Crain's Detroit Business, July 4, 2016 issue by Crain's Detroit Business

Courts awash in Flint water lawsuits, Page 3 JULY 4 - 10, 2016

Report: Diversifying economy at crossroads

“We look for locations that are great views for vehicle traffic, pedestrian traffic, within a few blocks of the stadium. The bigger, the better.” Candice Simons of Detroit sign maker Brooklyn Outdoor

By Tom Henderson

Apartment development to move to nearby parcel

thenderson@crain.com

The state’s 21st Century Jobs Trust Fund has had a strong return on investment since launching in 2005, but Michigan is at a crossroads in its efforts to diversify its economy, according to a study commissioned by the Michigan Economic Development Corp. The fund’s Entrepreneurship and Innovation Program has created 26,839 jobs in the decade since legislation in Lansing allowed proceeds from the state’s portion of tobacco settlement revenue to fund various diversification programs, according to the 73-page report by Columbus, Ohio-based TEConomy Partners LLC, a consulting firm that focuses on analysis and strategy for innovation-based economic development. The report said that since the trust fund was created, $261.6 million has been spent by the state in innovation and entrepreneurship efforts across Michigan, helping nearly 1,400 companies and new entrepreneurial startups, either

By Kirk Pinho kpinho@crain.com

By the numbers How Michigan's venture capital business has changed: 2006 2014 15

THE DISTRICT DETROIT

The arena district, with its ample expected foot traffic, will be a magnet for billboards and other outdoor advertising.

SEE REPORT, PAGE 17

VC firms

VC dollars under management $0.9B $4.8B VC investment in Mich. startups $103M $204M Mich. startups receiving investments 13 51 Source: TEConomy Partners report for MEDC

Big score for signs? Fight for billboard space around Little Caesars Arena figures to grow as opening nears By Bill Shea bshea@crain.com

The race is on to find new spaces for billboards and other outdoor display advertising surrounding the new Detroit Red Wings arena by the time it opens in September 2017. The $627.5 million Little Caesars Arena location at I-75 and Woodward Avenue, as the anchor of 50 blocks of new offices, restaurants, stores and housing, makes the project attractive for billboard companies. And leading the charge locally is Detroit-based sign company Brooklyn Outdoor, led by 2015 Crain’s 40 under 40 honoree Candice Simons. Her 4-year-old company, operating out of a fourth-floor Eastern Market loft, is scouting locations around the arena and within the

crainsdetroit.com Vol. 32 No 27

NEWSPAPER

Brewster plan splits; parking an issue

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Parking economics and planning have split off the initial residential portion of the Brewster Wheeler Recreation Center site redevelopment, moving one developer’s plans for apartments to a nearby location and delaying the construction timelines of two unrelated projects. The developers couldn’t find an economically viable way to accommodate a parking deck, or expand surface parking, to meet the needs of the 6.2-acre redevelopment with about 200 new apartments, a new restaurant and meeting space, among other uses. So this week, a Detroit City Council standing committee is expected to consider the sale of about 4 acres of nearby Brush Park land a couple of blocks southwest of the Brewster Wheeler site off I-75 south of Wilkins Street to developer John Rhea for his planned Brush Park South multifamily project. The residential project is expected to cost about $50 million and add about 200 apartments in the area of Brush and Winder streets. Rhea, a Detroit native who is managing partner at New York SEE BREWSTER, PAGE 16

BROOKLYN OUTDOORS

Candice Simons of Detroit-based Brooklyn Outdoor manages advertising on Cobo Center’s electronic billboards and now has her eye on the arena district.

50-block District Detroit revitalization area for billboard and signage spots. “Having coverage at the stadiums is a huge priority for us,” she said. “I could see us realistically having 15 prime sites. I’d like to have more. We have our eyes on a lot of sites, but so do our competitors.” Having 15 prime sign locations near the arena would generate about $1 million in new annual

revenue for Brooklyn Outdoor, Simons said. The company, which has five full-time employees, expects to do about $6 million in total revenue this year. “We’re scouting very actively in those areas to build different types of media formats,” Simons said. That includes traditional billboards, large walls either painted as murals or covered with SEE SIGNS, PAGE 15

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MICHIGAN

BRIEFS Dow Chemical to cut jobs, close plants to trim costs

Dow Chemical Co. plans to eliminate about 2,500 jobs and close plants in North Carolina and Japan to achieve $500 million in cost savings and more revenue from taking full control of its Dow Corning Corp. silicone venture, Bloomberg reported. The cutbacks will include 700 jobs in the Great Lakes region. The Midland-based company did not specify which facilities would be affected by the regional cost cuts. It said all Dow and Dow Corning offices will remain open in the region, and construction on Dow’s new headquarters in Midland will continue. The company will take a charge of about $410 million to $460 million in the second quarter for costs related to the revamp, Dow said last week in a statement. Dow will close silicone factories in Greensboro, N.C., and Yamakita, Japan, as well as some offices and production lines in other unspecified locations. Dow paid $4.8 billion to buy Corning Inc.’s 50 percent stake in the 72-year-old joint venture in a deal completed at the beginning of June.

Dow is also seeking to merge with Delaware-based DuPont Co.

Kellogg’s next serving: A cafe on Broadway Kellogg Co. is opening a cafe in New York City as it pushes to reinvent cereal’s soggy image. The Battle Creek-based company said bowls will cost $6.50 to $7.50 and combine cereals like Special K and Frosted Flakes with ingredients like pistachios and lemon zest, AP reported. The move comes as Kellogg has suffered declining cereal sales in the U.S., with people reaching for a growing array of breakfast options. To boost sales, the company is also trying to market cereal as a nighttime treat and on-the-go snack. Kellogg’s cereal cafe, located on Broadway, opens July 4. The cafe will also serve ice cream dishes, juices and coffees. Kellogg said it plans to offer delivery later this year.

MICH-CELLANEOUS n Michigan Gov. Rick Snyder signed a $38.6 billion budget bill last week that will more than triple state spending on the water emergency

in Flint, AP reported. Expenditures on the water crisis will total at least $240 million — about $165 million more than the $75 million previously approved by the governor and lawmakers, according to a legislative fiscal analysis. The city will use some money to begin replacing thousands of underground lead pipes that connect water mains with houses and buildings. n Documents newly released by the Grand Rapids Planning Commission outlined details of a proposed redevelopment project along the burgeoning Bridge Street corridor in the city, MiBiz reported. Grand Rapids-based Rockford Construction and a variety of partners plan a mixed-use development on sites that would include housing, a Meijer Inc. grocery store, additional retail, parking and office space. n Holland-based automated equipment maker JR Automation Technologies LLC is creating 250 jobs and investing $5.6 million into the region via an expansion in which it intends to acquire a new facility near its current operations, the Grand Rapids Business Journal reported. The address, cost and use of the new facility, which is expected to be operational by year’s end, was not disclosed; most of the jobs created will be in engineering. n Developers and architects now can submit to the state construction plans for building projects through an online software program meant to simplify the permitting process.

The technology will allow contractors and others involved in the building process to submit all construction documents electronically to the Bureau of Construction Codes, housed within the Michigan Depart-

ment of Licensing and Regulatory Affairs. The state earlier this year

launched e-PlanCheck, a software program made by Los Angeles-based e-PlanSoft and integrated with San Ramon, Calif.-based Accela Inc., which sells cloud-based software to government customers. Developers will continue to be allowed to file paper copies if they wish. n Michigan plans to step up efforts to connect food and agriculture companies in the state with Chinese buyers during a November trade trip, AP reported. Officials announced last week that Michigan Department of Agriculture and Rural Development Director Jamie Clover

Adams will lead a trade mission to China from Nov. 9-14. Stops are planned in Shanghai and Shenzhen. The trip will include one-on-one meetings, retail tours and briefings with U.S. Department of Agriculture officials. n A northern Michigan resort

INSIDE THIS ISSUE

BANKRUPTCIES ................................18 CALENDAR .........................................13 CAPITOL BRIEFINGS ......................... 5 CLASSIFIED ADS...............................15 DEALS & DETAILS.............................12 KEITH CRAIN....................................... 6 MARY KRAMER .................................. 7 OPINION .............................................. 6 OTHER VOICES ................................... 6 PEOPLE ...............................................14 RUMBLINGS .......................................19 WEEK ON THE WEB ..........................19

COMPANY INDEX: SEE PAGE 18 has closed a restaurant for the summer because it doesn’t have enough workers, AP reported. The Homestead, in Leelanau County near Lake Michigan, says it recently held a job fair — and no one showed up. Beppi’s, a sports bar at the resort, is closed except for private parties, and a day camp for kids has been scratched. The Homestead is a yearround, 500-acre resort in Glen Arbor surrounded by Sleeping Bear Dunes National Lakeshore.

Correction n A story on Page 3 in the June 27 edition of Crain’s misquoted Ron Henry, senior vice president, chief facilities and construction officer for the Detroit Medical Center. He said, “While it costs $250,000 to buy a teardown south of Mack (Avenue), it costs $30,000 to buy a teardown east of Woodward (Avenue) and (north of Grand Boulevard) in New Center.”

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Flint water battle lines

Paul turns to sports for new VC deal Ex-Compuware CEO’s new firm to pair with video software company

Legal settlement interests may differ for state officials, city residents By Chad Halcom chalcom@crain.com

Attorneys in the Flint water crisis say Attorney General Bill Schuette’s recent lawsuit in Genesee County Circuit Court makes him a powerful ally against the engineering and environmental companies that worked for the city — for now. If and when the various lawsuits against Lockwood, Andrews & Newnam Inc. and Veolia North

By Tom Henderson thenderson@crain.com

America Inc. reach settlement talks,

however, the state and the city residents’ interests may be less aligned. More than 315 cases are pending in various state and federal courts, including the Schuette case filed in Genesee County last week. Many are still awaiting rulings on proper jurisdiction, but in general the LAN and Veolia suits are expected to coalesce over time in Genesee Circuit. Lawsuits targeting

JAKE MAY/THE ASSOCIATED PRESS

A reporter asks Attorney General Bill Schuette a question after he filed a civil lawsuit last month against two water engineering companies, saying their negligence caused and exacerbated Flint’s lead-tainted water crisis. the Michigan Department of Environmental Quality, Gov. Rick Snyder,

various state-appointed emergency managers for Flint or other state employees began landing in June at the Michigan Court of Claims, which hears cases against state agencies. Genesee Circuit Judge Richard Yuille is considering a request to consolidate early discovery and procedural matters, among a previous class-action lawsuit and various individual cases and the Schuette suit, although that request is on hold until other issues get addressed. About 630 children and their families allege lead poisoning from contamination in the water supply in the various individual suits. Lockwood Andrews, a Hous-

ton-based engineering services and program-management company with an office in Flint, was hired to oversee a refit of Flint's nearly century-old Water Treatment Plant when the city separated from the Detroit Water and Sewerage Department in April 2014. Veolia is a Chicago-based environmental services company that performed an analysis of Flint’s water system and reported to the city in March 2015 that it complied with state and federal drinking water standards. Mark McAlpine, attorney and owner of McAlpine PC in Auburn Hills who first brought a prospective class-action lawsuit against Lockwood in late January, hailed Schuette’s entry into the fray as a validation of the previous negligence claims against the engineering firms. SEE WATER, PAGE 16

Crowdfunding site ‘flattens philanthropy world’ to help needy By Sherri Welch swelch@crain.com

About $1,600 stood between “Jan,” her two children and homelessness. She had been traveling to DMC Children’s Hospital of Michigan in Detroit from their Port Huron home and staying at the Ronald McDonald House of Detroit to be close to her 7-year-old son during his cancer treatment and a bone marrow transplant from his sister. When Jan, whose name has been changed to protect her privacy, returned home one weekend, she discovered a house fire had consumed everything she and her children owned, said Michelle Berry, senior

case coordinator of adult programming at Detroit-based Matrix Human Services. Jan remained focused on her son’s treatment, and his cancer went into remission. But where would she and the children live after he was discharged? “She was humble enough to go to a shelter,” Berry said. “But she knew the chances she would take if he left the hospital and they went to a shelter open to the community.” By posting her need for $1,600 on crowdfunding site Benevolent.net, Jan was able to raise the money through private donations within a week, covering move-in costs to get into a Detroit rental home and beds

for her children. (Matrix was able to secure a bed for Jan and other home furnishings through Pontiac-based Humble Design.) Evanston, Ill.-based Benevolent has shifted to a no-fee operating model and is re-engaging with Detroit nonprofits like Matrix and its clients. It’s relying on grants and donations from supporters who include the late Marjorie Fisher, who died June 12, to support its renewed entry in the local market. Launched late in 2011 in the Chicago area, the site quickly spread to Detroit and other cities. As it pursued nonprofit status over the next few years, it posted the financial needs of low-income people on its

site, tacking on a 10.25 percent overhead charge on top of whatever the person was trying to raise. The needs include things other funding doesn’t support, such as the cost of car repairs, a laptop for school use, a washer and dryer or other furnishings for a home. Benevolent finally heard back from the IRS on its nonprofit application in the fall 2014, but the news was not good. The IRS said that by baking a fee into the process, the site was acting as a fee-for-service fundraising platform rather than a charity, Benevolent founder and CEO Megan Kashner said. During negotiations with the IRS, nonprofit SEE BENEVOLENT, PAGE 18

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Bob Paul, the former CEO at Detroit-based Compuware Corp., expects to close this week on the first investment by his new venture capital company, Northville-based Greenflash Investments LLC, in a video software company that has helped golfers like Tiger Woods and Jordan Spieth analyze their swings. Paul will become chairman of Plymouth-based Interactive Frontiers Inc., which does business as V1 Sports, after the deal closes. Joining him on the board will be Bryan Finnerty, a former member of the Detroit Rockers indoor soccer team owned by Mike Ilitch in the 1990s. Finnerty is Bob Paul: To be now CEO and chairman of managing part- Interactive ner of High Ve- Frontiers. locity Sports, a 200,000-square-foot indoor sports complex in Canton Township. As a result of his involvement at High Velocity, Finnerty was named to the 2006 class of Crain’s 40 under 40. His investment in V1 Sports comes from his family investment arm, Opportunity Seed Capital LLC of Wolverine Lake. The size of their investment will not be disclosed. V1 Sports was founded in 1995 to provide video to help golfers analyze and improve their swings. It has morphed over the years into online and app-based platforms that use video and sensors to help golfers, tennis players and baseball players. A golfer can find out that his or her club is losing speed before it hits the ball. Or if too much weight is being placed on the wrong foot during a swing. Besides Woods and Spieth, the company counts as customers Bryson DeChambeau, a touted amateur who turned pro after this year’s Masters championship in Augusta, Ga.; and such institutions as SEE PAUL, PAGE 18

