythemed startups, opens at the former Venture Industries building on 15 Mile Road in Sterling Heights, then moves to a site north of 14 Mile in 2009 and into the current Velocity Collaboration Center over a year later. 2010 䡲 The former industry incubator site

near 14 Mile, the former headquarters of Transpec Worldwide Inc., becomes the Defense Corridor/Center for Collaboration and Synergy, a multitenant site for out-of-state defense contractors.

2011 䡲 General Dynamics closes on an

acquisition of South Carolina-based Force Protection Inc. in a deal valued at $360 million.

䡲 Tacom completes a consolidation called for years earlier under the federal Base Realignment and Closure Commission recommendations. More than 1,100 positions transfer to Warren from Rock Island, Ill., to reach a peak employment of 8,450, mostly civilians. 2012 䡲 Burtek becomes Burtek

Enterprises Inc., after the Illinois private equity firm Wynnchurch Capital Partners LP buys the company’s assets out of receivership for $9 million.

2014 䡲 Lakeshore TolTest Corp., a civil

engineering company with defense contracts in Iraq, Afghanistan and elsewhere, files for Chapter 7 bankruptcy liquidation and closes its offices in Detroit.

䡲 Tacom awards BAE a contract valued

at up to $1.2 billion for engineering and manufacturing development on the Armored Multi-Purpose Vehicle, a proposed replacement for the Army’s M113 personnel vehicles. The company is expected to divide the engineering and related work between its Sterling Heights unit and work sites in three other states.

[LARRY PEPLIN]

BAE Systems has maintained a metro Detroit presence since 1979.

— Chad Halcom

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ACQUISITIONS & MERGERS ProQuest LLC, Ann Arbor, signed an agreement to acquire Coutts Information Services Ltd., an academic library company, from Ingram Content Group Inc., La Vergne, Tenn. Under the terms of the agreement, ProQuest will take ownership of the Coutts facilities in Ringwood, United Kingdom, and Nijhoff, Netherlands. Websites: proquest.com, ingramcontent.com. 123Net Inc., Southfield, a telecommunications and Internet service provider, has acquired T2 Communications LLC, Holland, a telecommunications company. Website: 123.net.

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THE MILLER LAW FIRM Changing the Odds in our Clients’ Favor

Altair Engineering Inc., Troy, announced an original equipment manufacturing agreement with Cray Inc., Seattle, provider of supercomputing and high-performance computing systems. PBS Professional is now Cray’s workload manager and job scheduler. Websites: altair.com, cray.com. Roncelli Inc., Sterling Heights, a construction services company, has been chosen by DTE Energy Co. to construct a wellness center on the sixth floor at the company’s downtown Detroit headquarters. The facility will be staffed by Henry Ford Hospital. Websites: roncelli-inc.com, dteenergy.com.

EXPANSIONS U.S. Farathane Corp., Auburn Hills, supplier of plastic injectionmolded components to automakers, will locate its newest manufacturing operation in Riverside, Mo. The company will hire 267 people over the next three years and invest $51.6 million. Website: usfarathane.com.

NEW SERVICES Neil Rockind PC, Southfield, has launched the criminal defense law firm’s revamped website, created by SolutionsPal, West Bloomfield Township, at rockindlaw.com.

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Ann Arbor Spark recently launched Spared-Ed, a new video series designed to provide critical information and education to business owners. The nonprofit organization plans to release the new videos throughout 2015. Website: annarborusa.org. Deals & Details guidelines. Email cdbdepartments@crain.com. Use any Deals & Details item as a model for your release, and look for the appropriate category. Without complete information, your item will not run. Photos are welcome, but we cannot guarantee they will be used.

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ARCHITECTURE Emily McKinnon to principal, SmithGroup JJR Inc., Ann Arbor, from associate civil engineer. Also to principal in Ann Arbor is Lauren Williams, from associate urban designer. To principals in the Detroit office are Laura Matter, continuing as learning practice manager; Tricia Beck, continuing as senior manager; Michael Paul Krug, continuing as project manager; Stephen Lodge, continuing as director of architecture; and Mark Potter, continuing as senior project manager. Rick Erickson to architectural department manager, IBI Group Inc., Southfield, from project manager. Also, Dennis McKale to manager, mechanical engineering department, from manager of mechanical engineering, Norr LLC, Detroit.

PEOPLE

SPOTLIGHT

ON THE MOVE Send news items and photos to cdbdepartments@crain.com

MANUFACTURING Andy Ridgway to president, IAV Region Americas, IAV Automotive Engineering Inc., Northville, from president, IAV Automotive Engineering Inc. Also, Chris Hennessy to vice president of engineering, from business unit director for vehicle systems; Martin Richter to vice president of vehicle systems, from senior vice president of electronic development, IAV GmbH, Germany;

Jens Breitinger to business unit director, transmission and driveline, from founder and CEO, Breitinger Innovative International Consulting, Johannesburg, South Africa; Kathleen Rafalko to human resources manager, from human resources coordinator; and Kim Cybart to human resources director, from executive director of employee services, Glacier Hills Inc., Ann Arbor.

DENISE ASKER, executive director, Leadership Oakland Denise Asker has been named executive director of Leadership Oakland. She will fill the vacancy Asker created by Chris Scharrer, who is slated to retire in June after 10 years. Asker, 45, has been the executive director of the Auburn Hills Chamber of Commerce and has

eight years of nonprofit management experience. She is a former consultant for her firm, Asker Consulting LLC, and served in leadership roles for three global advertising agencies and a local public relations firm. She holds a master’s degree in management from Walsh College and a bachelor’s in public relations from Wayne State University. Asker lives in Oakland County with her family. “I am honored to lead this renowned association,” Asker said. “This role provides a wonderful opportunity to collaborate with our region’s leaders.” Visit LeadershipOakland.com.

CONSTRUCTION

Patterson

Amy Patterson to client account manager, Aristeo Construction Co., Livonia, from director of business development, DeMaria Building Co. Inc., Novi.

FINANCE Tim Gretkierewicz to senior vice president and loan group manager, Bank of Ann Arbor, Ann Arbor, from president of Michigan market, KeyBank, Ann Arbor.

HEALTH CARE Bill Makela to senior project manager, operations, St. Joseph Mercy Livingston, Howell, from project coordinator, planning, design and construction department, St. Mary Mercy Hospital, Livonia.

INSURANCE Geoff Kotila to commercial risk executive, HUB International Ltd. Midwest, Birmingham, from consultant SMI Capital Group LLC, Birmingham. Laura Irwin to director of field marketing and underwriting service and support, Amerisure Mutual Insurance Co., Farmington Irwin Hills, from service carrier operations and field marketing and underwriting production manager. Also, Tina McKenzie to director of service desk and operations, from manager, operations and service management. People on the Move announcements are limited to management positions. Email cdbdepartments@crain.com. Include person’s name, new title, company, city in which the person will work, former title, former company (if not promoted from within) and former city in which the person worked. Photos are welcome, but we cannot guarantee they will be used.

Grow my business, not their commission. Some businesses reach a certain point when they expect more than just a loan.They expect their bank to be part of their growth strategy. When it’s time, come to Comerica. And discover why we’re the leading bank for business,* ranked among the top 5% of U.S. banks with distinctive quality.**

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24 WEDNESDAY MAY 13

The 2015 Tigers. 11:30-1:35 p.m. Detroit Economic Club. With David Dombrowski, president, CEO and general manager; and Brad Ausmus, manager, Detroit Tigers. MotorCity Casino Hotel, DeDombrowski troit. $45 DEC members, $55 guests , $75 nonmembers. Ticket sales end at noon May 12. Contact: (313) 963-8547; email: info@econclub.org; website: econclub.org.

CALENDAR the Purchasers. 8 a.m. Detroit Regional Chamber, Flagstar Bank. Businesses can network with purchasers and learn the basics of purchasing and procurement protocol. Included are Barton Malow Co., city of Dearborn, DTE Energy Co., Henry Ford College, Wayne County Airport Authority. SME, Dearborn. $30 chamber members, $70 future members. Contact: Maggie Oldenburg, (313) 596-0482; website: detroitchamber.com.

Small Business: Unlocked — Meet

p.m. Association for Women in Communications, Detroit chapter. Keynote speaker is Denise Ilitch, president, Ilitch Enterprises LLC. Award winners are Marilyn Trent, Trent Creative; Emily Hay, Hay There Social Media; Keith Famie, Visional ist Entertainment Productions. The Community House, Birmingham. $55 members, $65 nonmembers, $40 students. Contact: RoseAnn Nicolai, (866) 385-1784; email: info@womcomdetroit.org; website: womcomdetroit.org.

day and 8 a.m.-2 p.m. Friday. Michigan Women in Finance. 2015 annual conference includes speakers Cy Wakeman,business consultant; Jen Guarino, CEO and co-owner, J.W. Hulme Co.; and Erin Rohde, director of global treasury operations, Ford Motor Co. The Plaza Ballroom at The Henry and the Ford River Rouge Plant. $295 reception and conference; $195 Thursday reception only. Website: michiganwomeninfinance.org.

Leading the Way: Michigan Women in Motion. 4-10 p.m. Thurs-

A Meeting With Jim Keane. 11:30 a.m.-1:30 p.m. May 18. Detroit Eco-

THURSDAY MAY 14

63rd Annual Matrix Awards. 5:30

Crain’s 2015 General & In-House Counsel Summit

UPCOMING EVENTS

It pays to tend to your ﬂock.

Crain’s Fifth Annual General & In-House Counsel Summit will feature keynote speaker John Dean, former counsel to President Richard Nixon. Dean’s most recent book – The Nixon Defense:What He Knew and When He Knew It – is a cautionary tale of mistakes that can been avoided, much like the legal issues organizations grapple with daily. Educational sessions will include: Managing the ups and downs of the business cycle, What your CFO wants you to know, E-Discovery, Cybersecurity. The event is 2-7:30 p.m. June 10 at the Westin Book Cadillac, 114 Washington Blvd., Detroit. Tickets are $150 in advance, $140 each for groups of 10 or more. Preregistration closes at 9 a.m. June 8. If available, walk-in registration will be $170 per person. For information, contact Kacey Anderson, (313) 446-0300, cdbevents@crain.com

nomic Club. Keane, president and CEO of Steelcase Inc., will provide insights on the power of place and how space helps attract talent and boosts engagement. Detroit Marriott Renaissance Center. $45 members, $55 guests of members, $75 nonmembers. Contact: (313) 963-8547; email: info@econclub.org.

Over the past 5 years, employee out-of-pocket expenses have risen nearly 40%.1

Inforum 53rd Annual Meeting. 11:30 a.m.-1:30 p.m. May 20. Inforum Professional Women’s Alliance. With writer and public speaker Iyanla Vanzant. The Henry, Dearborn. Tickets: $50 Inforum members, $75 guests (nonmembers), $700 table sponsors, $25 students. Register: inforummichigan.org.

Aﬂac can help protect your employees with cash to cover their bills in the event of a covered sickness or injury. And now employees’ claims can get paid in a day with Aﬂac’s One Day PaySM

Family Owned Business Institute Summit. 8 a.m.-noon. May 21. Grand Valley State University’s Family Owned Business Institute. The workshop includes working with family and nonfamily managers to find solutions unique to each business, defining core strengths and understanding how to leverage them in a more profitable way, learning the 10 types of innovation and how leveraging them gives companies a competitive edge, turning ideas into action, and leaving with a plan to implement new concepts in a way that will inspire growth. $100 per person, $75 two or more. L. William Seidman Center, Pew Grand Rapids Campus. Contact: (616) 331-7278 or visit gvsu.edu/fobi.

when they submit online.2 Small businesses like how easy it is to add voluntary coverage to their benefits at no direct cost. Especially when it is from Aflac, the number one provider of worksite/voluntary insurance sales for 13 consecutive years.3 Aflac may even be a pre-tax deduction, so when we say it pays to tend to your flock, it just might.

Call your local agent and visit aﬂac.com/smallbiz

Calendar guidelines. Visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page.

2014 Employer Health Benefits Survey, The Henry J. Kaiser Family Foundation, September 10, 2014. 2One Day PaySM is available for most properly documented, individual claims submitted online through Aflac SmartClaim® by 3 PM ET. Aflac SmartClaim® not available on the following: Short Term Disability (excluding Accident and Sickness Riders), Life, Vision, Dental, Medicare Supplement, Long Term Care/ Home Health Care, Aflac Plus Rider and Group policies. Individual Company Statistic, 2015. 3Eastbridge Consulting Group, U.S. Worksite/Voluntary Sales Report. Carrier Results for 2002-2014. Avon, CT. Coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance Company of New York.