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Blues funding shift to endowment fund means higher cost for Medigap buyers By Jay Greene jgreene@crain.com

A shift in subsidy funding for Medicare supplemental policies from Blue Cross Blue Shield of Michigan to an endowment fund will mean higher premiums for many buyers of the Medigap policies. The Michigan Health Endowment Fund board has approved a plan to partially take over the duty from Blue Cross of providing subsidies — expected to be much less than Blue Cross has been providing — for an estimated 79,000 seniors who purchase Medicare supplemental insurance policies. Under the plan, seniors under 65 with a disability will get a $125-permonth subsidy, those between 65 to 75 will get $40 per month and those over 75 will receive $65 per month. Eligibility was set for seniors at 150 percent or below the federal poverty level. Open enrollment starts Oct. 1 and runs through Dec. 15 for policies effective Jan. 1. Some 400,000 seniors purchase individual Medigap policies in Michigan, including nearly 200,000 low-income seniors through Blue Cross, under a state-mandated subsidy policy for low-income seniors that ends Dec. 31 and a five-year rate freeze that expired July 1. As part of the 2014 conversion of Blue Cross into a nonprofit mutual health insurance company, Blue Cross was allowed to drop its 36-year mandate to provide Medigap subsidies at the end of this year. In exchange, Blue Cross is paying $100 million in annual taxes and contributing $1.56 billion over 18 years to the Michigan Health Endowment Fund, which was created with a mission to fund a broad range of child and senior preventive health services, including Medigap. However, the endowment fund is limited by law to spending only $120 million of its current and future assets on Medigap subsidies over five years from 2017 through 2021, averaging $24 million per year. “Our challenge is to spread it over that five-year period,” said Paul Hillegonds, CEO of the fund. “We need to

make it meaningful and address the most vulnerable with the subsidy.” To minimize Medigap sticker shock for the low-income seniors, Terry Gardner, the fund’s COO and CFO, said the endowment board decided to frontload the subisidies in the first year and will fund $44 million, which is almost 100 percent of the revenue Blue Cross is expected to contribute to the fund for 2017. In an interview with Crain’s two weeks ago, Blue Cross spokesman Andy Hetzel said Blue Cross needs to wait until the endowment fund announces its subsidy levels before it prices its new Medigap policies. Critics have long complained that more than 100,000 low-income seniors who once received subsidies from Blue Cross now will pay full freight for their Medigap policies, and thousands of other seniors will pay higher prices for their Medicare supplemental policies. Seniors have a choice to switch to Medicare Advantage, a managed care plan, for lower prices, but network providers are in some cases limited. Nationally, the average Medigap policy was $181 per month in 2015, according to the Kaiser Family Foundation. There are several different Medigap benefit plans, A through N, which range in price, coverage, deductibles and service copayments. In Michigan in 2010, the last year for which data was available, Medigap policies averaged $119 per month for a Plan C, which is the most popular in the state, to $175 per month for a Plan F, said Kaiser, noting that Medigap policy yearly price increases have been modest. Blue Cross officials say they plan to continue to sell Medigap policies and expect prices to rise. But officials said the state’s largest insurer hasn’t come up with pricing yet for new customers and those who previously received subsidies, which amounted to about $200 million annually. In 2010, before the Michigan insurance department froze Blue Cross rates, seniors with incomes less than 150 percent of the federal poverty level paid about $95 per year for subsi-

dized policies. For example, the Blues’ Plan C Medigap product cost about $111 per month for a subsidized premium, which was about 39 percent less than Blue Cross’ regular rate. More than 90 percent of seniors were enrolled in a Plan C, officials said in a previous Crain’s story. But one unknown question that could affect the endowment fund’s Medigap budget still is how many seniors will sign up to receive the subsidy, Gardner said. “Blue Cross customers are eligible but also all Medicare qualifying residents in the state,” he said. Gardner said the endowment fund is working with carriers to provide the subsidies before the senior is charged for the policy. “We don’t want the seniors to go out of pocket and get reimbursement from us later,” he said. The endowment fund also has created a call center and informational website at michiganmedigapsubsidy. com. The call center’s number is (866) 824-9772. Seniors can apply for subsidies in three ways: Apply online, use the call center and apply over the phone, or print out and mail in applications. Gardner said the endowment fund designed its subsidies to pay for about half the difference between the Blue Cross current subsidized rates and current market rates for other Medigap carriers. For example, if a Blue Cross Medigap subsidy policyholder paid $100 for a Medigap policy and the average of other carriers was $200 per policy, the endowment fund set the subsidy amount at $50, he said. “We are trying to help people with potential (Medigap price) increases,” Gardner said. “We recognize that Blue Cross rates” are likely to increase. Gardner said five carriers already have agreed to participate with the endowment fund on the subsidy program. They are Blue Cross, Blue Care Network, Priority Health, United AARP and Health Alliance Plan. There are more than three dozen Medigap carriers in Michigan and most are still considering their options. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Home of Heidelberg Project’s nonprofit office for sale By Kirk Pinho kpinho@crain.com

The Brush Park building, where the Heidelberg Project nonprofit leases office space, is for sale. Located at 42 Watson St. between Woodward Avenue and John R Street, the building is about 10,000 square feet and was built in 1923. Gordon Hawkins, broker/owner of Detroit-based Hawkins Realty Group, which is marketing the building for sale and specializes in Indian Village real estate, said last week that an official asking price has not yet been set but that he is expecting it to be around $1.2 million. “The Heidelberg Project building is an important part of the Midtown

neighborhood fabric and has no plan to move in the immediate future,” Executive Director Jenenne Whitfield said in a statement. The two-story building is owned by Warren Smith of Asheville, N.C., according to CoStar Group Inc., a Washington, D.C.-based real estate information service. In the building, the Heidelberg Project has its administrative, meeting, gallery and studio space on the first floor; the second floor is residential with cork kitchen floors, cherry wood kitchen cabinets and granite countertops, and stainless steel appliances, according to the Hawkins Realty Group listing brochure.

The building sits just a few blocks north of the $627.5 million under-construction Little Caesars Arena for the Detroit Red Wings, a location that will likely generate substantial investor interest in the 42 Watson building. The Heidelberg Project art installation, which marked its 30th anniversary in April, covers a pair of sparsely populated Heidelberg Street blocks in the McDougall-Hunt neighborhood. Started by artist Tyree Guyton, it transformed the rundown area into an art installation with found objects and paintings. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

New state budget requires transparency on tax credits LANSING — Lawmakers are attempting to get a better handle on Michigan’s outstanding tax credit liability — and the budget implications caused by inaccurate forecasts — by requiring the departments that award them to account for all remaining costs. The Michigan Strategic Fund, a division of the Michigan Economic Development Corp., and the Michigan Department of Treasury together have to file a report detailing actual and projected costs of all remaining state tax credit programs by Nov. 1. The requirement was included in the spending plan for the 2017 fiscal year — which starts Oct. 1 — that Gov. Rick Snyder signed last week. The provision is the result of a series of corporate tax credit redemptions that punched holes in state revenue forecasts — most notably, a $9.4 billion obligation under the now-defunct Michigan Economic Growth Authority program that caught state administrators by surprise in February 2015, in large part because more credits were redeemed than expected. The spike contributed to a midyear budget cut that year, led by credits awarded to the Detroit 3 automakers to save jobs during the recession. And in May, state Treasury data showed corporate income tax reve-

LINDSAY VANHULLE

CAPITOL BRIEFINGS lvanhulle@crain.com Twitter: @LindsayVanHulle nue was down 20 percent so far this fiscal year. A drop in corporate profits was thought to be a factor, but so is uncertainty surrounding the state’s tax credit obligations; some companies elect to file under the old Michigan Business Tax rather than the new 6 percent corporate income tax in order to claim existing credits. The Snyder administration negotiated caps with Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles NV on the remaining value of the MEGA credits they can receive. Treasury administrators in May said they believe refunds will peak this year with an estimated $600 million in MEGA credits claimed and another $200 million in battery credits. “Like any large state liability that could potentially impact revenues, I think our legislative partners are

Deteriorating Summit Place Mall faces demolition

Talent update The 2017 budget also allows the

Michigan Department of Talent and Economic Development to use up to

“I think our legislative partners are looking for as much information as they can to really understand what the potential impacts are.” Amanda Bright McClanahan, Michigan Economic Development Corp.

$2 million for a challenge match program within the state’s Community Ventures program, which helps employers in four cities hire long-term, “structurally” unemployed workers. Snyder and lawmakers didn’t increase Community Ventures’ $9.8 million allocation, but offered administrators the option to use some of the funding to match, dollar-for-dollar, private contributions put toward the program. “It’s an option for us as we look at ways to partner with businesses,” department spokesman Dave Murray said. “We appreciate the lawmakers including that option, and it is something to consider as we move forward.” Community Ventures is offered in Detroit, Pontiac, Flint and Saginaw and has led to the hiring of at least 3,000 people at more than 100 companies since 2012, the state said. Through the program, companies offer wraparound services to employees that can remove barriers to work, such as transportation or

child care, as well as training and education support. As part of the program, the MEDC reimburses participating companies $5,000 for each employee hired full time over the course of a year. The average wage paid is $11.20, according to 2015 data. Other business budget notes: n Michigan’s skilled trades training program, housed within the Talent and Economic Development Department, will receive an additional $5.3 million, bringing the total to $30.9 million in 2017. The program helps employers design new training that leads to an education credential or full-time employment. n The MEDC’s business attraction and community revitalization efforts will get a $1.5 million funding boost, for a total of nearly $115.5 million. n As reported earlier in Crain’s, the Pure Michigan tourism branding effort housed within the MEDC’s Travel Michigan division will get an extra $1 million, for a total of $34 million next fiscal year.

Corporate Law Experience

In Your Corner.

By Adrienne Roberts aroberts@crain.com

The abandoned Summit Place Mall in Waterford Township may be torn down after the township issued a demolition order to the California-based owner of the deteriorating site. Township Clerk Sue Camilleri said it will cost Santa Monica-based SD Capital LLC $4.1 million to demolish the 1.4 million-square-foot structure at Elizabeth Lake and North Telegraph roads, which is less than it would cost to repair the building. The enclosed mall portion was shut down in 2009, and Macy’s and J.C. Penney closed their stores there the following year. Sears remained open until 2014. On April 13, the township held a hearing to present the building’s condition and suggest demolition of the structure. SD Capital requested 270 days to respond to the evidence in order to hire contractors and determine if demolition was required. The township granted SD Capital 60 days to respond, and at the hearing June 14, no representatives from SD Capital were present. Camilleri said SD Capital claims the procedure was unfair and it didn't have enough time to respond. SD Capital has until July 15 to seek necessary permits, then an additional 30 days to begin demolition work.

looking for as much information as they can to really understand what the potential impacts are,” said Amanda Bright McClanahan, the MEDC’s CFO. “Obviously, the last couple of years and understanding the impact on total projected revenues has brought part of that to the forefront. “We can tell what credit was applied for, but when companies will come in there’s a level of conjecture or projection on that that we continue to work through.” Under the new budget provision, MEDC and Treasury administrators will have to report the amount of the credits when they were approved and their value dating back to 1995, when the MEGA program started, until its projected end. Forecasts of pending claims will have to be based on estimated employee counts and compensation. Reports also will need to account for the value of all other programs — including credits for brownfield redevelopment, film production, photovoltaic technology, vehicle battery manufacturing and polycrystalline silicon manufacturing — until they expire.

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OPINION

Development strategy must be inclusive T

o borrow some phrasing from Eminem, what if you only have “one shot, one opportunity” to get something right? Detroit is trying to get its economic development strategy and public space planning right. As Mayor Mike Duggan pointed out in the announcements of the new iteration of Paradise Valley (most recently known as Harmonie Park), coordination and good working relationships among the developers involved are essential. These groups are working on more than $50 million in separate new projects. (See Page 19.) Also part of the plan is to create a nonprofit, the Paradise Valley Cultural and Entertainment Center conservancy, which would be made up of the developers and others to organize programming and events in Beatrice Buck Park. The park sits in the heart of Paradise Valley. Duggan said that’s “so you don’t have five businesses running five different strategic plans in the same area.” This coordinated effort makes sense, and it also, smartly, provides opportunity for other real estate investors besides Dan Gilbert to have a slice of the economic development opportunities in downtown Detroit. In Paradise Valley, some of the big investor names are Dennis Archer Jr., Rainy Hamilton and Jim Jenkins, all businesspeople with proven track records in various industries. One person unhappy in the unveiling of the new plans? Carr Center President Oliver Ragsdale. The group, which provides space for artists and grassroots groups, can be renewed only as a minor tenant. It hasn’t been able to pay rent on the Harmonie Club building it occupies, and the city hasn’t promised anything specific in the new plans. Sometimes, market realities mean that as the going rental rates edge upward in a given neighborhood, some groups can’t afford to stay. It’s also true that there is sometimes the feeling of two Detroits, one that is vibrant and infused with new sights, sounds and exciting things to do. And the other, as is the real-life experience for many people, a Detroit full of poverty, hunger and blight, a place where even basic needs aren’t met. A place, especially in certain neighborhoods, where minority investors, grassroots groups or entrepreneurs don’t stand a chance. Re-infusing a neighborhood near the foot of Gratiot Avenue with new development isn’t going to solve all those problems, but the strategy here of coordinated urban planning makes sense. It’s also important that events programming, in this reinvigorated district and all others, is welcoming to all — and encourages dense streets from early morning until night. Could the Carr Center groups still perform in Paradise Valley? Could the Charles Wright Museum or other cultural entities offer free rent somewhere near downtown? There is an opportunity here for creative problem-solving to go one step further — and help all involved — as part of something bigger, that opportunity for reinvention that can be inclusive.