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REVERIE, from Page 1: Waking up for customers Reverie

built-in lumbar and head tilting, a built-in alarm and messaging function, as well as mattresses. Reverie sells directly to consumers from its website as well as to stores such as Art Van Furniture Inc. at the Warren-based furniture retailer’s Pure Sleep stores. Reverie also sells an adjustable bed called Performance by Reverie under the Serta brand name as part of a licensing deal, Rawls-Meehan said. Reverie’s adjustable frames range from $700 to $2,000, and sleep systems — adjustable beds with a mattress — retail for $4,000 to $7,000, Rawls-Meehan said. Bloomfield Hills is home to Reverie’s headquarters and research and development lab. Its products are manufactured in Buffalo, N.Y., and imported from Taiwan, RawlsMeehan said. David Van Elslander, president of Art Van Pure Sleep, said integrating technology into the bedding industry is not a fad, it’s the future. “My father realized in 2009 that we needed to change our business model because people were realizing sleep is as important as diet and exercise to their overall heath,” Van Elslander said. “Adjustable beds, along with more technology, are really taking off. Where it used to be considered a luxury item, it’s now viewed as key to getting a better night’s sleep.” In a deal with Mebane, N.C.based Kingsdown Inc. , Art Van in 2009 began outfitting its Pure Sleep stores with diagnostic machines to identify which mattress is best for each customer. Van Elslander said the machines and the technology from manufac-

turers such as Reverie have translated into increased sales for adjustable beds. For every mattress Pure Sleep sells, 30 percent of those customers also buy an adjustable bed frame, Van Elslander said. “This is where the business is going in the long term, and selling products like Reverie’s is positioning us nicely,” he said. Dave Perry, executive editor and mattress reporter for the Greensboro, N.C.-based industry magazine Furniture Today, said the adjustable-bed category and its increasing technology are raising sales for retailers such as Art Van. “The cliché is that these products are no longer for senior citizens; these are not geriatric products,” Perry said. “According to our research, people are using beds more and more as a workstation or an entertainment center, and the adjustable-bed market encourages that.” The technology trend is causing Reverie to step up its R&D investments, Rawls-Meehan said. “We’re going to continue to spend more to achieve our goals,” he said, although he declined to reveal the exact R&D spending figure. “Clearly there is a demand for better sleep, and the industry needs to step up to take more market share.”

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Headquarters: Bloomfield Hills Founder and CEO: Martin RawlsMeehan Revenue: Just under $100 million in 2014 Employs: 150, 40 in Bloomfield Hills

Perry said Reverie is among the big players in the adjustable bed market, including Carthage, Mo.based Leggett & Platt Inc. , Natick, Mass.-based Customatic Adjustable Bedz and Santa Barbara, Calif.based Ergomotion. Within the $40 billion sleep industry, expected to reach $50 billion in four years, beds and mattresses make up only $14.2 billion. In addition, it’s only projected to reach $16 billion in four years, Rawls-Meehan said. That’s because the larger industry growth drivers are pharmaceutical sleep aids and medical devices, such as continuous positive airway pressure, or CPAP, machines. “People are becoming aware of the importance of sleep to cognition, and that’s driving demand for sleep aids and we (bed and mattress manufacturers) are losing market share in the industry,” Rawls-Meehan said. Reverie’s strategy includes beefed-up advertising on radio and TV and in print but also integrating more technology. Last year, Reverie introduced its Elation four-speaker plus subwoofer surround-sound system, which can be packaged with its product line as well as other frames. The system retails for $400. The company next year also plans to unveil several other technologies, including sleep tracking, smartphone integration and other systems Rawls-Meehan declined to reveal. “Sleep is critical, but people are doing so much more than sleeping in the bedroom,” Rawls-Meehan said. “We’re evolving with them.” 䡲 Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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BANK, from Page 1: BOA building could score high, brokers say, but will the market comply? foot). Both building sales included parking decks. In the suburbs, the 2.2 millionsquare-foot Southfield Town Center sold to New York City-based 601W Cos. for $177.5 million ($81 per square foot), and the 237,000square-foot Tri-Atria office building in Farmington Hills sold to Detroitbased Sterling Group for $20 million ($84 per square foot). Bank of America said that after the expected sale-leaseback, it plans to become more efficient with its space in the building but will not reduce employment levels. Data tracked by CoStar Group Inc. , a Washington, D.C.-based real estate information service, shows that only 2,500 square feet is available in the six-story building, leaving it 99.4 percent full. The asking rate is $24.50 a square foot. “The property could fetch one of the highest sale numbers in the last number of years within Troy and the surrounding area,” said Matt Farrell, executive principal and partner at Birmingham-based Core Partners Associates LLC. “However, the sale value will be 100 percent predicated

Troy is region’s 3rd-largest office market Alobbyview at North Troy Corporate Park. The city’s 13.3 million square feet ofoffice space trails only Southfield and downtown Detroit. [KENNY CORBIN]

At 13.3 million square feet, Troy is the third-largest office market in the region, according to data from Newmark Grubb Knight Frank, behind only Southfield (17.2 million square feet) and greater downtown Detroit (14 million square feet). Troy had a 24.4 percent vacancy rate in the first quarter, the third-highest in the region, behind Pontiac (38.5 percent vacancy rate) and Dearborn (29.5 percent).

on the credit, length of term, lease value and general conditions of the B-of-A lease provided by the seller.” Regardless of how much it sells for, the building is still expected to attract significant attention from both local and out-of-state investors. Jim Berkemeier, vice president in the Southfield office of Advocate

Commercial Real Estate Advisors , called the Troy BOA building one of the “true” Class A buildings in Troy. “It’s in line with Columbia Center,” he said, referring to the two-building, 507,000-square-foot office complex on West Big Beaver that last sold in 2010 for $59 million. It has a strong track record of attracting top-

tier office tenants, he said. “You’re drawing a particular tenant, like Dickinson Wright (PLLC ), a professional tenant who likes to be in a building like that because of the perception it gives.” Dickinson Wright has about 68,000 square Jim Berkemeier: feet in the buildBOA building draws ing, making it a particular tenant the secondlargest tenant behind Bank of America. “I’m assuming the investor is looking hard at the rent rolls in valuing the building from a purchase price based on the return of the rent,” Berkemeier said. “And when vacancies come up, they are pretty easy to fill.” “Taj Mahal” of office buildings The Bank of America building’s quality construction materials and “green building” status are other reasons some brokers predict a big

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sticker price. In 2007, it became the first existing building in Michigan to receive Leadership in Energy and Environmental Design, or LEED, gold-level designation from the U.S. Green Building Council, the secondhighest designation. Steve Morris, a principal at Farmington Hills-based Axis Advisors LLC , is more bullish on pricing. He predicted the building, constructed by Standard Federal Bank, would sell for more than $70 million or at least $155 a square foot.The building’s value in the marketplace has had the same roller-coaster ride as other buildings in the region. The financial crisis of 2008-09 cratered office building values. Buildings that had been worth $150 a square foot or more have sold for no more than $80 per square foot, he said. By comparison, the BOA building cost $300 per square foot or $135 million to build when it was constructed, he said. But Morris said that because of the quality of construction — which includes marble directly from Italy, the building’s high occupancy rate and strong rental rate — he predicts a higher current value. That’s because it would be a value pegged on the income it currently generates, not potential income. Other building features include an on-site cafeteria, sundry shop and conference center, plus an attached parking deck. The restrictions placed on employee behavior in the building after it was constructed in 1990, are details of local workplace lore. It was built for Standard Federal, which was then acquired by LaSalle Bank, which was then acquired by Bank of America. When it opened, employees couldn’t bring anything to eat or drink to their workspaces — including bottled water, lunch or coffee — because of fear of crumbs or stains. It had been dubbed the “Taj Mahal” or “Fort Federal” because of the rules and the big vision for the building by the late Thomas Ricketts, the former president and CEO of Standard Federal. Subsequent bank executives worked to change that vision from a building that was part art museum-part bank office to something more modern. Diane Wagner, BOA senior vice president of media relations, said the bank’s sale and lease-back is part of a national trend at the company. “We’re shifting from owning the Troy building and serving as a landlord for space the company doesn’t use to selling it and leasing the space we need,” she said. The reconfiguring of employees in the building will be completed in the fourth quarter, Wagner said. For this story, Bank of America’s brokerage, CBRE Inc . declined to comment. The Southfield office of CBRE is marketing the property at 2600 W. Big Beaver. Jones Lang LaSalle is the property manager. 䡲 Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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SNYDER, from Page 1: Governor builds national profile in aftermath of Proposal 1 defeat an effort to lure new business. “I do not have plans to run for president in 2016,” the statement said, adding that Snyder will focus on resolving “historic issues” at home. One of those “historic issues” is the dramatic defeat of Proposal 1 on roads funding in Michigan. About 80 percent of statewide voters in the May 5 ballot proposal rejected the complicated plan to raise money for road work. Plan B on roads The morning after Proposal 1 was defeated, Snyder told reporters he planned to work quickly with the Legislature on an alternative, preferably one that does not involve asking voters to approve another ballot proposal. He said a delayed deal threatens to postpone construction schedules as roads continue to crumble. Snyder won’t be able to build name recognition nationally if he’s stuck at home dealing with this unresolved road-funding plan, said Ron Fournier, a columnist with the Washington-based National Journal. “He’s got to get this infrastructure thing straightened out,” Fournier said. “That was a big blow to him.” Lawmakers put the roads deal to Michigan voters after failing Ron Fournier: Fix to come up with of infrastructure is a a funding plan on must for Snyder their own. Proposal 1 would have raised more than $1.2 billion to fix the state’s decaying roads and bridges by raising the sales tax from 6 percent to 7 percent and removing it from fuel sales, while also raising fuel taxes. But it ran into trouble with voters in part because of its complexity. Besides roads, it also would have raised money for public schools, local governments and an income tax credit for low-wage workers. Proposal 1 failed by the largest margin of any constitutional amendment since Michigan’s constitution was adopted in 1963, The Associated Press reported. A Cabinet post? Exactly what Snyder does now to deliver on that promise of a Plan B for roads may be one of the deciding moments of his governorship, and his long-term political prospects, some observers say. There is speculation among analysts and political writers that a Cabinet post may be Snyder’s ultimate endgame. Snyder, however, will neither confirm nor deny he wants one. He said only that he will stay on the national speaking circuit, and that he’s proud of Michigan’s successes. “I will continue to tell Michigan’s comeback story nationally because our reinvention should not be unique to just our state,” he said. And in terms of the field of presidential candidates, Snyder told The Wall Street Journal last week that he was “watching who is in the candidate race, because we need a prob-

lem-solver in Washington,” adding later that he didn’t see such a problem-solver in the field. Snyder isn’t a viable presidential candidate for 2016 because the Republican field is crowded with contenders who have better name recognition and more money in their war chests, Fournier said. To be sure, Snyder does have successes to promote for a future run or other high-profile post. He helped craft Detroit’s grand bargain during the city’s bankruptcy, a deal designed to lessen the blow from cuts to retiree pensions that included $195 million from the state and hundreds of millions more from foundations and the Detroit Institute of Arts. “His big calling card is Detroit. Detroit is a hip, exciting, intriguing brand across this country, even in the world,” Fournier said. “The Detroit comeback story is something that everybody is watching, and that’s something that Snyder has unique claim to.” Even though he’s not a national household name, Snyder is hailed in Republican circles for replacing the Michigan Business Tax with a 6 percent corporate income tax and for signing right-to-work legislation in December 2012, which prevents labor unions from requiring workers to pay dues as a condition of employment. More than 12,000 union members and supporters protested the politically divisive right-to-work legislation at the Capitol. But signing the law earned Snyder stripes among more partisan Republicans. Michigan’s economy also has rebounded since the recession. Unemployment, once the highest in the nation at more than 15 percent, fell to 5.6 percent in March, state data show. And, Snyder says, Michigan has added close to 400,000 private jobs as the state’s economy moves away from heavy dependence on auto manufacturing. Political ambitions Bill Ballenger, a former state lawmaker and founder of Lansingbased political newsletter Inside Michigan Politics, said if Snyder had joined the fray for the 2016 presidential bid, he would have struggled to convince a national electorate of his problem-solving prowess, he said. “The real question is: Has he really ‘solved’ Michigan’s problems?” Ballenger asked. “I think many people would say there are a number of things that he hasn’t solved yet. Maybe he can solve them by the time he leaves office in 2018. Maybe not.” Snyder’s eventual prospects as a Cabinet member or other Washington post could depend on who is elected president, said John Truscott, president of Lansing-based political consulting firm Truscott Rossman and an ex-aide to former Gov. John Engler. And what he’s doing now may well raise his profile in Washington, or serve as a platform for a post-government career. “I wouldn’t doubt that some people get in the race just to be a player so they get mentioned, they get their

[BLOOMBERG]

Gov.Rick Snyder speaks with a trader on the floor of the New York Stock Exchange on Friday.Snyder says his getting out of Michigan is good for Michigan. agenda out there,” Truscott said. But, he added, “I don’t think he would ever admit (it).” Building a national profile A former executive with computer company Gateway Inc., Snyder has a background in business, not politics. But he has proven an ability to tackle tough political problems, notably Detroit’s bankruptcy, Fournier said. “Snyder might be somebody that would make sense to have on a ticket,” a Republican from a blue state, Fournier said. “If a Republican wins, he’d certainly be somebody who’d be mentioned as, and even on the short list for, a Cabinet post.” That depends, he said, on two big “ifs” — whether Snyder can continue momentum on rebuilding Michigan and Detroit, including reforming the city’s troubled public

schools, and whether he can raise his national profile. Raising Snyder’s profile is the mission of a nonprofit entity led by Snyder supporters, including former Michigan Republican Party Chairman Bobby Schostak. The group recently created a 501(c)(4) nonprofit called Making Govern ment Accountable to fund Snyder’s national trips. It’s not an official campaign fundraising arm but helps pay for his travel. The travel effort is “a trial balloon,” Ballenger said. “They’re going to try and help him do what he wants to do for as long as he feels it’s something that looks acceptable.” The national circuit includes a range of influencers; Snyder spoke April 27 on a panel discussion on Detroit’s bankruptcy at the Milken Institute’s Global Conference , and,

according to The AP, had a packed schedule in New York late last week. He met with site selectors who help companies choose where to locate and hosted a reception at Detroit watch company Shinola ’s flagship store in New York City, AP reported. Schostak could not be reached for comment on this story. The resident agent on the nonprofit formed March 23 is Peter Ellsworth, a Lansing-based attorney with Dickinson Wright PLLC. In the immediate term, Snyder’s main focus likely will be on roads. He can recover politically, longterm, from Proposal 1’s rejection, Truscott said, adding that it took Engler multiple tries in the 1990s to pass John Truscott: Proposal A, Even Engler had to which restructry, try again tured property taxes and funding for K-12 schools. To succeed, Snyder will need to pull House and Senate leaders aside to work through alternative proposals and lobby for votes, Truscott said. The Legislature won’t be able to raise the amount Proposal 1 would have without either a tax hike or significant budget cuts elsewhere in state government. “When you have an accomplishment after a failure, the failure pretty quickly gets wiped away,” Truscott said. “The measure of a good deal is not everybody’s happy.” 䡲 Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