Advice to U.S. biz after Brexit: Prepare, stay alert

he nervous tailspin U.S. business leaders are experiencing as a result of “Brexit” is not likely to settle anytime soon, especially due to the fear of the unknown. The reality, however, is there are some things we know will occur, and we can prepare now to minimize negative impact. While the exact reason the United Kingdom voted to exit the European Union is likely to be debated throughout history, the term “freedom” was touted as a leading factor. Freedom from deep integration with the rest of the EU, freedom for Britain to make its “own” decisions regarding economics, and freedom to change its own immigration laws are the key issues. However, with the approval of “Brexit,” these freedoms will soon become restricted and will have tremendous impact on employers, especially the freedom for employees to easily relocate for work to and from the U.K. and within the rest of the European Union. While the world begins to feel and understand the economic aftershocks stemming from U.K. voters’ decision, U.S. corporations do not have to feel completely helpless waiting for details to unfold. Corpo-

rate America needs to prepare as best as possible knowing the divorce, or separation, between the U.K. and EU will include changes such as: n A registration plan may be established between the U.K. and EU to prove lawful status of EU nationals who are in the U.K. This will replace the current free-travel arrangement between the EU’s 27 participating countries and the U.K. n The current points-based system in the U.K. that regulates immigrant workers on different tiers such as entrepreneurs, investors, artists,

engineers, midwives, skilled labor and students, for example, will most likely be replaced with an Australian-style system. While the EU’s system currently used in the U.K. is more relaxed, Australia’s is more rigid. For example, unless an individual is either a documented and U.K.-approved refugee, sponsored by an employer to fill a job or approved from a specified list of skilled professions, chances of relocating to the U.K. will be nil. (It will not apply to Irish nationals because of Ireland’s strong relationship with the U.K.) American companies that have offices in the U.K. are likely to wonder whether they should start looking to relocate into an EU country. If they employ staff from the EU, these companies need to prepare for delays and increased costs that will occur from increased red tape that will occur from Brexit. On another side, the U.K., during this turmoil, may look even further to its friendship with the U.S. for guidance and will not want to upset its relations with U.S. business leaders who have a strong impact on their economy. Keeping calm and being alert regarding possible upcoming changes will only serve to benefit U.S. business.

ed their country back, and that’s how they voted. If there is a parallel to the United States, we'll find out in November. Meanwhile, if cooler heads prevail in the U.K., things will probably settle back into some sort of normalcy in preparations for an election. We are all part of a global economy. It will take more than the U.K. leaving the EU to upset the applecart — unless some head of state does something stupid. Then all bets are off. But I don’t see a huge trade war involving the EU, the U.K. and the

rest of the world. If you are a U.K. consumer, chances are you are a bit unsettled. If you were planning a major purchase, you will probably postpone it. But you’ll still make the purchase; you might just wait a bit. If you live in Southeastern Michigan, you’ll still see all the products from the U.K. that you saw before. And parts for your factory will still be arriving on time. Things may calm down over the next few weeks, if no one panics. The world economy is simply too large and too global to let a minor skirmish affect business.

OTHER VOICES Alexandra LaCombe

LaCombe is a managing partner and attorney at Fragomen, Del Rey, Bernsen and Loewy in Troy. She is a member of the American Immigration Lawyers Association and serves as an adjunct professor at the University of Detroit Mercy School of Law.

May cool heads prevail in Europe Nobody likes uncertainty. When people and companies don't have the slightest idea what's going on, they panic. The United Kingdom voted to leave the European Union. It’s just the way it was several decades ago when everybody had to figure out shillings and pounds. We still have to figure out stones for weight and imperial gallons. Like Japan, Great Britain is an island. But I doubt that Germany will stop building and selling goods from Germany to Great Britain. And Burberry and Clarks shoes are still going to be shipping to France and

Italy. Companies will continue to ship products into and out of Great Britain. Europe will continue to buy products and services from Great Britain. Some suggest that countries in Europe will adjust pricing as the pound rises and falls. Remember, the U.K. has always had its own currency. Like so many others, I remember the U.K. before it entered the common market. I expect it won’t be much different from how it has been recently, unless some other EU country does something stupid and changes the way it acts without regard to the

KEITH CRAIN Editor in chief

economic consequences. It’s going to take time as everyone adjusts. But the best advice is to slow down and take some deep breaths. Things will be OK. Some U.K. voters said they want-

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

Interviewer Gilbert helps complete circle of Ford’s Detroit connection We know Dan Gilbert as an entrepreneur, a real estate developer, a Detroit booster and, as of June 19, the owner of an NBA champion, the Cleveland Cavaliers. But could he be a journalist at heart? He has a penchant for asking good questions, onstage in “fireside chat” formats, of some pretty high-profile people, including a memorable onstage interview with Warren Buffett at the inaugural Detroit Homecoming in 2014. (You can find that video at CrainsDetroit. com/buffett.) Perhaps for the first time, donors and supporters of the Detroit Institute of Arts last week watched Gilbert in action as he interviewed Darren Walker, president of the Ford Foundation. It was Walker who was tapped by Gerald Rosen, federal judge and Detroit bankruptcy mediator, to help shape the “Grand Bargain” — raising more than $800 million in state and philanthropic dollars to fund city retirees’ health care in a pact that prevented museum art from being sold in Detroit’s bankruptcy. It was the commitment by Ford — $125 million over 15 years — and Walker’s personal lobbying with other foundations that made the bargain work. So the DIA honored Walker, as we should as a community, again and again. (Walker will be among the speakers at the Detroit Homecoming in September.) As Gilbert noted: “Selling the art would have been the face of Detroit for years to come. It’s hard to come back from that.” But the conversation was about more than the Grand Bargain; Gilbert probed how that commitment has reconnected the foundation to Detroit in a very big way. The Ford Foundation saga is one of those “what might have been” Detroit stories. What if the foundation didn’t move to New York in 1953? What if the Ford family — whose company stock fed the foundation’s endowment – were still engaged? For years, until Bill and Melinda Gates created their foundation, Ford was the largest foundation in the United States and one of the largest in the world. Co-founded in 1936 by Edsel Ford, the foundation might have had a different trajectory if Ford had not died prematurely in 1943 at age 49. His death triggered asset transfers to the foundation — ahead of schedule. And history knows what came next: Edsel’s son, Henry Ford II, became CEO of Ford Motor Co., a study was commissioned to decide the future of the foundation, and the recommendation was that the foundation become more global in scope. The move to New York followed. Hank the Deuce resigned as board chairman in 1956 and resigned from the board in 1976, expressing dismay with the liberal grants and distressed by what he

MARY KRAMER Publisher

saw as a foundation philosophy that seemed to bite the hand that created it — capitalism. As Walker noted, it was a period that was “deeply regrettable … (a)

sense of disconnection.” But in recent years, the “Ford family has been nothing but gracious toward the foundation,” Walker said. And when Walker embraced the Grand Bargain idea — after initially thinking the scheme “crazy” — Walker said his board deliberated just 45 minutes in a conference call before voting unanimously to make the $125 million commitment. “Our money was made in Detroit,” Walker said. “We owe this city. It wasn’t a hard decision.” And here was Gilbert — who with

his wife, Jennifer, is a signer of The Giving Pledge, a billionaire pledge created by Warren Buffett and Bill Gates to give half or more of their wealth away in philanthropy — interviewing the guy who helped Detroit emerge from bankruptcy with a shot at sustainability. The Grand Bargain commitment is secure. It seems so fitting that a foundation born in Detroit came back to help save the city’s future. But there’s one more thing that would make the circle complete: Add a qualified executive from the Detroit area to the Ford Foundation

board whose members include Ursula Burns, CEO of Xerox, and board Chairman Kofi Appenteng, a senior counsel at the global law firm Dentons. Maybe it’s time to close the circle even more tightly.

Mary Kramer is publisher of Crain’s Detroit Business. Catch her take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760 and in her blog at www.crainsdetroit.com.

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Develop Detroit CEO hopes to rejuvenate housing outside downtown, Midtown Sonya Mays is a woman on the go. After spending two years working as a senior adviser to Detroit's former emergency manager, Kevyn Orr, from 2013-15, the 40-year-old Detroit native jump-started her next venture: Develop Detroit, a new housing development company focusing on areas outside the active downtown, Midtown and Corktown markets. Before working for Orr during the city's historic Chapter 9 municipal bankruptcy case, Mays was a vice president for Deutsche Bank in its corporate and investment bank division, raising more than $4 billion in debt, equity and securities for a variety of clients, as well as leading M&A transactions. A graduate of Detroit Renaissance High School, she received three degrees from the University of Michigan. She spoke with Crain's reporter Kirk Pinho. Q: Talk a little bit about Develop Detroit and what void it will fill in multifamily housing.

Pretty much every morning I get up and think about how we can do better work in Detroit’s neighborhoods. Develop Detroit is a nonprofit that is targeted to doing work in Detroit’s neighborhoods. Our vision is to use our firm to do some of the same catalytic projects and try to capture some of that same energy

we have in downtown and Midtown in other parts of Detroit.

get our activities in a very tight way, such that they end up being catalytic for our neigbhorhoods. Long term, we want to be very thoughtful about the projects we select, make sure they are reflective of what a community has identified as important. The hope is that will be the tipping-point projects, the test cases, for for-profit developers in other parts of Detroit. We’ve seen time and time again in Detroit that sometimes it’s important to just show people what’s possible. I don’t know the people would have guessed that Whole Foods on Woodward would become the well-populated, well-attended microcosm of the city that it’s become.

Q: In general terms, how is the organization and developments structured and financed?

We are a Michigan nonprofit. We have been very fortunate to successfully raise startup capital from the philanthropic and national bank community. J.P. Morgan Chase made a very generous $4 million grant to use for the startup operating costs for the first several years while we get a few projects going. Our vision long term is to be an organization that funds itself through its core real estate activities, with a little bit more of an investor lens that you would see at a typical CDC (community development corporation). As far as projects go, each will be financed separately as a self-contained project. Our funding sources for those will vary, depending on the nature of the project. That can look like countless different structures. We also have the internal capability to provide our own equity for our transactions, which is a pretty important competitive advantage in doing this work in some of the parts of Detroit that are outside downtown and Midtown. Q: What are the short-term and long-term development goals and metrics for Develop Detroit?

Our initial production goal is with-

After working two years as senior adviser to Kevyn Orr, Sonya Mays turns her focus to the Detroit housing market. in three years to hit 100 units a year of single-family housing, and within a couple of years to be at the point where we average 250 units of multifamily housing. We are going to hit our multifamily goal this year, which is fantastic. So we are a little bit ahead of our projections with that. We have somewhere around 250 units that are either under contract or soon to be under contract right now, all in Detroit’s neighborhoods. The long-term goal is to really tar-

Q: We are about a year and a half out from the city’s formal exit from Chapter 9 municipal bankruptcy. What sort of issues still remain that need to be addressed?

I don’t know that the bankruptcy was ever meant to be the right tool to fix everything, particularly in the 20-month time window that the team had to work with. I think it was the right tool to deal in a pretty surgical, triage way, with the financial, the on-paper number imbalances. I don’t know that anyone realistically thought the 18- to 20- month window was enough time to both deal with the financial imbalance as well as with some of the operational inefficiencies that had developed

over a 30- to 40-year period. Those built up over that period as the city moved through this declining revenue environment. It basically went into survival mode the last 10 years. It just takes time to work out of that. I don’t think there is a better mayor in this moment. Mayor Duggan from the beginning totally understood the need to improve the functioning of city services. Q: What specifically did you work on under Kevyn Orr?

There were almost two phases. There was the pre-Duggan phase, where we were responsible for much more of the city operations. I got involved in that for several months with several city departments. But the way that things were split up was kind of based on expertise. My own included investment banking, specifically asset disposition experience. I’m a licensed attorney, and you sort of marry those two things. It fell into land use and property work. So that spanned from restructuring efforts in Planning and Development to working with the new leadership team and the Detroit Land Bank Authority to get things transitioned, as well as working on the various larger asset disposition projects, the DIA (Detroit Institute of Arts), there was a large building on Jefferson that we sold, the (Joe Louis Arena), the bridge. Q: What was one specific moment or meeting that you will tell your family about, or your friends about, that not many people know?

I’ll wait for the Bill Nowling book, if he ever writes one. My motivation for coming back to work on the bankruptcy was that I know how these large transaction teams get composed, and I suspected it was very unlikely that there was a Detroiter. I had a pretty unique skill set, so it was pretty important for me to come back from that perspective. My whole family lived in Detroit the entire time of the bankruptcy. I have an aunt who is a retired police officer. The pension cuts are not an abstract concept. The biggest takeway was that it was my hometown and everything had this critical weight to it. Q: You started your career as a junior high math teacher. How do you go from Algebra 1 to commercial real estate executive and mergers and acquisitions, like you did with Deutsche Bank?

I like interesting jobs. I’m a terrible advocate for doing things the “right” way. Some people are really excited about subject matters. I just never have had that. I just really like finding interesting jobs that are compelling. I’ve chased whatever seemed really interesting to me at the time. This might have been growing up in Detroit — being the birthplace of modern auto, Motown. Nobody told me I couldn’t just go for what I wanted. I never learned that lesson that said don’t reach high for something.

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Weathering unexpected disasters Insurance experts: Business survival depends on preparedness, business continuity planning By Paul Vachon

Special to Crain’s Detroit Business

In a world fraught with uncertainty, shocking events inevitably happen, such as the June 12 attack on an Orlando, Fla., nightclub. And while many disasters share common characteristics, no two are identical, and planning an effective response is imperative. The astute business owner needs to prepare a disaster preparedness plan to reduce the likelihood of an incident occurring, to minimize its impact, and to work with an insurance component to mitigate losses. The need for complete disaster planning is crucial: According to the Small Business Administration, 90 percent of small companies that experience a disaster interrupting normal opera-

tions are out of business within two years. “Plans for dealing with emergencies have been around a long time, but typically involved only more conventional types of incidents, such as a fire, a power outage or some type of natural disaster. Today, the range of possibilities includes the more esoteric, like an active shooter situation or a sophisticated cyberattack,” said Jim Giszczak, an attorney at McDonald Hopkins, a Bloomfield Hills law firm that assists clients with emergency preparedness. “This demands that the plans must become ever more sophisticated. One size fits all won’t work.” Rich Donley, senior vice president for Detroit-based Mort Crim Communications, said, “In the aftermath of

any disaster affecting a business, it’s essential that the people responsible for emergency preparedness at other organizations study what transpired and use their creativity to devise more effective ways to deal with a similar situation, should it one day affect them. “Once that is done, the staff must be trained and regularly drilled to assure proficiency. Effective communication is key.” Practice drills Donley said that he often will test the effectiveness of a client’s security protocols by posing as an employee to see if peers will “tailgate” each other at the point of entry. This is when one person uses his credentials to gain access, then holds the SEE DISASTER, PAGE 10

Disaster planning 101 Effective corporate disaster planning is necessary for two basic reasons: to protect lives in the event of an emergency, and to preserve the ability of the business to survive in the aftermath. Proper planning involves these three essential elements:

 A professional risk

assessment. This is a thorough evaluation of the organization’s vulnerabilities, its capacity to provide immediate response and an analysis of the potential impact to the business from any of several possible emergencies.