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HORSES,from Page 3: Racing industry looks to track down profits during recent rough ride to the table. There are a variety of agendas in play. Everyone’s self-interest is at odds.” “There hasn’t been any interest in cooperating on legislative (action) since talks broke down about 18 months ago.” A message seeking comment was left for the primary thoroughbred organization, the Howell-based Michigan Horsemen’s Benevolent and Protective Association. The latest hope is account wagering, which is online or telephonebased horse betting through a statelicensed agent. A joint meeting of the House and Senate appropriations, agriculture and rural development subcommittees at Hazel Park Raceway on May 4 heard testimony from the state’s horse industry in favor of account wagering. Sample legislation has been circulated, but no bills have been formally introduced seeking to authorize online and telephone account wagering. There is no timeline for any bills. How it works Account wagering would open horse race gambling to a much wider potential audience. How it works is that bets are made on horse races from money placed in an account, over the phone or online, through a service licensed by the state. Account wagering remains illegal in Michigan but is legal in other states. One of the major account wagering services is Twin Spires, owned by iconic Churchill Downs in Kentucky. Stommen said industry estimates place illegal online horse race wagering by Michigan residents at $50 million to $150 million annually — money that could benefit the state’s track industry and Michigan itself via taxes. Horse and greyhound racing are exempt from federal gambling laws. Even if all sides of Michigan’s horse racing industry reach an accord on online betting, Stommen predicts that the casino industry and the current account wagering companies in other states would spend heavily on lobbying to stop it. “Depending on what the legislation looks like, we might see more $10,000 suits in Lansing than we’ve seen in a long time,” he said. “Even if track operators and horsemen agree on what’s best, there’s still going to be a fight.” As recently at 2013, Snyder vetoed legislation that would have allowed tracks to use electronic terminals that allowed users to wager on previously run races for which they were presented only certain data, something known as instant racing. Snyder said such gambling would be unconstitutional because of Michigan’s 2004 law — a measure financed by the casino industry — that mandates local and statewide votes on certain types of new gambling. The tracks disagreed, but the issue died with the veto. Last year, the Michigan Lottery im-

Downfall of the downs Hazel Park Raceway and Northville Downs are Michigan’s only remaining horse tracks. Here are those that have closed: 1998: Ladbroke Detroit Race Course, Livonia 2005: Saginaw Harness Raceway 2007: Great Lakes Downs, near Muskegon 2008: Jackson Harness Raceway 2010: Pinnacle Race Course, near Detroit Metropolitan Airport [PINNACLE RACE COURSE]

Pinnacle Race Course ran thoroughbred contests for three years before closing.

2014: Sports Creek Raceway, near Flint 2014: Mt. Pleasant Meadows

As wagers fall, horse owners, tracks seek help from state The horse racing industry statistics show why the tracks and horse owners want help from Lansing: The financial and breeding data paints a bleak picture for horse racing in Michigan. The amount of money wagered at Michigan horse tracks on live racing has fallen 65 percent in the past seven years, to $90.2 million last year from $260.9 million in 2007, according to state data. The most money wagered at Michigan tracks on both live and simulcast races was a combined $474 million in 1997, which was a year after the state legalized simulcast betting at tracks. The peak of pure live-race betting was $443.1 million in 1989. That was before the rise of the Internet, the expansion of the state lottery and the legalization of Michigan’s casino industry. Nationally, combined live and off-track wagering on thoroughbred racing fell to $10.5 billion last year. Its peak was $15.1 billion in 2003, according to The Jockey Club, a New York City-based breed registry for thoroughbred horses in the U.S., Canada and Puerto Rico. The data are collected by Lexington, Ky.-based Equibase Co. LLC, a

plemented its iLottery system, which allows players to buy instant tickets and numbers of drawing games from their mobile devices or computers — a development not lost on the horse racing industry. “It’s literally the same thing,” Stommen said. Aside from the state-sponsored lottery and pari-mutuel horse racing, the only gambling authorized under state law includes bingo, charity “millionaire parties” and casino gambling operated by individuals licensed under the Michigan Gaming Control and Revenue Act. Hazel Park The Hazel Park track, which opened in 1949, had been losing $1 million annually since 2004. But the reintroduction of thoroughbred rac-

national database of industry statistics. Horse breeding data show a precipitous decline in Michigan. In 1992, Michigan’s annual foal crop was 518 horses, according to the earliest data available from The Jockey Club. That number fell to 44 in 2013, the most recent available data. That’s a 91.5 percent rate of decline. The number of Michigan mares bred last year was 94. By contrast, it was 714 in 1993. The number of Michigan stallions breeding mirrors a similar decline, from 134 in 1993 to 17 last year. Perhaps the poster child of Michigan’s horse racing woes is Pinnacle Race Course. Banker Jerry Campbell led an investment group that spent $35 million to open what was intended to be a $142 million thoroughbred track on 320 acres at Pennsylvania and Vining roads, a mile southwest of Detroit Metropolitan Airport. Pinnacle, modeled after Churchill Downs, lasted three years and was only partially complete before it succumbed to both the recession and the decline in horse racing interest. Today, the track is abandoned and overgrown. — Bill Shea

ing last June cut the 2014 financial loss to $150,000, said Dan Adkins, vice president of the Southfieldbased real estate developer Hartman and Tyner Inc., whose holdings include Hazel Park Raceway along with casino/greyhound track operations in Florida and West Virginia. “It was a good move, we’re very happy with it,” Adkins said of adding thoroughbreds. “We just need to find a way to generate more revenue.” The five-eighths-mile track, at the southwest corner of 10 Mile and Dequindre roads, halted thoroughbred racing after the 1984 season, converting in 1985 to full-time harness racing. The Michigan Gaming Control Board approved 38 thoroughbred racing days in January 2014 for Hazel Park along with a shorter slate

for Northville Downs, which the track ended up not running. This year, Hazel Park has 40 thoroughbred racing days — Fridays and Saturdays from May 1 to Sept. 12. Hazel Park dropped harness racing entirely. The first year of thoroughbred races there generated $2.7 million, state data show. A limited harness racing run generated an additional half million dollars, but simulcast betting fell to $43 million in 2014 from $57 million in 2013. Thoroughbred races attracted more people who spent money on dinner, snacks and booze and other ancillary revenue at the track. Adkins said Hazel Park intends to ask the state for permission to reduce the number of thoroughbred races to eight a day from the current nine, which would increase the perrace purse. The track employs 140 for live racing days — down from 600 at the peak of racing’s popularity many years ago. Hazel Park tries to carve out revenue where it can, and it built a 50,000-square-foot building behind the grandstand for $12 million in 2004 in anticipation of slot machines — which the Legislature approved but then-Gov. Jennifer Granholm vetoed. The same measure also legalized online wagering. The building has never been used. Talks to bring in a brewpub restaurant fell apart last year, Adkins said, so the track is considering building its own. It may hire a brewmaster next year.