 Emergency response

planning. Development of plans, each tailored to respond to a particular type of incident, such as a fire, flood or power outage, but also more esoteric types of incidents, such as a kidnapping, a shooter or a civil insurrection. Such plans have as ultimate goals the protection of staff, customers and company assets. Each individual within an organization must be sufficiently trained in activating such plan(s), and

provision must be made to communicate the plan to all involved.

 A business continuity plan.

This is a set of procedures, to be implemented once control of all facilities is regained, to maintain business operations. This may include facility sharing with a competitor or enlisting the help of a third party in establishing a temporary company “hot site” to enable continued company administration. The continuity plan will also address the issue of loss remediation through the use of various insurance products such as those covering fire and tornado, business interruption, or even kidnapping, ransom and extortion. Paul Vachon

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

SPECIAL REPORT: BUSINESS INSURANCE

DISASTER FROM PAGE 9

door for a co-worker, not realizing that the second employee is unaccounted for and a potential security risk. According to Donley, security slip-ups like this happen too often. The focus of disaster preparedness, however, goes beyond physical security and involves a plan that addresses the issues of risk, response and contingency.

Risk planning Setting up a plan begins with evaluating an organization’s vulnerabilities, its capacity to provide immediate response and an analysis of the potential impact to the business. Ideally, this should be developed by a third-party professional, but also should include a cross section of employees to offer a variety of perspectives. A risk assessment will identify the range of potential hazards, determine the assets in jeopardy and estimate the impact to the business. According to the London-based Institute of Risk Management, the risk assessment should include a vulnerability analysis, which takes into account what the business does, the parties with whom it interacts (suppliers, customers, employees, etc.) and an evaluation of the facilities and grounds. The assessment should provide

enough information to form response plans tailored to various incidences, ranging from the common — such as a flood, fire or power outage — to the rare — such as a kidnapping and/or extortion attempt. And although no two disaster response plans are identical, there are a few common features: n The formation of two incident response teams (a primary and a backup, each with basic medical skills). n Designation of staff responsible for shutting off utility lines. n Establishment of alternate communications systems (such as phone call trees). n Development of off-site backups for essential data (such as a cloud-based location. n Extensive training for teams to properly execute their roles, plus periodic refresher training. After dealing with the immediate consequences of a disaster — removing staff and customers from harm’s way, securing the site, and working with law enforcement — the next step is to activate a business continuity plan coordinated with the organization’s insurance program. (See related story, this page.) Experts say a well-orchestrated action plan will save lives and reduce costs, including property damage.

Extreme situations To help companies prepare for acts of terrorism, ColburnColburn In-

surance and Risk Services, Bloomfield

Hills and Detroit, works with underwriters to provide kidnap, ransom and extortion coverage. Clients purchasing such policies are usually engaged in highly sensitive activities, such as defense contracting, and use them to cover their top executives. In almost all cases, the coverage is a closely held secret, so as not to motivate potential perpetrators. Often, the individuals insured are not aware of the coverage. In the event of a kidnapping, the insurer — working with law enforcement — will provide expert hostage negotiators and, if necessary, ransom money. A business continuity plan should address business interruption, experts say. Robert Colburn, principal at ColburnColburn, cites the example of the 2011 Japanese earthquake and resulting tsunami and how it affected the global auto industry. The area of Japan closest to the epicenter was the home of several key industry suppliers, which impacted production worldwide. Adequate planning would provide for backup sources for components. Insurance experts also emphasize that while effective contingency planning involves all levels of an organization, the involvement of senior executives is a must. “If you don’t have executive leadership (buy-in), implementing a plan will not be successful,” said Mark Cullen, a commercial insurance executive at ColburnColburn.

Key to success: A well-thought-through business continuity plan

In formulating a continuity plan, the Federal Emergency Management Administration advises businesspeople to “carefully assess how your company functions, both internally and externally, to determine what staff, materials, procedures and equipment are absolutely essential to keep the business running.” Although the initial response and the subsequent work to maintain business continuity are distinct, they should be viewed as two branches of the same tree, since Robert Colburn: a threat to a A proper plan is business’ surviv- essential. al begins at the moment an emergency begins. Both aspects, therefore, should be viewed as integral to an organization’s continuity management. Implementing an insurance program to mitigate losses is necessary, but it must be integrated with the continuity plan to be effective.

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“No matter how good your insurance program is, you can still be out of business without the proper business continuity plan in place,” said Robert Colburn, a principal with

Colburn Colburn Insurance and Risk Services, an advisory and consulting

firm with offices in Detroit and Bloomfield Hills. “Before the insurance piece can be addressed, formulating the business continuity plan is a must for the agent or broker. They’re inextricably linked,” said Mark Cullen, an executive at Colburn Colburn. Developing such a plan will often yield useful information by identifying the company’s exposure. A large company, for example, may decide to transfer some risk via insurance, and/or retain some liability by setting up a fund for self-insurance. A well-thought-out continuity plan will take steps to identify potential bottlenecks to a business’ operations to reduce the severity of a delay and, therefore, the amount of a net loss. Cullen offers an example: “Let’s say a manufacturer experiences a fire that damages a machine essential for (its) operation. The machine would cost $100,000 to replace and has a lead time of several weeks. The delay in production will result in several million dollars in lost sales.” Instead of carrying insurance to cover those substantial losses, a good contingency plan will rely on redundancy and call for a spare machine to be maintained in anticipation of such an event. The cost of this alternative would be substantially less, and would be seamless to the customers. “In this situation, insurance coverage would be needed only to replace the damaged machine. But far more important is the time element. If the company’s production capacity were down for several months, the business would migrate elsewhere and might be impossible to regain. So no matter how much insurance we throw at you, the coverage alone is not the solution,” Cullen said. Another item to think about: Backup internet and power. Disasters can potentially affect all levels of an organization, including the C-suite, limiting executives’ ability to manage and communicate. Charlotte, N.C.-based Agility Recovery Inc. is among the companies that addresses this need, specializing in the delivery of “hot sites” to a business whose offices and/or communication systems have been knocked out. The company promises that within 48 hours of an interruption, clients will be provided with a temporary office with electrical power, secure computers and backup communications — delivered to the location they specify. Paul Vachon

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

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Survivor’s story: Lessons learned on cybersecurity best practices Most people don’t spend much time thinking about cybersecurity day to day. As someone whose identity has been stolen four times in the past 18 months — courtesy of Anthem Health, Target, and the U.S. Office of Personnel Management — cybersecurity has become somewhat of an obsession for me. I have learned first-hand that these events are the new normal in today’s connected world. Think about it: In 2016, more than 15 billion devices are connected through the internet. Those devices range from smart watches and phones to autonomous vehicles and infrastructure. By 2020, the internet of things is expected to integrate more than 50 billion electronic devices, creating innumerable opportunities for hackers to compromise our devices and networks. Let me paint a picture of the variety and scale of cybersecurity threats around the world. Almost daily, hackers target major institutions, including banks, health care providers and government entities. These hackers represent nation-states, foreign and domestic competitors, and individuals simply looking for a thrill. With the advent of autonomous vehicle technologies and connected infrastructure, we now face the possibility of hackers shutting down transportation infrastructure, caus-

OTHER VOICES Noel Nevshehir

Nevshehir is director of international business services at Automation Alley. ing fatal accidents in their wake. Sophisticated hackers now have the ability to remotely power down sensor-driven heart pacemakers, morphine drips and kidney dialysis machines. In addition, hackers are responsible for the greatest transfer of wealth in the history of mankind, as they incrementally and almost imperceptibly empty bank accounts, steal medical data and poach intellectual property. According to a report last month by Bank of America/Merrill Lynch Global Research, cybercrime costs the global economy up to $575 billion annually. The report goes on to say that in a potential worst-case “Cybergeddon” scenario, cybercrime could extract up to a fifth of the value created by the internet. This not only threatens our nation’s economic security, but our national security, too.

And don’t discount the threats posed by disgruntled employees who can download their company’s IP onto a flash drive and auction it off to their highest-bidding competitor. For businesses, cybersecurity must go beyond protecting the outside perimeter, because just like a brick-and-mortar retail store, most theft occurs from the inside. Today, nearly every aspect of our personal and professional lives depends on a secure and stable cyberspace. The challenge is that we want simplicity, functionality and safety at the same time, despite the requisite trade-offs between them. Unfortunately, software providers do not take sufficient responsibility for developing products that can effectively combat intrusions, malware, fraudulent transactions and phishing scams. Hindering progress on this front is the general lack of encryption on the devices and systems that billions of people now use. And even data encryption, while a good start, does not offer a systemic, long-term solution. And with multiple accounts covering social media, banking, email and other online services, many people have little time or inclination to constantly change and remember strong passwords. The “another brick in the wall” strategy aimed at protecting data

suggests adding another layer of masonry (aka patches) to your firewall. However, no sooner after you patch a hole in your defenses, a dedicated criminal adds another rung to his ladder and leap-frogs back over your wall. While technology to counter these threats has become more sophisticated, cyberthieves will always have an edge over our defensive approaches to guarding data. So what can be done to protect a business or individual from hackers? And how do you assess potential threats to your systems, detect intrusions, and ward off malware? While there is no one-size-fits-all solution — short of going completely off the grid — there are precautions everyone can take to lessen the risk of attacks and to make it as difficult as possible for a thief to steal your private data. Preventative measures include: n Regularly updating your anti-virus software and applications. n Avoiding use of public Wi-Fi networks, which are target-rich for cyberthieves. n Turning off your devices when not in use. n Regularly changing passwords using a mix of 20 or more characters and dedicated passwords for each site you frequent.

n Recognizing and avoiding phishing scams and other malware intrusions. n Installing dual-factor authentication/tokens, biometric solutions (e.g., fingerprint, facial recognition and iris scanning software) and other data encryption software onto electronic devices. n Getting a security audit or risk assessment by an ethical hacker who can point out areas of vulnerability. n Backing up your files onto the cloud or external drive. n Preparing a strategy in advance to respond to a breach and conduct a root-cause analysis. Protecting your data is analogous to a group of gazelles quietly grazing in the Serengeti and suddenly being stalked by a hungry cheetah. Key to their survival is not so much trying to outrun the big cat as much as being able to outrun one of their own. You want to avoid being an easy mark in cyberspace by implementing the measures noted above. The key to not becoming another victim is to take all of the possible steps to reduce your likelihood of being another meal on the Serengeti plain.

OSHA gears up for anti-retaliation guideline rollouts By Gloria Gonzalez Crain News Service

The U.S. Occupational Safety and Health Administration will have a

busy regulatory agenda during the second half of 2016, including the planned publication of anti-retaliation and health and safety program management guidelines, according to the head of OSHA. The final anti-retaliation guidelines, a draft of which was published in December 2015, will “hopefully” be released in December, David Michaels, assistant secretary of labor for occupational safety and health, told attendees of the American Society of Safety Engineers annual conference in Atlanta last week. The guidelines will outline the key components of an effective anti-retaliation program, including ensuring leadership commitment, fostering an anti-retaliation culture, implementing a system for responding to reports of retaliation, conducting anti-retaliation training, and monitoring progress and program improvement. OSHA sees retaliation in many industries because the agency enforces the anti-retaliation provisions of not just the Occupational Safety and Health Act, but various federal statutes such as the Clean Water Act and the Sarbanes-Oxley Act, Michaels said. “We see workers retaliated

“We see workers retaliated against for raising concerns about their safety ... and well-being of the public.” David Michaels, OSHA

against for raising concerns about their safety, their co-workers’ (safety) and the safety, health and well-being of the public,” Michaels said. “We have some new materials on how to (prevent retaliation) in a positive way.” Separately, the final version of OSHA’s voluntary health and safety program management guidelines is expected to be published in September, with a version specifically geared toward the construction sector issued shortly thereafter, Michaels said. “This is something we hope you all become evangelists (about) and get them out there,” he said. “This is just guidance. We’re not going to enforce this, but this is the way we can have that impact that we need to have.” The guidelines were last updated in 1998, but the new edition will go from six to seven core elements,

adding provisions related to coordination and communication on multi-employer worksites because many worksites have employees of multiple organizations, contractors, subcontractors, independent contractors and temporary workers. “Unless there’s coordination between those employers, those workers are at high risk of injury and death,” he said. The agency is also planning to finalize its slips, trips and falls proposed rule in the next few months and is beginning groundwork for a noise in construction rule. “We want your input on that, so please help us,” Michaels told ASSE members. There are several other items on the agency’s radar, including addressing tree care hazards, with a planned meeting on the topic on July 13 at OSHA headquarters in Washington, D.C. “We see fatalities almost every week of workers involved in tree care (and) landscaping, for lots of reasons,” Michaels said. “They’re untrained. They’re not working safely. The equipment is wrong. And they’re killed. We’re going to launch a regulatory effort to prevent tree care (injuries) because that’s a high-hazard industry.” Business Insurance is a sibling publication of Crain’s Detroit Business.

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C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

DEALS & DETAILS ACQUISITIONS AND MERGERS

Commercial Progression, Northville, a web design and development firm, announced a merger with Symmetri Marketing Group, Chicago, a brand and marketing agency. Website: commercialprogression.com.

corporate office from 39400 Woodward Ave., Suite 100, Bloomfield Hills, to 2600 Big Beaver Road, Suite 555, Troy. Telephone: (248) 593-8820. Website: horizonglobal.com.