Adkins said he has talked with the Michigan Economic Development Corp. about getting grant money to build out the facility, but nothing has happened yet. “I would love to have that building turned into a brewpub, a bar and restaurant. It just needs a new flair,” he said. “Our efforts are to put the best product out there with the limited funds we have.” Adkins predicts a bleak future without significant new gambling revenue. “Racing in Michigan is still in trouble,” he said. “We don’t have enough purse dollars to continue. We’re struggling. We’re down to two tracks. All the states around us, racing is subsidized by gaming.” One example: Thistledown Racino near Cleveland — co-owned by Dan Gilbert’s Rock Gaming LLC — this year will have an average daily purse of $130,000, Adkins said. It has nearly 1,300 video lottery terminals — another term for slot machines — that generate additional revenue. By contrast, Hazel Park offers about $70,000 in daily purse money, Adkins said. More lucrative purses elsewhere mean horse owners travel to other states. “If you’re a horseman, you’re going to go elsewhere,” Adkins said. As Michigan’s other horse tracks have closed, the purses have shrunk because the money from the tracks is pooled. When Sports Creek Raceway near Flint closed last year, it sapped 26 percent of the purse, Adkins said. Hazel Park’s owners have tried to make the track attractive over the years by adding a restaurant and freshening up facilities. It has relatively inexpensive food and alcohol compared with ballparks and theaters. “We make it a destination, an outing. It becomes a night out,” Adkins said. “The problem isn’t getting people there. It’s getting people to wager.” Hazel Park’s owner gets online wagering revenue from its Florida and West Virginia facilities. Bettors in those states can use the TrackInfo.com system from Lien Games Racing LLC for online wagering, which is licensed by the North Dakota Racing Commission. See Next Page

[JOHN SOBCZAK]

Hazel Park Raceway has been losing money annually since 2004,but the reintroduction of thoroughbred racing has helped the bottom line of late.

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CRAIN’S

From Previous Page

Northville Downs Northville Downs, which can trace its roots to 1902, got approval last year for a short thoroughbred season but opted not to do it. “That just got muddied up,” said Mike Carlo, operations manager and co-owner of Northville Downs. “We’re back to just harness racing. So far, we’re having a pretty good season. Derby Day was just Mike Carlo: “A monstrous.” pretty good season” The standardat Northville Downs bred harness horse race business is different from than for thoroughbreds, he said. “We run primarily the same style of business, but the cost is a little different,” Carlo said. “Standardbreds can race weekly. Thoroughbreds run every three to four weeks. “The opportunity for income, when you own a horse, only happens every three to four weeks. Those guys get nervous really quick when they don’t win. With harness racing, owners get more chances. Our horsemen don’t face the same crisis when they don’t win this week.” Thoroughbred horses at Hazel Park may have just six to seven chances to make money during the season, Carlo said, while Northville Downs’ horses could have 20 opportunities to win. “Purses are less, and there are better opportunities outstate, but it’s not as bad for harness horsemen,” Carlo said. Northville Downs is profitable, but by a tiny margin, Carlo said. “Right now, we just did our firstquarter review, and we’re in the black, but just barely,” Carlo said, without disclosing specific financials. He did say the track’s annual operating budget is about $5 million. State data show live wagering fell to $465,129 at Northville Downs last year from $1.4 million the year prior. Simulcast wagering in 2014 dropped to $31 million from $47 million in 2013. Michigan’s tracks lost customers to the Detroit and Indian casinos. “They’ve taken 60 percent of my business. I’ve been able to maintain a little profitability, but not much,” Carlo told Crain’s in a 2012 interview, noting that the track pays more in taxes to the city than it col-

DETROIT BUSINESS www.crainsdetroit.com

[PHOTOS BY ANTHONY BARCHOCK]

As harness racing goes on outdoors (above) at Northville Downs,monitors and machines stand ready for bettors (below) at the track,which can trace its roots to 1902.

lects in profit. Northville Downs backs the account wagering push. “We support every effort to find new revenue streams for horse racing in Michigan,” Carlo said. “We

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: Advocate Commercial Real Estate Advisors .. 26 Altair Engineering .......................................... 19 Art Van ............................................................ 25 Autoliv .............................................................. 19 Bagger Dave’s Burger Tavern ........................ 11 BarFly Ventures .............................................. 12 Belfor Holdings .............................................. 19 Belle Michigan Fund ........................................ 6 Buffalo Wild Wings ........................................ 11 Build Institute .................................................. 6 Chrysler Group .............................................. 19 CWD Real Estate Development .................. 18 Diversified Restaurant Holdings .................. 11 Domino’s Pizza .............................................. 19 Dow Chemical ................................................ 19 Ecotelligent Homes ...................................... 14 EOS Worldwide ........................................ 12, 14 Federal-Mogul ................................................ 19 General Motors .............................................. 19 GR Forward .................................................... 18 Great Lakes Central Railroad ...................... 16

Hartman and Tyner ...................................... 28 Hazel Park Raceway ........................................ 3 Lear .................................................................. 19 MeritHall Staffing .......................................... 11 MICHauto ........................................................ 15 Michigan Department of Transportation .. 15 Michigan Economic Growth Authority.......... 7 Michigan Environmental Council ................ 15 Michigan Land Use Institute ........................ 15 Michigan Manufacturers Association .......... 7 Michigan Women’s Foundation .................... 4 MSX International ........................................ 19 Northville Downs ............................................ 3 Quicken Loans .............................................. 10 Reverie .............................................................. 1 Riviera Tool ...................................................... 15 State Bar of Michigan .................................... 3 TI Automotive ................................................ 19 University of Michigan .................................... 6 Walker-Miller Energy Services ...................... 4 Ziebart International .................................... 19

see that potential in Michigan if we’re given the right tools to make it happen. I’d love to have slot machines, but I know that’s not a realistic option in Michigan.” For tracks without significant nonracing revenue sources such as slot machines, marketing gimmicks such as dollar beer nights and similar incentives are not enough, he said. “There is no marketing trick that racetracks have figured out, or we’d all be doing it,” Carlo said. “Nobody has figured out that magical formula.” Like Stommen, he predicts bitter combat over any effort to help horse gambling in Michigan. “The casinos have a huge lobbying effort in Lansing we’ll never overcome because we’ll never have the funds to do so,” Carlo said. “It’s the same with tribal gaming.” Appealing to the industry’s agriculture roots and long history are tactics that could sway legislators,