ProQuest LLC, Ann Arbor, has

BorgWarner Inc., Auburn Hills, a

announced the acquisition of Alexander Street, Alexandria, Va., a provider of streaming videos, music and primary source collections to libraries. The companies’ complementary content will enable libraries, faculty and students to improve research and learning. Websites: proquest.com, alexanderstreet.com. Stratford-Cambridge Group,

Plymouth, a private equity firm, announced the acquisition of Aetna Bearing Co., Franklin Park, Ill., a niche manufacturer of bearings and assemblies for agriculture, automotive and general industrial markets. Website: scgequity.com.

CONTRACTS

Foodjunky, Detroit, a tech startup

that specializes in group online food ordering for corporate clients, has agreed to integrate with the Yelp platform. It will power online food ordering and delivery from Yelp pages of Foodjunky restaurants and bring new restaurants to Yelp. Websites: foodjunky.com, yelp.com.

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MOVES

Horizon Global has moved its

ZipLogix LLC, Fraser, a real estate technology company, announced an agreement with SmartPathe LLC, a full-service digital marketing agency, which bundles the essentials necessary to help a seller use equity in his home to renovate the property. Websites: ziplogix.com, smartpathe.com.

EXPANSIONS

TI Automotive Ltd., Auburn Hills, a

supplier of automotive fluid systems technology, has opened a fuel tank systems production facility in Baoding, China. The 74,000-square-foot facility will produce low-emission plastic fuel tank systems for Great Wall Motors’ sport-utility and crossover vehicles. Website: tiautomotive.com. ManagedWay, Southfield, a cloud services provider, has opened a 45,000-square-foot data center at 319 Executive Drive, Troy. Website: managedway.com. Art Van Furniture, Warren, announced a new 25,000-squarefoot showroom in Coralville, Iowa, and a 40,000-square-foot showroom in Cedar Falls, Iowa. Website: artvan.com.

NEW PRODUCTS

manufacturer of components and systems for powertrains, introduced the Cummins 5.0 liter turbodiesel V8 engine family to expand its engine timing systems and drive chains into the North American light-duty market. Website: borgwarner.com. Humantech Inc., Ann Arbor, introduced an e-book, Four Ways to Ensure Leadership Commitment to Your Ergonomics Process, the third in a series about the five steps required to build and sustain a successful ergonomics process. Website: humantech.com.

NEW SERVICES

Gale Group Inc., Farmington Hills, part of Cengage Learning Inc. and a

publisher of research and reference resources, launched three new historical newspaper collections: The Telegraph Historical Archive 1855-2000, an archive of Britain’s best-selling quality newspapers; China From Empire to Republic: Missionary, Sinology, and Literary Periodicals, a collection of English-language periodicals in or about China from 1817-1949; and British Library Newspapers, Part V: 1746-1950, which adds newspapers from the northern part of the U.K. to Gale’s digital collection of British newspapers. Website: gale.cengage.com. ProQuest LLC, Ann Arbor, announced the addition of 58 scientific and medical journals from Springer Nature to its databases. Titles include seven Nature Reviews journals in clinical medicine, biology and materials sciences, and several academic and society titles, including American Journal of Gastroenterology and Translational Psychiatry. ProQuest LLC announced its new RefWorks, a reference management platform simplifying and improving research and collaboration workflows. Website: proquest.com.

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.

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

CALENDAR

UPCOMING EVENTS

Big Data â&#x20AC;&#x201D; Small Bytes. 8:30-10:30 a.m. July 13. Automation Alley. Better understand what big data is and how it can be used to create easy-to-use yet powerful visual interfaces. Topics to be covered are an overview of what big data is, how it can be extracted, and how it you can be used with low-cost tools. Automation Alley, Troy. $15 members and $25 nonmembers. Contact: Lori Podsiadlik, phone: (248) 457-3212; email: podsiadlikl@ automationalley.com. Starting Up: An Introduction to the Entrepreneurial Support Ecosystem in Michigan. 9:30-11 a.m. July 19.

Macomb-OU INCubator. A workshop to explore the resources in Michigan to help start and/or grow high-tech innovation. Items for discussion include business incubators, SmartZones, various support services, university technology acceleration and commercialization, and funding programs. The incubator at Velocity

Center, Sterling Heights. Free. Contact: Joan Carleton, phone: (586) 884-9324; email: macinc@ oakland.edu.

Scam and Fraud Prevention. 8-10 a.m. July 20. Better Business

Bureau. Presentation on common frauds, scams, prevention tips, protection from ID theft and protection from financial crime. BBB, Southfield. Free. Contact: Demitria Robinson, phone: (248) 799-0305; email: drobinson@ easternmichiganbbb.org. 2016 Crainâ&#x20AC;&#x2122;s Twenty in their 20s. 5:30-9 p.m. July 20. Crainâ&#x20AC;&#x2122;s Detroit Business. Each year, Crainâ&#x20AC;&#x2122;s publishes a special feature on local up-and-coming businesspeople who are in their 20s. The recognition program celebrates the best and the brightest businesspeople under 30. Detroit Yacht Club, Detroit. $60 individual; $55 each for groups of 10 or more; $45 alumni. $5 of each ticket will be donated to the Belle Isle

Conservancy. Preregistration closes 5 p.m. July 18. If available, walk-in registration will be $70 per person. Contact: Kacey Anderson, phone: (313) 446-0300; email: cdbevents@ crain.com. Third Quarter Business Builder Series. 7:30-9:30 a.m. July 21. Dearborn Area Chamber of Commerce. Chris Collins, president and artistic director of the Detroit Jazz Festival, will speak on how the worldâ&#x20AC;&#x2122;s largest free jazz festival has become an economic driver in Southeast Michigan since 1980. Dearborn Inn, Dearborn. $45; $30 for chamber members. Contact: Ron Hinrichs, phone: (313) 584-6100; email: rhinrichs@ dearbornareachamber.org. Minority Business Womenâ&#x20AC;&#x2122;s Conference. 7 a.m.-7 p.m. July 27.

Michigan Minority Supplier Development Council. An event designed to bring together minority women business owners and corporate executives nationwide to discuss industry trends, share practical advice and network, this will feature national headliners, keynote speakers, discussion forums, breakout sessions and a few

surprises. Henry Hotel, Dearborn. $200. Phone: (313) 873-3200; email: info@minoritysupplier.org; website: www.minoritysupplier.org. Doing Business in Mexico. 11:30 a.m.-1:30 p.m. July 28. Automation

Alley. Seminar aims at helping Michiganâ&#x20AC;&#x2122;s small and medium-size companies identify market opportunities, determine entry strategies, and learn more about technical requirements for selling products, services and technologies in Mexico. Hear case studies, discover more about industry in Mexico, and identify opportunities. Automation Alley, Troy. $20 members; $40 nonmembers. Contact: Lisa Lasser, phone: (248) 457-3283; email: lasserl@ automationalley.com. New Enterprise Forum Showcase and Pitch Pit. 5-7:30 p.m. July 28. Spark.

Training entrepreneurs on how to present to investors. Learn what is important to communicate and what not to do. Three entrepreneurs each give a fourminute pitch of their business idea to a panel of investor judges in a kinder version of television's â&#x20AC;&#x153;Shark Tank.â&#x20AC;? Spark, Ann Arbor. Free.

Contact: NEF Public Relations, phone: (734) 214-0110; email: PR@ NewEnterpriseForum.org Location, Location, Location â&#x20AC;&#x201D; GeoTargeting Your Audience. 11:30 a.m.-1 p.m. Aug. 10. Troy Chamber of Commerce. Brian Blau, Quell Communications Group, will walk

attendees through an integrated digital marketing program to target specific audiences in specific markets. Discussion includes messaging and positioning, content generation, digital production and media deployment across diverse online channels. Troy School District Services Center, Troy. $28; $18 Troy Chamber members. Add $5 for registering on day of event. Contact: Jaimi Brook, phone: (248) 641-8151; email: theteam@troychamber.com. Calendar guidelines. Visit crainsdetroit.com and click â&#x20AC;&#x153;Eventsâ&#x20AC;? near the top of the home page. Then, click â&#x20AC;&#x153;Submit Your Eventsâ&#x20AC;? from the drop-down menu that will appear. Fill out the submission form, then click â&#x20AC;&#x153;Submit eventâ&#x20AC;? at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

Crainâ&#x20AC;&#x2122;s event focus: Food economy Behind Michiganâ&#x20AC;&#x2122;s food story is a business story. The food economy is one of untapped growth potential. At Crainâ&#x20AC;&#x2122;s Food Summit, key players from local food companies will gather to focus on building Michiganâ&#x20AC;&#x2122;s supply chain and pairing ideas with the visions from major national food companies. The summit will connect entrepreneurs, farmers, manufacturers, distributors, retailers, growers and processors to potential customers and those interested in learning more about our food ecosystem. Investors will be introduced to food entrepreneurs from around the state in an effort to showcase the investment-worthy companies. The program includes a keynote panel featuring Jeff Dunn, president of Campbell Fresh, along with breakout sessions on how the local food movement is impacting agriculture, processing, distribution, and retail and restaurants. There will also be a local food truck rally. The event runs from 2-7 p.m. Aug. 22 at Eastern Market in Detroit. Individual tickets are $80, and groups of 10 or more are $75 each. A discount combo ticket with the Live Love Local event is available for $100. Registration closes Aug. 18. To register, go to CrainsDetroit. com/events. Questions can be directed to Kacey Anderson at cdbevents@crain.com.

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C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

Sales healthy for Tespo vitamin dispenser startup By Jay Greene jgreene@crain.com

A Northville-based company is gaining traction with buyers as it aims to make vitamin pills a thing of the past. LifeBoost LLC and its patented vitamin dispensing system Tespo is the brainchild of Ted Mills and Jeff Linton. After three years of engineering and testing, the duo conducted a soft launch of the Tespo product last November, and in March began selling the $129 machine online. With $4.25 million in venture capital funding with more than 50 investors and their cash, Mills and Linton doubled sales every month during their first three months and have sold more than 1,500 Tespo units through direct online marketing. Tespo works similarly to a single-serving coffee maker like Keurig by mixing powder and water together into a drinkable liquid formula with no sugar. “We’ve invented a new product category that doesn’t exist today,” Linton said. “We are at the forefront of custom nutrition, cleaner products using intellectual property surrounding delivery systems. We started with a whiteboard and focused on the consumer needs. We firmly believe that the pills and tablets will be the minority form of delivery in 10 years.” Right now, the Tespo machine mixes seven vitamin formulas that also are purchased online: men’s, women’s and children’s, energy, focus, sleep and bariatrics. The company plans to add a formula every six weeks until it produces at least 22 different mixes. “Our idea was to change the industry that relied on pills for years,” Linton said. “This is a great option for the consumer.” Liquid vitamin drinks are sometimes easier to take for older people or those who have difficult swal-

PEOPLE: SPOTLIGHT

DIA exec Erickson leaves, is finalizing transit pact Annmarie Erickson, executive vice president and COO of the Detroit Institute of Arts, is

LifeBoost LLC has recently doubled monthly sales of Tespo, its patented vitamin dispensing system.

“We started with a whiteboard and focused on the consumer needs.” Jeff Linton, LifeBoost LLC

lowing pills, he said. The formula also contains no additives, inactive ingredients and fillers, as pills typically do, and it absorbs more readily, Linton said. LifeBoost, which employs 10, contracts with Wixom-based Future Pak Ltd. to manufacture the vitamin powder. Future Pak has received approval by the U.S. Food and Drug Administration.

“We never touch the powder,” he said. In 2013, Mills left Manoj Bhargava and his Five Hour Energy empire.

Mills ran the private investment arm of Five Hour and also co-founded and was managing director of ETC Capital LLC, a middle-market private investment fund with holdings in the insurance, transportation, leasing, mining and commercial real estate sectors. Three years ago, Mills met Linton, who has been in the durable goods equipment industry as the owner of Ann Arbor-based Best Equipment Inc. and involved with various commercial real estate projects, and the two began talking

LIFEBOOST LLC

about a new consumer product geared around wellness and supplements. “We spent countless hours testing and sampling various ingredients from all over the world. We were inundated with industry veterans telling us that we couldn’t do it,” Mills said in a statement. “We faced constant roadblocks along the way from ingredient suppliers, packaging suppliers, equipment manufacturers and even our own consultants. It was sheer determination that enabled us to launch Tespo.” Linton said it would have been easy to give up. “We were driven by the desire that consumers deserved better products and, quite honestly, to prove that we could do it,” he said. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

David Barfield Board Member

The Nature Conservancy

ADVERTISING & MARKETING Chris Walker

Director of Technology Carhartt, Inc. Carhartt has named Chris Walker as its new director of technology. Walker will lead the operations of the technology infrastructure as well as help to develop a multi-year information technology strategy to meet the business needs of the company.

Barfield serves as chief executive officer of Impellam North America and is recognized as one of the staffing industry's most influential executives, having leveraged process improvement, technology and supply chain and strategies to deliver abroad range of talent solutions to corporations globally. "The Nature Conservancy plays an important role in helping people understand and connect with nature for the good of us all. I am honored to be part of such a wonderful organization," he said.

DMC Children’s Hospital of Michigan names CEO Luanne Thomas Ewald has been named CEO of DMC

Children’s Hospital of Michigan.

She had been vice president of business development and strategic planning and interim CEO since April, following the departure of Larry Gold. Ewald joined Detroit-based DMC in 1993 and served in various capacities in women’s services and business development.

Nonprofit names leader Rebuilding Together Oakland County has promoted its

director of fund development,

ADVERTISEMENT SECTION

NONPROFITS

stepping down after 17 years with the museum to pursue a position as a Erickson consultant on a regional transit education campaign. Erickson’s contract to serve as special adviser for coalition building and government relations to the Detroit Regional Chamber Foundation was being finalized late last week, a foundation spokesman said. In that role, Erickson will be working with the foundation on an education campaign around the need for regional transit and working to broaden the coalition supporting the Regional Transit Authority master plan. Erickson will also be a consultant to the DIA through December to assist transitioning to her successor. She had been executive VP and COO since 2008.

NONPROFITS Kelly RossmanMcKinney Board Member

The Nature Conservancy As a principal at Truscott Rossman, RossmanMcKinney will bring issues management and communications expertise to the Conservancy. She is deeply committed to community service and lives by the adage "the more you get, the more you give." She chairs the Michigan Chamber Foundation and serves on several other boards.

Halie Black, to executive director. She succeeds Al Kaczkowski, who is retiring.

Black had led fund development for the Farmington Hills nonprofit, which provides free home repair services to low-income residents, for the past year.

United Way selects COO Detroit-based United Way for Southeastern Michigan announced Tanya HeidelbergYopp as its new COO. She

previously was senior vice president of culture, community and diversity for Detroit-based CompuwareCorp. and vice president of business affairs for MTV Networks. She replaces Kristen Holt, who left the position in March.

July 4, 2016

SIGNS FROM PAGE 1

a vinyl hanging, and small areas that can have marketing messages installed, she said. Brooklyn Outdoor has about 750 properties nationally, but just 30 in Detroit. “It’s not like we can come in and build a pole on an expressway,” she said. “Those don’t really contribute to the area the way that they look. We want to be able to locate properties that fit into the design and landscape. You don’t have to build anything additional.” With buildings, vacant structures whose windows can be covered are an option, in addition to large walls. “We look for locations that are great views for vehicle traffic, pedestrian traffic, within a few blocks of the stadium,” Simons said. “The bigger, the better.” Brooklyn recently erected signage in Corktown and Eastern Market for Red Bull. Simons said she’s also doing deals near the proposed Major League Soccer stadium site that’s currently the unfinished Wayne County jail at I-375 and Gratiot Avenue. The company also is looking for buildings with rooftops on which a billboard can be constructed. Brooklyn pays for all the infrastructure, lighting, and maintenance, and the building owner gets a monthly check, which can be up to $5,000 for a choice location, Simons said. Typical pay-

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6 CRAIN’S DETROIT BUSINESS ments are $2,000 to $3,000 a month. those optimal locations,” said Jeff the money stays local, she added. “It’s really no inconvenience to the Stoltman, a Wayne State University While a modest company comlandowner,” she said. “It’s been a pow- professor of marketing. “They’re ba- pared with the big players, Brooklyn sically buying those things on a Outdoor is no stranger to sports venerful thing for me in Detroit.” Signage isn’t cheap for advertisers. long-term lease. The people who ue signage. It has inventory around An 80- by 65-foot vinyl wall hanging own the buildings know that.” baseball’s Wrigley Field in Chicago, The District Detroit’s owner, Olym- the new arena of the NBA’s Sacramencan cost $10,000 to create and an additional $12,000 to install. Then, the pia Development of Michigan — to Kings, and the new T-Mobile Arena monthly lease is another $3,000 to owned by the Ilitch family, which in Las Vegas, which will be home to an $30,000 in the Detroit market, a cost owns Little Caesars and the Red NHL expansion team in 2017. Locally, driven by location and how many Wings — is likely to want to limit it has inventory near Joe Louis Arena, people are likely to see the sign. Along third-party advertising around its Ford Field and Comerica Park. Brooklyn Outdoor also has the I-75 near the arena, she expects such properties, Stoltman said. “They want the spectacle to be the contract to manage the massive digisigns to lease for at least $10,000 a arena,” he said. That leaves properties tal board that festoons Cobo Center. month. While there is no shortage of critics In a market such as New York City, a owned by others. ODM didn’t comment on its bill- of billboards and outdoor advertising similar sign in an equally desirable loin general as an unsightly nuisance, cation could cost as much as $150,000 board philosophy. Brooklyn Outdoor is small com- Detroit hasn’t reached anywhere near a month, she said. Rates for digital billboards are pared with its rivals, and will have lim- its capacity for large outdoor display about the same, she added, but her ited ability to get into a bidding war advertising, Simons said. “That’s a unique thing about Depreference remains traditional static with billion-dollar behemoths, Stoltman said. That’s why Simons is pitch- troit. We have a lot of space and buildsigns. ings and a lot of building owners that “Static is always my favorite prod- ing the local angle. She said part of her business strate- want to do things,” she said. uct to sell. Walls. They’re never going gy is to sell clients on Brooklyn being a The war for billboard space around away,” she said. Until Little Caesars Arena — itself Detroit company, and that the money the new hockey arena comes as Dereally just a massive billboard for the clients pay her stays local. She also troit wrestles with its billboard adverpizza chain — is ready to open, spots said she enjoys helping building own- tising ordinance. Seattle-based Total Outdoor began for new signs can still be had cheaper ers make some extra cash. “We’re going to get them the best lobbying the city government two versus when hockey games begin. “Some signs that are going to be deal as we can get them because we years ago to allow large digital billthere are not worth a whole lot until want to keep the revenue here, in our boards to be erected atop downtown local economy,” she said. “If you buildings. In response, the city is hirthe arena is built,” Simons said. While Brooklyn Outdoor and its spend a million dollars with us, 15 to ing a consultant to aid in drafting a competitors will realize new revenue 20 percent is going to the agency; the modernized and consistent set of adfrom sign deals around the arena, the rest is going into the local economy in vertising sign rules. The City Council building owners around the district some capacity, to the installer, pro- could vote in July on the contract for the consultant. duction, landowner, to Brooklyn.” stand to benefit, too. Simons likened Detroit’s billboard With out-of-state billboard com“There will be a bidding war among the media companies for panies, maybe 25 percent or less of situation now to the Wild West.

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Page 15 “The city is a very awkward place right now,” she said. “It’s going to be a process over the next five to 10 years to figure out what that (ordinance) is going to look like. ... The city sign ordinances are archaic.” Simons’ competitors for billboards are mainly national companies. A message was left for Richard Rickert, vice president and general manager for Baton Rouge, La.-based Lamar Advertising’s metro Detroit operations. Lamar, which first came to Detroit in 1987, has 144,000 advertising displays in 44 states, Canada and Puerto Rico. Detroit accounts for less than 1 percent of Lamar’s displays, according to the company’s annual report. Lamar has about 2,000 leased sign sites and another 189 owned sites in Michigan, mostly in metro Detroit. A message also was left for New York City-based Outfront Media, which was CBS Outdoor until it went public in 2014. Over the years, it has acquired some or all of the assets of major billboard competitors such as 3M National, Viacom Outdoor, Infinity Outdoor and Gannett Outdoor. It has more than 400,000 signs nationally, but did not have a metro Detroit breakdown. The third major billboard signage company is New York City-based Clear Channel Media, with 107,000 sign structures in the Americas. A message was left for its corporate communications staff.

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C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

WATER FROM PAGE 3

The state, which is suing Lockwood for professional negligence and a public nuisance and added a fraud claim against Veolia, has nearly identical legal theories to the other lawsuits, McAlpine said. But since it seeks a different set of damages than families and property owners are after — mainly its own costs to manage the water problem after it developed — their interests don't conflict while the cases are pending. “The state’s lawsuit is extremely well-founded, obviously, and their interests are well-aligned with ours,” McAlpine said. “But the issue’s going to boil down to some level of damage allocation. “What the state is trying to recover is the $200 million-plus the state seems to be paying in providing relief — short-term relief from water bills, or expenses it incurred supplying assistance, what it needs to pay to solve the problem. We’re looking at injury damages, and they’re looking at post-event expenses. And we tend to see that as a secondary class of damages.” David Shea, founding partner of Shea Aiello PC in Southfield who has a separate prospective class action still pending in federal court, agreed

BREWSTER FROM PAGE 1

City-based Rheal Capital Management LLC and was one of four key

development partners on the plans for the Brewster Wheeler site, said parking deck spaces can cost more than $35,000 each to build, compared with $10,000 to $12,000 each for surface parking lots. Kalamazoo-based Gary Walker Inc., a national structural engineering firm that specializes in parking consulting and parking structure design, says in a parking cost outlook report for this year that Detroit's median parking structure construction cost is $19,532 per space, or $58.47 per square foot. “Deck parking is very expensive on a per-car basis and parking fees are not sufficient to cover that cost. It’s not like you can charge three times the rate,” Rhea said. Plans for the Brewster Wheeler site that was announced last year followed an RFP process that involved four development interests, with Rhea and Livonia-based Schostak Bros. & Co. planning to build the apartments; they are both planning the Brush Park South project. The duo behind the separate redevelopment of the Brewster Wheeler building itself is KC Crain, executive vice president/director of corporate operations for Detroit-based Crain Communications Inc., parent company of Crain’s Detroit Business; and restaurateur Curt Catallo. Dan Austin, deputy communications director for Mayor Mike Duggan, said the RFP for the Brewster Wheeler site generated nine pro-

RACHEL WOLF/THE ASSOCIATED PRESS

Children play in an inflatable pool filled with bottled water in front of City Hall in Flint. It took about 80 cases of water to fill the pool. the state suit aligns with the others on liability but parts on damages. “The AG’s office obviously has more expansive remedies to pursue. We’ll ultimately see how all these requests play out,” he said. But attorneys and experts agree that if a settlement is in the works, Lockwood and Veolia can offer only so much money or corrective action — and it may fall to a court-appointed special master to sort claims by priority. “One big question is whether the deep pockets are there. What insurance, or reinsurance, is available to

help the firms? And what’s the rationale for blaming the debacle on consultants?” said Peter Jacobson, professor of health law and policy at the University of Michigan School of Public Health and director of the Center for Law, Ethics, and Health. “There’s also a political question: Is the state’s lawsuit also a state attempt to shift responsibility away from the state to a private actor? And what kind of factual basis does it have to assign that blame?” Veolia’s French parent company reported more than $29 billion in global revenue for 2015, and has

posals, and two “were particularly impressive.” “The first was a great reuse of the historic Brewster Wheeler Rec Center; the other development featured a considerable affordable-housing component. There was no way we could squeeze them both onto the Brewster parcel, so, in order to deliver both of these projects to Detroiters, we moved one of them slightly to the south. Both of these developments will be a boon to the city of Detroit and its residents Rhea: Apartments and represented now planned for the two best nearby site. proposals that we received through the RFP process.” With the space crunch made clear, the city opted to move Rhea’s portion, and did not reissue a new RFP for the Brush Park South land. Rhea’s project has already gone through an extensive RFP process, costing him over $100,000 and more than a year — just during the RFP process for the Brewster Wheeler site a few blocks away. “They are honoring the designation or award” for Brewster Wheeler, Rhea said. “In those (RFPs), it’s very clear that the city has the right to make adjustments or changes — they have all kinds of caveats and conditions. In this case, they did what they believed was in the best interest of the city.” The city is not obligated to issue such an RFP for the land sale, said city officials and outside observers. “However, the council would

have to approve the sale,” said John Mogk, a Wayne State University law professor who teaches classes in property, state and local government law, land use planning and urban development, among others. George Jackson, the former head of the Detroit Economic Growth Corp. who founded Detroit-based real estate consulting firm Ventra LLC, said it appears the city is following the original intent of the Brewster Wheeler RFP and that the city would have risked losing the Rhea project if it had done the process differently. “Sometimes, when you do an RFP, there are things that have to be adjusted when you put the reality test to the actual development of the RFP,” he said. But Geoff Sypitkowski, owner of the multitenant residential building at 255 Winder St. and co-owner with his wife, Fumie, of the Miwaki Japanese restaurant at Milwaukee and St. Antoine streets, said he was blind-sided learning of the Rhea land sale because he had planned a small residential project next to the 255 Winder building and wanted to construct a building for Miwaki on the property. “It’s really a slap in the face,” he said. “There are a lot of people in Brush Park that are really, really frustrated by this but won’t speak out.” If the land sale is approved by Planning and Economic Development this week, it goes to the full council for its consideration July 12. Construction on the restaurant and event space, meanwhile, was expected to begin last year, with the building opening this year. A groundbreaking ceremony was expected this year for the multifamily project, with construction wrapping up in 2017.

about 174,000 employees worldwide. Lockwood reports more than 800 employees at 31 global locations; revenue and insurance information weren’t immediately available, but parent Leo A Daly of Nebraska ranked No. 81 in the Engineering News-Record 2015 list of top 500 design firms by revenue. Veolia and Lockwood have both previously cited a report of Snyder’s Flint Advisory Task Force in March, which assigned blame to the state, in their past responses to the Flint litigation. Jacobson suggested the courts may eventually appoint a special master to oversee and prioritize claims for damages, much like the one overseeing the Madoff Victim Fund under the U.S. Department of Justice forfeiture program for victims of convicted Ponzi-style investment schemer Bernie Madoff, or the master overseeing claims of toxic mold in public housing after Hurricane Sandy. “There may be a lot to sort out, but there’s no automatic requirement that the state have any claim priority over families or others in this setting,” he said. “The state has more resources, but that doesn’t mean the state gets there any faster in the race to the courthouse.” Chad Halcom: (313) 446-6796 Twitter: @chadhalcom

Rhea declined to provide an updated timeline for his project, although he did say that he anticipates applying for the October round of tax-credit financing and other incentives. Detroit-based Hamilton Anderson Associates is the architect on Brush Park South and was the architect for the project previously planned for the Brewster Wheeler site. Detroit-based Jenkins Construction Inc. is the general contractor. In addition to the restaurant, the Brewster Wheeler redevelopment plans include a kitchen incubator, culinary arts studio, catering space, community and meeting space, and outdoor event space. The restaurant is expected to be built on the center’s 1950s basketball court, and a boxing ring and gym also will be incorporated into the design. Crain is co-owner of the Vinsetta Garage restaurant in Berkley with Catallo, who also owns the Clarkston Union and Union Woodshop restaurants in downtown Clarkston. He said the relocation of Rhea’s project “makes room for two great businesses in Detroit.” Under the previous plan and site configuration, both developments weren’t going to fit, he said. Rhea, a University of Detroit Jesuit High School graduate who from 2009 to 2014 was chairman of the New York City Housing Authority, in 2014 opened a Detroit office for Rheal Capital, a multifamily and mixeduse real estate investment management company. He is also part of a planned development of the Albert Kahn Building and Fisher Building, both in the New Center area. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

Prism Plastics acquires Pennsylvania company By Dustin Walsh dwalsh@crain.com

Chesterfield

Township-based

Prism Plastics Inc.’s deal to acquire Tech Molded Plastics Inc. of Mead-

ville, Pa., offers it a raft of new customers and geographic markets. Effective June 23, the deal nearly doubles Prism’s size and creates an operation with combined annual revenue of about $60 million. Terms of the deal were not disclosed. Prism specializes in precision safety, fuel and power steering components, mostly for the automotive market. Tech manufacturers connectors and sensor components for the automotive, aerospace, medical and packaging markets. Rod Bricker, president and CEO of Prism, said the deal lets the company enter new geographic markets, expand capacity and add customers. “Their customers and ours are complementary; there’s no overlap,” Bricker said. “We’re working to diversify our customers and markets.” Bricker said Prism was investigating options to open a fourth plant in the U.S. in Arizona or western Texas before the opportunity to acquire Tech arose. Prism will hold off on a new plant until next fiscal year, beginning May 1, 2017, Bricker said. In May 2015, Prism announced it planned to invest $3.5 million to add new equipment at its plants in Chesterfield Township and Harlingen, Texas. Prism invested $2 million in additional capacity at the two plants in 2013, a move expected to boost production by 20 percent. Those plants, along with a plant in Port Huron, supply parts to several tier one auto suppliers, including Nexteer Automotive Corp. and TI Automotive Inc.