Carlo said. “Hopefully, being a small business that’s been here since 1944, some of the Michigan history and agriculture that horse racing supports carries some weight beyond the dollars and cents that lobbying efforts can do in Lansing.” The track, which has live races on Wednesday and Thursday nights, has a staff of 35 on race days, Carlo said. Northville Downs has made no capital improvements because the money isn’t there, Carlo said. His dream is to rebuild the track from the ground up, something he estimates would cost “tens of millions” of dollars. It was last remodeled in 1970. “It’s such a slim margin at this point just to keep your head above water,” he said. The track could be sold and the land used for houses or other development. Northville Downs gets a handful of offers every year from developers interested in buying some or all of the track’s 49 acres, Carlo said. So far, no one has offered enough. “We entertain all options,” Carlo said. “If they have the right number, everything is for sale. I’ve had multiple offers over the years.” Carlo declined to say what the right offer would be. The Carlo family owns some of the track’s acreage, and an investment group called Northville Driving Club Corp. owns the rest. The Carlos are minority shareholders in that entity, he said. The driving club was formed in 1907 to manage land in Northville that had been turned into a rudimentary fairgrounds horse track in 1902. Michigan didn’t create a formal pari-mutuel harness racing law until 1933, and Northville Downs became the entity it is today in 1944. The track business itself leases the land from the Northville Driving Club on an annual basis, Carlo said, and any sale would require both the club and family to jointly sell. Northville’s online tax records show that the Northville Driving Club was the city’s largest taxpayer last year. The state equalized value of the track, at Center Street and Seven Mile Road, is listed at $10.5 million, and its 2014 summer tax bill was $245,928. 䡲 Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

Editor-in-Chief Keith E. Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Marla Wise, (313) 446-6032 or mwise@crain.com Executive Editor Cindy Goodaker, (313) 446-0460 or cgoodaker@crain.com Managing Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com Director, Digital Strategy Nancy Hanus, (313) 4461621 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) 446-0344 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 orshill@crain.com Web Producer Norman Witte III, (313) 446-6059 or nwitte@crain.com Editorial Support (313) 446-0419; YahNica Crawford, (313) 446-0329 Newsroom (313) 446-0329, FAX (313) 446-1687 , TIP LINE (313) 446-6766

REPORTERS Jay Greene, senior reporter Covers health care, insurance, energy, utilities and the environment. (313) 446-0325 or jgreene@crain.com Amy Haimerl, entrepreneurship editor Covers entrepreneurship and city of Detroit. (313) 4460416 or ahaimerl@crain.com Chad Halcom Covers litigation and the defense industry. (313) 446-6796 or chalcom@crain.com Tom Henderson Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho Covers real estate, higher education, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Lindsay VanHulle, Lansing reporter. (517) 6572204 or lvanhulle@crain.com Dustin Walsh Covers the business of law, auto suppliers, manufacturing and steel. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com ADVERTISING Sales Inquiries (313) 446-6032; FAX (313) 393-0997 Sales Manager Tammy Rokowski Senior Account Executive Matthew J. Langan Advertising Sales Christine Galasso, Catherine Grace, Joe Miller, Sarah Stachowicz Classified Sales Manager Angela Schutte, (313) 446-6051 Classified Sales Lynn Calcaterra, (313) 446-6086 Audience Development Director Eric Cedo Events Manager Kacey Anderson Creative Services Director Pierrette Dagg Senior Art Director Sylvia Kolaski Marketing Coordinator Ariel Black Special Projects Coordinator Keenan Covington Sales Support Suzanne Janik, YahNica Crawford Editorial Assistant Nancy Powers Production Manager Wendy Kobylarz Production Supervisor Andrew Spanos

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CRAIN’S DETROIT BUSINESS // May 11, 2015

WEEK ON THE WEB/MAY 2-8

RUMBLINGS

RTA to announce its master plan for mass transit on Tuesday

Tri-Atria building sale a good sign for office market

he Regional Transit Authority of Southeast Michigan, metro Detroit’s regional transit authority, will unveil the initial process of developing a regional master plan to create a public mass transit system for Wayne, Oakland, Macomb and Washtenaw counties in a May 12 news conference. Details have not been disclosed.

ON THE MOVE Automation Alley promoted Tom Kelly to COO, a new position at the Troy-based nonprofit technology business association. Kelly joined Automation Alley in 2014 and launched its 7Cs accelerator program, which provides seed funding to manufacturing startups. Rose Ramirez, M.D., a family physician from Grand Rapids, has been formally installed as president of the Michigan State Medical Society. She Ramirez succeeds James Grant, M.D., chair of anesthesiology at Beaumont Hospital in Royal Oak.

COMPANY NEWS Superior Industries International Inc., an aluminum wheel manufacturer led by former Visteon CEO Don Stebbins, is relocating its global headquarters to Southfield from Van Nuys, Calif. The relocation is expected to create 75 new jobs along with a $75 million investment, the Michigan Economic Development Corp. said. The Michigan Strategic Fund awarded Superior a $900,000 performance-based grant. Livonia-based Schostak Bros. & Co. has begun a $2 million project to redevelop a former Home Depot in Redford Township for light industrial use. Work on the 145,728-square-foot Inkster Road store is to be complete by July. Livonia-based TRW Automotive Holdings Corp. received approval from the Federal Trade Commission to be acquired by Germany’s ZF Friedrichshafen AG for $12.4 billion. The deal, announced last year, is expected to close later this month and would create the second-largest auto supplier in the world, according to data from Crain’s sibling publication Automotive News. The home of RR Donnelley & Sons Co.’s office in downtown Detroit’s financial district sold for an undisclosed price. The sale of the 25,000-square-foot building, at 610 W. Congress St., to Congress Real Estate Ventures LLC by the Detroit Legal

News Co. closed April 17. The listing price was $1.75 million. Bloomfield Township-based contractor Fresh Co. Home Inc., Royal Oak-based clothing company Lawrence Hunt and Benton Harborbased Big Head Farm Inc. were awarded $10,000 as regional winners of the Comcast “Innovations for Entrepreneurs” program, and are in the running for one of six national grand prizes. Oakland Integrated Healthcare Network in Pontiac ($704,167), Wayne County Healthy Communities Health Center in Detroit ($691,667) and Advantage Health Centers in Detroit ($483,333) are among eight health centers in Michigan that have received a total of $5.1 million in federal funding this fiscal year to expand access to an estimated 28,000 low-income and uninsured patients. Ann Arbor-based Huron River Ventures, an early-stage venturecapital firm founded in 2010, has finished raising a second fund, the $5 million Opportunity Fund. The fund will invest in later-stage funding rounds for companies that received support from the firm’s $11 million Huron River Ventures I fund.

OTHER NEWS The Michigan Women’s Foundation received a $100,000 donation from the Virginia-based Moko Door Foundation, which puts the campaign to process 11,000 untested rape kits in Detroit over its first $1 million mark. The donation was the largest of a $10 million fundraising effort that launched in January to help process the kits, found unopened in a Detroit Police Department storage unit in 2009, and support the Enough SAID (Sexual Assault in Detroit) coalition. Oakland University is exploring potential future uses for a campus residence that the school maintains for its presidents, AP reported. According to The Oakland Press, new concepts for Sunset Terrace include a development and alumni center as well as a museum named in honor of John Dodge, co-founder of Dodge Bros. Motor Cars and the first husband of Matilda Dodge Wilson, the school benefactor for whom the house was built in 1974. Zip lines and a new Tuskegee Airmen National Historical Museum air show are among the additions to the 2015 GM River Days presented by Soaring Eagle Casino & Resort, the June 19-21 festival organized by the Detroit RiverFront Conservancy. See riverdays.com . Cynthia and Edsel B. Ford II made a $1 million gift to the Metro Detroit/Southeast Michigan Chap-

Detroit Digits A numbers-focused look at the week’s headlines:

$35 million The investment that Memphis, Tenn.-based FedEx Corp. plans to make to redevelop the former Detroit Artillery Armory site in Oak Park. FedEx will use the site as a distribution center.

1:10.3162 The lap record for the Chevrolet Detroit Belle Isle Grand Prix, set in 2012, that is expected to be broken at the event this month. Between track improvements and a new IndyCar Series chassis, speeds are expected to rise.

4-to-1 The ratio by which Proposal 1, the ballot measure to increase road funding, was defeated in a public vote last week. Of the 1.76 million Michigan voters, 1.4 million voted “no.”

3 percent The percentage of its global workforce that Dow Chemical Co. plans to cut as it prepares to break off a portion of its chlorine business. That translates into a reduction of up to 1,750 employees.

$9.4 billion The value of tax credits the state remains on the hook for from the now-defunct Michigan Economic Growth Authority incentive program. Last week, the Michigan House passed two bills that would prevent new tax credit agreements for businesses. ter of JDRF to help fund efforts to find a cure for Type 1 diabetes. The gift is the latest from the couple who have supported the organization (formerly known as the Juvenile Diabetes Research Foundation) since 1997. The Horizon League men’s basketball tournament is coming to Detroit. The nine-school Division I conference, which includes Oakland University and the University of Detroit Mercy, will change its postseason format to shift games beginning in 2016 to Joe Louis Arena for two seasons, then to the new Detroit Red Wings arena expected to open in 2017. Detroit-based advertising agency Lowe Campbell Ewald is back to being just Campbell Ewald. The name change after less than two years is a byproduct of the agency’s parent company, New York City-based advertising holding company Interpublic Group of Cos., reorganizing some of its agencies Friday. Boston-based Mullen and London-based Lowe and Partners Worldwide have been linked by IPG to become Mullen Lowe Group. The IPG units can access each other’s resources as needed, but operate independently.

nother sign of metro Detroit’s improving office market came last week when it became known that the Detroit-based Sterling Group purchased the Tri-Atria building on Northwestern Highway in Farmington Hills for $20 million. It is the second-largest sale in terms of price for a single office building in the five-county metro region this year, behind only Dan Gilbert’s purchase of One Detroit Center in downtown Detroit in March for $100 million, based on a review of 2015 sales listed by CoStar Group Inc. The 237,000-square-foot Class A building, at 32255 Northwestern between 13 Mile and 14 Mile roads, changed hands in late February, according to CoStar. The local office of Transwestern was broker for the seller, Chicago private equity firm Pearlmark Real Estate Partners LLC. The building was developed in 1986. According to a marketing brochure, the building is 86 percent leased, with Millennium Medical Group (92,000 square feet) as the largest tenant. The average rent is $19.50 a square foot per year, according to CoStar. Sterling Group had no broker in the sale. It is now property manager for the building, while Transwestern will continue leasing office space.

Race a topic of Mackinac conference panel This year’s Mackinac Policy Conference will close with a panel discussion on what organizers hope is the start of a broader national conversation about race and class in Michigan — and beyond — and is prompted by the civil unrest in Ferguson, Mo., and Baltimore. Organizers of this year’s conference, set for May 27-29 on Mackinac Island, say they don’t expect to resolve the tensions that have led to riots and protests elsewhere after the death of black men while in police custody. But at least talking about the underlying racial and economic tensions that have simmered and erupted in cities around the country is important, said Mark Davidoff, Michigan managing partner of Deloitte LLP and this year’s conference chairman. Ferguson and Baltimore — which generated headlines after protests and riots spurred by the deaths of Michael Brown and Freddie Gray, respectively — parallel Detroit, which has its own history of racial unrest. “We think this is a national discussion,” Davidoff said. “If we don’t talk about it, it might get ahead of

us, and we can’t afford that.” Panelists have not yet been announced, but Davidoff said conference organizers are working to ensure that the panel is diverse and authoritative. For conference details, see detroitchamber.org/mackinac.

[PALACE SPORTS & ENTERTAINMENT]

Pistons fans are ballers and buyers despite losses The Detroit Pistons struggled on the court this season, but finished with their best (losing) record since last making the National Basketball Association playoffs in 2008-09. Still, fans responded with optimism — and with their wallets. Attendance improved a bit as did retail sales. Especially of basketballs. Pistons fans bought 11,500 basketballs of all varieties this season during the team’s 41 games at the Palace of Auburn Hills. That’s 3,000 more than the season prior, said Terry Adam, the Pistons’ director of merchandising. Adam attributed the ball sales growth to boosting the number of styles, including a glow-in-the-dark ball. Overall, retail sales transactions were up 22 percent and merchandise revenue increased 13 percent over 2013-14, the team said. It didn’t disclose dollar amounts, but some back-of-the-envelope math suggests nearly $800,000 in new retail revenue. For the full story on the Pistons’ merchandise sales, visit crainsdetroit.com.

BITS AND PIECES America’s largest Thanksgiving race will have a new sponsor this year as Strategic Staffing Solutions Inc. has agreed to a three-year deal to support what will now be the Strategic Staffing Solutions Turkey Trot presented by The Parade Co. The Turkey Trot is the umbrella name for three Thanksgiving morning runs: the 10k Turkey Trot, the 5k Stuffing Strut and the Mashed Potato Mile. Fifth Third Bank had sponsored the races for the past decade.

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