Prism operations are mostly automated, where only a few employees per shift work on its factory floors, programming machines and packing boxes. The supplier uses software from California-based IQMS Software, which automates and digitizes the manufacturing process. Bricker said some of its automation will be instituted at Tech, followed by the implementation of new technologies, such as CT scanning parts for reverse engineering. “There are some areas where we can bring big improvements, but it’s not going to be overnight,” Bricker said. For now, Tech will retain its name, and brothers Scott, president and CEO, and Mark Hanaway, vice president, will stay on for the transition. Prism employs roughly 250 nationwide, up from nearly 100 before the deal. Plastics News contributed to this report.

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

REPORT FROM PAGE 1

directly or through service intermediaries. The result by 2014 was the generation of total employee income at those firms of more than $1.6 billion; about $165.5 million in state and local tax revenue; and, most important, total economic output in the state of $5.5 billion, providing a multiplier effect of 21 for every dollar the trust fund spent. But there were areas of concern to offset those glowing metrics: n The state’s universities underperform those in the U.S. as a whole in generating patents and creating jobs through spinning off for-profit companies. n The state woefully lags the U.S. and 12 benchmark states in university R&D that is sponsored by private industry. n It lags the U.S. and its benchmark states in the percentage of companies that are startups. n Despite the rapid growth of the local venture capital industry, it is well under the U.S. average for the amount of VC money invested here as a ratio of gross state product. “There are pockets of bad news in the report. We still have to keep the pedal to the gas. But I’m optimistic. Overall, it’s a great report. It showed that taxpayers spent their money wisely,” Fredrick Molnar, the MEDC’s vice president of entrepreneurship and innovation, told Crain's. “Michigan’s economy has made impressive gains as companies grow, creating more and better jobs,” MEDC CEO Steve Arwood said in a news release that accompanied the report. “It’s important for us to have outside groups study what we’ve done to create an environment for economic success and measure the effectiveness of programs so we know how we can continue. We want our state to be thriving not just in the short term, but for decades to come.” Of the nearly 1,400 companies that got support, 1,073 were operating in 2014, with 862 of them having received entrepreneurial or incubation services, 435 getting pre-seed or early-stage funding, and 111 getting funding through venture capital firms. There were 198 of those companies in advanced manufacturing, employing 3,896; 222 in life sciences, employing 2,412; 311 in information technology, employing 2,350; 204 in engineering and R&D, employing 1,572; and 137 in business, consumer and retail services, employing 773. The report said companies receiving support from the trust fund created more than 11,000 direct jobs and nearly 16,000 indirect jobs, either through impact on supplier firms or the effects of worker spending throughout the Michigan economy.

Third fund? Not likely Despite strong returns on the dollar so far, the report said the state

A plan of attack The TEConomy Partners report finished with 11 recommendations for the state to continue its momentum to diversify its economy: 1. Develop an executive connect program patterned after one launched in 1985 in San Diego that connects would-be entrepreneurs with resources such as technology, coaching capital, management, partners and support services. 2. Develop and fund an entrepreneur-in-residence program to provide startups with experienced C-suite management. 3. Once again provide additional funding for an executive-attraction program. Previously the state funded such a program, managed by the Michigan Venture Capital Association, which provided help with recruiting experienced talent and first-year salary expenses, and should fund another. 4. Even out the availability of entrepreneurial services statewide. 5. Create a third fund of funds to invest in both in-state venture capital funds and out-of-state funds willing to invest here. 6. Provide more pre-seed and seed funding for startups. 7. Provide more support for the growing network of angel investors by offering, as do 20 other states, tax credits to angel investors who invest in technology companies. 8. Create a proof-of-concept fund to help determine the commercial potential of a discovery or research and to support prototype development, testing and marketing research. 9. Create a sector-specific matching grant program to build connections between research institutions and industry. 10. Develop a revised reporting system that allows for economic analysis and assessment of various Michigan Economic Development Corp. programs on an ongoing basis. 11. Analyze innovation-industry clusters to determine how best to support unique sector needs.

is at a crossroads. For progress in diversification and entrepreneurship to continue, the report said, state universities must become better at commercializing research and technology; there needs to be more collaboration between industry and universities; the state should bolster angel investing in the state through tax credits offered in 20 other states; and, perhaps most important, it needs to create a third fund of funds to invest in venture capital firms willing to invest in early-stage state companies. The state has created two funds of funds, the $95 million Venture Michigan Fund I in 2006 and the $120 million Venture Michigan Fund II in 2011. “The (state) has already helped create two funds of funds in Michigan, both of which are widely credited with helping to alter the national perception of Michigan being a ‘flyover’ state in terms of deal flow,” read the report. “While some have questioned the terms of the original funds ... it would be extremely shortsighted to simply do away with such catalytic and impactful investment activity altogether.” That recommendation is likely dead on arrival. It wasn’t just “some” who later questioned the terms, it was many, including a sizable majority of state legislators last year, when they briefly tried to end funding for the two programs. Molnar told Crain’s that despite the recommendation for a third fund, the MEDC won’t be recommending one. The Ann Arbor-based Michigan Venture Capital Association

has been lobbying legislators about the need for a third fund, and Molnar said he hopes the organization is successful but described its effort as “uphill at best.” The state didn’t finance the funds

with tobacco settlement money, instead borrowing money with tax vouchers as collateral. The state put up $200 million in vouchers for the $95 million loan from Deutsche Bank in 2006 that created VMF I and $250 million in 2010 for the $120 million loan from an affiliate of Credit Suisse that created VMF II. The plan was that as VC firms sold off or took public the state companies they had invested in, the loans would be paid off. The problem that riled legislators last year was with the loan payments due on the first fund. No one in 2006 envisioned the Great Recession, which not only slowed the pace at which venture capital firms invested in companies, but greatly slowed the pace at which their portfolio companies grew and delayed significantly the timeline for selling them or taking them public. By the time it came last year for the state to start paying off the first loan, it hadn’t gotten any returns. Early last year, the House Fiscal Agency said it might cost the state $140 million from 2015-17 to cover shortfalls in loan and interest payments to Deutsche Bank. “This was all done with good intentions,” Rep. Al Pscholka, R-Stevensville, told Crain’s. “But venture capital is risky, and I don’t think we should be risky with taxpayers’ money.” Even Tom Kinnear, chairman of the Venture Michigan Fund since it was launched in 2006 and the founding executive director of the Zell Lurie Institute for Entrepreneurial Studies at the Ross School of Business at the University of Michigan, admits that, in retrospect, using tax vouchers as collateral “is a very inefficient way to invest in venture capital.” Two House bills were introduced in February 2015 to halt investment

“It’s important for us to have outside groups study what we’ve done. ... We want our state to be thriving not just in the short term, but for decades to come.” Steve Arwood, MEDC

from both funds, though legislators changed their minds after finding out that had they proceeded the state could have been on the hook for $450 million. Though contracts with VC firms had committed all the money from both funds, much of it had yet to be disbursed. It is only paid out as VC firms make what are called capital calls to cover the costs of new investments. Had the two funds stopped making previously agreed payments to VC firms, the firms would no longer have been required to make distributions back to the funds and the state would have been on the hook for everything it had borrowed. Kinnear told Crain’s at the time the legislators were threatening to cut off payments that eventually the state treasury would show a profit from the two funds. He said that tax vouchers would be needed at first, “but the problem is temporal, not systemic. Ultimately, the treasury will be paid back.” The two funds did as they were intended, said the report. More instate VC firms were created, and many of the out-of-state firms that got money not only invested in companies in Michigan but opened offices here. In 2006, there were 15 VC firms with offices in Michigan; in 2014, there were 37. In that same time, the number of investment professionals in Michigan went from 40 to 115; the amount of money under management by VCs went from $900 million to $4.8 billion; and various state programs made $204.7 million in risk capital investments, which were leveraged with an additional $621.3 million in follow-on private investments, a ratio of 3 to 1. “While there is broad consensus that the risk capital climate has greatly improved, there is also a widely held belief that the investment culture is at great risk of disappearing without further additional support,” read the report. “It is a widely held belief that the national venture capital funds are monitoring Michigan’s risk capital landscape, and if investors think the state is not committed to supporting entrepreneurial development, then they will disengage and invest their funds’ resources in regions that are committed to building an entrepreneurial culture.” If continued investment by national VC firms is contingent on Michigan creating a third fund of funds, then Michigan is, indeed, at a crossroads.

“Pockets of bad news” The report named 12 states as benchmark states to compare Michigan, some regional competitors, some with similar economies

and size and others that have made long-term investments in entrepreneurship. The states were Illinois, Indiana, Ohio, Pennsylvania, Tennessee, Minnesota, Wisconsin, Arizona, Connecticut, Georgia, Maryland and Texas. Michigan did well in some areas — industrial R&D spending, for example, was $311,161 for every $10 million of gross state product in 2012, compared to the national average of $143,615, ranking it first among benchmarks; and in 2013, university R&D was $49,335 for every $10 million of GSP, compared to the national average of $37,866, ranking it third among benchmarks. But the state fared less well in other areas, what Molnar referred to as “pockets of bad news.” For example, while Michigan has sharply improved the amount of venture capital over the last decade, when it comes to venture capital invested per $10 million of gross state product, it lags at $20,787. The national average is $77,088, a figure distorted by huge outlays in California, but Michigan is just ninth among its benchmarks. n In 2012, the percentage of all companies in Michigan that were startups was 6.7, which ranked it eighth among benchmarks. That was actually down by 1.8 percentage points from 2004, possibly a result of young companies that failed during the recession. n In 2014, Michigan had 130 companies on the Inc. 5000 list of fastest-growing companies, sixth among benchmarks. n There was a disconnect between industry and universities when it came to R&D collaboration. In 2013, there was $1,610 per $10 million of GSP spent on industry-sponsored R&D at universities in Michigan, compared to the national average of $2,049, good for a benchmark ranking of ninth. n Despite the presence of the University of Michigan and its large research budget and large technology transfer office, state universities overall lag at commercialization. From 2011-13, state universities averaged a total of 16 spun-off startup companies, eighth among benchmarks; that was actually down from an average of 18 from 2004-06, the decline ranking Michigan 13th among benchmarks; from 2011-13, state universities issued .81 licenses for every $10 million spent on research, compared to .99 nationally for a benchmark ranking of seventh; in that same period, universities averaged $92,510 in licensing income per $10 million in research spending, compared to a national average of $345,570 and a benchmark ranking of ninth. Tom Henderson: (313) 446-0337 Twitter: @tomhenderson2

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

PAUL FROM PAGE 3

the IMG Academy in Bradenton, Fla.; the Pebble Beach golf course in California; and the legendary Royal and Ancient Golf Club at St. Andrews in Scotland. In April, Golf Digest named V1 as the best tool for analyzing a golf swing on the market. Paul and Finnerty say that with their influx of capital, V1 will target cricket and soccer players, too, and improve the company's digital and social media marketing. Paul will also use his background at Covisint to give the company more sensorand cloud-based capabilities. Covisint was founded in 2000 as an online marketplace by Ford Motor Co., General Motors Corp. and DaimlerChrysler as a cloud-based company before the word “cloud” meant something other than that puffy thing in the sky. Paul was CEO at Covisint before it was sold to Compuware in 2004. “I’m really excited and looking forward to having Bob’s insights and sage advice, and Bryan’s as well,” said Chris Hart, V1’s founder, presiChris Hart: V1’s dent and CEO. Hart said the founder, president company em- and CEO. ploys 17 and will soon be adding to its marketing staff. He declined to disclose revenue. “We expect to be able to quickly leverage the company’s strengths

BENEVOLENT FROM PAGE 3

use of the site largely declined as Benevolent laid off its staff and put its resources behind its push to secure nonprofit status. Today, Benevolent operates as a nonprofit, posting stories at no charge to those in need or their nonprofit validators; 100 percent of the money donated goes to the recipient. It now offers donors the option to add an additional percentage to support the operation of the site rather than tacking on an operating fee, and is fully operational again — albeit with a stronger reliance on local nonprofit validators to vet the needs rather than its own staff in each city and on donations and

V1 SPORTS

Golfers at the U.S. Open this year use the V1 Pro app, in which a mat embedded with sensors determines the speed of a golfer’s swing and how pressure is distributed by the golfer’s feet. The app was developed by V1 Sports, which also has platforms to help tennis players and baseball players. into broader performance analytics, leveraging cloud-based assets for both coaches and athletes,” Paul told Crain’s. “We believe that this company could very easily be a $100 million cloud-based subscription revenue company in the coming years. “We’re going to put this whole thing on steroids.” Finnerty said the deal with V1 Sports began with an article in Crain’s in February 2015. Paul had retired from Compuware at the end of 2014 after it was sold to Chi-

cago-based Thoma Bravo LLC, and in a Q&A with Crain’s said he wanted to get involved in venture capital and thought he might like to invest and lend Bryan Finnerty: his expertise to CEO of High local tech comVelocity Sports. panies. Finnerty thought Opportunity Seed Capital,

grant funding. Over the past year, Matrix, Black Family Development and the Wayne

“People hear ‘philanthropy’ and think they have to have millions (to give), but they don’t.”

County Detroit Disability Network

have posted needs, but Kashner is looking to reach more nonprofits. Benevolent is now competing against other platforms that work with nonprofits to meet their clients’ unfunded needs, such as San Francisco-based for-profit crowdfunding platform HandUp. Supporting its Detroit comeback is a $20,000 grant made early this year by Fisher. Fisher’s daughter, Julie Fisher Cummings, said she met Kashner at a social innovation event hosted at the White House and immediately saw the fit between the interest she and her mother had in linking individual donors with individual needs.

INDEX TO COMPANIES

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

Julie Fisher Cummings

She introduced the two, and Fisher subsequently made grants to Benevolent of about $85,000 for 2013 and 2014. She paused on funding the organization in 2015 while it resolved its nonprofit status with the IRS and came back again with a grant this year. “What I loved about what (Kashner) was doing, and I told my mother, is she flattened the world of

BANKRUPTCIES

Colburn Colburn Insurance and Risk Services ..10

Prism Plastics ......................................................16

Detroit Red Wings.................................................. 1

Rheal Capital Management LLC ........................16

Develop Detroit ..................................................... 8

Shea Aiello PC ......................................................16

Greenflash Investments ......................................3

Summit Place Mall ................................................5

Heidelberg Project ............................................... 4

University of Michigan ........................................16

LifeBoost LLC .......................................................14

V1 Sports .................................................................3

The following businesses filed for protection in U.S. Bankruptcy Court in Detroit June 24-June 30. Under Chapter 11, a company files for reorganization. n General Products Corp. and General Products Mexico LLC, 14137 Farmington Road, Livonia, voluntary Chapter 11. Assets and liabilities not available.

Lockwood, Andrews and Newnam......................3

Veolia North America ............................................3

Chris Ehrmann

Benevolent .............................................................3

McAlpine PC ...........................................................3

Blue Cross Blue Shield of Michigan .................... 4

McDonald Hopkins ............................................... 9

Brewster Wheeler Recreation Center ................ 1

Michigan Economic Development ...................... 1

Brooklyn Outdoor .................................................. 1

Mort Crim Communications ............................... 9

the family investment firm he founded with his wife, Denise, might be a good match with Paul and gave him a call. “I read the article in Crain’s. I didn’t know Bob, but we were both members of Walnut Creek Country Club, and I reached out to him. We had a couple of lunches, and it was one of those things where we were finishing each other’s sentences,” Finnerty said. They decided they wanted to do some deals together. Shortly after, Paul told Finnerty there was a cool company in Plymouth they ought to look at investing in. “It was in my sweet spot,” said Finnerty. “I’m a tech geek to the nth degree, and it was sports. As both a player and a coach, it interested me. “It’s funny. Back in 2003 or so, I talked to the guys at V1 Sports about using their platform for teaching soccer, and now we’re going to do that.” Finnerty had success with a previous tech company. In 2006, he co-founded Novi-based ProtectCell, a cellphone security company that grew revenue to $49 million in 2012 before being sold. In 2013, that deal was a finalist for best deal under $100 million at Crain’s annual M&A awards. Finnerty and Paul share more in common than a desire to invest and tech geekiness. Paul was an allstate soccer player at Detroit Catholic Central High School in 1980 and an all-Midwest region soccer player at Aquinas College before transferring to the University of Michigan, where he played on the school’s club team. Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

philanthropy and made it accessible to everybody,” Fisher Cummings said. Fisher was a hands-on giver who liked to have impact, especially with grassroots efforts, and said, “‘We’ve got to do something; Detroit needs this,’” her daughter said. “People hear ‘philanthropy’ and think they have to have millions (to give), but they don’t.” It’s probably too soon to quantify Benevolent’s impact in Detroit, Kashner said, given its operational lull. But overall, since it started working in Detroit in 2013, the site has posted the stories of 136 people and fully funded more than 77 percent of them. Those people, on average, have two children, and nearly three-quarters of them are single parents. Their annual household income averages just under $8,300. “Detroit is actually doing a great job ... better than many of the cities where we operate, at rapid re-housing” of homeless families, Kashner said. But some of the challenges are basic everyday needs such as access to laundry, tables, beds and refrigerators. “This is often where Benevolent comes in, during that process and transition from homeless to housing.” Sherri Welch: (313) 446-1694 Twitter: @sherriwelch

www.crainsdetroit.com Editor-in-Chief Keith E. Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com Director, Digital Strategy, Audience Development Nancy Hanus, (313) 446-1621 or nhanus@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Managing Editor/Custom and Special Projects Daniel Duggan, (313) 446-0414 or dduggan@crain.com Assistant Managing Editor Kristin Bull, (313) 446-1608 or kbull@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Senior Editor Gary Piatek, (313) 446-0357 or gpiatek@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

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WEEK Sources: Pistons sign Drummond to 5-year, $130M deal

he Detroit Pistons made a big splash on Friday — the first day of NBA free agency — by locking up center Andre Drummond with a five-year, $130 million contract, according to multiple sources. Drummond would become the highest paid Drummond: Would player in the be highest-paid history of the Piston. Pistons franchise and one of the highest paid in the league. The Pistons also finalized a three-year, $18 million contract with free-agent point guard Ish Smith, who played with the Philadelphia 76ers last season.

COMPANY NEWS

n Five groups have been named to spend $52.4 million in a series of projects to redevelop and construct new buildings on parking lots in the Paradise Valley Cultural and Entertainment District. Included in

the plans, conditional property purchase agreements for which were approved by the Detroit

Downtown Development Authority,

are a new 1920s-style boutique hotel and residential and retail space. n M-1 Rail announced that its QLine streetcar on Detroit’s Woodward Avenue will be operated by Transdev Services Inc., a Lombard, Ill.-based transportation management firm. n The Detroit Sports Commission and Olympia Entertainment hosted officials from U.S. Figure Skating at

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 4 , 2 0 1 6

ON THE WEB JUNE 25-JULY 1

Detroit Digits A numbers-focused look at last week's headlines:

3.8 percent

The tuition increase passed by Wayne State University’s board of governors for in-state lowerdivision undergraduates. The average of that increase and a 4.5 percent hike for in-state upperdivision undergraduates is just under a 4.2 percent in-state cap instituted by the state Legislature.

$15.2 million The planned investment by Daifuku North America Holdings Inc. to build a new headquarters in Novi. The subsidiary of Japan-based Daifuku Co. Ltd. will transition from its current building in Farmington Hills.

$50 million

The amount of a fundraising campaign announced by Cornerstone Schools to support its urban K-12 education mission in Detroit.

the Detroit Skating Club in Bloomfield Hills as part of their bid to host the 2018 U.S. Figure Skating Championships. n Engineering services firm FEV North America Inc. plans to construct a new $27.4 million North American headquarters and tech center in Auburn Hills. n Plans to upgrade the neonatal intensive care unit at Beaumont Hospital in Dearborn are getting a $4 million boost in which a $2 million grant from The Carls Foundation in Bloomfield Hills will be being matched by the Oakwood Foundation.

n Plymouth Township-based

Esperion Therapeutics Inc. said its

experimental drug may not be able to win U.S. Food and Drug Administration approval based solely on its ability to cut cholesterol, the requirement used to clear previous medicines, Bloomberg reported. n The effective merger of Detroit-based Inforum and its research and education arm, the Inforum Center for Leadership, into a single, charitable nonprofit is expected to translate to a 20 percent increase in revenue over the next few years, officials said. n LGBT Detroit is expanding by moving into a larger headquarters. The nonprofit plans to move from its 1,200-square-foot headquarters at 41 Burroughs St. in Midtown to a 3,100-square-foot building at 20025 Greenfield Road. n Rochester sports entrepreneur Andy Appleby, majority owner of the United Shore Professional Baseball League in Utica, said he'll make a

decision by Oct. 1 on adding one or two more teams to his new three-team league for next year. n Detroit Pistons games will air on WMGC 105.1 FM despite the station’s format change from sports talk to hip hop/R&B. The decision to honor the third and final year of the broadcast rights deal was announced by station owner Greater Media Inc. and team parent Palace Sports & Entertainment LLC. n Detroit-based Huron Capital Partners LLC announced the acquisition of Texas-based EPI-El Paso for one of its portfolio companies, the Indianapolis-based XLerate Group, which manages auto auctions in six states. n Detroit-based DTE Energy Co. broke ground on a 1.5-acre park near its headquarters in downtown Detroit. The cost and funding source were not announced.

OTHER NEWS

n The University of Michigan won $2 million in state funding to continue a connected vehicle test program in Ann Arbor. The Michigan Strategic Fund award matches funds to a $9 million federal grant earlier received by UM’s Transportation Research Institute. The fund board also approved the creation of the

Detroit Next Michigan Development Corp. to issue incentives for job

creation and investment.

n The Greening of Detroit, a

DETROIT ECONOMIC DEVELOPMENT CORP.

The proposed $27 million Hastings Place development, with apartments, retail, office space and a parking deck, is part of the Paradise Valley project.

nonprofit dedicated to supporting urban reforestation, has hired more than 180 Detroit high school students for its summertime Green Corps youth employment program. n A malicious destruction of property case against graffiti artist Shepard Fairey was dismissed in Wayne County Circuit Court last month, AP reported. Fairey was to stand trial on charges of illegally tagging buildings while in Detroit last year to complete a commissioned project.

RUMBLINGS

Varnum renews $1M legal services program; Detroit, AA biz benefit most

outheast Michigan accounted for almost half of a statewide $1 million pledge over five years of legal services to startup, early-stage and growing businesses by Grand Rapids-based Varnum LLP, which is renewing the program. The MiSpringboard legal assistance program for entrepreneurs began in mid-2011, wrapped in June and helped more than 225 emerging companies in 60 Michigan communities, the law firm reported last week. Of those, the cities of Detroit and Ann Arbor led with 33 clients apiece and more than more than $280,000 of combined legal services. They were followed by 24 clients in Grand Rapids, 10 in Kalamazoo, six in Novi and five in Battle Creek. The rest were spread across the state, including the Upper Peninsula. Varnum said it is extending the statewide program for another five

years and another $1 million. Pro bono services typically included company formation and operating agreements, employment agreements, vendor contracts, trademark work and licensing agreements. Qualifying emerging companies typically get referred by business incubators, Smart Zones, angel investors, state agencies, universities and entrepreneur programs. Southeast Michigan as a whole received about $420,000 of services. Varnum attorney Matt Bower, who has an emerging company practice focus and works with MiSpringboard clients, credits tech community meetups and co-working spaces with fueling growth in startups. “(T)here was also a corresponding rise of early-stage investors in the state, closely followed by the state's own investment in startups through grants and enhanced SmartZones,” he said.

State police to help at GOP convention

JACOB LEWKOW

Jimmy John’s Field will host a softball

tourney featuring wounded veterans.

Free softball tournament features wounded veterans The new Jimmy John’s Field in Utica on Sept. 10 will host a slow pitch softball tournament team known as the Louisville Slugger Warriors that is made up of active duty and veteran servicemen wounded during combat in Iraq and Afghanistan post-9/11. The event, sponsored by Bloomfield Hills-based American House Senior Living Communities, is free and set for 1 p.m. that day. It’s intended to commemorate the 15th anniversary of the 9/11 attacks. Facing the Warriors, many of whom are fitted with state-of-theart prosthetics, will be the Detroit Connection softball team. An American House softball team also will play three innings against the Warriors. A World War II veteran will throw out the ceremonial first pitch. “It’s an honor, on behalf of American House, to be able to invite these brave, wounded heroes to Detroit for their inaugural softball game against the Detroit Connection,” said American House founder Bob Gillette in a statement. The ballpark along M-59 is home to the United Shore Professional Baseball League, a development league that began play in May.

Michigan state troopers are heading to Cleveland to help with security at the upcoming Republican National Convention. Michigan State Police said it is sending more than 100 uniformed troopers to help with crowd control and a group of motorcycle officers to assist with vehicle escorts at the GOP convention, which runs July 18-21. Troopers will leave July 16 for a seven-day stint, the department said. Estimated costs were not released, but state police said the costs are reimbursed through the Emergency Management Assistance Compact, a national mutual-aid

system that includes all 50 states, plus Washington, D.C., and U.S. territories. Cleveland requested Michigan’s help. New York businessman Donald Trump is the presumptive Republican presidential nominee; supporters and opponents are expected to hold rallies.

‘Retired’ Detroit chamber CEO takes N.C. post Longtime Detroit Regional Chamber CEO Dick Blouse just

couldn’t stay fully retired. Blouse last week was named interim CEO of the Wilmington, N.C., Chamber of Commerce. Blouse led the Detroit chamber for 15 years, retiring in 2010. Before moving to Detroit, Blouse headed the Greenville, S.C., chamber. Since his retirement from the Detroit chamber, Blouse has operated as a consultant. He’ll help the Wilmington chamber choose its next permanent CEO, according to a news release.

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SUMMIT HIGHLIGHTS:

ehind Michigan’s food story is a business story. At the Crain’s

• Featured speaker Jeff Dunn, President, Campbell Fresh

Food Summit, key players from

local food companies will gather to focus on building Michigan’s supply chain and pairing ideas with the visions from major national food companies.

MONDAY

The Summit connects entrepreneurs,

AUG. 22, 2016

farmers, manufacturers, distributors, retailers, growers and processors to potential customers and those

2-7 P.M.

interested in learning more about our food ecosystem.

INVESTOR FORUM TITLE SPONSORS

• Breakout sessions with a focus on how the “go local” movement is impacting agriculture, processing/distributing and retail/restaurants • Food truck rally dinner with a variety of eclectic flavors from local food trucks

INVESTOR FORUM MAJOR SPONSOR

PARTNER

Showcase your products or services with a sponsorship at the Food Summit Contact: Matt Langan, mlangan@crain.com, (313) 446-6032

3OXV

Nonprofits: Tell your story to the business community at a discounted rate!

2016 GIVING GUIDE

Position your nonprofit profile in front of business owners, CEOs, presidents and top-level executives in the Oct. 24 issue of Crain’s. Your nonprofit will be featured in the digital edition for an entire year on CrainsDetroit.com

SOXV BONUS DISTRIBUTION: 750 copies distributed to wealth managers and estate/trust attorneys in Southeast Michigan 800 additional copies will be distributed at the AFP annual Philanthropy Day Dinner

SPECIAL OPPORTUNITY Buy a spread and be featured as a “Nonprofit of Note” in one of

Crain’s Detroit Business weekly newsletters. Only 19 available*

Publication Date: Oct. 24, 2016 | Profile Reservation Deadline: Aug. 15 | Profile and Ad Materials Due: Sept. 1

CONTACT: Matt Langan at mlangan@crain.com or (313) 446-6032

*At the time of publishing